Why Trump is Re-Opening the Economy (And Why It Will End Badly)

You might be wondering why Trump announced the dissolution of the COVID task force on the day that we passed 70,000 deaths nationally. Every 3 to 4 days, another 10,000 Americans die. So why shift the focus to re-opening now?

He's got an election and he's trailing badly in the polls. How badly? Hoover is the last incumbent to trail by such a large margin. Trump has to turn things around and wants to look like he's addressing the economy before Friday's numbers come in.

Friday we will learn how many jobs were destroyed in the last month. It will be millions, dwarfing any previous month on record. The talking points for every politician and reporter will be, "Is this virus costing us too many jobs?" You watch. The fact that Trump shifted to reopening will actually make his poll numbers go up a couple of points.

But of course the virus could care less about his poll numbers. It will simply exploit more opportunities to spread as the country re-opens. Meanwhile, it will be tough to get people to shop, dine out, and mingle like they did in 2019 while the number dying is actually accelerating. Trump loves PR but hates actual executive responsibility. The PR boost he'll get for pushing to re-open the economy will fall as people realize that his impatience has given us the worst of both worlds: high death rates AND economic contraction. No healthy economy is going to emerge atop rampant spread of and fears of illness.

Putting the Cost of the Pandemic into Perspective

In the US, household net worth is $118.4 trillion (and our annual GDP is $21.4 trillion).

If your net worth was $118,000 - let's say you had $68,000 in home equity and $50,000 in stocks and savings - would you dip into it for $2,000 to $10,000 (or take out loans of $2k to $10k) to cover sudden, serious medical expenses? 

Would you consider yourself destitute if you had to?

Estimates vary, but the coronavirus will cost us at least $2 trillion - perhaps more than $5 trillion. It's worth remembering that we have $118 trillion (and the credit score to borrow trillions more).

Couples in Quarantine

She: "I'm going out for a few hours."

He, worried. "Please be safe."
She: "Don't worry. I have protection."
He: "Great."
The door closes. Suddenly it dawns on him that this could mean a couple of things. He does start to worry.

*****

"Please," she raised her hand. "Just ... please. I've had enough of people today."
"Had enough ..." he sputtered. "But I'm the only one here!"
"Exactly," she sighed.

*****

She, sounded exasperated: "We should start seeing other people."
He, alarmed: "What?!?!? You want an open marriage?"
She, disgusted: "What? No! I just literally mean that we should see other people. After 6 weeks I am so ready to spend the evening with someone - anyone - else."

***********

He was outraged. "He's recommending doctors experiment with disinfectant as a way to cleanse the body from this virus?"
"You can't really blame Trump for his confusion about medicine," she said.
"What?!?! He's an idiot."
"Well medicine is confusing for him," she calmly said. "He's had really confusing personal experiences with medicines. For instance, the only time he took Viagra, the only thing that happened was that he was a couple of inches taller for a little while."

***********

He had just stepped in the door and before he could take off his mask, she stopped him. "Leave your mask on," she instructed him as she grabbed his hand. "Speak to me in a French accent," she said as she led him into the bedroom. He mumbled something largely unintelligible in what might have been a French accent and her only response was to pull him closer.
By the end of quarantine, he was regularly uttering largely unintelligible nonsense in various accents, uncertain whether he should be hurt or flattered when she told him that she'd never so enjoyed their conversations.

***********

The first day they re-opened the beach, he saw something remarkable. She was wearing matching bikini and face mask. He couldn’t help but notice that the black material for each breast was the same size, shape, texture and color as her mask. He wondered if in the post-pandemic world women who had a boyfriend or husband would convert the his and her masks into a bikini top and the single women would simply convert their one mask into a monokini. A post-pandemic signal that one was single. Then he thought again. "Probably not what they meant when they said that things will never again return to normal."

***********

He, after a day of silence. "I can't take this anymore."
She: "I know. This quarantine is going on too long."
He: "No. I can't take being with you another week. We need to swap partners. Even if just for a week."
He braces himself, ready for tears, anger, accusations ... instead she calmly says, "Carl."
He: "What?"
She: "I've thought about it too. I would rather be with Carl."
He's offended, angry, confused .... but stands there mute. She goes back to reading. He wanders out of the room.
Neither of them speak of it again.

Gales of Creative Destruction and the Need for Aggressive Investment post-Pandemic

In the 3Q of 2018, the economy created 67,000 jobs.
In the 3Q of 2019, it created 11,000 jobs.
In the three quarters between, it created 811,000, 525,000 and 182,000 jobs.
That sounds innocuous enough but those are net.

In the 3Q 2019, the economy destroyed 7.3 million jobs and created 7.3 million jobs and the difference between them was this tiny sum of 11,000 jobs. This is what gales of creative destruction look like.

In the last six weeks, 30 million people have filed for unemployment. This quarter the economy is likely to destroy closer to 50 million jobs than it's typical 7-ish million.

What does this mean? To counter this unprecedented level of destruction we will need unprecedented levels of creation. One tactic is to preserve businesses that will hire back once this is over. The other - complementary - tactic is to launch a tsunami of startups, turn cheap money (interest rates are absurdly low) into precious jobs. A third tactic is to literally create new infrastructure, knowledge and industries.

We should stop having infrastructure weeks and start an infrastructure decade - included in that the creation of green energy solutions that hasten the obsolescence of oil. Also, start spending as much research and development for federal departments like Housing, Transportation, Energy, Interior, and Education as we do on Defense.

We have a huge economic problem that will only get more complicated. Like any problem, we'll have to create our way out of it. When you have more destruction, the solution is more creation.

Who Survives and Who Dies After Shipwreck

COVID-19 fatalities
Days to hit
10k - 41 days
20k - 5
30k - 5
40k - 5
50k - 4
60k - 4


I still don't understand two things.
1. What makes people so confident that we don't hit 100k before mid-May?
2. What makes people think that - other than our fondness for groups of 10 (says the guy typing with 10 fingers) - this will pause or even slow down at 100k? Particularly if we loosen regulations.

I'd love to think that it will take 6 days to hit 70k, 10 more days to hit 80k, another 30 days to hit 90k and 100 more days to hit 100k. That is, I'd love to think this is slowing down.

But is there anything to support that expectation? Other than some combination of hope and fatigue? Am I missing something?

Meanwhile, a study of shipwrecks is revealing about which sort of communities thrive.
In 1864, two ships wrecked onto the same island near New Zealand within months of each other. Neither knew of the other.

The survivors of the first wreck found themselves at the base of a cliff that one was too weak to scale. The rest left him behind to die.

The survivors of the other wreck, by contrast, risked their lives to save the life of another in the effort to first get to shore.

One community was founded with the clear philosophy of, "We're all in this alone." The other with the clear philosophy of, "We're all in this together."

After being cut off from civilization for 12 months, only 3 of the original 19 shipwreck survivors from "we're in this alone" group were still alive. By contrast, every one of the "we're in this together" survivors were still alive 19 months later.

Willingness to sacrifice to help others made a difference. In another wreck from the mid-1800s, a crew member was bringing the captain's chest of gold to shore, an amount equal to $23 million today. The captain ordered him to leave the chest and rescue a girl instead. This visible sacrifice set the tone for how the survivors would look out for each other. The captain and many of the survivors were LDS and the whole group was cooperative and caring. 2 months later, all 51 of the 51 were still alive.
Cooperation and care for each other turns out to be a great predictor of how well these involuntary social experiments in shipwrecks do. There is probably a lesson there.

When the Ignored Predictions Have the Best Chance of Coming True

Sometimes, your prediction has to be ignored in order to come true.

Someone predicts that a stock will skyrocket in price over the next few years. So, its initial price when it goes public is very high. Because it is so high when it is first available, not only does its price not skyrocket, it hardly goes up at all. The prediction that everyone acted on is made a lie.

Someone predicts that a company is over-priced, so few people buy it when it first goes public. Its initial stock price is very low. Because it started so low, its price rises over time as it performs okay and investors who bought when it first went public see a good gain. The prediction that everyone acted on is made a lie.

Experts warn that hundreds of thousands of Americans could die from a pandemic. They are taken seriously, special measures are taken (people stay indoors and interact with almost no one), and the experts' dire predictions do not come true. The prediction that everyone acted on is made a lie.

Advocates for life as normal argue that the pandemic is overblown and we should go about life as normal, ignoring the panicked advice of so-called experts. They are taken seriously and hundreds of thousands of people die from a pandemic. The prediction that everyone acted on is made a lie.

Predictions and policies here in the US will be volatile. To make it even more complicated, the predictions will change what happens - in the opposite direction of what was predicted.

What is my prediction? Our behaviors, policies and the predictions about it will look like a murmuration of birds.

A Post-Pandemic Stimulus Plan to Quickly Create Jobs

Adding to the trauma of deaths, illness, layoffs, and social isolation, at the end of this pandemic we will find ourselves with tens of millions unemployed. Without quick, bold policy initiatives, the post-pandemic economy will create even more trauma. The millennials in particular – a generation that began its career in the aftermath of the Great Recession and now face this economic wreckage only a decade into careers – are going to be badly hurt by this.

Unemployment has longer lasting negative impacts than does divorce, being widowed, or being laid off.[1] It’s traumatic and ruinous to someone’s long-term economic prospects and any policy we need to adopt to address tens of millions who are unemployed has to account for this.

What would quickly employ people and stimulate wage and productivity growth? Doing for entrepreneurship what policymakers did last century for capital and labor. That is, invest boldly, at unprecedented levels.

Prices tell you what markets think is abundant and what is scarce. Capital and labor aren’t scarce. Entrepreneurship is.

Proof that capital is no longer scarce is simply this: the price of capital has gone negative. How unusual is that? The Dutch have records on bond sales that go back 500 years. In all that time they never had negative interest rates until just a couple of years ago. Growing affluence means that there are more investors than ever looking to build portfolios. (And hundreds of millions more reliant on markets through investments in pension funds.) Because of this, trillions in capital move around the globe in search of returns.

Education seems to also be providing a lower return than it did half a century ago. The price for college graduates is dropping. The Fed recently reported that a college degree no longer offers a wealth premium.[2] Which is another way of saying that market prices for education – like capital – suggest that it isn’t that scarce. And many millennials, struggling to pay for housing in cities on wages that aren’t terribly higher than those from a decade or two earlier are wondering when their return on a college investment is going to yield a return. It might not.

Once upon a time capital and education were scarce, though, and investing in them gave the country phenomenal returns. A look at what past investments in what was scarce did for wages and job creation suggests what could happen if we make similar investments in what is scarce today. That is to say, to get some sense of what a startup stimulus might do for the economy, we can look at what past investments in capital, education and research did for the economy last century.

In his book, The Rise and Fall of American Growth, Robert Gordon reports that output per hour between 1920 and 1970 grew 2.82% a year. Between 1970 and 2014, it grew only 1.62%. If wages had grown at 2.82% between 1970 and 2019, median income would have been $88,000 rather than the $48,000 it actually was. Compounded over a lifetime, a difference of 1 to 2% is huge. You don’t get returns without making investments, though.

During World War 2, the government invested billions in capital equipment for factories building wartime equipment. Between 1940 and 1945, consumption of capital rose from $19 billion to $116 billion[3], much of that coming from the government.  Additionally, it sent experts on production and management – consultants like W. Edwards Deming and Peter Drucker – to help companies make best use of this capital.

The result was dramatic. On D-Day, June 6, 1944, the Germans could deploy only 319 aircraft. The United States and its allies deployed 12,837. American manufacturing was more powerful than a Nazi blitzkrieg.

When the war was over, the government let companies keep the manufacturing and intellectual capital it had funded. Rather than make tanks and planes, they began making cars and TVs – at rates as impressive as the preparation for D-Day.

Next, the government invested an unprecedented amount in education. Between 1944 and 1949, BA degrees conferred rose from 126,000 to 432,000. The rapid rise in the creation of knowledge workers was essential to the emergence of the information economy.

Finally, the government spent more on R&D, funding agencies like DARPA and the NSF. The innovations resulting from this research – as varied as the internet, communication satellites, and genetic engineering –helped to create hundreds of new technologies, thousands of new products, millions of new jobs and trillions in new wealth. Most R&D investments fail to generate any return. The ones that do, though, continue to compound over time to create value that dwarfs the initial investment. (In this way, investment in R&D is very similar to investments in startups: most fail and the few that succeed generate great returns.)

A startup stimulus could do two things. It could quickly create hundreds of thousands – even millions – of jobs. And it could yield returns as dramatic as the long-term returns to education and research made after World War 2.

While the price markets pay for capital and education seems to be falling, the the price of entrepreneurship – wealth created by successful entrepreneurs – is high and still rising.

In 1987, when he was 31, Bill Gates became the youngest self-made billionaire in history. About a generation later, in 2008, Mark Zuckerberg became the youngest self-made billionaire at age 23. Investments in entrepreneurship could offer high returns.

Big investment in startups – entrepreneurship – will pose as many challenges as big investments in education, research or infrastructure did for past generations. Anyone who knows how difficult it is to identify good startup ideas or to launch a company from scratch will realize that a startup stimulus will be at least as difficult as figuring out how to ramp up production in 1944 to complete one plane every five minutes, launch fifty merchant ships a day, and finish eight aircraft carriers a month. Or land on the moon or launch communication satellites. It won’t be easy but it will yield a great return.

This is a big challenge that promises a big reward. A hundred billion dollars could fund 50,000 startups that employ 700,000 people for 18 months; a half a trillion would fund about 250,000 startups and create 3.5 million jobs. There would be no question about whether a startup stimulus would create jobs. It would be designed for exactly that. We could begin funding startups even as people still shelter-in-place and – depending on how bad unemployment is – adjust the scope of this startup stimulus up or down.

Americans hit by this pandemic could quickly return to work. Rather than a gap in their resume and a hole in their savings, they would get valuable work experience and savings. The trauma of long-term unemployment would be mitigated and their lifetime earnings, productivity and wealth would be greatly different.

What would we get for our return? Tens of percent of these startups will fail as soon as their guaranteed funding is gone, but they will have provided employment at a critical point in the recovery. Tens of percent are likely to continue beyond their window of guaranteed funding for another year or three. Many will become great, viable companies. A few will even become iconic companies, the GE, GM or Apple of their generation. Successful companies mean better products and services for all of us, higher wages and more wealth.

Additionally, all sorts of unexpected benefits came from aggressively investing in capital, education and research. The NSF didn’t start with the idea of genetic engineering or a computer smaller than a pocket protector. The same will happen with great investments in entrepreneurship. As more people become more adept at entrepreneurship, as more communities can at will create new companies able to create jobs and wealth, economies will become more prosperous and less subject to long-term sluggish growth that breeds cynicism and helplessness.

Bold investments in entrepreneurship will not only immediately create jobs but could trigger a steady rise in productivity and wages at least as strong as that of the American economy before 1970. The short and long-term potential of such policy is huge. So is the risk of doing anything less.

Ron Davison lives in San Diego County, wrote The Fourth Economy: Inventing Western Civilization, and helps team within Fortune 500 companies and startups to accelerate product development. @iamrondavison

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[1] https://ourworldindata.org/happiness-and-life-satisfaction

[2] https://www.theatlantic.com/ideas/archive/2020/01/college-wealth-premium-collapsed/604579/

[3] https://fred.stlouisfed.org/series/A264RX1A020NBEA (in 2012 dollars)

Investing in the Apocalypse

The Dow
between mid-Feb and mid-March dropped 38%.
between mid-March and mid-Apr (today) rose 34%.
Since mid-Feb the Dow is down 18%.
(Remember that if the market falls from 100 to 50, it drops 50%. If it then raises 50%, it will only be at 75. It takes a bigger % gain to recover than the % fall that got you into a hole.)

This raise of 34% strikes me as irrational. Our economy will not be the same for at least a year. It could easily take years to get back to normal. Profits will drop more than the 18% that the Dow has fallen.

The dilemma is that if you get out of the market and then get back in, you have to be smart on timing twice: you have to know when to sell (best time was 15 Feb and second best might be now) and when to buy (that may be about mid-summer when people finally realize how abnormal the new normal is or even in February of next year when a new administration awakens optimism).

I don't know about you, but I cannot save enough to retire on the 0.1% return of a bank account, and one of the only certainties in investment is that risk and reward go together. If you avoid risk, you will avoid returns.

What are our options?
1. Just ride this out and try not to get cute on timing. This probably means looking at some lousy monthly statements during the next 3 to 12 months. (And probably a couple of exciting ones. It seems safe to say that volatility will continue to be high. Also, as the government pumps money into an economy where people are going out less and consuming less, this money might just find its way into investments rather than consumption, oddly driving up asset prices even as the underlying economy of everyday consumer behavior shrinks.)
2. Sell and wait for months to finally buy in later. The risk is that you miss the sharp rise that could easily characterize the uptick or that you simply sell at the beginning of a surprisingly decent year's gain.
3. Invest in countries and states that are having better success managing the coronavirus. Of course if it is a country like South Korea that is so dependent on exports, even getting your own act together might not be enough when your trading partners are in a deep recession or - worse - enacting xenophobic trade barriers. In this situation, having a great economy is like having a beautiful home in a terrible neighborhood; still not that great. Still, I do think that there will be a return premium on communities that are well managed.
And speaking of well managed, California (and possibly Washington) companies are more likely to benefit from a virtual world and from smart government management to enable their communities to be less hard hit than companies in other regions. CA and WA's companies could be as different from the rest of the nation as any foreign companies.Watch your own behavior. What are you consuming more of? Less? This could be a leading indicator of where profits will flow.

All the above should be taken with a grain of salt. Your best bet is to diversify across time (just buy once a day or month or year or decade depending on what you can afford, regardless of whether the market is reaching new highs each day or seeming to drop into the abyss) and companies / industries / and countries. Still, I have trouble believing that the market is going to have a great run over the next quarter or three. We have yet to get handle on this pandemic, much less what it will take to adjust to a post-coronavirus world that could easily run at about 75 to 95% of current levels for quarters or even a couple of years.

Acting on Forecasts Rather than Proof

The forecasts for COVID-19 deaths are falling. That's wonderful news. It turns out that measuring the cost for exponential growth of a virus has something in common with measuring the value of startups. It is subject to error but can still inform you how to act.

One key lesson is to move first and move fast. By the time you have data proving the value of a startup, you pay far more for it. Similarly, by the time you have data proving the severity of a virus, you pay far more for it.

Number of deaths thru 11-Apr:
San Francisco: 14
New York: 6,898

"[San Francisco mayor London] Breed ordered businesses closed and issued a citywide shelter-in-place policy effective on March 17, at a point when San Francisco had fewer than 50 confirmed coronavirus cases. (California Governor Gavin Newsom followed with a similar statewide order 19 March.) On that date, New York City already had more than 2,000 positive cases. But New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio, reluctant either to shutter schools or issue a stay-at-home directive for the nation’s largest city, didn’t take similar action for several days. By the time New York City fully shut down on March 22, more than 10,000 cases were reported across its five boroughs." [From the Atlantic, "The City That Has Flattened the Coronavirus Curve"]

5 days can make a big difference when facing a virus that spreads or contracts exponentially.

I see people wondering how stock prices can go up when we're still in a pandemic. Stock prices represent an attempt to price an endless stream of future profits. It is true that the Dow is up 30% in the last couple of weeks. It is also true that it is still down 25% from its peak a couple of months ago. Stock prices fluctuate because people are trying to estimate something in the future that is continually changing as events and best estimate methodologies change. Investors still agree that the coronavirus and measures to protect against it have lowered the value of future profits; their margin of error in estimating that means that stock prices are going to fluctuate. A lot.

I see people dismissing the models forecasting coronavirus deaths as being wrong. Models are always wrong but that doesn't mean that they aren't helpful. One catch-22 with models and policy is that the group taken least seriously could be proven most accurate. What do I mean? Let's say that we had ignored the coronavirus warnings from experts and continued as normal - never socially distancing and not changing anything. In that scenario, New York would be a best case for cities and fatalities would be multiples of what they are now. We could easily have 1 million deaths rather than 100,000. The best-case forecasts would now seem tragically naive. On the flip side, if we listened to those who warned of the worst and took serious measures to protect against that, moving fast and dramatically, the worst-case forecasts would now seem morbidly pessimistic. We would have far less than 100,000 dead and would never come close to a million. Even without behavior change, forecasts of anything that grows or contracts exponentially are likely to be off. Hugely. The outcome could easily be 10X or 1,000X better or worse given just small changes in the rate of contagion or mortality.

Early investors in Apple likely never once stopped to think that it could be worth a trillion early the next century. But they didn't have to know it would be worth that much to know it was a good investment. Given the Bay Area is the epicenter for trying to value the future, it is unsurprising that it would become a model for how to minimize the harm of a virus. Among the many things the folks in the Bay Area have learned is that it is better to move first to pursue a possibility - whether that possibility is avoiding fatalities from a pandemic or owning shares of a startup that later make you rich - and then learn from and adapt to reality than it is to wait for the data to come in and by then to have missed your opportunity.

As the future comes at us with increasing speed, the ability to quickly assess what models suggest rather than what data confirms could make all the difference.

A Preview of What Alternative Energy Could Mean for the Health of our Planet

Per the Economist, by the 21st of March in most cities trips planned had dropped by 70 to 90%. People are traveling and polluting less - about 10 to 30% of what they normally would.

We are going to get such great data on what a difference dramatic drops in pollution levels make from this crisis as we all enjoy bluer skies and - in the face of a respiratory epidemic - actual decreases in asthma-related cases. (*Note - Ron is not a medical expert. He's just speculating on this point. Obviously rises in COVID-19 cases would dwarf drops in asthma due to drops in pollution. But if you can avoid the virus AND enjoy less pollution ...?)

In the mid 1800s, we slaughtered whales for oil to use on machinery in the early days of the Industrial Revolution. By 1900 we were using petroleum oil, a huge improvement. And now we're about to make another great improvement. a move to alternative energy. That can be accelerated with broader public support.

This trial period might help to raise that support by providing us a taste of what is possible, a preview of coming attractions.

How Trump's Policy Turned a Catastrophe into a Tragedy

Greek tragedies were based on the notion of a dilemma, a character forced to choose between two bad options. Kill your mother or your father. Be sat on by an elephant or eaten by a tiger. Crash the economy or kill millions of people. There is no happy ending in a tragedy.

Right now the US is choosing to crash the economy rather than kill more people. The virus has already cost us trillions in lost equity. It will likely cost us millions in lost jobs. Most of us support that choice but there is another option.

We have this dilemma in part because we don't know who has the virus and so we're acting as if everyone does. Why don't we know? A paucity of testing.

If you know who has the virus you don't have to quarantine everyone and shutdown everything. You track who has the virus and who they've come into contact with and you restrict their movements. People they've not come into contact with are free to go about their day. It's business as usual for some portion of the community.

It costs money and takes executive expertise to do this kind of testing and tracking. One of the things that Singapore does is take government seriously; just as in the private sector, they pay some government executives millions and can compete with corporations for the best and brightest. They did extensive testing and tracking of people with the virus and took a very targeted approach.

Michael Lewis's The Fifth Risk may become the source for explaining the deeper cause of why 2020 became a tragedy. Lewis (author of Moneyball, Blind Side, The Undoing Projct and other best sellers) documents how the Trump administration at turns gutted and neglected the various agencies that employed the experts who do things like track hurricanes or nuclear weapons. Trump slashed funding to the Center for Disease Control (CDC), which included eliminating the team responsible for simulating, setting policy for, and coordinating responses to a global pandemic. That cost us in response time and decision quality when this pandemic hit. It's like the difference between calling the fire department that is sitting around the firehouse and waiting for your call and figuring out who could help to fight the fire and where they might find hoses and ladders and how to use them ... while the fire is burning.

Trump has largely replaced any experts who might challenge him with sycophants who only praise him. The World Health Organization (WHO) offered testing kits early on in this pandemic. His administration - biased against anything global - said "No" to this offer and chose to manufacture the kits themselves. Consulting on product development projects, one thing I've learned is that it always takes longer to develop something than you think it will, even if you allow for it taking longer than you think it will. It took longer to create testing capacity than the experts hastily drafted into roles as pandemic response team members hoped. We lost valuable time. And now the virus has spread without check or without good information about where it is. Vietnam - a country with a fraction of our per capita GDP - had conducted more testing than us early on.

We saved a few billion dollars by not taking government seriously Now we're going to lose trillions and trillions. (I know. It's a global pandemic. Lives would have been lost regardless. Trillions of dollars would have been destroyed regardless. My argument is not that this could have been completely avoided. My argument is that it could have been significantly mitigated. The fallout could have been much less severe.)

I understand that Singapore is city-state rather than a sprawl of a nation-state spread over a continent. Still, they pulled off this strategy of extensive testing and tracking and have been able to avoid the tragedy we face. They've had no deaths. Schools without cases of the virus are open, as are shops and restaurants. The American disdain for the importance of good people in strong agencies who are not forced to operate in the equivalent of a pop-up store to deal with something of this magnitude is going to cost us dearly, in lives and dollars. It's tragic.

https://www.npr.org/…/singapore-wins-praise-for-its-covid-1…

How Trump's Fixation on Wealth and Disinterest in People Has Exacerbated the Stock Market Crash

Right now, Trump seems focused on the stock market. You can see why. The stock market that he has taken as an affirmation of his leadership and wisdom is now in free fall. The Dow did well under Clinton and Obama's presidencies (gaining the equivalent of 15.9% a year and 12.1% a year) and disastrously under George W. Bush's 8 year term (losing the equivalent of 3.5% a year). With this coronavirus rippling through markets, Trump's annual compound returns equates to 1.1%. By another measure, as of 12 March 2020, the market had lost the entire $11.5 trillion it gained since his election.


Trump's travel ban and the Fed's attempt to add liquidity and dramatically lower interest rates has done little thus far to slow the fall of markets. Trump's fixation on wealth and disinterest in people and complex problems has caused him to work backwards on the catastrophe before him.

1. The first priority is lives and healthcare. Trump has done little to suggest more lives will be saved by his actions. Test kits have been slow to emerge. Treatment centers are not set up across the country. More will die than need to. He's announced a travel ban from Europe because he's xenophobic, not because it is likely to make much difference at this point. Tests and treatments should be made free and capacity for testing and treatment should be radically increased.

2. The economy is the second priority. People will lose jobs and will need income. Children may be turned away from schools and will need childcare. Businesses like airlines and hotels will suffer severe income loss and will likely layoff workers. Plans need to be in place to keep the economy operating and to keep people financially secure with things like mortgage payments and grocery money, to say nothing of healthcare.

3. Last, actions should be taken to stabilize markets. Without a foundation of good healthcare and protected economy, actions to stabilize the stock market simply ring hollow and seem insufficient. And in truth, the stock market is one way to predict the future. Without good plans in place to change that future, tinkering with the stock market is likely to be ineffectual. With credible healthcare and economic plans in place, stock markets may correct on their own.

Lives matter more than the economy. The economy matters more than the stock market. And if policy makers work on these issues in that order, they could return things to normal by year end. If they try to rush things and gloss over these real world issues and "fix" the stock market first, they will exacerbate a catastrophe that will include the stock market. The stock market is not the game. It is merely the scoreboard. If you want to change the score, you focus on the field of play. What's on the field are real lives and their medical and economic health. Thus far, the market is not convinced that Trump has a good game plan for those realities and if Trump wants to change the score he has to turn the game around.

Globalization and Today's Reality

Markets across the West are down 9 to 15% today. It's important to talk globalization.

The most defining issues of our day are not national. Pandemics, economies, financial markets, global warming, immigration, culture, ideas, research .... all of these issues are about as neatly contained within borders as are clouds.

The US went to war in 1860 to settle a really important question: would we be a confederacy of independent states or a union of states? Before Lincoln, the most common phrase was "The United States are." After Lincoln, the most common phrase was, "The United States is." Lincoln made us a nation. By 1860, railroads, a nascent stock market, and factories able to make enough goods for a nation and not just a neighborhood had transformed the US from a collection of neighborhoods and states into a nation. The world had become bigger and our government needed to adapt. At that point, state economies had become less meaningful than the national economy and we needed a national government to match that.

Today a similar thing has happened in regards to national borders. We cannot resolve the big issues of the day with national policy. It requires international alliances and strong international organizations, just as the growth of the economy in the late 1800s required a national government.
Globalization is not just about international trade. It is about creating strong alliances and organizations that enable coordination and cooperation. National today is what states were 150 years ago. And just as states still have distinct cultures and policies, so will nations. That said, our reality is global. We need institutions that match that reality.

How Exponential Growth Boggles the Mind

Somebody picks up on a problem in the pond. Lily pads are growing rapidly. By their calculations, they're doubling every day to cover more and more of the pond.

Assume that it takes 30 days for the pads to cover the whole pond. Someone who has been hollering about this problem for 25 days sounds shrill for a simple reason: on day 25 lily pads cover only 3% of the pond. From day 1 to 25, lily pads have only grown from a tiny fraction to 3.1%. Double that 5 more days, though, and you're looking at 100% coverage - enough to choke out the pond.
We don't have good intuition for exponential growth.

In related news, a week ago Italian hospitals were able to give each coronavirus patient high-quality care. Today they are practicing triage. Not everyone who comes into the ER is getting treatment - even some folks who are dying for reasons unrelated to the coronavirus. They simply haven't the capacity.

Unprepared for a Pandemic

A standing army is a fairly new thing in the history of humanity. Now we likely spend too much on the military but the notion is that a community needs the ability to rapidly respond to a threat as serious as invasion. And it turns out that a strong military is a deterrent. The fact of having it makes us less likely to need it. (Although sadly, not less likely to use it ... which is another story.)

Trump's 2020 budget proposed an increase in military spending of $210 billion over 2016. Increase. He proposed a total of $2.7 trillion.

Meanwhile, he proposed only $136 billion in public health and safety, a cut from the $140 billion in 2016.

He proposed a bigger increase in military spending than he proposed in total for public health and safety. Military, INCREASE by $210 billion; health and safety, FUNDING of only $136 billion.

Infrastructure, staffing and research to rapidly respond to a threat as serious as a pandemic will - like a standing army - save lives and perhaps even make us less likely to need to respond to a pandemic because it might help us prevent such an event.

In an interview about five years ago, Bill Gates called a global pandemic the most predictable catastrophe of our time and said that there was no excuse not to be prepared.

And if you think that it cost too much to have the equivalent of a standing army for battling pandemics, consider this: in the last 3 weeks, the market has lost about $4 trillion in value. Even more than Trump wants to spend this year on the whole of our military. It may cost you more but the life you save could be your own.