Two phase pandemic

I have not written directly about the ongoing COVID-19 pandemic because I don’t have any relevant expertise to add. Enough people are writing about this so I am following a small number of sources to try and keep the noise down.

• Ben Thompson, particularly his interviews, providing good coverage from a tech perspective.
• Imperial College reports provide excellent epidemiological modelling and are informing UK government policy. It was Report 4 on Feb 10 about the fatality rates that changed my mind about how serious this was going to be. On 2nd Feb I had booked a June flight to Japan, but after reading this report decided to hold off any further planning to see how things developed. That trip has now been postponed.
• Niall Ferguson writes in various outlets and usually tweets his articles, providing an essential economic historical perspective. His Feb 2 column in The Times alerted me to the potential of what was happening, although I did not yet appreciate the severity. A recent policy seminar with him provided a useful historical perspective.
• Paul Graham of Y Combinator is tweeting useful information, mostly from medical and epidemiological sources.
• Yuan Yang, the Beijing correspondent for the FT is providing an essential perspective from within China.
• I am not following daily on Twitter but Tim Ferriss was also an early signal for me as the pandemic was ramping up in Feb. Sam Harris came a bit later via his podcast in March.

I am also watching the daily UK Government press conferences, which are useful for keeping up to date with how the UK is dealing with things. Staying glued to the news is not helpful, so I am trying to go about everything else in as normal a manner as possible, only checking the above sources once or twice a day.

I use writing, and this blog, to develop my understanding of topics. The best way for me to work through an issue is by writing, so this post is about how I am thinking about the pandemic in two phases: medical and economic.

There are a lot of questions and I have no answers. Nobody knows what is going to happen next – uncertainty is one of the biggest challenges and models are only a simplification of reality. Whether it is the true number of infections or what is going to happen to major industries, the lack of predictability makes it even more difficult. That said, I have found thinking in two phases useful to understand our current situation.

Phase 1: Medical #

We are currently in this phase. The goal is to “flatten the curve” through social distancing, thereby protecting the health service to allow it to treat as many people as possible. A huge part of this is staying at home, which is what has caused the serious economic damage. Governments are trying to simulate the economy by paying people’s wages (or equivalent, through social security) so that we can get through this phase. In this phase the economic cost is rightly being ignored – the priority is to get through this phase as best we can.

• How many cases are there? What is the true fatality rate? How many people are asymptomatic? How does this change based on demographic?
• How does transmission work? How do we know if workers should self-isolate or if they can return to work? How will the antibody testing work? Why can’t we test more people? What measures are effective at prevention? Are people immune once they have had it?
• How is the health system coping now? How will it cope over the coming weeks? What do health workers need to be effective?
• Do we need to introduce stricter measures? How long can people keep this up? What happens as the weather gets nicer?
• How do people deal with isolation? What is the mental health impact? How can healthy people help?
• When can we lift the social distancing measures? How do we gradually allow people back to normal activities? Who gets priority to return to work first? When is it safe for the most vulnerable to go out again? How do we know who has immunity and who doesn’t?
• When will there be a vaccine? How do we deliver it to the global population? Who gets it first and how do we know who has had it and who can go back to work?
• How do we safely roll back the measures introduced in this phase? What about students and teaching? Are qualifications considered as valid? What about people brought into the frontline who are not technically qualified e.g. final-year medical students?
• Will there be a second wave?
• How do we prepare better for the next pandemic?

This phase will be short-term and will have an end.

Phase 2: Economic #

At some point, the medical phase will end. Whether through a vaccine or exhausting transmission through isolation and/or herd immunity, COVID-19 cases will start to decline. The economic phase started when social distancing was introduced as business as usual came to an end, so it runs in parallel behind the scenes, but once the medical phase ends (or reduces) then phase 2 really starts.

• How quickly can people return to work? How quickly does consumer demand return? Will it return to the same levels? How soon? Do industries bounce back right away?
• What happens to the people who have lost jobs? Is it permanent? What do they do next? Can they retrain? How will the new social security measures cover them and for how long?
• Is there a new mortgage crisis because people who previously had secure jobs lost them and can no longer pay their mortgages? Will properties be repossessed because landlords lost their income from people who cannot pay rent? How does that affect house prices?
• How are pension funds affected? Will people coming up to retirement have less money than they were expecting?
• Does this change how we think about climate change?
• How does the oil shock interact with the coronavirus shutdown?
• Is this a major shock that changes things in unknown ways or does it accelerate existing trends?
• What was already changing that will now be the norm e.g. remote working or political nationalism, telemedicine? What changes become permanent e.g. do we need a big office, is everything in the cloud, what level of social security is right for the government to offer?
• How do we pay for the costs? Are taxes changed? Does it matter if we have such a high national debt? If there is huge unemployment, where does the government find revenues to pay for everything?

This phase will have an unknown duration. We don’t know the long term implications, what “normal” will look like or when we will return to it. Although the medical phase has terrible human cost, the economic phase may well cause even greater hardship over a longer period of time.

Thinking in phases #

The medical phase is what everyone is thinking about now because it impacts people personally. Illness and death are horrible.

It’s important to focus on how to react now (as an individual or a company), but just as important to think about how to deal with the long term impact. That’s where the economic considerations come in. It’s too simplistic to dismiss “the economy” as something impacting the wealthy few – the risk of lasting harm is present for both phases, just in different forms. Both are important at the right time.

For now, these are all open questions.