Contracts and agreements will be understood differently by different parties: The Association of British Insurance has put out a statement saying standard business interruption cover - which majority of firms purchase - does not include forced closure by authorities.
Governments need to take dramatic actions to limit the long-run economic crisis due to the short-run of closing down the economy.
Governments will be picking the winner and losers of the economy.
Nationalizing businesses will happen: 1) Guaranteeing loans | National governments back-up loans made by private banks; 2) Equity and control | Putting so much national cash at risk governments will require some control.
Economies need a backstop - some agents with a massive balance sheet - the only option is national governments.
Think Corporate Social Responsibility (CSR): Support others in your supply chain, industry, community, and local government. Consider in advance and identify what situation(s) where your business can contribute, be it healthcare, communications, food, or some other domain. Focus on the intersection between acute social needs and your specific capabilities.
Vital to inform citizens what we do know and don’t know.
Panic in financial markets reflects societal panic about the virus and the government’s response to society’s panic is to hurt the economy by shutting the economy down - real-world improvements will drive markets and government activities.
National governments are looking at direct stimulus in the short-term around 4-5% of their GDP. So the US has a 20 trillion dollar economy, so look for one trillion-plus or minus - basically a stimulus equivalent to the economy of Texas
Plan for a global recession - how long this will last is unknown.
We don’t have precise information on when this will stop.
We don’t know if the virus is seasonal - will summer halt the spread only to see it return next winter?
We don’t know what happens when you reopen the economy.
Good businesses will go bust due to no fault of their own.
The recovery: V-shaped? U-shaped? L-shaped?
A typically American company only has two months of cash reserves for payroll.
We are making decisions against an unknowable future - what will happen now will depend very much on how we all behave in dealing with a pandemic.
Post-COVID-19 world
Plan to reflect on what will be learned: Efforts should be made not to squander a valuable learning opportunity. Even while the crisis is unfolding, responses and impacts should be documented to be later reviewed and lessons distilled.
Prepare for a new world of commerce and governance: We should expect this crisis will change our businesses and our society in important ways. Many business pundits are speculating areas like online shopping, online education, and public health investments, which will all be impacted and changed forever.
Future happenings: 1) Global JIT supply chains will be changed for more resilience; 2) Building work from home infrastructure that scales; 3) Think TSA-like infrastructure for stadiums, concert venues, theaters, airports, cruise ship terminals, hospitals, and office building that protect us from viruses and not just weapons; 4) Think pandemic insurance and Black Swan savings accounts; 5) Mobile and remote education - they way kids learn will be changed
Going forward
Know the difference between responding and reacting: Just like medicine, you want to respond to treatment, not react to treatment. For this crisis, you want to respond and not react to events.
Over-index on resilience and generosity.
These next 30 days won't define your year, your decade, your life. Be present but know that the future will happen.
What narrative do you believe? Do you believe that the world is breaking down or that private business will save the day?
"Some of the best things in life come from uncertainty." -- Mervyn King, for BOE chair and author of Radical Uncertainty
Embrace uncertainty: I met my wife of 17 years randomly at a DC cocktail party. I randomly drove around France and discovered Château de Chambord. I sat next to now a dear friend by total chance on a flight from Singapore to Hong Kong. I arrived unscheduled to see a sunset at the Taj Mahal. I saw Kelly Slater surf a perfect wave. Uncertainty is where the magic in life happens.
Enjoy the ride and plan accordingly.
-Marc
Marc A. Ross - Founder | Brigadoon
