I am publicly releasing today (April 23rd) a post I sent 6 weeks ago (March 11th) to an international group of entrepreneurs. It’s about preparing for the post-COVID-19 world, and thinking « two steps ahead ». Here’s why I’m sharing this post and why I’m looking for input.
I waited a bit before asking about this… But I think the timing is right. (Otherwise, please ignore this post)
I believe that the coronavirus « crisis » is not going to be a short-term thing that will be settled in a few weeks.
For the last 2 weeks I’ve been looking for the answers to two questions:
- What’s the exit strategy?
- What’s the opportunity?
It’s been difficult because, as Olivier Roland put it to me, I was « a bit ahead of the time » and nobody cared. I’ve visited several forums and discussion boards, and nobody seems to be asking those questions.
I believe that over the next 2-4 weeks people in your countries and mine are going to be asking the question that should have been asked in February: »Wait! What is the actual situation? You mean it’s that serious? »
And that over the month of April and May people are going to ask the question that could have been asked in Early March: »OMG What should I do now? »
I’ve shared my thinking on both of those; I’m trying to look forward now.
So we’ve got probably 3 months of panic-based decisions ahead of us, on behalf of the political and business communities. And then sometime in the summer, people start wondering « how do we get out of this mess? » (the exit strategy question). Much later, maybe by early/mid 2021, when it looks like the stock market will « never » come back, businesspeople will wise up to the amount of opportunities that will be all around in a depressed economy with all the social implications of the disease.
So, just for whoever is ready to humor me, I’d like to start asking these two questions right away because I need some input.
And, I’ll just use one more disclaimer; this is another post with actual facts (therefore, bad news).
THE EXIT STRATEGY QUESTION
Here’s a very likely scenario:
- Several rich countries are trying to minimize the issue right now.
Everybody accuses the media of spreading panic, but I’d argue they are actually doing their best to NOT do that.
We all have « better things to do » than worry too much. E.g. France has elections coming up on March 15th and 22nd, and we probably won’t go into Phase 3 of the outbreak response plan before that happens because it’s a lot of trouble if we do.
- Whenever there is enough pressure from the population (say, after 500-1K deaths, which should occur around March 23rd in France based on current models, and with a similar timetable or earlier in the US), a lot of countries are going to use emergency « mitigation » measures, as I mentioned before.
That means restrictions on travel, public gatherings, school closures, basically the scenario that Italy has gone through.
HOWEVER, because we’ll be taking those measures reactively, they won’t be nearly as effective as what we’re seeing in Italy, South Korea or China. (There’s a 37% difference in effectiveness based on whether you act locally BEFORE the first case or AFTER)
- A bit of social disorder insues for a brief time as people crowd out the supermarkets in quarantined places.
- People politely freak out in Italy, vocally freak out in France, and in more gun-equipped countries we get a lot of sensational stories in the media that ratchet up the fear.
- Then hospitals start getting overwhelmed, triage of new patients is necessary because doctors now have to choose who they think they can save (currently happening in Italy, not speculation).
- People get really upset when they realize (a) that hospitals are now prioritizing younger patients which means this is NOT an « old folks disease », and (b) that his also means that older patients have an even lesser chance to make it.
- By end of April, business is considerably slowed down in many industries, and it looks like only a vaccine can save us.
BUT here’s the deal though:
- The fabled vaccine is not coming anytime soon (even if it were discovered today, by the time it passes testing and regulations assessment, and then is mass-produced, we’d have it in early 2021 at the very earliest).
- This is not an influenza virus, but a coronavirus. Who else is in this « corona » family? SARS (still no vaccine), MERS (still no vaccine), and the « black sheep » of the family is a form of the virus which causes the common cold (no vaccine for that one either).
- Because SARS-CoV-2 is a single-strand RNA virus (in other words, a very fragile chain of DNA-like code wrapped in a thin bubble), it mutates easily. So… by the time we have « the vaccine », we could have a new strain of the virus making the rounds, where « the » vaccine is inoperant. Is that a realistic scenario? Yes it is. That’s what happens every year with the flu. You get a shot, and you hope that the dominant strain that year will be the one you got vaccinated for.
So here’s the question again:
How do we get out of « crisis » mode?
- We don’t know if the cavalry is coming
- If the cavalry ever comes, they are going to take a long time to get here
- And when the cavalry gets here, sometimes all they do is shoot blanks
Here’s my conclusion based on the above:
- This is not a short-term « dip ». It’s a least a year-long, likely years-long, and potentially longer shift in our social practices and the way our economy works.
- Americans will have a lot of things to figure out that will be painful in the short term (cost of health care, allowing people to get sick leave, etc) ; but so do other countries (government transparency, reassessment of emergency measures)
In other words, I don’t think we get to return to the old normal this year.
I think it’s unlikely (but possible) that we return to something close to the old normal by early next year: for instance, if we can develop a good anti-viral « cure », then we will curb the number of deaths significantly ; but people will still be slightly more socially cautious because of the scarring effects of the disease, even on survivors. For instance, we have a much different culture around sexual practices in a post-HIV society than we had before.
There will most likely be a huge impact on the culture, on social norms, on overall morale (think New Orleans after Katrina).
BUT there will also be a LOT of businesses and assets that will be affected. This is not speculation, it’s already happened. This is the most optimistic outlook I could find.
Airlines are suffering, some have already declared bankrupcy ; cruise lines are suffering, food, beverage and event companies are suffering. And this is all just now – when the best scenario says we are at the verge of some very bad news.
That brings me to:
THE OPPORTUNITY QUESTION
When everyone catches up in 2-6 months with the enormity of the situation, and people realize how unprepared they were, I think there will be a lot of new issues which we, as entrepreneurs, are uniquely positioned to solve.I believe there is a leadership opportunity here and I believe « people don’t rise up to their highest potential, but fall down to their level of preparedness ». Hence this discussion.
Current known facts, and their implications:
- Social distancing will create huge morale and mental health issues and I think we should proactively address that among our staff, our clients and our community. I don’t have the answers there, but I’d love to get some input.
- I think people look for leadership in hard times and if we can provide that, we generate an amount of goodwill that supersedes dollars in a bank account.
- People will need to not lose their jobs in a down economy (I hope we can agree now that it’s a down economy when we shut down public gatherings, but I’m willing to let this statement stand the test of time and I’m hoping to be proven wrong), and I think it’s important for us to have the cash reserves now to self-insure against the next few months and be able to weather the storm (possibly for a year).
- On the other hand, as long as people are still not under lockdown and panicking, I think we should do our best to provide a ton of value, and sell and sell and sell and « make hay while the sun shine » to build our own cash cushion.
Sonia Simone has a well-written word of warning about trying to « leverage » the pandemic as a marketing hook. Here I’m talking about speaking to all the business-as-usual folks who still don’t care, and running our existing funnels for as long as they keep working.
- Not many businesses and individuals have the cash cushion to last long under depressed economic circumstances, so I believe there will be a lot of assets for purchase in a « fire sale » starting right about mid-April… and it will probably get worse as the months go buy. I do believe there is an opportunity here to decide ahead of time what kind of productive assets we are willing and able to purchase or invest in within that timeframe, because that is what helps restart a stalled economy. People are not going to stay away from hotels and conference centers forever – but there might be hotels selling for pennies on the dollar at the end of the year. If they remain unsold, those employees are out of work, the places get run down, etc. There is a point where everyone being all in cash is hurtful.
So if anyone is already planning for the post-COVID-panic-world, I’d love to hear about it… Especially if you have any pointers or ideas about what the opportunities are a few months/a year down the line.