The Black Swan: Covid-19

It seems a pity to name a crisis after something as beautiful as a Black Swan. But then, it is a greater pity when a crisis like a Black Swan occurs. So what is it? While many authors have expounded on this topic, I would like to simplify it further:

Black Swans are an extreme type of crises that have three key characteristics:

1. Rare & high profile
2. Hard to predict
3. Huge negative impacts.

Because they are rare, Black Swans have an element of uncertainty. Often they are part of a portfolio of future foresight predictions, but are overlooked because they are outliers or the probability of the event occurring is low. Take for example COVID-19. In its annual review of top five events with the most impact, the World Economic Forum identified pandemics in 2007, 2008 and 2015. Seems like in the last few years, that this topic was totally overlooked by industry experts!

An article published in the The Journal of American Medical Association (JAMA) in 2007 on pandemics by Taubenberger, Morens and Fauci state, "It is currently impossible to predict the emergence of a future pandemic other than to strongly suspect that one will eventually occur, or to predict when or where a future pandemic will occur, what subtype it will be, and what degree of morbidity and mortality it will produce." So while you might foresee a Black Swan as a possibility, its probability of occurrence is so low that that is still catches everyone by surprise and shortens the response time to mobilise resources and find mitigation strategies.

Black Swans are high profile events - meaning they lead to huge losses - of lives, money, or security, or all of the above. They capture the minds of people and this leads to an overload of fear and destabilisation. In today's world, this means social media hysteria and fake news. Managing rumours and separating fact from fiction becomes critical to prevent the spillover of a crisis. It was estimated that from January 1-13, 2020 (beginning of the outbreak outside of China), coronavirus was mentioned in 48.7K Tweets (27% expressing fear). Then from January 14-February 28, coronavirus was mentioned 46.7 million times (15%-16% mentioning fear). WHO declared COVID-19 a pandemic only on March 11, 2020 (by when we had reached the point of no return).

As a Black Swan, Covid-19 affected over 180 countries, leading to a loss of life. As of March 23 (we knew about this virus on 31 December, 2019), there are 360,697 known cases and 15,488 deaths. This is high impact! HOWEVER - the total recovery is 101,794 - not something often tweeted! The spread of the virus is exponential. According to Devex, it took over three months to reach the first 100,000 confirmed cases, 12 days to reach 200,000 and three days to reach 300,000. Google has a live map for you to track cases.

This crisis is being prolonged as borders did not synchronise closing, but did so in a staggered manner. This has been going on since December (starting in China), dragging on effects that will lead to a global recession. The negative impact includes the loss of jobs, the fear and uncertainty about the future, the wiping out of young firms, the impact on "globalisation"and supply chain, the rising inter-generational gap (elderly versus young and perceived as more immune generation), the ethnic fears based on virus origin, the poor health systems resilience, and the lack of coordination and data sharing across countries. It is estimated that this Black Swan will have an economic impact in excess of US$ 1 trillion.

While closing borders have left people stranded between borders on cruise ships, in airports and in transit countries, it is not new. Closing borders was also how we dealt with the Ebola crisis a few years ago in 2014. Ebola cost Liberia, Sierra Leone and Guinea US$ 2 billion in 2014-15, with nearly 23,000 people infected and 9,000+ people dead (less than COVID-19). The lessons from that Black Swan were - most importantly that it was people who are the worst transmitters of the virus (you can't blame the animal except for origins)! The only way is to manage the spread of an epidemic is so called "physical distancing", the self-responsibility of quarantine to wait out the incubation period of the virus, and teamwork (we are all in this together)!

Black Swans are always easy to identify in hindsight so what can you really do? It all comes down to an agile approach to crisis mitigation. Data sharing, cross border collaboration, transparency, partnerships, citizenship and leadership for creation of public value are some key tools. But what is most important is solidarity and hope. Innovation flourishes as both young and old firms search for opportunities as industries crumble and get realigned to market needs. Schumpeter's creative destruction is widely apparent.

If anything, the resilience of the people in Italy who were singing, the care the UAE has taken for all its residents including its expatriates (80% of the population), the transparency of Singapore in sharing data on COVID with its citizens (check out the network graph), the way Canada made job security a priority - all these examples make you realise that crises like these, are a test of humanity - who we are, what values we hold dear and how much we care about the society we live in. The way the private sector has pitched in - the Jack Ma Foundation, Google in fulfilling a promise they were not aware of, Marriott taking a lesson from Toyota post the 2011 Triple-disaster, and cutting executive management payrolls by 50% and leading by example, to protect employee jobs..... are examples of best practices for corporate social responsibility! Factories are pivoting with a wartime effort to make essentials for healthcare workers on the frontline. This event may lead us to redefine what is a public good.

There are great lessons for all of us - for individuals, business owners, large companies, NGOs, IGOs and Governments. There are heroes we took for granted - health care workers, city maintenance people, grocery shop workers, delivery men and women. There are neighbours we never knew who needed help. In the end - a Black Swan is really about people - everything else is secondary. Yuval Hariri said in a recent Financial Times article (you should read this), "The decisions people and governments take in the next few weeks will probably shape the world for years to come....many short-time emergency measures will become a fixture of life....they fast-forward historical processes....When choosing between alternatives, we should all ourselves not only know how to overcome the immediate threat, but also what kind of world, we will inhabit once the storm passes……"