Can America be gaslit into an economic recovery?

There seems to be a new strange divide happening among those who want the economy reopened and those who don’t. It isn’t as simple as partisan politics. 

Two weeks ago those of us in Blue States-- including our governors-- were scoffing at states like Georgia tha were opening up, despite the agreed-upon things we should see before opening up not having been met.

Less than a week ago, California’s Gavin Newsom was closing beaches, as other states were opening up, and vowing to follow science not the White House or protestors. 

Then this week, Newsom announced we’re suddenly ready to go to phase two of reopening. The same week my kids’ school opened back up to lower grades, and friends of mine in California were increasingly advocating for opening things up on social media. 

Huh?

At first, I wondered if I was the only one still hewing to the guidelines that we should see a downward trajectory of documented cases (or positive tests) for two weeks before taking these steps. As a refresher, the White House's guidelines suggest states should have a “downward trajectory” of documented cases or positive COVID tests. Those guidelines were already criticized by public health experts as not being nearly enough to warrant opening up the economy. And most of the states opening up fail to clear even that low bar. In more than half of the states opening up, positive test results are still increasing. 

"What changed?" I found myself wondering, as more and more people in my ecosystem and the media and Democratic lawmakers seemed to be jumping on the reopening bandwagon.

Turns out I’m not alone in the head scratch: According to polls Americans are widely opposed to reopening the economy.

From the Washington Post: 

The opposition expressed by sizable majorities of Americans reflects other cautions and concerns revealed in the survey, including continuing fears among most people that they could become infected by the coronavirus, as well as a belief that the worst of the medical crisis is not yet over.

About half of states have eased restrictions on businesses, but Americans’ unease about patronizing them represents a major hurdle to restarting the economy. Many Americans have been making trips to grocery stores and 56 percent say they are comfortable doing so.

But 67 percent say they would be uncomfortable shopping at a retail clothing store, and 78 percent would be uncomfortable eating at a sit-down restaurant. People in states with looser restrictions report similar levels of discomfort as those in states with stricter rules.

As the Post notes, it isn't all partisan. I’ve actually experienced family members of mine in the Evangelical deep South being more cautious about reopening the economy than friends of mine in Science-loving San Francisco or New York. 

Something strange is going on here. 

I don’t buy it’s just the onset of spring, at least on the West Coast. California, for one, has pretty spectacular weather most of the year and even with current restrictions, we can still get outside and go on hikes, runs and walks. Some of us have stoops and patios and backyards from which to enjoy the weather. 

I also don’t buy it’s some sort of frustrated new WFH situation either. Let’s be honest: For all of our smugness, San Francisco handled the early days of this pandemic well -- in part-- because it’s dominated by an industry of introverts. 

For all of the HBO shows and glitzy magazine, building a startup mostly involves not sleeping and staring at a screen for 18+ hours in isolation. Sure as startups scale they have sales people and crowded all-hands meetings and those plush offices are renowned perks. But at its roots, software is not a fundamentally extrovert-driven industry like banking or media. The greater the isolation, the easier it is to code. It was easier for us. 

Yes: Kids being home from school is a massive challenge. It has destroyed productivity for working parents and especially put working mothers at a massive disadvantage in a time of layoffs and job losses when there’s pressure to bust out peak performance. That is real. But even the Southern states opening up haven’t been talking about kids going back to school, they’ve been talking about haircuts and restaurants and movie theatres and gyms. 

One thing that friends of mine running companies and investing in companies have in common with the President and the publisher of major national newspapers is a desire to get the economy moving again. (A second thing most of them have in common is priviledge. Those talking about lives being lost like eggs being broken to make an omelet are rarely envisioning their loved ones...)

Is it possible that there’s an economic lizard brain trying to magically think us all out of the truths we agreed on a few weeks ago?

If so, there’s not just scientists and epidemiologists there to warn us about the futility of that. There are economists and market watchers. Ellevest CEO Sallie Krawcheck reminded us again of economic realities in her (must read) weekly Money Monday newsletter. 

She recapped the seeming disconnect between reality and magical thinking from a Wall Street point of view, and it’s just as puzzling as what I was seeing from California:

“Usually, when the economy shrinks or falters, stocks fall in reaction. But if April’s gains are any indication, markets seem to be ignoring the bad news (at least for now) … or simply passing Go and looking to better days on the way. 

Yes, there are signs sunnier days may be ahead: The federal social distancing guidelines ended on Friday (though many say it is too early). States are gradually loosening up restrictions and businesses are starting to re-open (with the same criticism). Meanwhile, Gilead Sciences reported positive preliminary results for its remdesivir treatment for COVID-19, and some scientists reported the possibility of a vaccine toward the end of this year. 

The biggest boost, though, continues to be the Federal Reserve’s aggressive stimulus programs, and a pledge to use its “full range of tools” to support the US economy. Some estimates of the power of the stimulus program, as it ripples through the economy, have it at more than 20% of GDP. Ok, wow. 

Still, the roughly 30% gain in stock prices, which seems to signal the expectation for a quick, “V-shaped” recovery, feels optimistic when looking at the decline in GDP, increase in unemployment, and the biggest one-month drop in consumer spending since 1959….and the prospects for staggered re-openings, and potentially waves of the virus.”

She continued with what we all know: Magical thinking only gets us so far. 

“The truth is that how short or how long this downturn is depends entirely on us, the consumers. Our spending accounts for 70% of total economic output. It’s comforting to imagine things getting back to pre-virus normality, and stores are beginning to reopen: Macy’s announced plans to open all of its stores within two months, while Starbucks says 90% of its locations will be open by June. 

But the reality may not be so simple. Will consumers be reluctant to go out without a vaccine or treatment? Will activities that were necessary during the lockdown — like cooking and eating at home and virtual workouts — become habits that consumers will embrace permanently? Without jobs and income, will consumers want (or be able to) to start spending?”

Magical thinking can also be called gaslighting. And this gaslighting only exacerbates the existing erosion of trust in politicians and the media in this country. And as someone watching scientists and health care providers stay consistent in their message on when the economy should be reopened while the media and politicians and some business owners whipsaw, I can see why.

Magical thinking can be dangerous and not just for the reasons epidemiologists have warned about: That a resurgence will delay a true economic recovery even longer. 

There’s also the boy who cried wolf effect if newspapers’ and politicians’ credibility is destroyed when it comes to what we “should” be doing right now. Assume things do get safe enough for people to resume life as usual. If you’ve headfaked us once in the name of a quick recovery, will people believe you? 

I’ve gone from the safety of groupthink around me, and the wisdom of following the state’s guidance, to realizing my family is going to have to decide what’s safe for ourselves. And if there’s any doubt, going out to eat is simply not going to be worth the risk.

And that puts me in my normal spot of being an entrepreneur. Those founders who are contrarian for the sake of being contrarian rarely win. Those founders who get so caught up in group think that they dress like Steve Jobs or Mark Zuckerberg and hope for their success rarely win either. It’s the ones who take in all the data, think for themselves and then ignore all the noise around them that tend to be the ones who make it.