Covid-19 vs. Florida-2004

The former Chairman of the Federal Reserve, Ben Bernanke, said last week that he thought the economic effects of Covid-19 would end up looking more like a natural disaster than a "1930's style economic depression". When I first heard that, I thought he was downplaying the threat. Then I had a flashback - to the summer of 2004.

Back then, I was running a cybersecurity startup in Jupiter, Florida. Life was good - we'd just landed contracts to provide security suites to millions of Comcast and Cox broadband users, and my President and second-in-command, Doug Brunt (more recently famous as a key player, alongside his wife Megyn Kelly, in the "Bombshell" movie), was close to bringing on Google and Microsoft as customers for our antivirus technology.

What could go wrong?

As summer came to a peak, we got the first hint of the phenomenon that would transform the next two months - a storm warning broadcast in English and Spanish by Jeb Bush, then the state's Governor. He told us a hurricane was forming in the Atlantic and had been given a name - Frances.

We went to the conference room and turned on the TV. The hurricane track showed a raging blue mass of wind and rain extending hundreds of miles - coming straight for us.

"Don't worry," my local co-managers informed me. "Jupiter has not been hit by a hurricane in a hundred years. We'll be fine."

This was comforting information. But it was dead wrong. Three days later, Hurricane Frances went right over the top of us, killing almost 50 people people on its way through the Bahamas, and ultimately causing over US$10 billion in damage.

Like most disasters, it started out as a very mild change in the weather. Panic-buying, fueled more by tourists than the hardy locals, was happening right up to the moment it hit - mainly BBQ gas cylinders, ice, bottled water, and... toilet paper (sound familiar?)

To be prudent, we checked ourselves into a local hotel room, and watched as the storm approached, drinks in hand. The stiffening breeze blew a leaf onto our balcony, where our small group was holding an impromptu hurricane party.

"Oh look," someone said, pointing a beer at the leaf. "Debris!"

That got a laugh. But less than three hours later, we were struggling to hold a mattress up against the flimsy sliding doors of our 4th floor hotel room, as torrential rain flooded in and debris, some pieces the size of a refrigerator, roared past us at eighty miles an hour. Outside, trees were falling onto cars and power transformers were exploding in fireballs, sparks lighting up the night sky. The noise was terrifying.

The storm-force winds lasted for hours. When dawn finally came, we were exhausted. Somehow we managed to get some sleep, and when we woke up, we woke up to a city that had been transformed. Debris - trees, branches, billboards, electrical cables, trash - was everywhere.

No electricity, no internet, no mobile phone service, no working ATMs, tainted water, impassable roads, "good old boys" in cowboy hats driving Ford F150s with guns laid beside them on the seat and chainsaws in the back... no open restaurants, rain-soaked inedible food, lines gas stations (the few still open), and limited supplies of water.

When the chainsaws came out of the F150s and the roads got cleared and we finally made it back to our house (which was thankfully still standing), there was no electricity, no TV, no internet, and nothing working except our gas-powered BBQ and an emergency lantern. It took days for stuff to start working somewhat normally again, and several days more for restaurants and stores and gas stations - and our office - to get back to normal.

And then, within days of the transformers being fixed and the lights coming back on, Hurricane Jeanne smacked right into us, on an almost identical track to Frances (in the image above, our house can be found literally at the center of the red dot.) And the same things happened to us all over again, with exactly the same results.

Ultimately, during the six weeks marked by the naming of Charlie (August 9th) to the demise of Jeanne (September 27th), we were affected by a total of four hurricanes, and for two of these we were forced to "shelter in place" - and then stay sheltered in place, largely because there were no other options - for days.

Our business was seriously affected, but not fatally - my stellar ops team had installed servers in multiple locations elsewhere in the world - and the only real effect was on sales and bus dev, both of which began bouncing back to life as the phones came back on. We did business from home, and via WebEx - and via Doug's office in New York. And by Christmas, things were relatively normal again.

So, with this quasi-analogous story now told, the question on my mind (and hopefully, yours) is: is Ben Bernanke right? When its history is written, will Covid-19 ultimately take the form of a short-term natural disaster, or a much longer-term financial depression?

Upon reflection, I think Mr. Bernanke will be proven correct. For while the current situation for many is terrible, and will certainly get worse, it is possible to believe that the economic consequences of Covid-19 will, over time, start to look more like a natural disaster than a 1930s-style depression.

At some point, this storm will pass, restaurants and stores and cinemas will re-staff and re-open, and we'll all get back to doing what we were doing before.

There are signs already (mainly in China and South Korea - but also even in hard-hit Italy) that key inflexion points are being reached (my partner Dan wrote an excellent article on this a couple of weeks back.)

We may still be some ways from the end - but the shape of the curve is becoming visible.