This Lockdown Hurts Business, But What Is The Alternative?

This subject was discussed today during the OneTAKE Live show hosted by Ian Barkin. I mentioned the NPR analysis and thought it might be useful to elaborate...

Do you remember Fight Club by Chuck Palahniuk? Check out this clip from the movie version. Ed Norton is a recall coordinator for a major auto company and he is describing to another passenger on a flight how the recall business works.

This is kind of where we are now with the COVID-19 coronavirus outbreak. We know that one of the few weapons we have against a virus with no vaccine is social distancing. so we can't travel, go to sports events, music gigs, or work. Staying at home is what everyone needs to do to ensure the deaths from this virus start declining.

As I wrote here, this may in fact be the new normal for several years. A team of Harvard epidemiologists recently published a paper suggesting that social distancing needs to be continued probably until 2022. We can't be sure, but let's assume that a vaccine is widely available inside a couple of years.

The sensible action for any business leader now is to ensure short-term survival and then to take any measures necessary to ensure that your company can continue to operate during a period of extended social distancing. It may mean that your employees are ALL working from home for the foreseeable future. It may mean that you need to completely review how customers purchase your products. Nothing is off the table or too outlandish. You need to change. How can your business function if people cannot get close together until 2022?

This is painful. Many people don't have the option to work from home and many businesses will not be able to pivot to a new operating model. This is why people are out on the streets protesting for an end to the lockdowns. This is why the British Conservative backbenchers (Members of Parliament without a cabinet position, usually more junior) are rumoured to be extremely dissatisfied with their own Prime Minister and cabinet.

The argument suggests that the economic destruction being caused by social distancing is actually worse than the health crisis - the cure is worse than the disease. The Mayor of Las Vegas, Carolyn Goodman is a good example - she wants to open up the city again with a plan that is essentially little more than 'survival of the fittest.'

What Mayor Goodman is advocating is a cull of those unable to fight the virus, so that everyone else can keep their jobs. How did we get civic leaders like this in 2020? People are broke and desperate, but who would seriously suggest that 'we just see what happens' is a good strategy? There are already deaths. This is not a hoax.

The question is, how much is a life worth? Just like the recall coordinator in Fight Club suggested. If we let the virus run free then there is an expectation of one to two million deaths in the USA alone. Multiply the number of deaths by the value of a life and bingo... you have the cost and can compare it to the current pain the economy is enduring.

NPR did the sums last week. Even assuming just one million deaths they estimated that the value of all these lives is about ten trillion dollars - around half of the entire GDP of the USA. So the entire American economy would need to collapse in half before measures like that suggested by Mayor Goodman make economic sense. It's painful right now, but the crisis hasn't cost that kind of money - yet.

Businesses are hurting. Cities like Las Vegas can't function at all right now and I get that, but the alternative to economic hardship cannot be the deliberate sacrificing of all those who catch the virus and are too weak to fight it. Surely?

Then there is the longer term. Consumer behaviour is likely to change dramatically during this period of social distancing and these new habits will be fixed. E-commerce will boom, but it could mean the end of the road for most cinemas or theatres. Even sports clubs will be wondering how to get their fans back to a stadium filled with 40,000 people when they have spent years avoiding others.

Even when a vaccine is widely available for COVID-19 people will now be asking what happens when COVID-20 comes along? Spending and saving habits will change, just as they did after the Second World War. That's not good for economies built on consumption.

I suspect the answer will come in one of two forms, mass surveillance or mass testing - or both. If testing is easily available in every pharmacy then people can get a test, get their digital ID updated by the pharmacist, and be able to prove their negative status where this proof is mandatory - like entering a rock gig packed full of fans.

Mass surveillance relies on people allowing the authorities access to their phone location so after any case of illness, the exact location of that person, and anyone they may have been close to in the previous week, can be automatically calculated. But this relies on permission from the public and a belief that the data will not be misused by government. This feels unlikely in the present climate.

Companies will now be exploring how to quickly minimise human contact through the use of automation and robots - this is digital transformation on steroids. During the last three recessions, automation expanded dramatically. This time it may not just be an expansion, it may be an explosion.

Photo by Ade Russell license under Creative Commons