You Ain’t Seen Nothin’ Yet!

At 8 pm on 24th of March 2020, Prime Minister of India – Narendra Modi announced a complete lock down of India for the next 21 days.

What does this mean?

For the next three weeks, 1.3 billion people will remain confined to their homes as the nation bids to fight the spread of coronavirus. Roughly, 17% of the world will remain in their homes for the next 21 days!

Read this aloud and think about it! Think again!

If you are still not startled, think about this. India’s population is more than the entire population of Africa. It is more than North America and South America combined. It is roughly the same as North America plus Europe! Yes, the entire western civilisation!

No one has attempted a quarantine of such size and scale in the entire history of mankind.

However, was this really required? Most definitely, yes.

India’s best chance of beating the virus is to act early and employ social distancing. Considering our population density and learning from challenges that other countries have seen in enforcing selective lock downs, a state enforced complete lock down was the only solution to protect the country from the coronavirus spread and somehow, flatten the curve. India’s health care system is not equipped to handle the sheer volume of cases that can come if this went unabated. In Mr. Modi’s words, “we have choose between 21 days to move forward or going back by 21 years.” He could not have been more right.

So here we are!

Truth be told, I have never seen such a thing in my lifetime and I thought I had seen a lot – India on the verge of bankruptcy in early 90s, opening up of economy, Mumbai riots, Asian financial crisis, dot-com bubble bust, roaring markets of 2000s, global financial crisis, Mumbai terror attack, 2G and 3G scam, coal scam, Modi wave, NPA crisis, IL&FS default and even the unimaginable, demonetisation! Sometimes, truth is stranger than fiction.

That being said, (in my view) the sheer scale of the impact that the coronavirus may have on the world is possibly as big, if not bigger, as the World War II.

It is quite natural to have lots of questions on what is going to happen next. Can this be properly effected for 21 straight days? What will happen to the people, especially the poor and those who live on daily wages? What will happen to our supply chains? Will most of the essential things be available or not? What will happen to mortgages, loans etc.?

Honestly, no one has a clue!

And, that is okay.

Famous neuroscientist, Antonio Damasio once said, “you will be much more in control if you realise how much you are not in control.”

Rather than trying to think about all the “unknown-unknowns”, we would be served better if we use this time to introspect and do what is under our control. During this period, some of the best advice I have received are:

• Focus on your and your family’s health. This is far more important than anything else.
• Cherish every moment with your family and remember that many may not be that lucky.
• Chronicle what you are going through in these tough times. Hopefully, we will have great stories for our grandchildren.
• This is the time to catch up on that book or movie or series or a hobby that you have always been wanting to.

As investors, many of us are constantly grappling with concerns such as – What will be the impact on the economy at large, on the businesses, especially the small and the more fragile ones? What will happen to the stock markets, particularly to our stocks/investments?

It is time to go back to the drawing board and think in first principles. You have to trust your investment philosophy and review why you invested in those franchises in the first place. Unless you were just speculating, you will realise that businesses are far more resilient than you would think. In the lives of these businesses, this is not the first crisis and in all likelihood, this will not be their last.

As long as you believe in delayed gratification, you will do fine even if the short term outlook may seem distressing!

Today more than any other time, the most useful counsel would be to not give in to pessimism. Amos Tversky described this perfectly when he said “When you are a pessimist and the bad thing happens, you live it twice.”

Lastly, all of us – from general population to businesses to health care workers to governments – are all in this together. We are all learning and responding to the curve ball that the nature has thrown at us. No one had anticipated or seen this before!

One thing I can tell you for sure is that – human resilience and will to live is far stronger than it is given credit for. At least, years and years of history is on our side!

One last thing,

I had read extensively on different bear markets from the global financial crisis to the great depression. I felt that most people overreacted and that my response would have been better. As an investor, this is the first full-fledged crisis that I am witnessing in my lifetime. I, now, realise how difficult it is to do things which seemed most logical just a few days back!

Just when you think you have seen it all, world has a way of singing that old song by Bachman-Turner Overdrive – “You Ain’t Seen Nothin’ Yet!”

But, its also important to remember that the album was called “Not Fragile.”

The author is Partner and Head of Research at Bay Capital. Views are personal.