Pandemics are master classes in managing existential uncertainty. Being overwhelmed is ‘normal’. Here are seven actions that we can take as citizens and investment professionals. The focus is on the US and the UK: their governments are floundering. The unravelling in the US is dangerous for investors. Both the UK and the US are very responsive to the financial sector.
Here are seven actions that we can take as citizens and investment professionals. The focus here is on the US and the UK: their governments are floundering. Although these tendencies are present elsewhere, the unravelling in the US is dangerous for institutional investors.
Both the US and the UK are highly responsive to the financial sector.
A pandemic-free world is, undoubtedly, a good thing for markets. If financial sector employees take action in their sphere of control but also lobby for assertive government action, this could help greatly.
The precedents we set during the pandemic and recovery are critical. We have an opportunity to reframe responsible business practices; but a risk of descending further into protectionism and fear.
Flatten the curve
We must flatten the curve of infections and push the peak to Q4 or next year. Without this, health systems will be massively overwhelmed and war time triage will be the norm.
Even the UK government – which tried unsuccessfully to spin 60% plus infection as desirable “herd immunity” – now finally agrees suppression is essential. The US is even more at sea, albeit with pockets of good practice.
Demand will peak at different times internationally. According to George Batchelor, co-founder of Edge Health, a specialist health analytics consultancy, without mitigation, UK demand will peak in around end May and will be “unprecedented”.
Beds for the critically ill will be the big crunch point. Assuming measures are taken to reduce the speed of the spread of the virus, “there could be a need for an additional 25,000 critical care beds”. In England there are only 4,000 such beds.
Their models are consistent with actual experience in China and Italy and the UK government’s own models. For Batchelor the implication is clear: “The priority should be to delay the spread of COVID-19 as much as possible, so that additional capacity can be created in hospitals.”
Seven things you can do
1-3 are for you; 4-7 are for your investment firm; 1 and 6 are the absolute priorities.
1. Leave the house only when absolutely necessary. Work from home (see point 3) and attend only critical medical appointments. If you can’t get deliveries, go shopping only for essentials and at non-peak times.
Avoid public transport at peak times or better, walk/cycle. Keep socially connected but put all socialising (ie, restaurants, cafes, gyms, pubs, etc) on hold for now – even if this is not mandated in your area.
Physical distancing and handwashing are the best ways to stop the coronavirus. Start immediately – even a day’s delay can have a big negative impact according to (theoretical) models.
If you have symptoms, isolate for seven days. If someone you live with has symptoms, the household should self-isolate for 14 days – those you live with will take time to develop symptoms. If you can’t get a test, then assume you are infected – but also don’t take this major political failure lightly (see point 2).
Persuade family and close contacts to do the same. Behavioural change – both helpful or not (eg panic buying) – is viral. People will copy you if you advertise how you’re distancing: share pictures that shows empty streets rather than photos of empty shelves.
2. Contact your elected representatives and tell them you want your government to follow the WHO guidelines, and test yourself. This means contact trace and isolating infected people. Benchmark your jurisdiction against New York, Paris & Madrid.
If you voted for the government in power in your area or country use that to full effect. Well informed and motivated elected representatives can have a big impact. In the US, Representative Katie Porter forced the head of the Centers for Disease Control and Prevention to agree to fund all testing.
3. Find concerned colleagues and ask your CEO to encourage working from home. If significant parts of the workforce are not able to work from home, immediately initiate (or reemphasise) the need paid medical leave, and include contractors and gig economy workers.
This is particularly important in the US context since 44 million people lack access to health insurance. Sadly, without government action, many will have little option but to keep working: transport for London reports that the tube is much emptier than buses, which are disproportionately used by low-income people.
4. Persuade your firm to write to all investee companies explaining what you are doing and asking them to do the same. Banks are particularly important: they should learn from the financial crisis on 2008-09 and not force otherwise successful businesses into bankruptcy because of short term liquidity concerns.
5. Ask your firm, particularly if you work for one of the larger financial sector players, to share responsibility for vaccine development. Pre-commit to capitalising companies that are developing vaccines when they need capital.
A great organisation in this regard is CEPI. Don’t let legalistic excuses about fiduciary duty stop you from doing what is needed. Make investing to prevent and mitigate systemic risks a small part of your fiduciary duty, and with a strong business case.
6. Persuade your firm’s CEO to write to government and ask them to:
- Follow the WHO guidelines on testing;
- Contact trace, isolate and treat infected people;
- Provide urgent financial support to SMEs (as in Italy and France) so that they will have a chance to recover after the crisis – without this large firms like Amazon will simply increase their market dominance and further reduce competition;
- Bail out workers before bailing out large cap companies that have engaged in significant share buybacks. It’s particularly imperative that investors who have a diversified portfolio and a long horizon time frame (universal investors) speak up for a dynamic market and public good. Such investors are uniquely suited to providing intellectual aircover for governments by pointing out that in this highly unusual situation, there is no contradiction between saving the economy and saving lives. Economic dogma should not limit action to mitigate and suppress the pandemic.
7. If your firm has a significant exposure to governments that slow in their response to this pandemic (such as the US and the UK), provide clear guidance on how you expect these administrations to improve their performance drawing on your international experience. Don’t worry if you are headquartered in another country – finance doesn’t have a passport. Joint statements from trade associations are likely to be most impactful, but speed is of the essence, and if compromise cannot be achieved, specific company statements are still useful.
Over the longer term, this crisis could be an unprecedented opportunity to rethink responsible business practices. So far, the shift to “stakeholder capitalism” has been dominated by empty rhetoric. But pandemics reveal our interconnectedness and make a pressing case for collective action on public health, climate change and inequality.
They will also clarify the limits of private sector agency in the face of government neglect. Real progress on ESG requires policy action as well as business innovation. We all have the opportunity to reshape business culture and practice as societal and environmental tensions sharpen further.
Lets seize this opportunity. Our common security and long-term future depends on it.
Raj Thamotheram is a senior adviser to Preventable Surprises and Alison Taylor is executive director, Ethical Systems, NYU Stern School of Business