This current coronavirus outbreak:
- In the short term in the U.S. will likely not be as frightening as many think now.
- In the long term will likely improve globalization and make economies more resilient.
Both results are due to fractions, as well as medical science, human reactions, and economics.
REASON #1 FOR CALM: ARITHMETIC OF FRACTIONS
On March 7, 2020, Johns Hopkins Coronavirus Map showed the following global stats:
- 3,491 dead—this number is the numerator in the mortality rate fraction. In the short term in the U.S. will likely not be as frightening as many think now.
- 102,472 total confirmed cases—this number is the denominator in the mortality rate fraction. In the long term will likely improve globalization and make economies more resilient.
Let’s look at the accuracy level of these two numbers:
- 3,491 dead has a high probability of being accurate because it involves counting dead bodies.
- 102,472 total confirmed cases has a high probability of being inaccurate due to under-reporting and lack of testing.
Therefore, when we look at the mortality rate of 3.4% (=3,491/102,472), the denominator is highly like to increase, which will make the mortality rate less than 3.4%. Example: if total actual cases on 3/7/20 were double the current confirmed number, the actual mortality rate would be 3,491/204,944 = 1.7% mortality rate, not 3.4%.
REASON #2 FOR CALM: MEDICAL SCIENCE
It’s a low probability that the mortality rate will increase greatly above 3% because a virus usually become less virulent—i.e., kills fewer of the confirmed cases—as the virus becomes more prevalent—i.e., more cases of people with the disease.1
REASON #3 FOR CALM: HUMAN REACTIONS
Self-preservation is the most basic human instinct with fear being one of the main drivers for humans to take action.
- By last week—several days after hearing the CDC announcement—people here were stocked up.
- Last week people began staying home with an increasing number of events cancelled, travel plans altered, and companies commencing work from home programs utilizing employee laptops with Internet communications.
- The U.S. population knows how the virus is transmitted, how to avoid catching it, and are altering their behavior.
REASON #4 FOR CALM: ECONOMICS
The markets are reacting, rewarding some, punishing others via capital flows, investment decisions, power reallocations because the:
- Extent of corporate decisions to place significant amounts—many times even 100%—of their supply chain deliverables in one country to gain short-term cost advantages has been exposed.
- Contagion transmission role of mass human transportation vehicles due to air filtration processes lacking effective germ elimination is now obvious.
- Levels of corporate, institutions, and government emergency readiness and communications plans are known.
My utmost condolences to those impacted by personal loss from this coronavirus. We need to continue to focus on ways to decrease the deaths from this new virus, the 50,000 annual deaths globally from pneumonia, the 56,000 annual deaths globally from the flu virus, the 100,000 annual deaths globally from weather hazards, and the 14+ million annual deaths globally from cancer—all horrible losses of human capital/people that are affected at random.
Meanwhile, let’s keep calm and carry on prudently with our responsibilities.
1 “The Importance of Disclosure – For Investors, Markets and Our Fight Against COVID-19;” SEC Chairman Jay Clayton, SEC Director, Division of Corporation Finance; 4/8/20; Public Statement at SEC.gov.
2 For more information on this topic by Kamerick, read “Audit Contends With ‘Endless Variables’ on Covid-19,” Lindsay Frost, Agenda, 4/20/20; agendaweek.com.
3 For more information on enhancing agility and flexibility, read Deloitte “COVID-19 and the board: A chair’s point of view.”