People are scared of the virus that is rapidly spreading from China to the rest of the world. Nervous traders in the United States have caused the stock market to plummet, and fears of a recession are looming. How worried should you be?
2020 is not 2008, 1987, or 1929. Today, fewer industries are affected by these global pandemics compared to the previous ones. The cause is the underlying fundamentals of how America and the rest of the world transacts have changed drastically. This change is primarily enabled by technology.
During the recent recession of 2008, consumers were barely getting introduced to the smartphone. Amazon wasn’t the biggest threat to local retailers. Food delivery virtually didn’t exist. Look up your smartphone and see how many apps you have. These apps have enabled people to live an easy and maneuverable life without much disruption. Similarly, since the last recession, companies have increasingly put their workforce on a virtual platform. Rarely you will come across a company that doesn’t have few remote or at least part-time home based employees. Companies are using Skype, Zoom, and many other meeting tools. They are used to productivity tools to manage workers.
The ones really hit by the fear are industries that bring a group of people in close contact. Some of these include hotels, cruises, planes, restaurants, coffee shops, and bars. Also hit are those that manage conferences, especially the big ones that attract thousands of people such as Salesforce, AWS, and Facebook conferences. Each of these conferences provide money to the local economy. Because of Salesforce conference, attendees fly in an airplane, stay at a hotel, eat at a restaurant, drink at a bar or coffee shop, and shop at various retailers like H&M, Macy’s Bloomingdale, Nordstrom. While nothing will happen to Salesforce unless their clients shut down their businesses, the economic boost these attendees provided to the economy would suffer.
This suffering is temporary
We are lucky to live in an era where science, technology and the supply of capital has advanced so much that it’s nearly impossible to be hit hard as bad as the previous great recessions or pandemics (this obviously from my very optimistic view). The first coronavirus vaccine was developed within 65 days, the first to ever occur in history. People are sitting in their homes and watching YouTube, Netflix, or a reality show. Some are busy with FaceTime or WhatsApp video/audio calls. Others are busy loving or trashing someone on social media. They do all of this while they order pizza online from apps like Grubhub and shop almost anything they need from Amazon, Walmart.com, or eBay. Local grocery stores have long lines because people are buying a lot of stuff, products that aren’t even their needs. Because of this over-buying, the others in-need are deprived of the basic necessities. They aren’t even realizing that it’s not a category five hurricane where the supply chain infrastructure has been or would be destroyed. Empty grocery shelves today would most likely be full tomorrow. No need to panic. And do not help create an imbalance by buying too much for yourself.
Looking forward
Think about this for a while. Do you really believe people will be confined to their homes? Of course not. Over time, as the number of cases start falling, people will start going to Cinemax movie theater in a Lyft ride and order a beer or popcorn from the counter and watch a movie. Would businesses continue to shut their doors? Of course not. Soon Starbucks, Peet’s or a local sandwich shop would realize that they need to pay their bills. In order to meet their obligations, either they will have to lay off employees or open their businesses. While many would be tempted to get rid of the workforce, they should remember that while the stock market has crashed, the underlying consumer optimism towards economy remains unchanged. They will need employees again soon.
In the next few years, you will read the stories of people who bought the market dip or made a bet that paid off exponentially. Why not be one of them instead of panicking about what to eat? For fun, you can try fasting for two weeks and you will realize how easy it is not to eat and how difficult it is to lose weight.
In some long checkout lines at large grocery chains, you will see some people with many boxes of Corona beer. They perhaps know it’s not the time to panic but to drink Corona and have fun while the coronavirus dies itself. You have to be an optimist in war times, especially when in a war against an unfamiliar enemy. While the invisible Corona enemy has threatened the world, we shall be determined to defeat it. And we will.
On a side note, predictions are made that US will see over three million deaths. I have been skeptical of that unbelievable large number. I would be surprised if we cross even one hundred thousand primarily because of the advances in medicine and technology that we have made since the Spanish Flu over a century ago.
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Update: (03/21/2020)
Reference stories that back up some of the trends I mentioned above:
Elon Musk’s Defiance in the Time of Coronavirus
Gig Worker Balances Big Paydays Against Coronavirus Risks
Update April first week:
Most restaurants and coffee shops are closed even for takeout. This has directly affected the food delivery or gig delivery people. Very few places are open such as Subway and McDonald’s (not all locations). Food is an essential business. It doesn’t appear that States forced the restaurants to be shut down; they had just forced them to service only pickup and delivery orders. It seems like businesses have shut down because of the extra precaution to practice social distancing among their employees.
Another likely argument for the businesses to fully close is due to the paycheck protection plan and others aid the government has provided. If workers are able to get equivalent amount of money without working, the are unlikely to work. This could be looked as a whole of stimulus, state plus federal unemployment benefits and medical care.
Food Delivery and Meal Kit Businesses Rise Due to Pandemic suggesting those restaurants who have kitchens open for takeout and delivery are benefiting
Update May First Week
As predicted, many people no longer follow the shelter-in-place rules. Parks in San Francisco are occupied with families and kids. Tenderloin has all the food smell coming. Embarcadero is crowded with people running, biking and walking holding coffee in their hands. In many parts of the country, massive protests are going on to open up the economy. In Texas, an arrogant judge fueled national outrage against the lockdown by imprisoning a mother who wanted to work so that she could put food on the table. The case got national attention for unprecedented reasons: a woman wanted to work to earn living; a judge who thought working is crime and was narcissist enough to demand an apology.
In another incident, Elon Musk is relocating Tesla from California to either Texas or Nevada. Musk has been publicly scolded by Democrat representative(s) for speaking against the California order.