This Time Is Different . . . and Not Different

Well, this COVID-19 crisis is another fine mess we humans find ourselves in. Whenever a major crisis happens — whether something like the Great Depression, the Great Recession, or COVID-19 — lotsa people think the sky is falling and see no way out. In short, “this time is different.” Others find security in telling themselves that whatever the event, it too shall pass. In short, “this time is not different.”

I’ll posit that both sides are sort of right and sort of wrong. In short, “this time is different and not different.” But you, my precocious Dear Reader, probably saw that coming from the title of this blog post. Not to brag, but I have the smarterest readers of all the readerers.

Samesies

Let’s start with the not different. Tho it’s impossible to know how the COVID-19 pandemic will end, odds are that it’ll eventually run its course. After all, other viral diseases, like SARS, the Spanish flu, and even the bubonic plague of the 14th century eventually ran their course, even if the destruction left in their respective wakes sometimes was nothing short of awful. The human race eventually trudged on. And markets and personal portfolios eventually recovered and/or adjusted for many.

Diff’rent strokes

But each crisis was unique, and had lasting effects just as unique. Heck, even the viruses I named above were radically different. SARS killed a mere 800 people. The Spanish flu, by comparison killed tens of millions. And the bubonic plague? That’s the major leagues, Dear Reader. It may have killed up to 200 million people, which represented up to 60% of Europe’s total population. Currently there are about 750 million people living in Europe. Imagine 390 million of them dying from a single virus. And had the world been as mobile in the 14th century as it is now, the worldwide damage would have been almost unfathomable.

Beyond the incalculable loss of life, each crisis also had its own unique effects. SARS ultimately caused tens of billions of dollars of damage to the Chinese and world economy as a result of broken families, travel restrictions, and other suppressed commerce. But it also showed the benefits of quarantining and other measures to address a pandemic, sped up the adoption of the internet in China, and demonstrated the folly of a government’s attempts to hide news about a virus. The Spanish flu gave rise to widespread adoption of socialized medicine. The resulting loss of labor resulting from the bubonic plague did things like increase wages and land ownership numbers and spur innovations to increase productivity with less manual labor.

The future is now

So, too, will the COVID-19 crisis have massive effects and be looked back on as unique. I’ll speculate as to how. Let’s start with the FIRE movement. Here, a lot of the work has been done for me by someone I admire, Tanja Hester, in an article she penned for MarketWatch, “A recession won’t end the FIRE movement, but it will change it for the better.” I largely agree with her assessment and predictions.

I’ll also make a few predictions of my own. Remote working and teaching is having a moment. Sure, each trend already was on the rise before, but nothing concentrates the mind like a gun to the head. Because of the mass workplace and school closures and self-quarantining being imposed, workplaces and schools face a choice of wholescale adopting web-based work/learning/teaching, or essentially shutting down completely. There will be untold number of grumbles and fits and starts as people make this quick and radically different transition. But eventually best practices will be established. And innovations that result in more effective work and learning will spring forth.

I also think that the social safety net in the United States (and, likely, in untold numbers of other countries) will be radically transformed. This is dark humor, but I think the Corona Fires will do more for America creating a stronger social safety net than Bernie Sanders or any one or group of Americans ever could have. The pandemic is laying bare the mass inadequacies of our current systems.

Think health care isn’t a right? OK. But Mother Nature is showing that she has two words to say about that. And they most certainly are not “happy birthday.” With easy and affordable access to health care, more people would take advantage of it and not have to make difficult choices that might lead them to, for example, go to work and cause an exponential spread of COVID-19 or some other disease. And the afflicted likewise could get care that could keep them in better health and more quickly able to get back to work than otherwise. Not to mention, you know, actually saving their lives. Will socialized medicine in the United States cost money? Yes. Will it cost a metric ton of money? Yes. Is the current regime also expensive in dollars, poor health, and life lost? You betcha.

As for unemployment insurance, large numbers of working Americans —and, notably, most gig workers, a large and fast-growing segment of the workforce — have been ineligible for it. We can debate the reasons for and merits of the system that resulted in this situation. But in my opinion, the situation always was untenable, even if the slowness of society to effectively address it was somewhat understandable given humans’ trouble with admitting to and resolving the negative effects of mass changes. I also think it’s one of the reasons the fabric of American society has frayed and our divisions widened in recent decades. The have-nots have increased in number and become more vocal.

Now we find ourselves in a place where the effects of this problem are as clear as day. Many gig workers have had their work partially or totally dry up. For those who had no traditional employment that might have afforded them benefits like unemployment insurance, I’m sure many or most have been absolutely terrified in recent weeks. And for good reason. To the extent that the call of the those without access to unemployment insurance had already been sounded, the volume has been amplified to a scream. I expect the expansion of unemployment insurance during this current crisis to result in a vast expansion of the benefit once the crisis has passed. It may take some time to get to the optimal new regime. And there will be pain points along the way. But my thinking is that a new dawn is coming.

Arrested development

While I think my predicted changes above largely or entirely will be for the good, I think problematic changes also may result from this crisis. First, I think there will — at least for some period — be a decrease in risk taking, both by those in and outside the FIRE movement. Tanja Hester makes what I think are pretty accurate assessments in this regard. On the one hand, the lower risk will be good for many people. But just as people now are realizing their true risk tolerance and finding that they far exceeded it during the bull market that just ended, I think their risk-tolerance pendulum will swing too far the other way during and after this crisis. That’ll result in people not prospering as much or as quickly as they otherwise would had they followed the optimal path for themselves in good and bad times.

But the bigger problem I’m worried about is the amplification and exacerbation of the harmful social distancing we’ve experienced in recent decades. So many of our interactions with others already are conducted online, not in person. While the technology enabling this has given us innumerable benefits, I think the lack of in-person or at least audible/visual communication by phone or video calls, has starved our fundamental human need for social connection. With remote learning, work, and other interactions now being necessary because of social distancing measures imposed because of the Corona Fires — and my predicted increase in use of this once the crisis has passed — I think we will have even fewer nonvirtual social interaction and consequently grow increasingly isolated and further apart. We will lose even more opportunities to interact with and hear the viewpoints of others instead of those just within the echo chambers we’ve increasingly found ourselves in. Perhaps technology also will be the solution to this problem. I hope it can be. But I fear it won’t. Time will tell.

Dear Reader, what say you? Is this crisis just a variation on a theme? I don’t think so, but if you do, look hard. I suspect you’ll spot some differences between it and other crises.