Waiting game thoughts for April 4th, 2020.

The “waiting game” continues. Here are today’s thoughts :ⁱ

• This is the start of another Great Depression. Here comes 30% unemployment on top of the 40% we already had. So call it 70% total, round figures. The economy will not be back to “full steam” anytime soon.
• There’s no choice between “the economy” and “human health.” It’s a false dichotomy. We still don’t understand this disease very well and it’s right to be naturally cautious.
• The net effect of the false dichotomy is that we’re priviledging human health and in doing so, giving our societal organism a much-overdue systemic shock. Every organism needs shocks to grow and shocks to survive. Every immune system – biological or societal – needs challenges. The “civilised world” is finally getting the first proper shock in a lifetime, which is a wake-up call to the narrow-mindedness of “efficiency” and “globalisation.”
• It’s useless to compare statistics from country-to-country, or even over time. No one is measuring the same way, nor keeping methodologies consistent as the pandemic progresses.
• Those who grow up in this era will care about more serious issues,ⁱⁱ less about bathroom signage and plastic straws.ⁱⁱⁱ
• “Resiliency” is finally maturing from hackneyed buzzword to first principle. Stockpiles as well as domestic/regional/local supply chains will be built from the ashes of this crisis.
• “Self-sufficiency,” “independence,” “autarky” as well.
• Manufacturing of everything from washing machines to pharmaceuticals to semiconductors must be returned to each geography pretending to call itself “a nation.” This is the golden opportunity.
• Localism is the cure for the inevitable economic deflation to come.
• Minimum wage is going back to $5/hr. Maybe lower.
• “Inefficiency” will increasingly be seen as a virtue, not a vice.
• Patience too.
• Bureaucracy is being used to solve the problems of bureaucracy, eg. American hospitals can’t buy masks and ventilators because their procurement staff are litigiously-minded, surprisingly poor,^iv and basically evil… so now 3M masks can’t be exported to Canada ? Let’s see if there isn’t retaliation.
• The US is still a bit of a powder keg as far as the virus is concerned, just as they were two weeks ago when they only had 150 (first-order) deaths from COVID-19. Today they have 7`404 8`276. And don’t forget the second- and third-order consequences of increased suicides, domestic violence, and bloodshed over scarce resources (ie. toilet paper).^v
• The stock of “public health” will rise dramatically.
• The stock of “climate change” will decrease dramatically as 2050 targets are met this year, global politics becomes more acrimonious, and “anti-carbon” dollars are spent elsewhere.
• Emissions targets won’t be able to force the electrification of the auto industry anymore. Tesla will likely still grow and thrive but the Lotus Evija will be canned, as will many others.
• Speaking of hypercars, like skyscrapers, their insanity seems to peak with economic cycles. The McLaren F1 was released into the headwind of the Mexican/Asian financial downturn of 1994 and it never sold all the planned production units. Today, the Aston Martin Valkyrie and Mercedes-AMG One will be released into this crisis as pinnacles of engineering in our time. Most of the other hypercars slated for release in the next two years will be pulled from market before the full production run is completed, or possibly before production even starts.^vi
• Borders will grow taller, tariffs will increase.
• Two currency systems (domestic/foreign à la CNY/CNH) will be attractive models for countries other than China in the decades to come.
• Privacy will decrease, surveillance will increase.
• Each country’s federal government will spend +/- and entire year’s GDP over the next 12-18 months to provide economic support and create a financial “bottom.”
• Federal governments will double the size of their influence on GDP over this time, inevitably leading to more bureaucratisation, more corruption, and a strengthened black market.
• Best case scenario for Alberta in the next decade is for Canada to cease imports of Saudi/American oil and turn Alberta into the primary oil/gas supplier for the country. I give this scenario a 40% probability by 2030.
• Canada’s natural wealth, abundance of space, and relatively high level of immigrants will serve it well under the new economic paradigm.
• The Chinese economic engine has no counterparty to its trade and so will take much longer to rev back up than previously anticipated. How many other economies will find out the same harrowing truth before long?
• The small positive impact on pension funds from the reduced numbers of retirees (killed by COVID-19) will be dramatically outweighed by the negative impact on pension funds by reduced market returns and reduced employment incomes.
• Playing economic kingmaker is a road to ruin. Why should Ontario force the closure of non-public construction sites ? Why close any sites at all ? The amount of confusion being created is leading to severe dislocations in the “essential” parts of the economy, to say nothing of the “non-essential” parts already shuttered. In my humble opinion, all construction should continue, to the extent that supplies and manufactured goods to build them are available.
• On a personal note, I’m no longer missing my previously scheduled trips this spring, four weeks later and that wound has fully healed,^vii but I’m super duper looking forward to the snow melting so that I can get back out to the track. I’m hoping to spend a looooot of time there this summer.^viii
• For someone who worked 80% from home before this whole episode, the path to a new normal has been relatively short and sweet.
• We’re all reassessing our priorities right now and it turns out that I’m far less in love with horology than I am with cars. Even though I’ve been spending more time/resources on watches lately, upon further reflection, I obtain far more utility from dollars allocated automotively. So it’s on now!
• It’s little Ari’s 2nd birthday today. Happy Birthday, My Little Lefty!^ix
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1. Just in case you didn’t notice that the datestamp is in the URL! ↩
2. Just like your great-great-grandparents who lived through the last Great Depression, and the ensuing wars, kids and young adults growing up through this mess will far sooner have 6 months savings in the bank than take a frivolous vacation or buy a new car. They’ll think you’re crazy if you so much as suggest otherwise. We’ll teach our kids to “keep powder dry” as if it were more obvious than the alphabet. Religions teach the same virtues but secular society has a few things to relearn, y’know ? ↩
3. Don’t get me started on paper straws. Anyone who has little kids knows how quickly they disintegrate with even the slightest gnawing. I’ve lost track of the number of times I’ve used 3+ paper straws to do the job of a single plastic one. What waste ? ↩

4. When contacting potential buyers, Remington needs two things to secure a deal with a seller: a letter of intent to purchase and proof of funds. “If you are working with a seller who has masks but you can’t quickly show proof of funds, someone else is going to buy them,” he told me.  And I watched that happen repeatedly throughout the day. Buyers from state procurement departments and hospital systems expressed desperate need for masks, but the deals bogged down when it came to providing proof that they could commit and follow through. In the meantime, another buyer provided proof of funds and the masks were gone, sometimes within the hour.

   via David DiSalvo, Fortune ↩

5. It’s fair to estimate 0.1% population mortality as a first-order effect of COVID-19 in western countries. Second-order ? Maybe add a zero. ↩
6. eg. Gordon Murray T.50, SSC Tuatara, Hennessey Venom F5, Pininfarina Battista, even the Rimac C-Two. ↩
7. In general, the “experience economy” is going to be hit hardest by both demand and supply shocks from coronavirus. Millennials will prioritize working (novel!) and saving (noveler!) over boutique donuts and trips to Machu Picchu/Coachella while many businesses providing such insta-focused services won’t be able to survive a few months without income, much less a few years. ↩
8. Blackzilla is getting some upgrades for this season, starting with Top Secret front upper control arms, rear tension rod arms, rear toe control arms, and rear camber arms, as well as Endless stainless steel brake lines, Endless CC-Rg brake pads, Brembo LCF 600 brake fluid, and a Sabelt racing harness. What’s next ? Maybe coilovers, maybe aero, maybe a rollcage ?  ↩
9. ↩