Financial professionals talk about all kinds of risk: credit risk, interest rate risk, political risk, inflation risk… the list goes on. Now, we have a new one.
I first heard about it last week. A Wall Street economist, speaking about coronavirus business impact, called it “lockdown risk.”
Lockdown risk is the possibility you were near someone with the COVID-19 virus and find yourself quarantined for weeks. That’s costly and inconvenient even if you aren’t infected.
Businesses don’t want to see highly paid employees on lockdown. Hence, some are cutting back on travel, which is bad for hotels, airlines, and their workers.
This is a problem even if the coronavirus proves less infectious and/or less harmful than it now appears. And the costs are getting higher every day.
A big part of the present economic challenge is in our heads. Our attitudes affect our decisions, and our decisions affect the economy. Today we’ll talk about healthy attitudes.
Space to Breathe
That won’t happen now. Last week local authorities cancelled the event due to coronavirus concerns.
If you haven’t been, it is hard to grasp how big SXSW is. Over 200,000 people attend its various components. The crowds are legendary, so I get the health concerns. Moving forward would have been risky.
Many sponsors and exhibitors—perhaps worried about that lockdown risk—had already pulled out.
One company called EPX Worldwide (with which I have no connection) cancelled its party but sent an announcement I really liked. Quoting in full:
After internal debate, talking to experts and monitoring other major brands & events, we’ve decided to postpone our SXSW white party until 2021. Furthermore, EPX will take a hiatus from our relentless pace of adventure until late May when Vegas re-appears on our calendar.
There will always be more parties and more adventures but we feel compelled to act responsibly for our friends, families and peers.
We’re not experts in viruses but here’s what we think after reading pretty much everything from everyone.
No one completely knows what’s going on – not on virality, incubation, or fatality rates. There’s evidence that the virus has been in the US far longer than anyone thinks and is under reported because of the lack of available and accurate testing. After all, most experts believe a host can carry the virus with zero symptoms for up to 14 days. Because of this, we expect the number of reported cases to rise significantly – we all should expect that without panic. Of course, these underreported cases could also mean fatality rates are far less than we think.
To some degree, who cares.
What matters is doing the right thing. If there is a virus that can cause deaths in those we love and that the world’s greatest minds don’t fully understand, we believe it’s our duty to help prevent further spread, angst and fatality.
Of course we want to do what we do best and bring smart people together to network and crush some of the greatest experiences on earth. We also we want our home city of Austin, Texas to shine and feel the boost SXSW gives our city. But the world needs time to slow things down and get this right. Just for a little while.
We don’t feel panicked. We aren’t worried. We don’t feel immediate risk. And like every issue we’ve faced before, this too will pass.
In the meantime, there is something we can do so we are doing it – remain calm, stay patient and help give the world some space to catch its breath so we can close this chapter of human history and get back on the magic trail again.
Let us all have the courage to always do what is right and not what is easy. We love you.
I think that strikes just the right note. We’re facing something new, unknown, and possibly dangerous. That doesn’t mean we should panic. It means we should think beyond ourselves, and try to protect each other from harm.
Now, that’s easy to say, but how does it work in practice? We can’t all seal ourselves into bubbles. Life has to go on.
None of us knows how this will develop. The health risks are only part of it. Local and national governments will rightly try to protect their people but excessive caution could add up to recession. That’s not good for our health, either.
Here in Austin, many people depend on SXSW for a substantial part of their annual income. And not wealthy people. I’m talking about hotel workers, waiters, bartenders, food truck owners, musicians, security guards, and many others.
They’ll have less spending money now. That’s bad for the economy. Worse, if they feel sick and can’t afford to see a doctor, they might spread the virus even more.
Multiply this times hundreds of cancelled events and millions of people not traveling. It’s going to be a big hit. And as I said last week, widespread income loss could even affect the banking system.
So we have to find a balance that keeps life going and reduces infection risk. Both are important.
As EPX said, we need to get this right. A lot depends on how we do it.
See you at the top,
Senior Economic Analyst Patrick Watson is a master in connecting the dots and finding out where budding trends are leading. Patrick has partnered with John Mauldin as the co-editor of Mauldin Economics’ premium research service, Over My Shoulder. Together, they curate research and analysis from the world’s finest thinkers, and deliver it to subscribers 3–4 times per week. You can also follow him on Twitter (@PatrickW) to see his commentary on current events.