Many pundits call COVID-19 a Black Swan event. And I have done the same. In countless conversations with clients, suppliers and others, ruminating wisely, “yes, it’s a black swan event. All bets are off.”
But is it really?
Black swans are supposed to take us by complete and utter surprise. Unpredictable before the fact, inevitable after.
But, a lot of people have predicted this pandemic. Not only predicted it, but also highlighted how unprepared we are. Among the famous examples, here’s Bill Gates, warning of a pandemic that could kill 33 million. And the resemblance of the current situation to the 2011 movie Contagion is eerie.
So, no – the epidemic was foretold.
What wasn’t foretold though, was the immediate and devastating economic armageddon. That was the Black Swan.
That spike at the far right of the graph – from 300K jobless claims to 3.3 million? That was the Black Swan.
The video in the tweet below illustrates this vividly.
COVID-19 was foretold. But the economic impact wasn’t.
Experts (and movies) predicted, sometimes in frightening detail, how medical capacity would run out. How we’d wait, interminably, for a vaccine.
But they didn’t think – what will happen if everyone has to sit at home for two months? What will happen if every business closes, all at once?
Like all Black Swans, seems blindingly obvious after the fact. Hindsight, especially in the case of Black Swans, is 20:20.
Alex Danco talks about this in his article on Black Swan Events.
Why did our governments react so slowly to the pandemic?
Separately, the chart above also explains why so many democratic heads of state reacted slowly at the start.
In The Dictator’s Handbook (an excellent book on Politics and Game Theory), Bruce Bueno de Mesquita says,
Politics is about getting and keeping political power, not about general welfare. Leaders do what they can do to come to power, and stay in power.
That’s what happened.
In the early days of the pandemic, COVID-19 was an unknown quantity. Many hoped prayed fervently that it was “just another flu”. On the other hand, every head of state knew what a lockdown meant. Unemployment.
And in any democracy, unemployment means one thing for sure – the leader in power crashes out in the next election.
Like Upton Sinclair said:
“It is difficult to get a man to understand something when his salary depends upon him not understanding it.”
Amen.
[Note: This article appeared in my newsletter Sunday Reads #85: Black Swans, Honesty, and Dishonest Statistics]