Did Coronavirus Just Eat Half My Money?

How will the virus end? How will it be next year, and in the future? Read this amazing and optimistic blog post. It gave me hope and I think it will give you hope, too.

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So, here we are after just one month,  in a complete economic panic, and at the start of the most sudden recession ever.

The pandemic has spread much further and faster than most uninformed people (including me) would have ever guessed, and the whole world is in some form lockdown. Nothing quite like this has ever happened before in the modern world.
What should we do?
On the financial side, a close friend said to me, “Well, I won't ever retire because with all my investments down 35%, I’m not financially independent any more.”
And I’ve seen many similar statements out there on the Internet:
Is it time to be worried like this person?

On the human side, we have seen a death toll of thousands of people per day in the US with best-case forecasts of 200,000, which implies several million worldwide.
This all sounds terrible, doesn’t it?
It makes sense that many people are fearful and pessimistic. So why is it that I remain as optimistic as ever, with the full expectation that you and I will come through this humbled, but also wiser and better than ever?
It’s because I already know how this all ends.
The world will keep rallying and doing its best to slow down contagion. Caring people will keep helping each other. People will stay home and heal, hospitals will expand, nurses and doctors will do their best to save as many lives as possible, and the 80% of us in jobs will continue to work.
Meanwhile, today, innovators are still innovating all over the world. People are staying up late working in labs, vaccines are being tested, genes are being sequenced and the current virus will end up defeated and then become no more than a (very) significant chapter in the history books.
But apart from all of this, there is still much more going on in the world, which simply isn’t going to the headlines. Engineers and scientists are still inventing things that will dramatically improve the future. Solar panels are still leaving factories and being installed worldwide. Better and better batteries, which will eventually displace fossil fuels, are evolving. The most efficient factories in history are being built. Gene therapies are advancing which will eventually make all of our current health conditions obsolete.  Internet connectivity and education are becoming more widely available and cheaper, which is allowing the next generation of brilliant kids to to grow up and learn faster and do more than you or I have ever dreamed. And all this will happen regardless of the course of the current pandemic.
If all that is true, then why is the world so scary right now?
I get it – never before has something from the daily news come home to affect our daily lives so much. Grocery stores are empty in some cities, people are wearing masks, and you probably have friends who are currently unemployed, or sick, or both.
But in this situation, it really helps to understand the big picture of what is actually going on. The world is not ending. The air outside your windows is not a circulating cloud of certain death.
All that has changed is that we are in a self-imposed economic slowdown created to save the lives of our most vulnerable people.
Which is one of the most compassionate things our society has ever done. To me, this is a remarkable and wonderful moment and I would not have guessed that such a capitalist country would ever have the courage to do it.
This would be the worst-case scenario if we took no action:
In this worst case, we might lose 1-2% of our people, mostly the most vulnerable. There is some overlap because the virus accelerates some other deaths that would have happened this year, and pulls some future deaths into the present, which is why the death rate dips for a while afterwards.
And we are working towards this:
With enough prevention, we cut the death rate by twentyfold, to about 0.04-0.06%. 200,000 is still an enormous number, but the existing death rate at least puts it into perspective.
Worst case
In the worst case where we do nothing, our public officials would all downplay the risk of COVID-19, and we’d keep working and traveling and spreading it freely. We’d maximize our economic activity and let the disease occur "naturally".
From the disease models I have seen so far, about 70% of us would eventually contract it. Half of those would have no symptoms or very mild ones, a smaller (but still huge) number would get sick or very sick, 10% might end up in a very overloaded hospital system, and in total about 1-2% of our population would die from complications – partly depending on how quickly we could build temporary treatment centers to care for 30 million people in only a few years.
It would feel cruel and chaotic, but in reality we would still not be approaching the conditions that people in the developing world face every day.
Our world has always been cruel and chaotic in so many ways which affect a much larger number of people – but we are used to them. And one thing that humans are exceptionally good at, is getting used to things.
List of causes of death by rate - Wikipedia

Best case

In the more compassionate case, which we are currently following, we drastically reduce the amount of contact we have with each other for a few months, which cuts the number of deaths in the US from 3-6 million down to perhaps 200,000. In exchange, our economy shrinks by several trillion dollars (it was about 21 trillion in 2019) for a year or more.

Assuming we are preventing 3 million early deaths, this means our society is foregoingabout one million dollars of economic activity for each person’s life that we extend and frankly, it makes me happy to know we are capable of that.

So that’s the big picture: we are cautiously and temporarily making some sacrifices, in order to help other people.
To me, that is not a cause for panic or fear – it’s a chance to try even harder and be thankful for such a once-in-a-lifetime opportunity.
Meanwhile, some good stuff is happening as a result:
  • We are driving around and polluting far less. The air is drastically cleaner everywhere.
  • People are out walking with their kids far more. The streets of my town are nearly free from cars, and are being enjoyed by (appropriately spaced) bikes and people for the first time.
  • Our expectations are being reset. Someday soon, it will feel like an absolute joy and privilege to walk into a store and see things fully stocked and prosperous again. And imagine the feeling of taking a vacation or attending a big event or a restaurant or a party!
  • People in rich countries may realise that we can afford to be helpful and compassionate after all – while actually increasing our long term wealth and happiness rather than compromising it.
  • And the world is getting a valuable "test drive" at dealing with a pandemic, with a relatively mild disease rather than something even more serious.
So How Does This Affect Me?
Once you really get the big picture above, you can see that we are going to come through this better in every way.
Just as with any recession, weaker companies will go bankrupt, stronger ones will become more efficient and smarter, and the chaos and broken pieces of the crisis will become the raw materials from which an enormous batch of brand-new companies will form.
Better ways to track and treat disease, more scalable and less bureaucratic hospitals, more options for remote medicine and more support for remote work and virtual offices, and virtual learning in general. More home delivery services and fewer big box stores and wasted parking lots, more support for biking and walking, and a million other things that a billion other people will think of.
The end result will be a better, more resilient and richer world than ever. Yes, that will also eventually mean more money in your retirement account, but more importantly it means better and happier living conditions for every living thing on Earth.
While this all sounds like optimistic magic, it’s actually just a byproduct of human nature. We are a lazy and change-averse creature and we become complacent when our fearful and primitive brains think things are “good enough” for survival and reproduction.
So, strangely enough, we often need a good slap on the head to get off of our collective asses and actually make some improvements. Observe the wisdom of our elders:
  • When the going gets tough, the tough get going.
  • Necessity is the Mother of Invention.
  • What doesn’t kill you, makes you stronger.
As old and repeated as these slogans might be, they continue because they are remarkably true. They are the real-world manifestation of a badassity that is built into our Human DNA, which is why they are some of my favorite phrases in life.
Are things a bit hard right now?
See you in the inevitable and incredible boom-time that will result.
Adapted from www.mrmoneymustache.com
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