Kairos
- Adaptive Alph
- Jul 25, 2020
- 15 min read
2020 started off with high expectations after a turbulent 2019. Gone were some of the geopolitical uncertainties such as Brexit and doubts about unilateral trade deals. The world was ready to take action against climate change and wealth inequality: Then COVID-19 struck. 6 months in and ongoing, the pandemic is already the most tragic event since World War 2 and perhaps one of the worst periods in the history of mankind. As of July 16th, 2020, more than 590K people have lost their life and at least 60K are in critical condition (1). There is no action or spoken word that will take back the incredible loss suffered by those families impacted by this horrific virus. So without taking away from the victims, we must find hidden option opportunities from the COVID-19 crisis. After rain comes sunshine, and focus must shift from all obvious negativity relating to COVID-19. Instead, civilization must use its built up quarantine energy to solve problems and create a greater world for surviving generations. Below are ten positive movements I see happening and worth fighting for.
1. Universal Health Care
Sadly, suffering is sometimes necessary before a human society considers a new approach. The corona epidemic is a one of those tragic events and should be the healthcare loadstar for the next generation of politicians. If countries like the US want to evolve, then affordable healthcare must become a human right. Politicians must therefore leverage COVID-19 so that the virus lights the fuse to make healthcare affordable. Sick people are unable to work, which is bad for the economy, and that is the most important lesson that we as a society have learned from COVID-19. Even if a person with corona is not showing symptoms that person must still stay at home to prevent the spread to vulnerable people. If the US had a single-payer healthcare system, then locking down the economy would be easier, as people would actually seek medical help in an affordable way and tons of money that have been distributed to people through the CARES act could have been saved.
Free market advocates that are now applying socialist bailouts of big corporations have inaccurately argued that a completely free market system always allocates resources more efficiently than other systems. These invisible hand proponents argue that people behave in a way that makes supply meet demand in equilibrium, which might be true, but imagine the equilibrium price of brain surgery. Opponents to the invisible hand theory believe that free market price equilibrium for healthcare services is not optimal, as people think short-term and are prone to making irrational decisions, and that politicians suffers from the same biases in combination with misunderstanding probability theory. Under a none single-payer healthcare system, people might therefore choose to not get healthcare, as seeking high cost medical attention for serious injuries is so rare. Most of the time, this frugal approach will save small amounts of money, as no healthcare premium is necessary. However, at a mass level, short-term frugal behavior leads to extreme costs when accidents actually take place. If an individual needs a hip replacement, this person is willing to pay almost anything to get that procedure. In the US, this includes going into debt, while in the single-payer system of Sweden taxpayers have already fronted the cost of the hip replacement procedure.
Another important problem worth tackling in healthcare is politicians misunderstanding of probability theory. For example, getting hit by a car is not the same thing as getting sick with COVID-19. Car accidents are independent events, while virus cases correlate with each other, which explain the exponential growth rate in corona hospitalizations across the globe. The R-number is the COVID-19 infection rate. If the R-number is greater than 1, it means a high case correlation and that every sick person will on average make more than 1 other person sick. The American healthcare system is built to withhold people suffering from independent events because politicians think about healthcare in terms of car accidents, but not mass epidemics, which is actually probabilistically similar to how the sub-prime mortgage crisis in 2008 developed. According to free market Harvard economist, Gregory Mankiw, another reason why the invisible hand theory does not work for healthcare is that each medical procedure is so specific to an individual and therefore difficult to price in a market-based system. As a result, healthcare providers have a high pricing power and are therefore able to make a huge profit , which is detrimental to society as a whole.
Finally, due to COVID-19, governments across the world have locked down their nations. As a result, people are unable to work, which leads to a vicious spiral, as workers without money equals no consumption. If there is no consumption, then businesses must shut down indefinitely. If businesses are unable to operate for too long, then workers are fired forever, which means these former employees might no longer have access to affordable healthcare. This is because people’s health insurance in the US is often tied to their place of work. In 2016, according to the United States Census Bureau, 155 out of 272 million people in the U.S below the age of 65 received employer-based health insurance. At the peak of the ongoing corona crisis, more than 22 million people have become unemployed and if there is a second wave, the worst level of unemployment is yet to come. A poll by Gallup, suggests that around 14% of US persons suffering from COVID-19 symptoms would not seek medical help because of costs associated with treatment (2). Obviously, the US government established an unemployment program to assist those without a job during the COVID-19 epidemic, but this program is expensive and the US per capita spending in healthcare related expenses, according to the CDC, already surpass USD 10,000 per capita, which amounts to a total cost of around 3.2 trillion dollars per year (3): 20% of total US GDP. Anyone that compares the US healthcare costs with the 2016 number for single-payer systems would get shock: Canada at USD 4800, Sweden at USD 5488, Australia at USD 4700 and UK at USD 4200 (4). There is definitely a sunk cost to the American taxpayer in order to establish a single-payer system, but healthcare is a human right and if we can bail out businesses for 3 trillion dollar during an economic crisis by printing money, then we can do the same thing to create universal healthcare. No one wants to go to the hospital voluntarily, it stinks, so the free riding worriers can calmly relax and keep on grinding.
What would we do without healthcare workers during a pandemic?
2. Working Remotely
Spending long hours at the office was part of the culture at many businesses prior to the corona crisis. Now these employers are forced to let their employees work from home instead, which has potential benefits for everyone. However, before passing judgment on how working from home impacts productivity as well as businesses bottom line, we must weigh the pros and cons over time. Working from home leads to less time spent commuting, more personal freedom, a greater ability to focus on tasks requiring deep attention, and frees up office space for employers. Some of the negatives of working from home are the inability to monitor employee activity, decrease in healthy everyday exercise, and idea sharing that comes from spending time together in an open landscape. However, these negatives can be mitigated by having to do lists for employees and utilizing communication software such as Slack or Microsoft Teams for idea generation. Group leaders should also dedicate a short amount of time everyday for their teams to connect even if there is nothing super important on the agenda. There are also 3rd party positive externalities such as minimal negative impact on the environment from commuting, local community companies getting more business from working at home employees, and less stress generated by crowded trains. Another positive impact is that online work might lead to de-urbanization. This will increase productivity in areas that has suffered most from urbanization. Large tech corporations have taken initiatives to hire people in rural parts of the country, which saves office and salary expenses for what is most likely the same quality work. In the future, office space might be translated to a meeting space where people can connect on a personal level and share ideas, rather than as an office where people complete their daily routines. I see a future where people might work three days at the office and two days from home. The three days at the office is for meetings, ideas and culture creation, while work from home is high intensive quality work.
Familiar?
3. Climate Change
With the airline, hotel and leisure industries suffering greatly from the lockdown, we have an opportunity to change travel preferences. Imagine if entrepreneurs or large corporations take the initiative to plow resources into creating carbon emission free planes that can fly using renewable energy. The airline industry would no longer waste financial resources on hedging oil costs and can instead focus time and effort on maximizing customer experience. For the work commute, people can drive electric cars 3 times a week rather than driving a gasoline fueled truck for all 5 days. AI powered cars will provide commuters with the ability to do work, while driving and cars will turn into offices. In person meetings and presentations that involves unnecessary travel can be exchanged for meetings via communication software such as Microsoft teams. These software programs have the added bonus of having a record button so anything that was missed by a meeting participant is easy to review. All of these examples will improve efficiency and decrease the global carbon footprint.
4. Digital Fiscal and Monetary Policy
Society is close to falling off an economic cliff. What people without an education in the financial markets fail to understand is that when the treasury department issues bonds that action equals a tax cost on its citizens, even if the idea behind issuing these bonds is beneficial, as these bonds are purchased by the central bank through the debt monetization process. Printing money to give people universal basic income or bailing out big businesses increases the amount of money in the system, which per definition lowers the value of existing money, especially as global GDP growth during the pandemic is set to be negative. This combination of fiscal and monetary policy will increase prices on real goods and services like in 1920s Germany or it will lead to a 21st century asset inflation. So far the money printing has gravitated to the latter, as global stock markets have seen a record recovery during Q2. What makes me question this record recovery is that the worst-case scenario is playing out. Some U.S. states are now forced to close again and the virus has spread to even more countries across the globe. If more countries are forced to close down and others to delay reopening, then we will see a repeat of the market crash in March 2020. This crash will result from consumption slowing down and another vicious unemployment spiral, which then erodes profitability for businesses and the little confidence that is left in our government institutions. With the S&P 500 now printing a black number for 2020 that will also further create division in our society. The majority of people holding inflating assets such as the S&P 500 are the top 1.0% so instead of providing a relatively higher living for those who are poor the wealth gap expands. However, with the creation of crypto currency and digital ledgers, the blockchain technology has the ability to revolutionize the conduction of fiscal and monetary policy. Politicians that have an incentive to spend borrowed money to fund pet projects for re-election purposes would now be held accountable, as every monetary distribution decision that is made by these politicians could be recorded and stored on the digital ledger. By utilizing digital currency, algorithms could also ear mark the use of the monies for their true purpose and they could set a hard limit on how much currency that is allowed to flow around in the system, which hopefully lessens the dangers of inflation in the future.
New digital cryptos can record transactions holding politicians accountable for their actions
5. Artificial Intelligence
When it comes to revolutions, my money is placed with artificial intelligence. The goal of all technology is to free up time from tasks that barely improve lives and instead use that time on solving problems that massively improves life quality. In healthcare, AI is another tool in the toolbox for our doctors. For example, one can feed AI algorithms with MRI scans and X-rays, which can help doctor diagnose their patients with greater accuracy. An efficient medical process would then be to establish MRI centers that can diagnose patients from all across the world so that doctors can then focus on procedures with greater importance. To make company employees more efficient, email servers use machine-learning technology to sort spam email from those emails that are important, which prevents precious time from being wasted by employees sorting through their inbox. Another process that AI has made more efficient is texting. Thanks to natural language processing, the smartphone can almost write texts by itself. Soon, we will also have self-driving cars and car commutes can then be turned into home offices. In finance, smart algorithms are conquering the markets, as these algorithms can scan through company balance sheets for earnings and other valuation metrics or detect management fraud faster and more detailed than any human being. Within the next 30 years, we might even be able to install computers in our brain so that we can maximize our brainpower and make calculations at the same speed as super computers.
AI specialization is represented by the water. If a certain area is covered by the water than a computer has surpassed human capability in that area.
6. Global Supply Chains
In economic theory, there are few concepts that hold truer than comparative advantage. In a perfect world, if country A produces apples at a greater efficiency than bananas compared country B, then country A should focus on only producing apples and country B should focus on only producing bananas. This theory holds true even if country A can produce both bananas and apples at a greater absolute efficiency than country B. The reason behind this logic is that country A and B can trade with each other. Through engaging in trade, these two countries can optimize the amount of apples and bananas being produced, while minimizing the amount of time and resources spent on producing these goods. This comparative advantage theory therefore frees up time for people so that they can focus their time on doing other productive tasks that improves our society. However, we do not live in a perfect world and efficiency is not the only constraint in the production function of goods and services. Another important constraint for a country is security. For example, if a pandemic strikes then, as a result, there is certain medical equipment like masks, medication and ventilators, that a country must have to protect its citizens. If big multi-national companies responsible for producing this equipment in certain countries have outsourced their production to foreign countries, then it might be the case that those foreign countries need to keep the equipment. As a result, a discussion on production origin is necessary because when tragic events occurs each country must be prepared to handle them without dependencies. The west therefore needs to limit its dependency on cheap labor in the east when it comes to healthcare by perhaps forcing multi-national companies to domestically produce healthcare goods, even if that breaks against the efficiency argument held so dearly by the comparative advantage theory.
Free Trade increases wealth, but must be balanced with security
7. Leisure And Entertainment
I live and work in New York City. When local government closed down bars, museums, gyms, malls and other entertainment venues, having fun in a large urban city was difficult. All the positive energy that comes from living in an urban space disappeared and the city went from lively to dystopian in a Thanos snap. The highlight of the day for 3 consecutive months was grocery shopping, exercising and playing online poker via a zoom chat. When I walked on Park Avenue at 5pm on a normal Wednesday afternoon in March, I saw no people in both directions. As a result of the lockdown, rental prices have dropped by 6 percent per square feet in the city and who knows if the prices ever will go back to normal, as the work from home revolution has begun. Entertainment in New York is not unique when it comes to quarantine, as Hollywood movies and sports leagues around the world have also been closed down. Sports leagues have been especially creative and some have reopened without fans like the German Soccer league, Bundesliga. In August 2020, the NBA season will resume at the Disney World resort in Orlando, Florida. Comedians with late shows have also been creative, as they have moved their show online and act more as Youtubers rather than salaried TV personalities. New forms of entertainment have emerged such as quiz apps using Snapchat like features to bring people closer together and more people play video games than ever. The online social community is growing and it also online where the future looks bright for the entertainment industry. Online content is king.
No fans in Bundesliga
8. Efficient Altruism
The definition of altruism is to improve the life of others: coaching a middle school soccer team, giving to charity, cooking a meal for a group of guests or running for political office with the aim of helping those who are less fortunate. Altruism is therefore a key trait in humans for developing a functional society. I also believe altruism increases in importance proportionally with the level of devastation generated by a crisis. That is why altruistic leaders of movements emerge during crisis periods such as Rosa Parks, Mother Theresa and Dalai Lama. Personally, I have seen average people’s behavior shift in times of crisis as well. I have witnessed small altruistic acts in corona times: grocery shopping for the old neighbor or wearing a mask when sick to prevent others from catching corona. Adding the word efficient in front of altruism refers to maximizing resources to help as many others as possible. The resource that is maximized is either time, money or a combination of them both. A well-known example of efficient financial altruism is to provide mosquito nets to rural populations in Africa. These nets are cheap and prevent millions of people from losing their lives due to disease spread by mosquitos so it is unlikely that any alternative use of that money is more efficiently altruistic. For most mortals, it might be difficult to help others financially, as one must be wealthy. A great way to maximize altruism is therefore to incorporate altruistic acts in daily habits and to have friends with common values. This way charity time can be scheduled around work and friends without having to choose between altruism and something else. When it comes to the corona crisis, people praise altruistic people such as Anthony Fauci in the U.S. and Anders Tegnell in Sweden. The reason they are put on a pedestal is that both of these gentlemen could probably make more money in the private sector, however, they choose to become their respective country’s top epidemiologist to help others rather than making money. By choosing an altruistic career path people understand that they maximize their impact on other people’s lives and that is why people have a tendency to praise them. We need to keep this movement of praising altruistic people because that is an optimal way to improve our society going forward.
9. Financial Markets and Impact Investing
In asset management, poorly run hedge funds have hidden behind index matching the S&P 500 or capturing cheap risk premia such as value or carry, while at the same time charging fees for offering superior insight. When financial markets trade within their normal bounds, differentiating between superior and fraudulent hedge funds is a difficult task, as most market participants will make money in normal bull periods. However, sooner or later there is a blow up in the market and all of a sudden these high fee fraudulent funds starts underperforming index funds or risk premias, which they have been harvesting in secret. These fraudulent hedge funds are often short volatility and not only underperform in turbulent times, but often they go out of business, which sadly means people’s hard-earned pension money disappears into thin air. These now bankrupt hedge funds may have existed for a long time and thus earned tons of money on fees prior to the blow up so they can keep living lavishly post blow up, while their end investors suffer. Worth noting is that hedge funds are important for creating efficient markets, as they are willing to take the other side of trades, which provides the market with liquidity. Those hedge funds that appropriately apply mosaic theory to take advantage of anomalies in the market therefore deserves to be compensated accordingly. As a society, we must prevent frauds from receiving investment allocations by setting high ethical standards and provide regulators with power and technological tools to prevent illegal activities from occurring. Also, if we want to improve financial markets a step further post the corona crisis, we should invest in companies and hedge funds that are interested in using time and resources to make the world a greater place to live in. To make it easier to invest in companies that are green, diverse and with the aim of maximizing value of all stakeholders, we must find a way to measure the positive impact. I know that impact accounting measurements are being developed to put a company’s positive or negative impact on society on its balance sheet. If these impact measurements are successful then ESG investing has a bright future.
Potential ESG factors
10. Space Travel
With advancements in technology, companies such as such as Virgin Galactic, Blue Origin and SpaceX, will send private citizens to space within the next couple of years. If successful, then emotions about our galaxy will normalize. Instead of considering space as a cold, scary and dark place, people will think of space as just another medium like water or air. Flying a space ship will be no different from travelling on a boat or an airplane. As a result of this normalization process, I believe space travel has hidden options that will push humanity forward. In the near future, people might be willing to take the risk of going to Mars. If enough people want to take this trip that will create demand for further improvements in technology. Demand will lead to more businesses investing time and resources to make it possible for the human race to spread across the galaxy. The technological improvement does not only include flight technology, but to survive on Mars other types of inventions are necessary to make the planet habitable to humans. Another hidden option is that natural resources may be mined from asteroids, moons and other planets. Perhaps there are materials out there unknown to mankind, which have the potential to change our lives. There are so many unknown variables when it comes to space, but going there will have huge implications in the coming century. Becoming an interplanetary species is the next step in evolution of mankind.
//Stay Adaptive!
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