Okay, this may sound crazy. But I’m going to say it anyway. A good chance exists you and I need to start thinking more—and thinking more optimistically—about what happens when the Covid-19 pandemic ends.
Don’t misunderstand me. This blog post doesn’t argue the pandemic isn’t serious. Or that we don’t still have terrible stuff to get through.
Rather, the blog post argues you and I may be too pessimistic about what comes next. And then it argues the reasons we have for optimism? Those reasons impact the way we plan for a post-pandemic world. And those reasons influence how we manage our small businesses over the new few months.
Two Stipulations First
But first two stipulations. In absolute terms, the world and our country has seen, and continues to see, enormous loss of life. The University of Washington’s Covid-19 model estimates that at the time I’m writing this, more than 160,000 Americans have already died with or from Covid-19. By the end of the year, that model predicts the number doubles.
To my knowledge, no widely-accepted estimate of Covid-19 business failures and closures exists. (See this article from the Washington Post, for example.) But the absolute number surely runs hundreds of thousands: restaurants and bars, gyms, preschools, drycleaners, and so on. In short, any business that didn’t have the financial resources to survive a lockdown? Gone. At least temporarily. And many never will return.
But despite the unquestionable toll on humans and business, reasons exist to keep going. And in fact, reasons exist for folks to plan optimistically in many cases. Let me go over the big ones.
Lower Lethality Than You May Think
A first, incredibly lucky break the world caught. Covid-19 displays far less lethality than originally estimated.
In February, for example, the World Health Organization estimated a nearly 4 percent infection fatality rate. More precisely, the WHO’s initial report on Covid-19 said this about the case fatality rate:
As of 20 February, 2114 of the 55,924 laboratory confirmed cases have died (crude fatality ratio [CFR2] 3.8%)
And then in the same report they indicated asymptomatic cases rarely occurred:
Asymptomatic infection has been reported, but the majority of the relatively rare cases who are asymptomatic on the date of identification/report went on to develop disease. The proportion of truly asymptomatic infections is unclear but appears to be relatively rare and does not appear to be a major driver of transmission.
With nearly zero asymptomatic infections, a case fatality rate of nearly 4 percent translated into an infection fatality rate of nearly 4 percent—at least in many journalists’ and readers’ minds.
The Our World In Data website provides interesting commentary here about early confusion concerning high fatality rates, in turn pointing to a useful summary and discussion of the confusion by the Wordometers.info website. Another useful discussion appeared in the British medical journal Lancet: Estimates of the Severity of Corona Virus Disease: 2019 Findings.)
The upshot of these initial assessments: People wondered, perhaps planned, and in some cases apparently still think the fatality rate runs much higher than it does.
One recent example of this: Harvard Law School professor Laurence Tribe’s July 6 tweet to his nearly 1 million followers that “15 to 20%” of Coronavirus cases “are severe enough to require hospitalizations and many of those never come home.” More than 7 thousand “tribelaw” followers then retweeted the comment and nearly 18 thousand readers “liked” it. (The CDC assessments available at the time Tribe tweeted estimated 65 percent of Covid-19 infections show symptoms, that 3.4 percent of these symptomatic infections require hospitalization, and that 0.4% of this group pass pass away.)
Another more recent example? On August 13, an article at the CNBC website started with two key points, one of which said, “The coronavirus, however, has infected less than 2% of the U.S. population and has already killed at least 166,970 people.” That would reflect a 2.5 infection fatality rate–something that’s clearly wrong if the CDC is right. But the error meshes with the earliest, most pessimistic fatality assessments.
Note: I’m not linking to these two bad examples of erroneous infection fatality rate data. That only propagates the error and boosts their visibility on the web.
What are the current best-estimates of infection fatality rates? Somewhere between 0.5 percent and 1 percent. For example, the Center for Disease Control and Prevention gives its best-estimate of infection fatality rate as 0.65 percent (see here). That number, by the way, comes from a study published by researchers Gideon Meyerowitz-Katz and Lea Merone.
The two big points here: First, the high fatality rates that many people bandied about in the beginning of the pandemic? And that some people continue to echo? Thankfully, they turned out to be way too pessimistic. Infection fatality rates remain unknowable. Partly because we don’t know the true number of fatalities. Mostly because we don’t know the true number of infections. But the rates aren’t as bad as many assumed and some still assume.
Finally, as small business owners plan and manage, they want to keep in mind that much old and thankfully out-of-date data still echos through the media reporting and social media networks.
Just to say this again: That infection fatality rate is bad! But not as bad as some worried in the beginning. And not as bad as some folks continue to report and think.
A Steep Age Risk Gradient
Studies like Meyerowitz-Katz and Merone’s show something else that counts as both good and bad news—but mostly good, I think.
Covid-19 treats people differently based on age. Meyerowitz-Katz and Merone, for example, say this half-way through their research paper when talking about the studies of infection fatality rates (IFRs):
…the IFR for <70 year olds is likely lower than 0.1%, and may be less than 10x the rate of death in over-70s. Another recently published estimate stratified infection-fatality by age and found a very low risk for under 50s that increased exponentially with age from 0.0016% <50 years to 0.14% for 50-64 year olds and up to 5.6% for those 65 years and older (60).
That insight suggests that business owners and workers, parents and their children, have more room to navigate this pandemic than some think.
For example, this insight probably helps us all better manage personal and business risks. That’s a weird thing to point out. But if the risks for older neighbors, family members, friends, and colleagues run ten or twenty or thirty times the risk for younger folks, it is good we know that. Really good.
Better Drugs, Better Treatments, Promising Vaccine Research
Something else to factor into planning for the future? Physicians and medical researchers are finding better ways to treat people infected by Covid-19.
For example, the drug remdesivir appears to significantly improve recovery. Gilead Sciences reported recently that a study of 1,100 patients suggested the drug reduced risk of death by 62 percent and accelerated recovery for roughly 15 percent of patients.
Dexamethoasone, a corticosteroid, seems to reduce fatalities by about 30 percent for people on ventilators and by about 20 percent for people needing oxygen (more information here).
Research and study continues on other treatments and drugs. I guess the main point here is, medicine didn’t stand still. It moved quickly and impressively to find treatment options that improve outcomes.
A related reason for optimism. A number of promising vaccine developments appear well underway. Most may fail of course. Maybe no early vaccine will prove highly effective. But here again, progress continues. (See this New York Times article for an up-to-date Covid-19 status report.)
What this means for your small business isn’t clear. And please don’t interpret this comment as me ignoring the trauma and crisis you and your business may already face. But you have reasons to be hopeful about the future and the future of your small business. Especially next year.
Heavy Federal, State and Local Government Support
Small business owners—often for good reasons—complain about how government treats them. Keep this under your hat, but I may have even complained a bit in past. However, one can’t say government hasn’t provided enormous support to small businesses during this pandemic. That counts as welcome news.
Over the last few months, for example, we’ve blogged extensively about one bit of the U.S. response to Covid-19, the Paycheck Protection Program (PPP) loans. The PPP provided massive support for small businesses and their employees. Roughly half a trillion dollars. Or restated another way, about 5 million small businesses received forgivable loans averaging about $100,000 each so they could keep people on the payroll, the doors open, and the lights on.
And the federal government provided a bunch of other support mechanisms for businesses, too: Economic Injury Disaster Loans, the Federal Reserve’s Main Street Lending Program, support for the airlines to continue operations and employment.
States and local governments don’t have the financial firepower to subsidize financially small businesses. But they’ve regularly been able to help in other meaningful ways. States like California have allowed small businesses to delay paying taxes. And local governments have found their own ways to help to small businesses. My home town, Redmond, Washington? Never prouder of those folks for developing their temporary outdoor dining permits, which allow restaurants and bars to add safe places to eat and drink.
The actionable insight here? Stay alert to the support programs that federal, state and local governments continue to provide. Every little bit helps.
Substantial Support from Still-operating Businesses
A shout-out to the still-operating businesses who’ve put their shoulders to the plow.
Many CPAs serving small businesses have provided hundreds of hours of either deeply discounted or free help to clients and non-clients.
Many banks have done the same. Wells Fargo, for example, redirected the hundreds of millions of dollars of gross PPP loan fees it earned to small business support programs. JP Morgan Chase, Bank of America and Citigroup have indicated they will donate their net fees. (More detail here.)
And I’m sure a bunch of other businesses, big and small, have stepped up.
I’m not exactly sure how this other support impacts you planning and managing. But I think it probably does.
Herd Immunity Thresholds Very Possibly Lower
One final thing to mention here: It’s possible the herd immunity thresholds fall much lower than folks thought at first. But let’s talk some crude numbers just to illustrate the math.
Using easy percentages and big round numbers, suppose a virus with a 1 percent infection fatality rate runs wild through a country of 300,000,000 people. You might guess, or worry, that means 3,000,000 die if the country can’t damp down the contagion. (The formula you use to make this calculation is .01 times 300,000,000.)
But it turns out that due to herd immunity, not all 300,000,000 people actually get infected. Maybe only 50 percent do. Or 75 percent. That’s still a lot. But less than 100 percent.
Note: The current CDC planning scenarios (see earlier links to CDC planning scenarios) suggest a herd immunity threshold range of 50 percent to 75 percent.
The basic formula used to calculate herd immunity thresholds works simply. (See here, for example: Herd Immunity: Understanding Covid-19.) But a growing number of researchers, based on the character of the virus, other diseases, and their models, think Covid-19 herd immunity threshold falls way below that basic formula’s calculation.
One peer-reviewed study says Covid-19 herd immunity may run around 43%. (Article here: The disease-induced herd immunity level for Covid-19 is substantially lower than the classical herd immunity level.)
Nobel laureate and Stanford professor Michael Levitt estimates the herd immunity rate is around 30 percent (see here: Is the Covid-19 Pandemic Self-flattening or Will it Grind Relentlessly On.)
Another study (not yet peer-reviewed but widely discussed) estimates that herd immunity thresholds run more like 10 to 20 percent (Article here: Individual variation in susceptibility or exposure to SARS-CoV-2 lowers the herd immunity threshold.).
At this point, researchers are still only debating the possibility that the Covid-19 herd immunity threshold falls way below earlier estimates. (See this article from MIT Technology Review, for example: Population immunity is slowing down the pandemic in parts of the US.)
But if you manage a small business? If you’re trying to plan for the future? You want to be aware that a return to the new normal may be closer than you think. Furthermore, you do not want to bet big that pandemic ends only far into the future.
Three Small Business Covid-19 Planning Takeaways
The preceding paragraphs cover ground a small business owner or manager usually shouldn’t have to ponder. And as uncomfortable as you are reading this? Hey, I bet I’m more uncomfortable writing it.
But let me present three final planning takeaways because, unfortunately, other better sources don’t seem to exist.
First, if you haven’t been updating your business plan and strategic thinking for the latest science, you want to do that. Not just the size but also the shape of the pandemic has come into sharper focus over the last few weeks. You want to update your thoughts on the pandemic’s impact on your firm.
Second, I think we small business owners follow the CDC’s approach to planning and so develop more than one scenario. Maybe a worst-case scenario, a best-case scenario and then a best-guess scenario. We can probably plagiarize the CDC’s scenarios for most of the Covid-19 stuff. And then we can try to come up with the specifics of how the pandemic and its fallout impact both our industries and then our small firms.
Third, consider and maybe work from the assumption that just as Covid-19’s impact on individuals varies greatly, the impact on individual small businesses varies greatly. In discussions with clients, other CPAs, small business friends, and blog readers, we’re hearing that the Covid-19 pandemic hits some firms really hard. But not others. A few firms even see their fortunes improving. So recognize that possibility.
I’ve tried to link to a bunch of relevant resources in the body of the post above, but a handful of other resources may be interesting for some readers.
The podcast from the Paradocs website of an interview of Mathematics professor Gabriela Gomes about her research into herd immunity thresholds for Covid-19 is a really easy way for non-mathematicians to learn the details of her work.
Stanford University professor John Ioannides’ early constructive criticism of the pessimistic infection fatality rates deserves highlighting: The infection fatality rate of COVID-19 inferred from seroprevalence data.
Justin D. Silverman, Nathaniel Hupert, and Alex D. Washburne’s early prescient insights do too: Using influenza surveillance networks to estimate state-specific prevalence of SARS-CoV-2 in the United States.
Finally, Nobel laureate and Stanford professor Michael Levitt’s preprint paper, Predicting the Trajectory of Any COVID19 Epidemic From the Best Straight Line is interesting. Note that Levitt’s paper cites the paper from Silverman, Hupert and Washburne.