prognostications of the plague year

☼ coronavirus ☼ predictions ☼ bayes

this will be a single, impractically long page with periodic updates on what the future seems to look like at that very moment.

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may 2020

15.5

april 2020

26.4

on this day, i am anticipating in the future:

• multi-country supply-side depression, akin to international version of dust bowl, lasting at least 2 years. will affect all countries. it will be bad everywhere but US, UK, spain, italy will be hardest hit by this.
• UK will exceed healthcare capacity short of massive NPI and surge capacity
• supply chains for non-food items will be gradually affected
  • supply chains for pharmaceuticals with primordials from italy, japan, china will fail (source failure) unless these countries are back online within 4 months of respective viral onset.
  • unexpected source of supply chain failure: national limitations on exports of primordials and finished already happening
  • already seeing nationalization of supplies (see US ordering 3M to stop selling masks to canada, though canada is the only source for the paper for the masks themselves; also india)
• supply chains for food in EU and US will not suffer source failure once in the prime growing months but may suffer intermediate carriage failure due to illness of human operators, intermediate supply failure due to interruptions of packaging and processing supply chains, and temporary demand surges leading to momentary stock-outs
  • still expecting this. already seeing signs of demand-supply format mismatch (toilet paper pack/config, flour bag/pack size).
  • in US and UK already seeing product at producer discarded because of inadequate route to market (from shutdowns). milk has been the first to be affected, being particularly sensitive to time-to-market.
  • ethnic distributors/warehouses shutting down due to staff illness
  • ATC shutdowns due to staff illness
• within 2 years, sovereign debt defaults for italy, spain at least. these will probably be disguised as something else. hard to see how eurozone survives this.
• alternating between intense and less-intense physical distancing for the next 18-24 months. countries that did not lock down early enough originally (IT, ES, FR, UK, US) will have shorter periods of less-intense physical distancing
• countries will renew aid packages at least once, but probably no more than 3 times.
• inflation is inevitable. where will countries find buyers for the debt that must be issued in order to fund stimulus? may be avoidable temporarily by stimulus structured as eventually forgivable debt—but there is a time limit to everything.
• when gov wage supports end: structural unemployment in hospitality and ZHC will set in within 1-2 weeks and peak within 8 weeks; demand contraction follows, leading to gradually expanding wage reductions then layoffs in salaried retail within one pay cycle, peaking within 4 pay cycles; similar dynamics will affect firms higher up the food chain but with timeframes unpredictable.
• 95% of mid-tier and higher restaurants currently existing will not survive until a vaccine is discovered. those that survive will have transitioned entirely to a grocery and prepbox model. logic: no restaurant can keep a team together that long, operate at less than establishment-modeled minimum capacity, or open and close with little notice and for a short period of time.
• big internet companies and consumer internet in general: main monetization model will begin to diversify away from current focus on advertising.
• sectors that will benefit short and medium term: logistics automation, automation robotics, materials engineering, drones, 3d printing, virtual presence, sex toys, prophylaxis.
• decentralized, locally enclosed supply chains (including ownership initially), especially for food production and in-person services, will become more popular despite being less “efficient”
• consumption will drop not in volume of product but in layers of intermediation. clearest indicator is in food—essentially, value-adding layers are being taken out of the consumption equation by force.

looks like it is beginning to sink in that a) reopening will not be a return to normal, b) that it will just be a slight relaxation of various countermeasures, c) that the state of business will keep changing repeatedly. the worst hit sector is hospitality, of course. the reactions split into two groups: a) “we need support to tide us over until things can go back to normal,” and b) “time to pivot and do something totally different.” i suspect the latter strategy will be the long-term supportable one. government support can only last for so long (maybe 2 quarters at maximum).

currently, there seems to be no way international air travel can resume at volume. it would require one or more of a) rapid, accurate infection testing, b) rapid, accurate serological survey, c) facilities to quarantine all incoming travellers. the scenario of partitioned countries becomes ever more likely, except countries can only partition if they are in the same state of play. i don’t see the US reopening for international travel any time soon. international tourism will not restart until air travel restarts. EU cross-border movement unlikely to restart either.

so, london’s city center, which is largely non-residential, will be a dead zone (60% capacity? less?) for at least 3 more months. offices will be operating at reduced capacity or WFH, no tourists other than domestic. will retail and restaurants be economically viable to operate under these conditions? doubtful. so let’s predict at the moment that 50% of retail and f&b in london’s city center will be gone if the physical distancing measures last 6 months or more. (this may be mitigated by government aid, but that seems unlikely to last long enough.

more general thought: low-QPR pseudoluxuries will vanish quickly. what will remain are true luxuries of high quality that are easy to consume in non-ostentatious ways. there will be lots of money left to be spent but it will be less socially acceptable to spend it demonstratively. so stuff like ultra-high threadcount sheets, premium health foods, etc.

6.4

on hiring: a thought, which i hadn’t articulated previously, is that hiring slowdowns and freezes will precede wage cuts, time cuts, and layoffs. (a response to this.)

on travel: this is a thorny one. short of massive biosurveillance, how will international air travel recover before a vaccine is available? next best is a quick and robust (i.e., low false positive) test of immunity and some way to document this that is internationally interoperable—on the assumption that acquired immunity is persistent. regions like the EU might have a way to implement this easily internally, but there would be enormous incentive to forge such immunity passports. studies just now being published suggest that only a very small proportion of the population is immune even in areas with severe outbreaks, so the global population of immune individuals eligible to travel would likely be very small anyway. another, much less good option that would also probably not permit any kind of volume resumption is aggressive tracing and testing for all visitors in country. this would naturally limit the extent of any visitor’s movements until after a quarantine period had ended. will the world partition itself into regions where coronavirus is endemic and those where it has been controlled, with travel permitted only within each partition? in any case, the outlook is not rosy for air operators at all.

5.4

on this day, i am anticipating in the future:

• multi-country supply-side depression, akin to international version of dust bowl, lasting at least 2 years. will affect all countries.
  • still expecting this. now updated: it will be bad everywhere but US, spain, italy will be hardest hit by this.
• UK will exceed healthcare capacity short of massive NPI and surge capacity
  • NPI for UK applied; surge capacity created through nightingale. UK will reach but not significantly exceed surge critical respiratory care capacity. peak new infections still unclear but not less than 8 weeks from now. peak new deaths and critical care load probably 9-12 weeks from now.
• supply chains for pharmaceuticals with primordials from italy, japan, china will fail (source failure) unless these countries are back online within 4 months of respective viral onset
  • unexpected source of supply chain failure: national limitations on exports of primordials and finished already happening
  • already seeing nationalization of supplies (see US ordering 3M to stop selling masks to canada, though canada is the only source for the paper for the masks themselves; also india)
• supply chains for food in EU and US will not suffer source failure once in the prime growing months but may suffer intermediate carriage failure due to illness of human operators, intermediate supply failure due to interruptions of packaging and processing supply chains, and temporary demand surges leading to momentary stock-outs
  • still expecting this. already seeing signs of demand-supply format mismatch (toilet paper pack/config, flour bag/pack size).
  • in US and UK already seeing product at producer discarded because of inadequate route to market (from shutdowns). milk has been the first to be affected, being particularly sensitive to time-to-market.
  • philippines apparently now with food shortages and riots
  • anecdotal accounts of permanent stock-outs in new jersey
  • ethnic distributors/warehouses shutting down due to staff illness
  • ATC shutdowns due to staff illness

new predictions for the week:

• within 2 years, sovereign debt defaults for italy, spain at least. hard to see how eurozone survives this.
• periodic lockdowns lasting between 3 and 8 weeks, interspersed with releases lasting between 1 and 2 weeks, for the next 15-24 months.
• stimulus packages announced last between 1.5 and 3 months of country ave. daily GDP. countries will renew the packages at least once, but probably no more than 3 times.
• inflation is inevitable. where will countries find buyers for the debt that must be issued in order to fund stimulus? may be avoidable temporarily by stimulus structured as eventually forgivable debt—but there is a time limit to everything.
• when gov wage supports end: structural unemployment in hospitality and ZHC will set in within 1-2 weeks and peak within 8 weeks; demand contraction follow, leading to gradually expanding wage reductions then layoffs in salaried retail within one pay cycle, peaking within 4 pay cycles; similar dynamics will affect firms higher up the food chain but with timeframes unpredictable.
• 95% of mid-tier and higher restaurants currently existing will not survive until a vaccine is discovered. those that survive will have transitioned entirely to a grocery and prepbox model. logic: no restaurant can keep a team together that long, operate at less than establishment-modeled minimum capacity, or open and close with little notice and for a short period of time.
• big internet companies and consumer internet in general: main monetization model will begin to diversify away from current focus on advertising.
• sectors that will benefit short and medium term: logistics automation, automation robotics, materials engineering, drones, 3d printing, virtual presence, sex toys, prophylaxis.
• decentralized, locally enclosed supply chains (including ownership initially), especially for food production and in-person services, will become more popular despite being less “efficient”
• consumption will drop not in volume of product but in layers of intermediation. clearest indicator is in food—essentially, value-adding layers are being taken out of the consumption equation by force.

before 5.4.2020

christophe, writing from his mountain redoubt in the massif central, has challenged me to write predictions every week so that i can hold myself accountable to my predictions as events unfold. this first entry summarises predictions up to now.

since at least 4 weeks ago, i have thought:

• multi-country supply-side depression, akin to international version of dust bowl, lasting at least 2 years. will affect all countries
• UK will exceed healthcare capacity short of massive NPI and surge capacity
• US, based on bizarre inaction, will exceed healthcare capacity by an enormous amount.
• supply chains for pharmaceuticals with primordials from italy, japan, china will fail (source failure) unless these countries are back online within 4 months of respective viral onset
• supply chains for food in EU and US will not suffer source failure once in the prime growing months but may suffer intermediate carriage failure due to illness of human operators, intermediate supply failure due to interruptions of packaging and processing supply chains, and temporary demand surges leading to momentary stock-outs

some thoughts about what would happen if a country took no measures (or insufficient measures) to control spread were in issue #21: https://uncertaintymindset.substack.com/p/21-consequences-of-inaction