Spotting Zombies

There have been a few articles in The Economist lately about so-called Zombie companies. They refer to businesses which are kept alive on some form of life support system, but which are doomed to die. It is generally healthy that such firms are killed off quickly, so that subsidies are not wasted and so the staff can start the task of finding other jobs in more productive enterprises.

 

One of the disadvantages of furlough schemes is that they can freeze this healthy churn in economies by keeping Zombies alive. If these dying firms had to pay their staff they would go under, and they will have to give up once the furlough is ended, it is healthier that this happen sooner rather than later. Compared with Europe, the US has followed a balance of supporting its economy by paying citizens more than firms, and The Economist credits this for allowing fewer Zombies and a faster resumption of growth.

 

There seems to me to be some merit in this argument, although there must be many other factors involved in selecting the best policy, for example targeting the most needy, speed and avoiding abuse. Furloughs were lauded in the early weeks of the pandemic for being efficient in all these areas.

 

The concept of Zombie firms made me wonder just how many firms might be considered Zombies, even in normal times, and how to spot them. I can argue that I’ve worked in a few Zombie firms in my time and that large chunks of economies might be classed that way.

 

There are various ways to grow profits in businesses. The purest are to put new or improved products into the market in order to acquire new customers or earn more from existing customers. Firms can also grow revenue by charging more for existing products from existing customers. There are also many ways to reduce costs or to alter cash flow profiles by managing working capital or investment.

 

Growth is more imperative than it used to be, at least in publicly traded companies, because investors today demand a consistent high return on capital. The other important trend is the radical lowering of prevailing interest rates. This makes the future relatively more important than the present. With a 10% discount rate, the first ten years or so dominate a net present value calculation, but with a 5% rate, projections out to twenty-five years or more are relevant. In a high discount rate world, firms with legacy assets can squeeze the lemon for a long time to eke out an attractive value, via costs or incremental revenue gains. In a low discount rate world, it is hard to create a competitive value profile without pure growth. Mature sectors facing demographic headwinds are especially vulnerable.

 

This is the essence of there being so many Zombies now. Pure growth is hard to come by, especially with Amazon and China hovering up most of what is available. So firms have to resort to more and more desperate measures to be able to project a cash flow profile that keeps investors invested. These firms can be argued as disguising their death spiral, or Zombies.

 

 There are many Zombie survival moves available, even when governments aren’t distributing pandemic subsidies. My favourites are the retail ones, because that is my background. When marketing becomes all about promotion, it is a total giveaway. Look out for retailers who rely more and more on stamps and offers. These are the last resort to hold on to existing customers and to drag extra sales from them, even low margin sales, in order to bolster the short-term and delay defections. In the US, Marshalls, Bed Bath and Beyond and JC Penney are examples. Once a retailer has started down this road, there is no escape.

 

Linked to this are heavy promotional advertisers and channel stuffers. Why to car companies throw so much money down the toilet on TV adverts? It is because it is all they have. It brings sales forwards from existing customers, and stuffs their dealers with stock, but it is a slow death spiral. Financing plans fall into the same category.

 

Then there are business model tricks, much beloved by private equity. Moving from direct operation to franchises and then brand licenses effectively sells future upsides and dilutes brand value, but does generate cash. Lease and lease back deals on property are similar. Selling off parts of a portfolio does the same, as does restructuring pensions. This sort of financial and business model engineering nearly always spells doom next times there is a downturn.

 

Outsourcing, offshoring and cost cutting are at least more structural than the tricks above, but the problem is that they are one-off tricks. They can boost profitability for a while, but reduce upside and tend to lose impact once competitors have copied. These are a staple of private equity too: look at ABInBev, and its recent struggles now the playbook is becoming exhausted.

 

Other cost cutting is even more insidious. Zombie firms will often reduce R&D and defer maintenance investments. It can be argues that the entire US economy can be classified as this sort of zombie – just look at the state of the infrastructure. Share buy backs are a good acid test of this type of activity.

 

Other tricks involve mergers and regulation. A Zombie industry can extend its life by firms buying each other out and milking margins for a time. This can work even longer if the sector has barriers to entry or regulatory advantages. US pharmacies are good examples. One acid test is to compare prices with those in other markets. In the US, pharmacies telecoms and realtors have pulled these tricks for a long time, but Amazon and others will ensure an eventual comeuppance.

 

This is an extensive playbook. In the days of lazy investors and competitors, high interest rates, possible windfalls and one-off opportunities, firms could survive more or less forever using these moves. They can still last a long time. Banks hate bad debts and have a bias to existing clients, so they will keep lending long past the time they should. Passive investors stay in the game too long too, especially when dividends are high and when a stock lingers in an index (so must be retained by tracking investors).

 

I looked at the thirty firms currently in the Dow Jones index, and I think as many as half might be zombies if I am a tough judge. The department stores, car companies and industrial generalists like GE departed the Dow a while ago. But where do you see true growth in Boeing, or Caterpillar, IBM, Exxon, Dow Chemical, Amex or Walgreens? I can argue that even P&G, Coke, Nike or MacDonald’s might be vulnerable to Zombiefication in the medium term. Verizon and Disney have some strengths but are in dangerous sectors. Outside of healthcare and technology, there might be zombies everywhere.

 

The other side of this coin are the winners, notably Amazon. Zombies are perfect for winners. They prop up sector prices and margins and can be picked off gradually without ever posing any sort of threat. Facebook and Google will also hoover up the excessive desperation advertising of Zombie sectors for many years yet. There are also Chinese upstarts in many sectors that will be salivating at the prospects for taking business in the west, without having to resort to state subsidies or intellectual property theft.    

Thinking Outside of a Bigger Box

 During the pandemic, there have been attempts by some of the publications to which I subscribe to think outside of the box. The pandemic has acted as an accelerator and made it possible to envision a radically changed society and a fleeting opportunity to take actions to bring this about. Both Time and The Guardian Weekly sponsored a series of articles on the subject. I found them both highly disappointing.

 

The overriding approach of these articles was to take a current gripe and to wish it away. Corporations would suddenly be more socially conscious, and would take a longer-term approach. Everybody would have somewhere decent to live, especially the historically downtrodden such as people of colour and immigrants. Education would embrace technology and become more enlightened. A green revolution would miraculously solve climate change. Racism would no longer exist.

 

There were various recurring themes in the articles. One was the portrayal of a leftist utopia that signally failed to recognise the benefits that markets have reaped for humanity. Another was the assumption of unlimited government money for investment, without any consideration of where this money might come from or the unintended consequences of spending it. A third was a lack of any coherent pathway towards the utopia: often a tiny example project was quoted with the lazy assumption that it could be easily scaled.

 

Most of my takeaways from this were rather depressing. Many on the left appear to be terrible managers, and even their good ideas can be easily swatted away by conservative forces. But I also found it depressing how limited their ambitions were.

 

There were a couple of glorious exceptions. Rich territory included reimagining cities. I love the idea of the mayor of Paris of working towards the fifteen-minute city, in which all citizens should be able to find most of what they need within fifteen minutes on foot, bike or public transit. This has legs. The vision is clear and appealing. It starts with current reality, and incremental steps can easily be identified and ranked according to cost and benefit.

 

The idea has potential even in the home of the SUV, the USA, though probably only in the bigger cities for the time being. The pandemic has opened up some possibilities, and I think our leaders could be braver in their experiments. In New York we have an Open Streets initiative, but it mainly seems to take very easy wins such as quiet residential streets next door to a park.

 

Why not be bolder? Where I live in Forest Hills we have a rather traditional high street – it can have a European feel and was one of the attractions leading us to choose the area. But the street would be so much more pleasant if it was pedestrianized, and that is quite feasible. One bus route would have to be marginally rerouted but the street is not important for any commuter routes. Take away the cars and Austin Street could become a permanent home for outdoor dining, café culture, markets and small businesses and simply walking. There must be hundreds of such opportunities within New York City, yet the mayor’s office seems to lack the vision or courage to implement them, even now. Habit and lobbyists run deep in the USA.

 

Still, practicality is not my main gripe with most of the articles. The primary purpose of such pieces should be courageous re-envisioning, yet most were rather incremental. I would have preferred it if some had challenged more fundamental assumptions. Here are two that are ripe for a challenge: the nation state and work.

 

Imagine a world where the role of the nation state was radically reduced. My model is of a world where nations were a bit like US states. Some powers would remain at that level, but many would become regional or global and others devolved to cities. A passport would become more like a driving license.

 

Global free movement, with only bridgeable financial restrictions rather than ideological or racial ones, would unlock the ultimate human right and plenty of innovation. We could get rid of most of the military jingoism on the planet, and its destruction and waste too. Nasty populism would lose most of its oxygen. Global challenges such as climate change could be addressed globally. Trade could be global, with a single currency and a monetary policy designed for humanity not rich elites within rich nations.

 

Most of the crap in the world today can be laid at the door of the nation state. Watch the news for the next few nights and note when a story makes you angry, and then note how many of those stories involve calumnies in the name of one or more nation states.

 

I am not advocating big brother here. Much can be devolved to cities and other smaller units. The nation state stops that too. The nation state is the toxic level, the level that is broken and destructive. If somebody visited from another planet, the nation state would be the aspect of human governance that they would first be confused by, then deride, and then eliminate.

 

By wonderful happenstance, we have an example to build upon, called the European Union. It is not perfect, but it sure gets many things right. And it would be even better if nation states didn’t constrain it so much.

 

My second out of the box idea is to eliminate most paid work. I’ll start with an example from today’s news. The MTA is the body running the NYC subway, and, not surprisingly, it has current financial difficulties. It is bleating for taxpayer help and threatening self-destruction by massively curtailing service levels. But it has a simple fix available. Trains run with a driver and a conductor. With no technological investment, the conductor could vanish today. Within a year and for a minimal investment the driver could go too.

 

Does this thought make me an evil capitalist bastard? Of course the reason it does not happen is that the MTA is answerable to the city and the state and various trade unions, all with political agendas in which protecting jobs is central.

 

Now think of it this way. Tens of thousands of New Yorkers get up early every morning to sir in a lonely carriage and do something they hate and that has no human value, since it can be easily mechanised. Those people could be freed to do something productive, or simply enjoy some leisure, or care for old or young or infirm family members. If the last option was paid for then nobody need go poor and lots of societal good would be achieved.

 

So let us envisage a world where maximising jobs is no longer the goal. How did we get into a situation where we all strive to slog our guts out doing unpleasant stuff, and call that progress? Reimbursement for Care could change that attitude in an instant, as well as building communities, kindness, culture and gender equality. A generation would need to learn how to feel fulfilled without their MTA uniform and pointless pressing of buttons, but I don’t think that would take too long, if our education were overhauled.

 

I am not advocating a hippie society where everybody is always high and nothing gets done. Paid non-caring work is still an option, and most people will choose to take it up, for several years at least, in order to give life balance and earn a few luxuries and develop something for humanity. There would be plenty of progress; my guess is more than today. All such work would be gig work, much more flexible and adaptable and fitted to needs.

 

Now I have to concede that both of these ideas suffer from a dose of leftist utopianism. Implementation paths would be tricky. Global outlooks are hardly fashionable among voters just now, and those MTA drivers and conductors could garner plenty of sympathy too. But surely the purpose of these exercises is a radical reframing of what might be possible? For without that first step, nothing can ever happen.

 

I predict that in one hundred years time, our successors will consider our use of nationality and passports rather like we now consider slave owners. It is not so different when you think about it. They will also look at how we structured our economic model around everybody doing forty years of usually unproductive and unfulfilling slog, and laugh at how backward we used to be.    

What Happens Next

 I am not even a citizen, and will probably not be living in the USA by the next time a presidential election comes along, but I lost a considerable amount of sleep over the last two weeks. I can only imagine how much anxiety has been afflicting people with more at stake.

 

After all the bluster and recounts and lawsuits and runoffs, it seems fairly certain that we will have a Biden presidency, a Republican senate, a marginally Democratic house and a staunchly conservative judiciary for the next two years. How is this likely to pan out?

 

First, we can all breathe a massive sigh of relief, because the Biden presidency is the key element for humanity as a whole. In global affairs four more years of Trump would certainly have put a brake on climate action, made nuclear escalation with Russia and China more likely, made countless world conflicts more dangerous, and entrenched a bi-polar economic world to stymie development for a generation. NATO might not have survived either, though I not sure how many tears I would have shed over that outcome.

 

With Biden at the helm, he will join all significant world leaders in stepping up efforts to mitigate climate change. The courts in the US will try to slow him down, but symbolism matters in these things and I predict a decisive shift over the next four years. Within the last six months, the EU and China have taken significant actions and Japan and South Korea have made aggressive pledges. With a positive USA, the momentum will be unstoppable, and not before time.

 

The China relationship is interesting. I believe a grand bargain between the USA and China is available, but I fear the window may already be closing and Biden’s flimsy political capital will not allow him to take the opportunity. A brave USA would put trade, global institutions, military balance, human rights festering disputes on the table together, and China would have the ability and foresight to come to a deal. Domestic US politics will get in the way, and, while at least things will not get worse under Biden, the opportunity for a unified world will slip away. The irony is that the world that will emerge will cement the decline of the USA for the rest of the century. Recent Economistarticles about universities, technology and finance confirm to me that the key battles are already lost.

 

So we can all celebrate a return to common sense in world affairs. There is also cause to celebrate that Trump’s ouster will halt the erosion of US institutions like the Justice Department. But when it comes to the domestic outlook, I am not optimistic. The most influential person in the USA over the next four years will be the same as the last four: Donald Trump.

 

Perhaps the most remarkable feature of the US election is how close it was. Trump made it into a referendum on himself, and then proceeded to take action after action to alienate everyone but his base. Four years in office have laid bare the manifest flaws in what pass for his policy platforms. The Democrats managed to unite behind a senile but otherwise unobjectionable candidate and to run a disciplined campaign. The Republicans are demonstrability a nasty, greedy and cynical crowd without any coherent platform. And Coronavirus was a curveball provided by fate at the perfect moment to undermine Trump’s electability. It is hard to imagine a more propitious set of circumstances for the Democrats, yet all they could achieve was a winning tie.

 

Democrats can justifiably moan about the unbalanced system, the gerrymandering and voter suppression of the other side and Trump’s abuse of the levers of incumbency, but a tie is still pretty shocking. How did this happen?

 

The answer is the Trump brand. Trump has been building his brand for ten years or so. At one point on the journey Trump took over the Republican brand. Trump’s brand is not driven by ideology or outcomes or even power. It craves respect, loyalty and adulation, and requires humiliation for those showing disrespect.

 

Like all good brands, this one is all about values. Values drive perceptions, which drive behaviour and build loyalty among target groups. Among the values of this brand are liberty and defending the American way of life. It is easier to list what it is against, including tax, the swamp, elites, wokeness and rules. Somehow the brand has managed to become associated with jobs and economic growth. During the takeover, the brand accepted some additional values such as extreme Judeo-Christianity and pro-lifeness.

 

The brand has been built via a relentless stream of communication, often flying in the face of objective truth. Twitter and Facebook newsfeeds have been the perfect vehicles, building upon what was already present, namely Fox News, conservative talk radio and certain churches.

 

The result of all this has been a division of the USA into bubbles that nowadays barely intersect. While those of us who follow mainstream media can barely understand how anybody could vote for Trump, just as many others, fed the unrelenting diet of the brand, have just as much trouble understanding us. They are captured; it is self-reinforcing and likely to grow further. QAnon and Pizzagate and the Proud Boys are sort of associated franchises.

 

We should be careful to accept that building brands is not illegal or even unethical and has been the core of politics forever. It is also not the first time that a political brand has come to be focused on an individual.

 

For me one of the most enduring images of Trump came almost exactly four years ago, the night of the 2016 election, when he suddenly realised he might win. I don’t think he wanted to win. Building the brand did not require winning – it would have been easier to build after losing. I have to admire how the brand has survived the scrutiny of four years in government.

 

Once he gets over his petulance, I think Trump will be rather happy he has lost this time. He has been preparing the ground four the next four years already. Now loyal supporters have a new sense of grievance, and spinning out the legal challenges will only grow it. This is dangerous territory: the USA is a land of many guns.

 

What does this mean? I think it is rather frightening. The Trump twitter feed will be the national agenda for the next four years. Republicans cannot escape and must continue to toe the line or be jettisoned into oblivion. Without the handicap of actually having to do anything or be judged by any outcomes, the twitter feed can become more extreme.

 

Biden has a wafer thin mandate. He faces a pandemic about to explode. 2021-2022 will be years of economic hardship. McConnell will block anything worthwhile, so Biden will be limited to pandemic stimulus and more short-term fixes to healthcare and not much else. Few will see any benefits. The twitter feed will blame him for everything. Going after Trump legally will only feed a narrative of Trump as martyr. The house may well flip in 2022, and, wait for it, Trump could easily win again in 2024. The circumstances will certainly be propitious and I fear the brand supporters will only become more loyal. All he has to do is expand his base incrementally – a few conservative Spanish-speaking memes in Miami have already showed the way. Biden will be eighty-two in 2024 and the Democratic ticket will be highly vulnerable with him or without him.

 

I hope I am wrong. I usually am. Plenty can change. Trump himself will be seventy-eight and I don’t think his movement will not survive him. In the longer term the next generation will be less gullible and more educated and more aware of wider issues, and we will all learn to turn social media into a force for good. But most of this will take longer than four years to have a measurable impact.

 

Humanity can celebrate dodging a bullet this week. I am sleeping better already. But the scenarios for 2024 feel very frightening to me.    

Small Mercies

 It is dawning on many of us that the coronavirus will disrupt our lives for many more months. We are bracing ourselves now for wave of infections, and the winter has not started yet. Surely there will be at least one further wave in the new year, though the exact timing will vary by region. After that we can be a bit more optimistic, from the possible combination of a widely available vaccine, the convenience of a do-it-yourself instant test, the return of warmer weather and further improvements to treatments.

 

In most countries we will have to live with the existing diet of restrictions. We will have to wear masks in public, avoid large gatherings, work from home where possible, accept constraints on schooling and live without any live culture. The only places where the restrictions can be less are where a combination of isolation and effective testing and tracing can eliminate the virus and stamp it out immediately whenever it reappears.

 

It is unfashionable to praise China, and of course the Chinese erred at the very start of the pandemic and in maintaining food practices that made it more likely in the first place. But it is wonderful how compliance and technology have enabled China to remove most restrictions. China is not an isolated island like New Zealand or even Taiwan, but a huge landmass with porous borders and high levels of internal travel. Yet they have suppressed the virus. Last week a Chinese city with the population of New York City was tested en masse. We tend to scoff at such things, saying we would not like to live in a country of such strict requirements to comply with state instructions. But when I think about it, just now I’d much rather live in China than in the shambles of the USA.

 

It reminds me of when I was growing up in the UK and we scoffed at the USA for its perfect teeth and two car families and its air conditioning and suburban mansions. We told ourselves we would not like to live in such a place, but we were lying to cover our envy and our shame. I suspect that over the next thirty years we, especially Americans, will have ever-increasing cause to create similar lies about China.

 

As we are forced to accept the reality of continuing restrictions, virus fatigue is becoming more prevalent, and I fear that many people will slide into depression. As humans we can endure a lot, but endurance is much easier when it is time limited. We will all have to work even harder to keep ourselves cheerful and to help those around us who are vulnerable.

 

We are especially at risk here in the USA, because we have a second reason to become depressed, namely the shameful politics. I predict that this too will have a dawning reality, soon after November third. If Trump should somehow win that dawning reality will be truly horrific, but we also will have to face up to consequences if he loses. Trump won’t just go away. Indeed, I see in his recent tactics that he is less interested in winning and more interesting in creating a loyal base to maintain a lucrative celebrity brand as a former president. He is stoking up his base more than ever, and doing so by casting suspicions and hate and conspiracy. He can use all this after a defeat, to the continuing cost of all of us.

 

So how can we avoid depression? One immediate remedy is to turn off twitter and facebook for a few weeks. I watched the first presidential debate but have decided to avoid the second one – why should I condemn myself to another night of lost sleep?

 

Part of the wider answer lies in counting our blessings. Firstly, most of us can recognise that our own hardships pale into insignificance compared with many others. I cannot sing or go to concerts, poor me. But I do still have an income and a bank balance and a home and a family and robust health. Perhaps sacrificing a few restaurant meals is not too bad when we think of what others are going through.

 

Then there are all the small blessings we can enjoy. Recently, I’ve paid special attention to relishing those things that were unavailable in April but possible now. I find it especially important to do this, because I fear the next move is more likely to take us back towards April than forwards into more possibilities.

 

One blessing is the return of live sports. Stuck indoors, we need some distractions, and live sports are important for me. I have got used to the absence of crowd noise. I especially applaud the organisers of those sports that have managed to return relatively safely. 

 

Three weeks ago the indoor pool at my local gym reopened, and I have resumed swimming. In truth I never enjoyed it much, swimming was always little more than the least painful way to avoid getting fatter, but now I am making sure I am thankful that I can swim.

 

A couple of months ago we started going to regular mass. We attend the church where I sang before the pandemic, and of course I miss that terribly, and it would even be preferable if others were singing beyond a lone cantor. But mass is still calming and beautiful and a purpose to leave the house and a source of community, with friendly faces even if we cannot see smiles. I also volunteer cantor myself now at another church, so can perform at least once a week.

 

Then last week I went back for the first time to the old folks home where we volunteer, to drive a resident to a medical appointment. This involved two long commutes there on public transport, the first of them in pouring rain to take a coronavirus test – three hours arduous travel for one minute of unpleasant activity. But wow, did I appreciate the opportunity to serve there again, even if I had to stay in the reception area and met very few old friends.

 

I can add in many other blessings, from increased family time to walking and reading and digital choirs. But there is some extra magic from being able to experience something that had been taken away for a while, especially when there is a risk that it might be taken away again. These are things to cherish.

 

I noticed one rather sad feature when I visited the home. I had expected a warm and exuberant welcome. Usually the place is full of kind outgoing human energy, from residents, staff and nuns alike. This time people were courteous, but some of the energy was not there.

 

It reminded me very strongly of the time in my life when I associated with addicts and their friends and families. I noticed that these people had learned behaviour to help them endure hardship and prepare for likely setbacks. They tended to be rather introverted and stoic. They celebrated small successes and constantly seemed to expect problems and used some of their energy internally as a reserve for when things would go wrong.

 

I found it an intensely sad way to live but also an impressive one. A life without colour or optimism or exuberance is a limited one, but somebody prepared to sacrifice such things deserves congratulation. Many of the teachings and sayings of the twelve step processes encouraged this sort of attitude.

 

This was exactly the attitude I encountered at the home. Of course enduring the pandemic there is tougher than it is for most of us. Residents are largely confined to their rooms and the fear of the virus is everywhere. Masks are also a bigger hardship for the hard of hearing.

 

So, unless we are lucky enough to live in China or New Zealand, we need to knuckle down for many more months of restrictions punctuated by setbacks. We can cope if we look after each other and if we look after ourselves. Counting our blessings is perhaps our most powerful tool.      

The Economist Misses the Point

This has been a tough year in many ways, and many familiar solaces have had to be discarded for the duration of the pandemic. That has made the pleasurable things that we can still enjoy all the more important, and one of those is reading. My weekly periodicals have assumed an even greater role in my health and sanity, not least because of their honest and detailed coverage of the pandemic itself.

 

The Economist is the best. For me it is the Amazon of journalism. It follows a relentless pursuit of clear and worthwhile goals, and as a result steadily builds competitive advantage to trample rivals in a self-reinforcing loop. As quality local newspapers, then national newspapers, then TV news channels have retreated towards celebrity flimflam on the way to obsolescence, The Economist strides forward vacuuming up market share. The BBC is clinging on, and a few quality papers are still strong, but the depth of their coverage compared with ten years ago has declined. Who now have people on the ground in many African countries? Who can give a thoughtful and content-sourced article on Nagorno Karabakh? Who can write beyond the propaganda to document how China is truly developing? Increasingly, there is only one player in town.

 

The Economist can still be annoying, notably their persistence in retaining some MI5 jerk to contribute cold war rubbish once per month or so. The review of Scott Anderson’s CIA exposé The Quiet Americans plainly required much iteration with internal censors.

 

The weekly feature writers are generally excellent, most notably Chaguan in China. Bartleby is plainly a cynical old fart like me and I am in awe of his self-deprecating humour. Lexington manages to retain some decorum and distance amidst the chaos of current US politics.

 

For me the weakest of the regular features tends to be Free Exchange. These contributors give a sense of intellectual snobbery and orthodoxy. Most of the others seem to be curious and to a more diverse range of inputs. Having said that, this week’s Free Exchange challenging conventional wisdom comparing policies to respond to climate change was excellent.

 

But the Free Exchange article Which Market Model is Best from a couple of weeks ago to me typifies the former less curious Economist. The article started well by describing emerging models of capitalist economies, describing LME’s, CME’s and PME’s, the initial letter referring to limbering, coordinated and political. Think the US, Germany and China as archetypal examples.

 

The article then compared the performance of the archetypes during the pandemic, finding much evidence to support the guiding principles behind the various models. LME’s rely more on individuals and markets rather than institutions, so initial responses were often haphazard, while on the other hand most of the game-changing innovation is coming out of LME’s, with the UK given a particular shout out. CME’s appear more organised in the face of a challenge like the pandemic, able to forge a more coherent strategy to keep ahead of a crisis, while their innovation is more likely to be incremental. PME’s can mobilise radical actions quickly with compliance, as China’s ruthless suppression of the pandemic exemplifies, but it was in China that corruption and fear allowed the pandemic to take hold in the first place.

 

These are all good arguments, but the article completely loses its way when it decides it should issue awards, declaring which of the models is the best within the context of the pandemic. Old dogmas kicked in. Whereas many Economist contributors have started to regularly challenge LME orthodoxy, such enlightenment has yet to reach the Free Exchange office. Incredibly, first prize in the pandemic was awarded to LME’s.

 

This is stretch worthy of a Trump campaign advert. Surely we have to start with the figures. Where are the most preventable deaths occurring? Where is civil society most under strain? LME’s remain an unholy mess, even six months or more after initial outbreaks. Compare the US and Canada, the UK and Germany, Brazil and Uruguay and The Philippines and China. True, raw competence, context and luck play a part, but it is hard to argue that many LME’s are relatively safe, calm or fair places just now.

 

If Free Exchange had not started from intellectual categories like innovation, and not felt constrained by seeking arguments to justify a pre-determined first prize, it might have provided more useful insight. An examination of why more people are dying and suffering in LME’s might have been more effective.

 

LME’s tend to lead to high and growing inequality, which is an important root cause of pandemic failure in a number of ways. An unequal society often has a large minority living in cramped conditions with no savings and restricted access to medical care. These communities as a vulnerable economically as there are from a health perspective, and have less opportunity to comply with guidelines to restrict virus spread.

 

Then there is the looser concept of a coherent society. LME’s emphasise individual agency and downplay the role of government and institutions. It is no surprise that “we are all in this together” rings less true and that trust in government guidelines is low, leading to low compliance. Empathy for those of different tribes can vanish.

 

Arguably, simple competence becomes an issue in LME’s over time. At least I could argue that while marketing might become stronger, patient project management can suffer. It is more likely in LME’s that medical and other technical competences are allocated towards capital accumulation of citizen’s welfare.

 

I also trust an economic recovery more in a CME than an LME, although that has yet to be proven. LME’s crave growth driven by consumption, and that requires everybody to spend. Even before the pandemic, this could only be sustained by ever-increasing personal debt, and a sudden shock has seen the edifice crashing down. It will take more than a few stimulus checks to rebuild; indeed arguably it will not be possible to rebuild at all without discarding some LME shibboleths.

 

The most damning argument that Free Exchange could make against PME’s was that corruption and nepotism would make any innovation untrustworthy. It is a fair point, and I certainly won’t rush to take a vaccine only approved in China or Russia. But, as Kamala Harris said on Wednesday night, if Fauci tells me a vaccine is safe then I’ll be first in line, but if the recommendation comes from Trump, count me out. It is not only PME’s where trust becomes fatally eroded.

 

I like the model classifications, and Free Exchange is right that they can produce insights. Like all models it is incomplete and has fuzzy edges: an incompetent PME or one without civic goals will always perform worse than a CME or LME with competence. Many economies will be hybrids and evolve over time.

 

Still, the method of taking an important issue and using it to compare outcomes between models and analyse root causes can be powerful. The Economist generally does this well, but not when the winner is declared before the analysis starts. Free Exchange, you can do better. Get out more.   

A Word in Your Ear

 For as long as I can remember, I have been somewhat deaf. My right ear performs well, but my left one significantly less so. I can’t remember what first triggered me to realize this, because it is possible to live with partial deafness without being aware of it, a bit like living with a weakened sense of smell: the only gauge I have really is myself, so as long as there is no change, how can I tell of any disability?

 

One of my favourite books is Deaf Sentence by David Lodge. Funny and touching, the book chronicles exploits of a character of about my age, and I can empathise with all of it. I recommend it as reading for anybody who might be deaf or who interacts with somebody who is – I suppose that encompasses most of us.

 

More men have hearing impairment than women, and for most it is correlated with ageing. I suppose I am rather lucky that my hearing appears very stable.

 

The clearest symptom of deafness is in some ways the opposite of what we might assume. True, it can be revealing when somebody struggles to make out what you are saying. But I find that usually deaf people talk more loudly than others.

 

Have you noticed how you always shout into your mobile phone, especially when outdoors? We all do, and on a subway carriage it can be both annoying and funny to witness people screaming into a device. Our bodies are reacting to a difficulty in hearing the other end of a conversation. Somehow we assume that the other side is talking too quietly, so we react by talking louder ourselves as a signal to them. In my experience, most of the deaf people I meet are the ones who habitually talk louder. I include myself on this list.

 

One sad effect of the pandemic has been to exclude us from the old people’s home where we volunteer. There nearly everybody is deaf, simply because they are so old. They can’t hear, so they shout. Often I will serve a table of residents with their dinner and walk away but continue to hear their conversation clearly. They might not be so candid if they knew I could hear them. It may be true that I have no idea how to serve a sandwich, but most of them would be ashamed to tell me to my face, yet that is what they are effectively doing.

 

Hearing is a poor relation among the senses, at least compared with sight. We are all encouraged to test our eyes regularly through our lives, and technology has evolved to offer effective, though overpriced, remedies. I took Lasik eye surgery about fifteen years ago and would also recommend that. By contrast, most deaf people don’t even know they are deaf, and until recently hearing aids were awkward, ineffective and very expensive.

 

I am happy to report that this is changing, and I’m delighted that eighteen months ago I checked what was available, something I’ve done from time to time for a while. The diagnostic process was efficient and my doctor was kind enough to whisper that I should visit Costco, of all places, to buy a hearing aid. Specialists are still charging thousands, but Costco has the same or better technology and better service for a tiny fraction of the price. My single hearing aid was $800, not trivial but perhaps my best investment of the last few years considering the benefits to everyday living. I love it, and it is so unobtrusive that the only people who ever notice I am wearing it are other people who use hearing aids.

 

For me, a singer, the biggest benefit was in how I was able to hear music in a choral setting. I had always experienced that I could hear the singer on my right loud and clear, sometimes too loud and too clear, might sound from the one on my left was barely audible. I expected the hearing aid to remedy this but it did far more. The actual effect was a bit like the difference between listening in mono and stereo. The whole sound came to life for me thanks to my hearing aid, and I am convinced it has made me a much better singer.

 

All of this is preamble. The pandemic has been tough for all of us, but spare a thought for those of us who are hard of hearing.

 

The pandemic will have made it obvious to most of us how much we listen with our eyes. But listening has become so much harder lately with everybody wearing masks. Firstly, the mask itself obscures the sound of the talker, especially clarity of consonants. Next, we often have additional hurdles such as standing farther apart and Perspex screens. But the worst part is that we can’t read the lips of our interlocutor, but have only our ears to rely on.

 

For the most part I suppose I am no worse off than anybody else because my hearing aid corrects most of the deficiency. But the correction is not total, and in the summer I sometimes did not wear my hearing aid, because the one thing it does not like at all is moisture, and humid weather makes ears and everything else more moist. None of this helps outdoor dining, with all its ambient noise. Furthermore, I suspect I am a better lip reader than most people, simply because I have had more recourse to using it than people with perfect ears, so my disadvantage in not seeing somebody else’s mouth may be greater.

 

I have noticed one other disadvantage. I’m sure anybody who wears glasses have noticed how masks make them fall off more, simply because there is more clutter on the face and around the ears. Now imagine adding a hearing aid to that equation! I’m so happy to be singing again, with a mask on, as volunteer cantor at a local church. But I’m sure the congregation are taking much amusement from the sight of me trying to stop my glasses falling off, as my left ear is completely overloaded with devices and objects.

 

I concede this has been a very convoluted way to relate a modest anecdote. But there may be a few other takeaways available.

 

Firstly, now may be a very good time to establish if you are a bit deaf. Understanding through a mask is a handicap for everybody, but do you find you are really struggling? If so check your experience with others and test out different things, such as standing to favour one ear then the other. Ask people if you shout down your phone more than most people.

 

If you come away with some doubts then get a hearing test. In most developed countries the costs have come down and the remedies have improved.

 

Next, try to be tolerant of people who are struggling to understand what you are saying. And try to annunciate consonants more clearly than usual. I promise you we are doing our best and it is not easy.

 

Next, I wonder if there is an opportunity here for producers of masks and of spectacles. Asia’s experience suggests that masks are here to stay in our lives. I see people putting effort into fashion, but not yet into design.

 

Finally I wonder if deafness is part of the cause of some other things we are witnessing. I watched the gruelling and depressing Presidential debate on Tuesday. True, they were not wearing masks, but here were three old dudes standing farther apart than they usually would. I wonder how many of them are a bit deaf? I wonder how many even know? Certainly they were shouting enough. Biden in particular seemed a little slow to pick up what was being said in the cacophony.

The Pandemic: Winning the Second Half

 When a soccer team is losing heavily at half time, it is traditional for the coach to use the half time team talk to motivate his team to win the second half. It gives a target and can avoid heads dropping, at least until the opponents score yet again when battle resumes.

 

Humanity has certainly conceded many goals in the first half to the Coronavirus. Perhaps now we are close to half time and ready to regroup and accept some sage advice from our coaches. One part of that surely has to be to look forwards and not backwards. There will be plenty of time for recriminations after the outbreak is over, and plenty of opportunity to win the second half, because we know our opponent better by now and can adopt smarter tactics.

 

A key prerequisite for the coach is to define what winning is. A defensive minded coach might argue to minimize deaths. But this can be fine-tuned. Excess deaths compared to normal is a better target, not least because it avoids the effortful need to accurately assign each death to Coronavirus or something else. We can be smarter too if we measure something like excess healthy years lost, because surely the death of a centenarian, tragic though it may be, is more harmful than the death of an otherwise healthy child.

 

This might satisfy our defensive minded coach. But what about the offence? It may be that we can take steps to reduce excess healthy years to nearly zero, but at what cost to our economy and future well-being? There is a valid argument to risk a little on defence if that enables our children to resume learning or more of our poor to resume earning, for surely those things will help us in future matches. It might even help immediately if we can avoid mental health or drug issues. The question becomes a balance: what is the appropriate policy enable humanity to thrive somewhat, while keeping excess healthy years lost low?

 

By now we have a lot of data. And based on the data I find myself playing more offence than defence. This virus requires a defence, but science and experience and improved behaviour have helped. Last week The Economisttabulated what had been a theory of mine for a while. The 2020 ‘flu’ season in the southern hemisphere has barely existed. It stands to reason. The vulnerabilities to ‘flu’ are similar to those for Coronavirus, and by training ourselves to minimise the new virus we reduce the incidence of ‘flu’ as well.

 

Before 2020, I certainly never bothered with washing my hands so often or was careful about what I touched or from where I ate. I happily shook hands and hugged and would never have dreamt of wearing a mask. I sang loudly and often, spreading droplets generously, and would have to be very sick before choosing to stay home. Well, that is most of us, and it stands to reason, at least to me, that fewer folk will suffer ‘flu’ as a result.

 

Then there is the risk from the virus itself. In March and April it is no wonder so many New Yorkers who picked up the virus went on to die. The hospitals had few effective drugs. And contagion was so rife that we were told not to go to hospital at all unless we had been very sick for several days, so by the time many people arrived they were beyond cure.

 

Now medicine has worked out that steroids are effective, especially early on. So long as an outbreak is relatively contained, there is enough capacity in hospitals. For most of us, our odds are pretty good. And many of those for whom the odds are not good reside in nursing homes or can be a focus for isolation.

 

We are all waiting for a vaccine, and of course an effective widely-available vaccine would be wonderful, but I think we are talking up the vaccine too much. It will probably end up like the ‘flu’ vaccines. It will take a long time for most of us, many people seem likely not to take it, and it won’t work for everyone anyway, especially as the virus mutates.

 

Luckily. There is much that we can do with a vaccine. So long as outbreaks are contained relatively quickly, we don’t need to abandon our offence completely. Given the ‘flu’ benefits and the medical advances, excess years lost seem likely to remain quite low, so long as the most vulnerable are isolated. I suspect we are already close to a situation where the risk from driving our car on the highway becomes lower than the risk from Coronavirus.

 

This assumes that outbreaks are contained, and by now we have a good idea how to do that too, though practice in many countries remains woeful. Why is it such a hardship to wear a mask, and wear it properly? The politicians who have equivocated on this truly have blood on their hands. If everybody avoids crowds and wears their masks and maintains good hygiene, we can otherwise live normally, except where there is community spread.

 

Avoiding community spread is all about testing and tracing. Again, there is good practice available and woeful project management in many places. We took a test in August, and received our result thirteen days later. That is almost worthless. It has taken far to long here and elsewhere for reliable tests to be readily available and return results quickly. If that is in place, then contact tracing can be effective too.

 

Can we do this even better than current good practice? I think the real game changer is less about a vaccine and more about an instant test, one we can self-administer like a pregnancy test. This is how professional sports have been able to resume, and it would be wonderful if that sort of test became available to all of us. Then we could do almost anything, even sing or party or go to the theatre. For if even a thousand people enter a clean space, they can do whatever they like if nobody has the virus already: they will all exit virus-free as well.

 

Perhaps singing and parties and theatres are not top priority, though it would certainly help the mental health of many if they were. But school certainly is a top priority, and so is work. Many people will work from home in future, so it should be possible now to handle the resumed demand on public transit and in offices and retail establishments. This would be a good moment to increase the taxes on car use, to influence more people to return to public transport rather than use their car or even buy a new car.

 

With cases rising around Europe this prognosis may appear over-optimistic. For sure there will be outbreaks, and local governments must quickly snap back quarantine measures when these become too dangerous. But for most of us, most of the time, we can confidently move towards normality, thus improving our mental and economic health.

 

Critical to all this is public health messaging that is clear and consistent. We can acknowledge that, while the virus remains deadly to some, the overall impact on lives lost no longer justifies extreme measures. Most importantly, everybody must play by the hygiene rules, notably wearing a mask, and strictly following periodic orders to stay at home. A focus should remain on provision of frequent tests with rapid results, and the possible game changer of the self-administered test.

 

In some places the first half performance was so bad that winning the second half would be a daunting challenge. How can a public trust leaders who have equivocated on hygiene? In these places, sadly including the one where I live, restoring that trust has to be the only priority, and that precludes more nuanced messages about opening up.

 

But elsewhere, even when two or three down at half time, ways are opening up to win the second half. Whisper it softly, but that might even include some fun. After the drubbing of the first half, we surely need that.

 

Even if the second half is won, the end result of the match will be defeat. Most obviously, that is reflected in the mourning that has touched most of us over lives taken to early. But the pandemic had exposed other fundamental weaknesses in our team, from urban design to care for the elderly to underclasses and precarious jobs and health care systems. The time to address these failings will be with us soon enough. But for now let us win the second half.