Coronavirus Is the Black Swan CEOs Have Been Dreading
As pandemics become the new normal, companies need to expect the unexpected
In a scenario-playing exercise last October, geopolitical risk expert Sam Brannen gamed out what would happen if a massively contagious coronavirus erupted and went around the world. Central banks responded with interest rate cuts and governments with fiscal stimulus. Yet, global recession ensued as countries shut down their borders against the pandemic, entrenching a spiral of distrust, self-dealing and one-upmanship that forestalled any recovery.
In May 2018, the Johns Hopkins Center for Health Security held a similar exercise. In this one, a bipartisan cast of current and former U.S. officials confronted public panic and riots as a flulike pandemic called Clade X broke out. Eventually, the dead around the world totaled 150 million, including 15 million Americans, and the U.S. health system had been nationalized.
CEOs need to adjust to a new reality that pandemics are now a known unknown when scenario-planning their businesses.
For decades, U.S. businesses have pushed increasing parts of their operations abroad, building far-reaching enterprises and supply chains that, while returning unprecedented profit especially for the tech giants, have risked something unexpected going wrong. The Covid-19 virus is not technically a black swan — an entirely unimaginable event coming from nowhere—since for years experts have sought to prepare for a pandemic akin to the 1918 Spanish Flu, which killed 50 million people and infected a third of the global population. But Covid-19 may add up to the same thing, as the virus appears to be just the unexpected catastrophe experts feared. CEOs need to adjust to a new reality that pandemics are now a known unknown when scenario-planning their businesses. (In a note to its startup founders and CEOs today, the venture capital firm Sequoia, called Covid-19 the “black swan of 2020.”)
The context is a new look to the world, with people everywhere crowding into cities, traveling more easily and farther than they ever have, growing in population to 7.5 billion, and inexorably warming the planet. With the…