Which Businesses Should Reopen First? A New MIT Study Has Answers.
As states plan to let businesses reopen, here’s a data-driven approach to determine who should be first in line
The grand reopening of America’s businesses has begun. On Monday, New York Governor Andrew Cuomo presented a plan for the phased reopening of the state’s businesses, while California Governor Gavin Newsom also announced that some of the state’s businesses would begin to reopen on Friday. Meanwhile, some other states have already given their businesses the green light to reopen, starting with Georgia, which allowed all kinds of businesses, including gyms, bowling alleys, and tattoo parlors, to reopen their doors starting April 24.
Governments and businesses that rely on in-person transactions are struggling with the question of how to weigh the health risks of reopening — or remaining open — against the economic and societal costs of staying closed for business owners, their employees, and communities they serve. But which types of businesses are most worth the risk?
A new study out of MIT aims to answer this question, ranking various types of businesses and public locations by weighing the danger they present for continued transmission against their economic and social benefit. (Spoiler: It doesn’t look so great for hair salons and barbershops.) The study, by Seth Benzell, Avinash Collis, and Christos Nicolaides at the Massachusetts Institute of Technology Initiative on the Digital Economy, used geolocation data from 47 million smartphone users to measure the danger posed by a type of location (including the number of visitors and hours spent in a crowded space). Meanwhile, they used consumer surveys and government statistics on payroll and employment to determine a location’s social and economic benefit.
Marker spoke with Benzell, Collis, and Nicolaides about their study, what they discovered, and how policymakers and business owners should weigh the risks as local economies begin to reopen.
This interview has been edited for clarity.
Marker: Can you give us some background on the study? How did you approach ranking these types of businesses and public locations by economic benefit and risk?
Seth Benzell: All of us here participate in the MIT Initiative on the Digital Economy [a team of researchers focused on business and digital transformation]. So when the Covid-19 crisis hit, there was a sense within our group that since human interaction seems to be a big part of the Covid story, and we’ve got a lot of tools for measuring human interactions, is there some way that we can bring our skills to bear on this problem?
So we got together and started brainstorming. People interact with each other in a lot of different ways, in a lot of different contexts. If we assume that every possible interaction between a pair of people is dangerous, how can we make sure that for every interaction we’re having, we’re getting as much bang for the buck as possible? We began to measure how many interactions — and dangerous interactions — do we think are happening at the places where people meet, and how socially important each of those places is.
And what did you find, in a nutshell?
Seth Benzell: We created a ranking of locations that should be opened earlier in the process rather than later or face more rather than fewer restrictions, in a context where the government can’t just strictly enforce density restrictions everywhere.
We found that the places with the worst trade-offs have indeed seen a larger reduction in visits than the places that we think are the best trade-offs. But there are some significant outliers. One example is liquor stores, which we think represents one of the worst trade-offs in terms of danger versus economic and social importance. But we found that the number of visits to those stores from February to March reduced by less than 10%.
On the other hand, we look at some locations that seem to be outliers on the other side. The big one is colleges and universities. These are big spaces that are visited by a consistent group of people. Those people who visit the space tend to be younger people, which is also something that’s taken into account in our danger metrics. And we’ve seen a reduction in visits to colleges and universities of about 60%.
Now, we’re not saying that colleges and universities don’t encourage some sort of behaviors that we need to be especially skeptical of, such as big college parties or other possibly unhealthy aspects about dorm living. But the extent to which visits have reduced does seem out of order in comparison to other locations that we’ve locked down less that pose a greater danger.
In the case of colleges and universities, for example, do you account for the fact that some institutions are more readily able to move their functions online versus others?
Avinash Collis: As these businesses or locations like colleges, shift online, we would ideally have to collect more data on how that impacts consumers’ valuation of these products. Let’s say if students get the same amount of value from online education as they did in person, and if shifting online doesn’t lead to job losses at universities or at these other locations, then these places get even better in our analysis because the danger metric would be drastically reduced while the importance metric might remain unchanged.
But while we haven’t done surveys asking how much students value online colleges, it seems from the other evidence out there that the online experience for students is inferior to the in-class experience.
Are you speaking with any public health officials or advise any state or local governments about your findings?
Christos Nicolaides: We talked with McKinsey, the company advising Governor Cuomo [of New York]. We are also approaching other policymakers around the country as well.
California said it will start allowing businesses to reopen on Friday and Governor Cuomo just announced a reopening plan for New York. Meanwhile, Georgia has already reopened, including gyms and bowling alleys. What do you make of these plans?
Seth Benzell: We haven’t gone state by state. There are some decisions being made that we don’t perfectly agree with. I understand that some states are talking about opening up locations like gyms. And according to our analysis, gyms have just one of the worst trade-offs and should be among the last to reopen as they don’t provide that much economic or social value while being highly trafficked and not very big. And there are other factors that count against them if you consider people sweating and not wearing masks.
Avinash Collis: None of these states are being very transparent about how they are coming to their decisions. In our research, we provide a data-driven approach to think about this trade-off between danger and importance of locations. But we haven’t seen any quantitative analysis that is informing reopening plans of these states. So this is where we hope we can come and help policymakers.
You mentioned that you’d spoken to McKinsey. What do you make of New York’s four-phase plan for reopening that prioritizes various industries? Is that in line with the findings in your paper?
Avinash Collis: The framework of this plan seems pretty similar to how we were thinking in terms of classifying locations based on risk and importance. But it’s still not clear how they exactly came to these decisions. It’s not really transparent.
Seth Benzell: Looking at it now, there’s a lot of heterogeneity within retail, to put all retail stores within Phase 2 of this reopening plan. We think that there are some stores like department stores that are pretty big spaces that people value a lot that should be maybe a little bit earlier. I don’t see personal services [such as barbers and hair salons] anywhere on this list, but those should tend to be towards the end. And then we think education [which is in the last phase of New York’s reopening plan], at least colleges and universities, should potentially be a little bit earlier in this process.
Are there any governments outside of the U.S. that in your view are doing this right, or taking a data-driven approach to answering the question of reopening?
Avinash Collis: We looked at some European countries, including Germany, and what we found is that they were trying to put density controls in locations. Our research talks about whether you keep places closed or open them up. And some countries, like Germany, are trying to open places up, but with density controls. The challenge with that is it’s really hard to enforce them properly. For example, in Germany what we saw is that they were opening up smaller stores and keeping bigger stores closed. And the logic for that was it’s easier to count the number of people entering smaller stores and it’s easier to keep density controls. But that goes against common sense. So we have seen some density-based plans, which we’re not sure how well they would work in practice.
Does your study account for the social distancing measures that are taken by some of these locations like offices and supermarkets?
Seth Benzell: Our measures are based on typical use before the Covid-19 crisis. We, of course, think that every location should be doing its utmost to use these social distancing best practices, like masks and screens as you described. The way I would think about using our tool to help policymakers and businesses implement those adjustments is places that look like bad trade-offs should be areas that we focus more intensely on making sure that they’re abiding by precautions, and taking these harm reduction measures. If the state only has so many resources or ability to check that people are abiding with density restrictions, they should focus enforcement on the places that we find to be bad trade-offs, places that are probably more vectors of what’s going on.
The last thought I want to share is that people should start thinking about their social interactions as suddenly being a lot more expensive. As the nation is making the decision about how to open up or close down, in either case, we’re not in normal times where just meeting up with someone is a happy, fun thing. Every time we interact with another human, we need to make sure we’re getting as much bang for the buck for every interaction as possible. So it’s strange and it’s disconcerting to think that we have to think of ourselves as rationing social contact, but that’s where we are.