“The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.” – Winston Churchill

Corona Crisis: Business Survival Tactics 

I’m reading a lot about how to stay busy during the shutdown. Practice meditation and yoga. Catch up on old movies. Learn a foreign language, etc.

If I were retired or happily unemployed, that’s what I’d do.

I don’t have that option. Like almost all the businesspeople I know, I’m working as hard as I can ever remember working.

And with good reason. We are in a crisis. A pandemic-triggered, macro-economic, business-demolishing crisis that has already killed 10,000 people, shuttered and/or bankrupted thousands of businesses, and put 15 million workers on the dole.

My guess is that the virus won’t end up being as deadly as many fear. But my fear is that the economic repercussions will be great.

The business outlook is grim.

Since March 1, the restaurant industry has lost more than 3 million jobs and $25 billion in sales, and roughly 50% of restaurant operators anticipate having to lay off more people in April.

Three out of five small businesses cannot conduct business remotely. And that’s probably why, on March 26, 74% of small businesses polled by the National Federation of Independent Business said they are being negatively impacted by the Corona Crisis. Just two weeks earlier, the equation was reversed. At that time, 75% said they were doing well.

Trimming the fat is important. Making sales is more important.

In my April 1 blog, I talked about how, despite my instincts and objections, I agreed with some of my partners – particularly in restaurant, hotel, and apartment businesses – to slash every dollar of unnecessary expense and to put some non-essential employees on furlough.

My brother, in whose real estate business I have invested for many years, has done that and more. He has put off improvement and expansion projects, furloughed non-essential employees, and asked those that remain to take on more responsibility. His hotel managers are manning the welcome desk. His apartment managers are selling leases.

He’s also reducing debt expenses by negotiating terms with banks. He’s put in nine applications for the government payroll programs, and he’s applying for additional small business loans.

This is a downside of the hotel business that neither of us anticipated. His plans for surviving market downturns and even extended recessions were predicated on occupancy reductions of 15% to 50%. We never even imagined a scenario where you have virtually no customers. That wasn’t the case even in the Great Depression.

So he’s doing everything he can think of in terms of expense reduction and loans. But he’s also looking to buy triple-net leases and sell them to his investor base. A year ago, a good deal might get you 4%. Today, he’s finding properties that are yielding 6% and 6.5%.

None of these efforts individually would have been enough to keep these businesses running. He and his executive team have had to work doggedly, tirelessly, and creatively to cover cash flow obligations through the rest of the year,

And even if business gets back to normal in 2021, he’ll still be dealing with a considerable debt load that will take him years to pay off.

If you are in the supermarket, alcohol, or delivery business, your sales are probably doing fine. The online publishers I work with haven’t yet seen a drop-off in revenue.

But they are not relaxing. Rather, they are working furiously to keep sales going. They are completing marketing campaigns that once took months in weeks or even days. Our legal and compliance teams are working overtime to get those advertising campaigns approved and out the door. And so far at least, all those extra efforts are paying off. About 75% of these online publishers have maintained their previous revenues. The other 25% are actually doing better than before.

You Don’t Know What Your Customers Want 

It makes sense to imagine that at a time like this the last thing consumers want is to buy products and services that are not essential. They should be saving their money to pay for staying alive. They can start buying your products again next year, when the threat of COVID-19 has receded.

That has a certain logic to it. But it’s not how consumers are responding now. For just about every industry where consumers can keep buying, they are. That may change. But for the moment, we need to keep that in mind.

The Good News About the Current Business Environment 

When things get as scary as they are today, the brain’s reptilian and emotional representatives begin arguing. The reptilian rep wants to fight or flee. The emotional rep worries about the damage either action will cause and blames the reptilian rep for causing the problem in the first place.

These conversations are loud and boisterous – so loud and boisterous that they make it impossible for the representative from rationality to get a word in edgewise.

I am happy to know that most of my partners and key employees understand that. They have all made plans for a serious drop in sales, but they are also pushing hard to optimize their sales and marketing.

And there are good reasons for them to be optimistic.

* The cost of media is dropping fast. 

If you are a digital marketer, you’ve already noticed that the cost of advertising on Google (PPC) and Facebook and other social media platforms is coming down. The main reason for this is that there are far fewer companies marketing now. As the demand for ad space goes down, so does the price of it. I’ve been told that the same thing is happening with TV and radio advertising. Less competition and lower prices sounds like a good thing. Don’t you agree?

* The demand for many products is still strong. 

The publishing businesses I own or consult with sell books, magazines, and newsletters. The topics range from business to travel to health and to investing. In February, when we began talking about options for dealing with impact of the Corona Crisis, we expected to see sales drop and refunds soar.

They didn’t. In fact, there has been little to no fall off on either front-end or back-end sales so far. Three of my clients have seen increased sales this first quarter. Most are seeing steady sales. For some, sales are dropping – but only by 10% to 15%.

There is a logical explanation for this. Most of them are publishers of health, business, and investment information and advice. One could argue that at times like this, consumers want more information and advice from sources they trust. I do think that’s what’s happening here. But I do not believe that these businesses are immune to the Corona Crisis. I have advised them that if the economy stays in lockdown for more than another month or so, they should expect the honeymoon in sales to end.

The main point is this: We considered the cost savings we’d get by reducing our ad spend but decided to continue for a few more weeks, and were rewarded for it.

But the larger decision to keep selling isn’t the only thing we are doing. We are also trying to figure out how to attract new customers and possibly capture market share during this time when so many of our competitors are standing aside.

* New opportunities are emerging. 

 Several of my colleagues in the information-marketing world, for example, have launched crisis-focused publications that talk about how the crisis is affecting their particular industries, with specific advice on how to respond.

A friend of mine in the furniture business has been advertising year-long, zero-interest payment plans. He tells me it’s working. In fact, he says, sales in March were higher than they were last year. (This is also something the car industry is doing.)

I’ve received several notes from legal firms I work with, offering to take care of any estate-planning “issues” I might want to address. And notes from accountants offering to help process government loan applications for me. (I might have seen such efforts negatively if they had come from firms I didn’t already know. But since they came from trusted sources, I took them as helpful and replied to some of them. Good for them and good for me.)

During the bull market that ended with this crisis, big companies and brands grew tremendously, as you’d expect. Small businesses did, too. But at times like this, small businesses have an advantage over their larger competitors. They can move more quickly – adapt and innovate to not just maintain revenues but also increase them by capturing bits and pieces of the market from the big guys.

 “Facts are stubborn, but statistics are more pliable.” – Mark Twain

Coronavirus Update: Bad Math, Dumb Reporting, Unthinking Citizens 

I had planned to publish an essay today about business strategies for surviving the Corona Crisis. I’ve decided to put that off till Wednesday to talk about the latest numbers the media has been reporting – how they don’t make sense and how the new serology tests may help us understand the two questions no one as yet has been able to answer: How many Americans will get infected? And how many will die?

If there is nothing else I will take away from following this story, it is this: Too many doctors and  scientists pretend to know more than they do, and the media’s reporting on the coronavirus and COVID-19 has been uncritical, irresponsible, and sometimes just plain dumb.

I could give you a dozen examples, but I will stick to just a few.

The Case Fatality Rate 

At the beginning of March, when the coronavirus began to be front-page news, the media was reporting that COVID-19 had a “case fatality rate” (CFR) of 10%. In other words, out of every 10 people that had tested positive for the disease at the time, one had died.

Since I didn’t understand what “case fatality rate” meant, that alarmed me. The regular old flu infects between 10 million and 50 million people each year, according to the CDC. So 10% would mean between a million and five million dead.

That was scary. And there were predictions like that at the time. But after thinking about it for about five minutes, I realized that it was impossible to project deaths based on the CFR. As I pointed out in my March 30 essay, it was an almost useless statistic.

* It was flawed because it was measuring current total deaths against current total cases. (Which makes no sense because of the lag time.)

* It was flawed because it was based first on reports from China and then from Italy. (The first were unreliable; the latter skewed by the age of the infected population.)

* It was flawed because it did not take into account the number of negative cases that were negative because the patients had already had and defeated the virus.

But the worst thing about that number was that the media never figured out or explained the difference between the CFR and the true mortality rate, which is the only statistic that ultimately matters.

I said then that I was flabbergasted that no one in the media was talking about these flaws. I became further flabbergasted when – for at least a week and maybe two – Dr. Fauci and other epidemiologists were not mentioning it themselves.

Since then, they have, but only occasionally, mentioned these important variables. But they never explained how important they were in the calculations. They never admitted that the first estimate of 10% and the subsequent estimates of 6% and 3% (the “scientific consensus”) were utterly useless and entirely misleading, based on ignoring logic and bad math.

As I write this, I’m still astonished by this – the bad science and the dumb-as-doornail efforts at reporting. Why was I able to point out the most obvious problem with the CFR – that it had to be much, much higher than the actual mortality rate?

If you want to read more about my logic and the arithmetic I used, you can do it here. Meanwhile, the media is still reporting unthinkingly on the new numbers coming from not just Dr. Fauci and Surgeon General Jerome Adams, but from Governor Cuomo and other politicians that have accepted these numbers without questioning them. Without asking one basic question.

The question is this: For every person diagnosed as positive, how many that have (or have had) the virus have not been tested?

Based on the fact that, at first, we were only testing people with all the symptoms who had been in China or in close proximity to senior centers and other “hot spots”… and that 80% of those diagnosed as positive had mild symptoms or were completely asymptomatic… how could the difference between the CFR and the real mortality rate be anything less than a multiple of 10?

That’s what I said then. And based on that (and the other flaws mentioned above), I estimated that the actual mortality rate would be between 0.85% and 1.02%.

A few days later, Dr. Fauci, the CDC, the politicians, and the media were all talking about a “fatality” rate of 1%. (They had stopped saying “case fatality,” which I didn’t notice at the time.)

In that same essay, I said that as time passes and many more tests are done, the CFR should begin to move closer to the real rate. Was I right?

Not at this point. In fact, the CFR today is actually higher than the 3% bandied about then. It is closer to 6% globally and 4% in the US!

Check it out for yourself. Right now, the number of cases globally is about 1.7 million. And the death rate is 106,000. That’s a CFR of 6%!

And in the US, the number of cases is 520,000 with 20,000 deaths. That is a CFR of about 4%!

So why are all our trusted sources saying 1%?

It could be because they realized that quoting the CFR was hugely misleading. And rather than admit it and explain the difference, they apparently decided to start quoting their estimates of the real fatality rates. That is the only explanation I can think of. Can you think of another?

So today, we are being told that the fatality rate is about 1%. But nobody in the media seems to be questioning how it went from 3% to 1%. They are assuming that the drop is due to washing hands and social distancing. But that can’t be true!

Adaptive behaviors can slow the spread of the coronavirus. But they do not account for these continued differences between a case fatality rate of 4% (or 6% globally) and the new consensus fatality rate of 1%. The difference, as I’ve explained, is in all the flaws I mentioned above.

But nobody is talking about that.

The Projected Death Toll 

The CDC’s original prediction – a worst-case scenario – was for 1.7 million deaths. On March 29, every newspaper and newscast in the nation led with an amazing update on the Corona Crisis. The new estimate was that 100,000 Americans would die from COVID-19… maybe as many as 240,000.

This was big, exciting news for everyone but little old me and anyone that had bothered to do the math I’d done. My estimate was 85,000 to 205,000.

But I didn’t pretend that my figures were anything but extrapolations based on the numbers I had to work with and the questions I had about how they were figured. I used only a few calculations. One to account for the lag time problem. Another to adjust for the difference between real and reported cases. And one that was a simple matter of multiplying my projected real mortality rate against the estimates we were getting on the number of Americans that would eventually get infected.

That third number was based on estimates that ranged from 20 million to 60 million to 200 million. For reasons I explained in my March 30 essay, I eliminated the high and the low and used the 60 million number as the factor.

But I didn’t know then and I still don’t know exactly how those estimates were arrived at. I explained that, like the government’s other numbers, they were likely derived from the number of people that became infected in China and then in Italy and then in the state of Washington.

It is, in fact, impossible to know what the infectious rate really is because it is an equation that has its own flaws. You can figure out what it could be in a regulated environment – in a lab with rats, for example (if rats responded to the virus the same as humans) or with a lesser degree of certainty in walled-off hot spots such as retirement homes and prisons.

But that number is based on unfettered movement for the virus. And since adaptive behaviors can reduce the speed at which the virus spreads, figuring out how many people will get infected will be impossible so long as society is implementing those measures.

The Arrival Date 

There is a bigger problem here, too – one that was not reported initially and is only now being touched on by marginal news outlets. (The major media are dismissing it as a conspiracy theory.)

That is the question of when the virus was first introduced. The generally accepted story is that the first case in the China was diagnosed on November 17, 2019, and the first case in the USA was diagnosed on January 20.

From the Los Angeles Times, April 11:

“The virus was freewheeling in our community and probably has been here for quite some time,” Dr. Jeff Smith, a physician who is the chief executive of Santa Clara County government, told county leaders in a recent briefing.

How long? A study out of Stanford suggests a dramatic viral surge in February.

But Smith on Friday said data collected by the federal Centers for Disease Control and Prevention, local health departments and others suggest it was “a lot longer than we first believed” – most likely since “back in December.”

“This wasn’t recognized because we were having a severe flu season,” Smith said in an interview. “Symptoms are very much like the flu. If you got a mild case of COVID, you didn’t really notice. You didn’t even go to the doctor. The doctor maybe didn’t even do it because they presumed it was the flu.”

This is one of several reports like this that are now appearing. Given how contagious coronavirus is, this means that the differential between the reported cases and the actual cases could be much higher than 10 (the number I used).

On April 8,  I reported that one epidemiologist from Harvard, Dr. Michael Mina, estimated that the differential could be 50 to 100!

Given what I’ve explained about how these projections are made, I can’t think of how he could have arrived at that number other than because he believes, as I’m beginning to suspect, that coronavirus was introduced into the US before January.

And what does that mean?

As I write this, there have been about 500,000 Americans diagnosed with COVID-19. A 10 times multiple suggests that 5 million have or have had it. A 50 times multiple would be 25 million, and a 100 times multiple would be 50 million.

Does that sound crazy?

Not if coronavirus arrived in the US a month or so earlier than reported.

So if that is true, what about the death rate? If so many millions are (or have been) infected, wouldn’t that mean that the projected death toll should go up proportionately?

But that’s not what happened. In fact, On April 8, Fauci and company revised the projected death toll down from 100,000-240,000 (the March 29 estimate) to 60,000!

As has been the protocol since day one, they didn’t explain how they arrived at that lower number. They didn’t provide the media with the analysis. And the media didn’t question it. They just announced it and, again, attributed it to the success of social distancing.

That makes no sense because social distancing only reduces the speed at which the virus communicates. It doesn’t reduce its natural infectiousness.

It could reduce the number of deaths due to lack of ICU space. And that’s why I concluded my March 30 essay by agreeing with the decision to shut down thousands of businesses and to mandate social distancing and curfews. (Not to mention criminalizing purposeful coughing.) But it turns out that the terrible predictions of patients dying in hospital hallways has not materialized. In fact, it looks like that isn’t going to be a problem.

As I said, social distancing cannot account for that 60,000 projection on April 8. Something else was going on. Could it be that Fauci and company decided to (or agreed to) reduce the high level of panic by talking only about how many would die through the summer, but not mention that by the end of the year the numbers would likely be in the 100,000-240,000 range?

To me, there is only one explanation for all this suspicious math we are being fed: The real mortality rate might be lower, even considerably lower, than 1%.

If, as suggested above, the differential between the reported cases and the actual cases is 50 or 100 instead of 10, the real lethality rate is 5 to 10 times lower than the 1% we’ve been hearing. In other words, one-tenth to two-tenths of 1%. Which is the lethality rate of the ordinary flu.

That doesn’t mean the coronavirus is the same as the flu. It is still very contagious – probably much more contagious than the flu. (The hot spot syndrome is good evidence of that.) And also, when the symptoms of COVID-9 are bad, they are sometimes much worse. That’s why it is much more dangerous than the flu for older people and people with compromised immune systems.

However, if these lower fatality rates turn out to be accurate, there is a good argument to be made that the shutdown was the wrong move. That we would have had fewer deaths and a shorter crisis if we had practiced protocols for establishing “herd immunity.” (Isolating the vulnerable only and allowing the rest of the population to interact as we do and have always done with the flu.) In theory, the “goal” of a herd immunity strategy would be to get half of the healthy population infected as soon as possible. Once that happens, epidemiologists say, the virus dies out on its own.

If we can get those new serology tests going quickly and widely, we will be better able to determine how many Americans have the virus (by comparing in a random test the percentage of those with antibodies) and have, for the first time, a good idea of what the real lethality rate is.

But again, what do I know? We’ll have to see how this plays out in the next few weeks and months and in the fall.