Supernovas are cosmological events that occur when the composition of a star’s core is fundamentally altered. As a star nears the end of its life, its core can no longer handle the pressure exerted by its own gravitational force, causing it to collapse. This sudden collapse rapidly converts gravitational potential energy into a dense mix of heat, energy, and mass. Sometimes, this burst of energy is so great that the star’s residual mass is still incapable of withstanding its own gravitational pull. When this dense object of heat begins to cool, it slowly collapses further into itself, leading to the creation of nothing: the creation of the black hole.
However, if a star fails to release enough energy to become a black hole, it remains suspended in space as a neutron star: a symbol of a once fantastic display of energy. While these stars once experienced tremendous change, they failed to generate enough energy to alter space and time. As a result of a star’s failure to create lasting change, the star sits there, cooling for eternity, reminding us of change that could have been.
The unforeseen arrival of the coronavirus has changed the world as we know it. The pandemic has incited social movements, exacerbated economic issues, and expedited the adoption of technology. Indeed, as Aleks Kocic eloquently states, “the role of the pandemic as an exogenous shock has played the role of a catalyst – as if it had revealed the underlying layer of social and economic malfunction, which would have remained latent and unobservable without it.” [1] While some of these developments may have occurred over the course of time, the pandemic has compressed time horizons – what may have taken place over ten years has materialized in just three months, and this phenomenon is largely due to pandemic induced entropy.
Entropy characterizes a system’s ability to do work, or to undergo change. Consider the following example: you invite some friends over to your home to watch a movie; the only catch is, the film you chose is beyond terrible. Sometime over the course of the film, your friends will stop watching due to lack of interest. In the absence of a binding force, entropy increases spontaneity. The system changed from a simple state – friends watching a film – to a more complex state of friends doing multiple activities scattered across your home. If you want to save the night, you will have to exert energy to bring your friends back together – order can only be restored with the application of external force. But after getting your friends back for a final viewing, you are not certain who you can trust – who is there to give your film a second chance, and who is there to take selfies in your bathroom, or worse, raid your pantry? The external system that moved the original system from disorder back to order increases its own entropy. [2]
As stated above, removing a system’s binding force causes a system to shift from order to disorder. The arrival of the pandemic decimated any binding force we had, increasing the spontaneity of social, political, and economic developments. As a result of this spontaneity, a significant external effort will have to be made to restore stability in the global landscape. This change must start with governments, and it must end with us.
The Application of External Force
In the early stages of the pandemic, Florida was grouped among the champions of pandemic response. It was able to keep parts of the economy open without fully shutting down while managing to keep its case count quite low relative to hotspots like New York. However, Florida has seen a large spike in coronavirus cases since its reopening in early May. Florida’s pandemic system moved toward disorder after removing the binding force of lockdown. In some Florida counties, a subset of residents erupted in anger over mandated mask-wearing – counterproductive responses to prudent policy is a consequence of disorder. [3] As a result, Florida is now an epicenter for coronavirus cases, and the discourse around its reopening has completely changed – localities are now considering curfews and shutdowns once again to regain system stability.
This response was one that I anticipated in Freedom and Security in the Age of Coronavirus. In that missive, I described a framework for how economic damage results from the misuse of our social freedoms. Specifically, if Americans failed to follow the social contract which states that we will sacrifice certain social freedoms to limit transmission of the virus, lockdown measures would likely be re-enforced as states attempt to prevent an increase in coronavirus cases. The graph below emphasizes Florida’s failure in preventing coronavirus transmission – the state’s daily increase in cases has now surpassed the heights experienced by New York.
The daily increase in cases in both Texas and California mirror the graph of Florida. Consequently, California has re-enacted lockdown measures, and the governments of Texas and Florida may follow suit. Yet, Florida and Texas see lockdown as a last resort, which is encouraging. Indeed, Texas’ Abbott has stated lockdown can be avoided “if everyone will adopt the best practice of wearing a facemask.” However, to borrow from Freedom and Security: lockdown cannot be viewed as a solution to the pandemic itself. Rather, it is a way for society to buy time to develop an effective way to reopen. Specifically, it stops transmission of the virus at the expense of curtailing economic growth.
Lockdown is consequently a simple trade – inflict more economic damage to reduce the number of active coronavirus cases; it does not create a remedy to ensure that future lockdowns will not occur (unless a vaccine is subsidized). Since lockdown cannot change the behavior of citizens directly, it should only be used to prevent death tolls from reaching catastrophic heights. Coronavirus transmission will continue to happen until individuals elect to take precautions against it.
Indeed, enforcing social distancing and mask-wearing is still the root of this problem, which is a point I have already harped on: the remedy for avoiding future economic damage would be to stop any unnecessary socializing or to wear a mask. Given that the economy is already in a fragile state, any more damage inflicted on small businesses is likely to be irreversible in many cases. As a result, we must seriously consider if reinforcing lockdown is the proper action to take, specifically because lockdown does not address the core drivers of coronavirus transmission. I believe a more immediate path to preventing transmission of the virus would be to pass social distancing and mask-wearing mandates that penalize those who do not follow these initiatives (fines and tickets are quite effective – when is the last time you intentionally ran through a red light?). If Americans will not voluntarily change their behavior, governments must force them to – order can only be restored with the application of external force. We must sacrifice this personal freedom to save the future of the economy as we once knew it. Preventing coronavirus transmissions starts with us
Yet, as mentioned earlier, mandating mask-wearing and social distancing is a complex issue. It elicits counterintuitive responses, as the choice to forgo a mask has become a statement about masculinity, politics, or social freedoms depending on the context. In any event, one can view the decision to forgo a mask as a rejection of modern complexity. These individuals are so frightened by this complexity that, to reduce it, they ignore modern developments in their entirety. Electing to forgo a mask reduces the imminent threat of coronavirus in their minds – out of sight, out of mind – no shirt, no shoes, no mask, no problem.
Fortunately, governments have some leeway in the event these mandates do not work as intended. The plot below displays weekly deaths normalized by the weekly increase in positive cases across New York, Florida, Texas, and California. The takeaway is the following – the world has improved at preventing coronavirus related deaths over time. Indeed, as of July 17, the ratio of weekly deaths divided by the weekly increase in cases has converged to an asymptote of 0.01, or 1/100.
Consequently, for every 100 new weekly positive cases, one person dies in the states shown in the graph above. This past week, we sadly witnessed 709 Floridians pass-away due to the coronavirus, which implies that approximately 70.9k Floridians contracted the disease. However, on April 14, we tragically saw 5.3k New Yorkers lose their life due to coronavirus over the preceding seven days. In that same seven-day period, the ratio shown in the graph above was 0.084, which implies that approximately 67k New Yorkers contracted coronavirus over the same period. Given that we are witnessing similar weekly case counts without observing a similar uptick in weekly deaths, we can conclude that the scientific community has become more skilled at treating coronavirus over time. This is a true triumph in the creation of knowledge and provides leaders with a basis to monitor the coronavirus – if you want to prevent catastrophe, you must prevent coronavirus transmission from exploding. Consequently, governments can still resort to lockdown if alternative measures do not prevent increases in coronavirus cases because the feedback after implementing these policies would be rather immediate. Thus, we can thank science for giving society a chance to avoid an immediate lockdown and further economic destruction. [4]
Technology and the Pandemic
The tech sector and the number of positive coronavirus cases have been related over the course of the pandemic. Consider the graph below, which plots the level of the QQQ (the Nasdaq 100 Index ETF, a tech sector proxy) and a rolling weekly average of new United States coronavirus cases:
This single graph conveys an incredible development: the forced global adoption of technology due to the pandemic. While the level of QQQ initially fell at the outset of the pandemic due to economic uncertainty, it quickly rebounded after the Federal Reserve and the government concurrently released monetary and fiscal stimulus, ensuring that the damage inflicted on corporate America would be mitigated. When coupling this injection of stimulus with citizens’ inabilities to leave their homes, the tech sector was uniquely equipped to realize positive equity returns, as companies were able to survive the immediate economic shock and capitalize on new consumer habits induced by the arrival of the pandemic. Indeed, workplaces have been virtualized with the adoption of Zoom, consumers migrated to platforms such as Shopify and Amazon to purchase goods, and service companies like Uber have capitalized upon delivery services as individuals could not leave their homes.
Thus, the tech sector has benefitted from the pandemic because the virus forces people inside. The pandemic has rewired our habits, pushing us to communicate, consume, and live virtually. Lockdown orders only strengthen the tech sector’s position, and many pundits believe that consumers will come out of this pandemic with a preference for virtual modes of consumption and conducting business. Additionally, the stimulus directed toward corporate America has served to strengthen many companies in the tech sector that did not desperately need this liquidity injection, enabling them to consolidate their positions over smaller businesses that have been structurally impacted by the arrival of the pandemic.
A remedy for combating what may appear to be a monopolistic consolidation is an injection of fiscal stimulus to small businesses. [5] But one thing is clear: re-imposing lockdown orders will be a nail in the coffin for many small businesses, and when considering the current strength of the tech sector, will lead to a significant divergence between equities and the underlying economy. This divergence between Wall Street and Main Street is likely to incite anger around growing inequality in America – what use is a strong stock market when Main Street has been decimated to obtain strong equity returns? This fundamental disconnect between the stock market and the underlying economy must be addressed, for the force of this social pressure may become too great, causing the social fabric to collapse under its own weight. Will the developments that come into existence due to the arrival of the pandemic create lasting change? Or are they destined to become another neutron star, a reminder of what could have been?
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This piece is dedicated to those who lost their lives due to the pandemic. I am truly sorry if someone you know lost their life due to the coronavirus, and I express my sincere condolences. Statistics can never convey the depth of the human experience. We are all far more than numbers on a page.
Disclaimer
Opinions expressed are solely my own and do not express the views or opinions of my employer. The above references an opinion and is for information and entertainment purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
[1] Aleks Kocic, The Importance of Distribution and the Rationality of the Irrational, Deutsche Bank (17 July 2020)
[2] Avinash Singh’s fantastic Quora response found here was modified for this paragraph.
[3] https://www.cnn.com/videos/politics/2020/06/24/mask-mandate-florida-anger-erupts-coronavirus-vpx.cnn
[4] https://www.nbcnews.com/politics/donald-trump/white-house-press-secretary-science-should-not-stand-way-schools-n1234102
[5] ibid.