COVID-And-World

Artist’s representation of the SARS-CoV-2 virus and North America from space. Source: IOI Capital

This spring, Pulitzer Prize winning author David Cay Johnston suggested that economic damage from Covid-19 would total from three to eight trillion dollars, depending how long the crisis lasted. Whatever the final tally, it is clear the damage to the global economy is breathtaking, both in terms of severity and suddenness.

For all the damage it is inflicting, there is light at the end of the Covid-19 tunnel. Just as an HIV / AIDS diagnosis turned from a virtual death sentence in the 1980s into one similar in severity to exercise-induced asthma today, eventually Covid-19 will become little more than an inconvenience for people in the developed world.

If such a temporary crisis can cost so much, imagine a crisis that is so long-lasting it will not be able to be resolved within the lives of our grand- or even our great-grandchildren.

Climate change represents just such a long-lived, high-impact crisis.

Bean counters try to tally up dollar costs and their timing, but even (fake) Nobel Prize winners fail to recognize how nonsensical the contention that that pushing average global temperatures high enough to destroy global agricultural output will cause more than a few percentage points’ worth of headwind to global GDP growth.

According to an academic paper published in January of this year, oceans have absorbed as much heat as if we had detonated five Hiroshima atom bombs per second in them for the last 25 years straight. Considering that the deep ocean currents that shuttle warm water from the equator to the poles take about 1,000 years to complete one circuit around the earth, it is easy to see the potential for our civilization to cause millennia worth of ecological damage.

…Nature simply obeys principles of physics, chemistry, and biology that we do not yet fully understand…

In a past article, I compared the financial world’s reaction to the dangers posed by climate change to a driver turning up the radio, closing his eyes, and hitting the accelerator upon seeing a sea of traffic jam break lights.

When I made this comparison, I imagined that the market’s failure to act was based on behavioral quirks that made it hard for human decision makers to conceive of slow-moving threats. Climate change, I thought, was just too distant and amorphous of a threat for people to experience a viscerally reaction.

However, seeing the actions of politicians and citizens in states like Florida, Texas, and Arizona regarding sensible, science-based approaches to limiting the spread of Covid-19, I am not so sure.

Last week, I traveled to my childhood home in Houston on personal business. Presumably, my fellow Texans have enjoyed access to the same news stories from China, Italy, Iran, and New York City that I have. Still, the number of (proudly) unmasked pseudo-cowboys, and others wearing unattractive paper ear loops and garishly colored fake beards surprised me.

Nature – whether in the form of a microscopic virus or the vastness of the ocean – does not care what position a political party adopts as part of its official platform. It does not care that you think of yourself as a proud patriot who is not afraid to die. It does not care if you hoist a handmade sign to protest fracking in your state.

Nature simply obeys principles of physics, chemistry, and biology that we do not yet fully understand.

The stakes are high: half a million deaths in six months, ecosystem collapse, and increasingly unsustainable disparities in wealth and living conditions.

Every moment we wait adds an incalculable additional opportunity cost whose payment may be demanded virtually overnight, as it did with the outbreak of Covid-19.

Intelligent investors take note.