Five Key Lessons from the Pandemic
Transcriber: Ivy Jin
Reviewer: Lucas Kaimaras
Hi, I’m Doug Greenig
from Florin Court Capital.
My talk is called:
Lessons from the Pandemic -
Five things you need to know now.
Are you suffering from COVID fatigue?
A lot of us are.
Of course, it could be that you have
COVID, no wonder you’re so fatigued,
but it’s more likely that you’re exhausted
by the daily inundation of virus news.
So have no fear,
this talk is not actually about COVID.
It’s about how to make better
decisions under pressure.
And decision making in the real world
is a tricky business.
Almost every decision is easy
if you have enough information,
but many times,
we have limited information,
we have time pressure,
which makes decision making
a branch of risk management.
My background is as a mathematician,
I studied Differential Topology Dynamics
and Chaos Theory at Berkeley,
where I got my doctorate.
But I also have
a long background in biology.
I’ve been a trader, portfolio manager
and risk manager for 30 years,
and now I run a macro hedge fund,
and a key aspect of my work
-maybe the most key aspect-
is trying to make consequential decisions
under a lot of uncertainty,
And we happen to have
a very good case study to hand.
I first learned about this virus
around this time last year,
and I saw a paper in The Lancet
in late January.
Title was: A Novel Coronavirus Outbreak
of Global Health Concern.
That was January 24th.
This paper was done
by some Chinese doctors,
and they talked about a cluster
of 41 pneumonia cases,
mostly in middle-aged men
without underlying conditions in Wuhan.
And they saw some strange stuff.
They saw abnormal CT scans
with what are called
bilateral ground glass opacities.
And these patients received incredibly
sophisticated medical care.
The kitchen sink was thrown at them,
and yet 13 had to go to the ICU
and 6 died.
So this paper was hair raising
and of great interest to me,
both as a person in the financial markets
and as someone very interested in biology.
It’s a dangerous pathogen,
6 of 41 died.
And the big question at the time is,
is there human to human transmission?
And very quickly, we found out
that there is, and indeed,
the novel coronavirus is far more
contagious than influenza
and most other respiratory viruses.
But take a look at this picture below.
That’s not lung tissue.
On the left, normal.
On the right, COVID-19.
This is cardiac tissue.
We now know that COVID
is a multi-system disease,
focusing a great deal on vascular tissue.
By the way, as an aside,
that Chinese data -6 to 41 dying-
that’s not that different from our own.
It looks a lot worse.
But remember, these were
hospitalized patients.
Here’s a little flow chart of outcomes,
typical outcomes
in the spring in the West.
And you can have a look at that
on your own time.
But we must move forward.
So what are the five principles,
and why only five?
Well, five, because I’m doing a TED Talk
and I don’t have a lot of time.
And these are ones that I picked
that are particularly important.
But there are others.
They may seem obvious,
but using them in real life
is not exactly common.
Indeed, our current predicament,
for example,
in the UK and in the US,
and in other places,
stems in part from failing to apply these.
So here’s a preview.
Number one:
Know when you don’t know, be open.
Number two:
Focus on action as information.
Watch what other people do,
rather than listen to what they say.
Number three: Listen to the people
with firsthand experience,
rather than armchair and academic pundits
who have not been
out in the field battling outbreaks.
Number four: Use evidence even if
it doesn’t rise to the standard of proof.
And think about decisions in sequence
as paths, not in isolation.
This last one is the most subtle.
So the first one,
know when you don’t know.
Now, Steven Seagal may not be famous
for work in the philosophy of knowledge
or in risk management,
but this is one important maxim,
a good one to remember.
“Assumptions are the mother of all f-ups.”
That’s from (the movie)
Under Siege 2 - Dark Territory.
And if that’s not good enough for you,
we’ll go to another Stephen,
Stephen Hawking,
saying essentially the same thing.
“The greatest enemy of knowledge
is not ignorance.
It’s the illusion of knowledge.”
So who makes unwarranted assumptions?
Everyone.
You have to actively fight against it.
Ask yourself, “what if?”
The initial idea you have isn’t right.
And here are some questionable assumptions
about SARS-CoV-2
in the US and the UK
circa February 2020.
Many people, including some experts,
treated it as like the flu.
It is nothing like the flu,
the virus is entirely different.
It’s a very different structure.
The disease has
a different pathophysiology
and the outcomes have different
mortality and morbidity rates.
The flu is a meaningless
and misleading comparison.
Another idea was that it can’t be
eradicated or necessarily become endemic.
We’ll have to see on that.
But the Chinese, Australians
and Koreans don’t agree.
Another idea was that travel restrictions
only delay the inevitable.
In fact, only those countries
that have imposed travel restrictions
have successfully managed the outbreak.
We have the “masks don’t work except
for health care workers
where they’re absolutely essential.”
Of course, it’s nonsense
that they don’t work.
They are very important.
And finally, we have the idea
that democratic societies
or countries that aren’t islands
are incapable of responding decisively.
And you have Australia, Korea, China,
all doing a pretty good job.
But you take assumptions like these
and you get the mother of all f-ups.
What’s the correct stance?
We don’t know yet.
Apply precautionary principles.
What are precautionary principles?
Plan for the worst, hope for the best.
There are positive examples.
I’m not going to talk about the negative
examples and take political shots.
Here are positive ones:
Australia, Taiwan, New Zealand, Vietnam.
And also, I can point
to doctors and researchers
who are observant and open-minded.
One comes to mind in particular,
I was reading his posts to social media
back in Europe in the spring.
His name is Dr. Cameron Kyle-Sidell,
and he is an intensive care M.D.
in New York.
And he went public with his concerns
about ventilator use.
He posted, “What I’m seeing is weird”
and he talked about what he was seeing.
“Intensivists out there,
critical care docs out there.
Are you seeing what I’m seeing?
Hit me up. Let’s compare notes”
in so many words.
And he raised important questions
about the best way
to use oxygen and ventilators.
And actually his stance,
that evolved from his openness,
changed the standard of care
in many places.
This is a guy
with the right kind of attitude.
Lesson number two:
Watch actions.
Here’s a quote, great quote,
but he didn’t say it.
Winston Churchill didn’t say it.
“I no longer listen to what people say.
I just watch what they do.”
Here’s another quote which I like,
“Figure out who has the best information,
then watch what they do.”
If somebody said it before me,
they get credit, but I’ve said it.
Anyhow, who knew the most
circa February 2020?
Who should we be watching?
Well, the Chinese.
So what were the Chinese doing
in February 2020?
Strict lockdowns, travel restrictions,
the building out of hospital capacity,
they trialled treatments
with repurposed drugs
and they adopted the goal of zero COVID.
COVID is not something, as we
have learned, that you can live with.
It’s like playing
footsie with a crocodile.
What did Chinese actions tell us
for focusing on what they were doing?
Let’s compare what
they were doing in February
with the sort of messaging
that I heard here.
In February,
the Chinese were locking down
-at first it was 35 million,
then more people-
essentially all of Hubei province
and other parts of the country.
Meanwhile,
our approach was to advise people to
“Please, sneeze into tissues”.
The Chinese actions showed
that they saw the virus as a grave threat.
They had the most information.
That was a message
to the rest of the world.
Watch what they did.
So now we come to lesson number three:
Prioritizing first-hand experience.
So, I am not an expert on virology.
I know a fair bit,
but I don’t compare with the people
who have made a career of virology,
and you may be in a position
where you have to make decisions
or form a view on something,
and you’re not an expert in the field.
Whom should you listen to when different
academic voices are coming at you?
It’s really very simple.
You go with battlefield experience.
you go with people -in this case-
who have been involved in outbreak control
in similar kinds of epidemics in the past.
For example, Mr. Guan Yi -
Dr. Guan Yi in Hong Kong.
This is a guy who was involved in managing
the SARS epidemic in Asia.
He’s been involved in important
outbreaks all over the place.
And his comment in January
-and this was actually before the Lancet
article that I showed you-
his comment was it could be
10 times worse than SARS.
Remember, SARS was an outbreak
of a lethal respiratory coronavirus,
I think in 2003 and 2004.
He also commented that he’s seen it all
and this time he’s petrified.
Then you go to a different part
of the world
with some armchair experts who advise
“This is not something to panic about”.
Actually, “panic” may be the wrong word,
but this is something
to take strong action about.
Listen to people like Guan Yi
who have been in the field.
And this applies whatever the problem,
you’re with battlefield experience.
As I mentioned, the SARS epidemic
provided the experience
that allowed many Asian countries
to do a much better job
than the Western countries
in managing the virus.
Despite the fact that it started there,
and despite that they have
very high population density,
multigenerational living,
a whole range of factors
that should have made it worse.
Taiwan has very close links
to mainland China these days,
and Taiwan has successfully pursued
a zero COVID strategy.
China’s achievements in public health
have been remarkable.
Singapore has done well.
And this is largely because of the lessons
learned in the prior epidemic.
Back to my point on experience.
So why weren’t the experienced
Asian experts heard in January?
That is a big question for me,
is this an example of prejudice?
You know, I leave that question open,
but they’re the people
who had the experience
that would have been most
valuable to our understanding.
So as you know from my background,
I’m a quant.
So where does quantitative modeling
come into all of this?
People like Neil Ferguson.
Αnd my comments are this.
The more novel the situation,
the less useful quant modeling is
because it requires good information
for good output,
but it can provide important qualitative
insights where intuition is poor.
And a good example of this
is when you’re dealing
with exponential processes.
People can’t comprehend
exponential processes.
I’m a mathematician. I can’t.
I’m pretty sure you can’t.
Plus, you’ve heard of the wheat
and chessboard problem.
You’ve got a chessboard
and you have a grain of wheat.
Put one grain on the first square,
double that for the second square,
double that for the third square.
So now you’re up
to like four grains, right?
Keep doubling each time.
And finally,
you’re done with the 64 squares.
How much wheat do you have?
Do you have thousands of grains? No.
Millions? No.
You have 18 quintillion.
It’s beyond trillions, just a vast number.
Exponential processes
get away from you so quickly.
And that’s relevant to this epidemic.
So models can help you recognize
what really matters qualitatively,
even if in the beginning of an epidemic
you may not have enough information
to estimate the details of the model.
Qualitatively, a 50% increase
in transmissibility, like the new variant,
is much worse than
a 50% increase in lethality.
So here’s a good use of quant.
So the reproduction number
of a virus in a population
refers to the number of people
that an infected person
on average will infect.
So R equals 0.9 means
that an infected person
infects 0.9 others on average.
Think of that as 10 infected people
creating 9 more infections.
Now, if you change R by just 0.4
you go from, let’s say, an R of 0.9
to an R of 1.3,
you go from a dwindling outbreak
to explosive growth.
That’s a good use of modeling
because our intuition
doesn’t suggest anything
like the drama
that you see on that graph.
My fourth lesson is you need to understand
that evidence is a continuum.
It’s not yes, no,
but more versus less.
So here is an outpatient
COVID-19 kit from India.
It contains some vitamins,
it contains an oximeter.
It also contains some medications
-well Ok-
that the Indian government deems
effective enough to dispense to people
and safe enough to dispense to people.
So does this kit work?
The proof is not definitive.
But there’s obviously
some positive evidence
associated with the supplements
and medications,
and limited downside.
It’s kind of benefit versus risk,
and the Indian government,
given their circumstances,
has made the decision
in certain states to dispense this.
So what’s the right standard?
How much evidence do you need?
Why don’t you have a kit?
What’s the standard that applies here
and that takes us
into a debate in medicine:
EBM -evidence based medicine-
versus traditionalists.
Actually everybody
is in favor of evidence.
It’s just an evidence based medicine.
A very, very high priority is placed on
what’s called gold standard evidence,
randomized clinical trials.
Traditionalists like those, too,
but they’re willing to consider
other things -
mechanism of action, observational
studies, clinical experience.
From my perspective,
we’re in a risk management issue.
And I’m not outside the mainstream
of medical thinking,
the modern version of the Hippocratic Oath
recognizes this trade off.
You should read the modern version.
It’s very, very beautiful.
You know, make you
want to become a doctor.
Frankly, it’s a very high calling indeed.
But there are two kinds of errors
to balance.
There’s type one
-now we’re in statistics-
errors of omission.
There are type 2 errors of commission:
Errors of omission is
you don’t do something good,
you don’t send out a COVID kit
when you should have.
Errors of commission
is when you do something bad,
you send out a kit that has
bad side effects and injures people.
Commission, omission.
Type 1 and type 2 errors.
So, is evidence based medicine,
which is and which has become, in a way,
the orthodoxy in some Western countries
too much of a good thing
from a risk management standpoint?
I don’t know. I don’t know.
Certainly, it’s helped medicine
a great deal in many contexts.
But pandemics require quick responses
and type 1 errors can be
as bad as type 2 errors,
but they’re less visible.
The thing you didn’t do
but could have helped
is less visible than an active mistake.
Now, a risk management
principle that is very important is
is that uncertainty must be balanced
at an optimal point.
You’re supposed to be
equally uncomfortable.
Did I do too much?
Did I do too little?
If you’re sure you haven’t done too much,
you probably haven’t done enough.
And if you’re sure you haven’t done too
little, you’ve probably done too much.
It’s an idea that I’ve taught traders
who have worked with me
that you’re supposed to be
sort of equally uncomfortable with -
Have I been too aggressive?
Have I been not aggressive enough?
Because when there’s a lot of uncertainty,
you don’t know.
If it’s one sided
it sort of means you’re favoring
one kind of error over another,
and the optimum is unbalanced.
So here’s a risk management perspective
from Robert Rubin,
a very prominent guy in finance,
a very smart guy.
“All decisions are based on imperfect
or incomplete information,
but decisions must be made
on a timely basis.”
The business I was in for 26 years
was all about making decisions
in exactly this way. Indeed.
Finally, my last lesson is to think
about strategy as decision paths,
not as a single decision,
because your choices now will determine
your options and choices later.
Play the tape forward
under different scenarios.
Now here I will make a literary allusion,
one of the great writers, Cormac McCarthy,
and here is a quote
from the El Jefe speech.
It’s a very, very fine
piece of literature.
You should have a look at it.
“Actions create consequences
which produce new worlds.
The world in which you seek to undo
the mistakes that you made,
is different from the world
where the mistakes were made.
And you want to choose,
but there is no choosing there.
There’s only accepting.
The choosing was done a long time ago.”
So he’s referring to the fact
that the choices you make now
will determine the choices you have later,
and this has implications.
Let’s apply it here.
The easy application is to understand
how important it is
to stay ahead of the curve.
It’s not hard to ease up
if things are well controlled.
New Zealand, China and Korea
have lots of options.
If you lose control, things happen fast.
Exponential growth.
Remember the wheat
and chessboard problem?
And you’re on the back foot
and you have few options.
You have a health care system
that will be overrun,
you’re going to have to lock down
and do things
that you don’t want to have to do.
You got to stay ahead of the curve and
keep things under control, tight control,
or you run out -
or you have few options.
So here are my points again:
Know when you don’t know,
which is usually.
Be open, even to things
you don’t want to hear.
Take the emotion out of the picture.
Figure out who has
the best information right now
and watch what they do.
Firsthand experience
usually beats cleverness and math,
although there’s a role for those.
You have to act
without imperfect information,
it’s uncomfortable, but get used to it.
Know about balancing
the two types of errors,
too much versus too little.
Draw out decision trees and choose
those paths that give you options later
and leave room to maneuver
as you learn more.
And as you think about these things,
you can see various policymakers
around the world
applied or did not apply these principles,
and there were major consequences
to the choices.
And then last
and certainly not least,
here are some top sources on the pandemic.
If you really want to know
what’s going on,
these scientists are really excellent
if you want to go in very deep.
You don’t want to miss the upcoming
episode of This Week in Virology.
Their podcasts are always
very informative,
If you want to learn more about the stuff.
And then thank you for your time
and good luck making decisions.