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  • stoumazou


“No man is an island, / Entire of itself. / Each is a piece of the continent, / A part of the main…” The words of John Donne’s poem “For Whom the Bell Tolls” find new meanings nowadays: mankind has enjoyed the benefits brought by globalisation unhindered for a few decades, however the beginning of 2020 clearly shows that the burden of natural disasters also is to be shared together.

COVID-19 has turned into the unprecedented global challenge, a so-called ‘black swan’ – an unusual event that, despite its low probability, does take place sometimes, reshaping the world we used to know before. Such events may be explained and analysed in retrospective, but at present there is not much use in theorising, the thing that matters the most is how we choose to react. As the great king said, “This too shall pass.” While currently in some countries the incidence is only gaining momentum, others have already experienced the peak of infection amongst their population, so it’s a good time to think what principles could be applied in the ‘post-lockdown’ life, and what is the impact on global order. Elements of Asian philosophy could be of help in this case.

Every battle is won before it’s ever fought. The legacy of Sun Tzu, ancient Chinese military general and philosopher, most known by “The Art of War”, entails proactive ensuring of sustainability before the situation gets out of control. The lack of timely reaction leads to threatening circumstances: as the number of infected people increases, resources of the medical establishments are getting scarcer; the number of doctors, medical equipment and simply beds in the hospitals is limited. Letting the disease make the first step, we soon find ourselves far behind in this race.

Sacrifice the plum tree to preserve the peach tree from the classical essay “Thirty-six Stratagems” means that in some circumstances there is a need to sacrifice short-term objectives in order to gain benefits in long-term. Simultaneous lockdowns set by many countries worldwide, combined with severe quarantine measures imposed within the countries have led to unemployment, cash outflow and supply chain disturbances with deep impact on the private lives of everyone. Despite the losses and inconveniences caused by paralysed life everywhere, it’s important to keep in mind that sometimes tough steps must be taken if one wants to preserve the wealth in a long run.

Wu Wei principle. In Chinese this notion literally means inaction or not doing. It doesn’t encourage to ignore reality or remain passive, but to remove all unnecessary and inefficient thoughts and actions, focusing on what really matters. Nowadays humanity can benefit from possessing more information and exchanging it faster than ever in history, but its quality and accuracy is often questionable. Thus, we shouldn’t consume too much data and focus on reliable sources instead.

Economies globally are facing severe complications caused by the virus: IMF expects up to 3%  drop of the world economy (1). Unlike the recent big crises, when the cause itself did not last, today the world is non-functional for an indefinite time, making it more difficult to recover. In this case, economies might go through not the V-shaped decline and following rapid recovery, but U-shaped recession, which is a realistic scenario especially for emerging economies, that don’t have much safety margin and already have problems with liability management due to the capital outflow: Institute of International Finance indicates, that within the last three months, investors would have withdrawn around $100bn from the emerging markets (2).

Deep mutual dependency of economies, beneficial in regular times, makes it more difficult to rebuild when supply chain doesn’t work. At the same time, manufacturing countries like China, that relaunch their productions, face the lack of demand, as the buyers in the West still have their doors shut. On this background more countries are doubting the viability of globalised production, considering relocation of suppliers. Oil is also an evident example of this phenomena, as the oil producing countries have an abundance of oversupply as the oil demand has sunk 70% in the last 2 months, resulting into historical drop of prices.

But these extreme times also create new growth opportunities. For instance, AI technologies, that have been gradually developing before, now got a dashing leap in application ways, as they process immense amounts of data, helping to monitor possible carriers of the virus. However, there are concerns that afterwards improper AI usage can become a threat to human rights and privacy, but with necessary transparency and compliance these technologies might change the world for good.

Healthcare industry, that has become world’s top priority these days, also can gain advantage from the new technologies: neural networks help with diagnostics, while novel 5G communication with its higher speed and safety makes possible even making surgeries without doctor’s physical presence.

Finance market trends highly depend on whether there will be the second wave of the virus, and thus, in these unstable times, big and steady corporations with healthy balance sheets are among the most preferable investment targets. They have strong products that bring real value to consumers regardless of the market circumstances are unlikely to disappear anywhere soon. Currently they are inviting investors with a big price discount. Another big category are the companies, that supply essential products and services, like pharmaceutical and healthcare giants, farmland and food as well as infrastructure industry – regardless of the investors mood, they remain in high demand and possess real assets. And more than ever reasonable diversification is vital for making a risk-optimised Black swan-proof portfolio.

Fighting the pandemic requires all of us to act wisely and responsibly, because this is exactly the case where everything counts. It is not in our power to turn back the clock, but we can define what the future will look like. Working on our own existing breaches that are exposed to Black swans is to become our main focus. Smart, mature and thoughtful decisions will make us better and less fragile, so that when the next crisis comes, we refuse to be the victims, taking the driver’s seat instead.

April 28th 2020



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