Covid-19 and Y2K

There are interesting parallels between Covid-19 and Y2K.

In both cases there was an absence of firm empirical data. Both had plausible arguments that unaddressed, the issue could become catastrophic.

In the case of Y2K there was a known issue that many information systems, particularly those which had been custom built (basically anything before the 1980s, used date indicators of only two digits for a year. 1997 would be represented as 97. The concern was what would happen as we transitioned from 1999 to 2000. In most instances, particularly in systems which were substantial self-contained and self-referential, there probably would be no issue. But in systems integrated into other systems, it possibly could be catastrophic. The scope of concern was limited only by the imagination - planes falling from the sky, heart monitors stopping, trillions erased from government ledgers.

By the mid 1990s the concern was given enough credence that corporations and state agencies began to pull forward replacements of systems. In most cases, this took the form of shutting down old custom built systems and replacing them with ERP systems such as SAP, Oracle, JD Edwards, PeopleSoft. Systems which were designed to be clean of the Y2K bug.

All through the run-up to Y2K there persisted doubts that the pervasive presence of two-digit date representations would be as bad as was being claimed. It was easier, though time consuming and expensive, to prove that there were X thousands of instances of two digit dates in a system than it was to prove that the fact that they existed might turn out to be operationally destructive. Proving the likely impact, tracing through all the code, was likely as expensive as actually just replacing the system. Everyone, from caution, just replaced the systems.

In the latter half of the nineties, system integrators (those who implemented the replacement ERP systems) boomed. Work had to be turned away owing to limited capacity. It was fun and fascinating work, done under a fixed deadline. January 1, 2000 would come, ready or not.

It came. It went. Civilization did not collapse. Planes fell not from the sky.

Was it wasted effort? Possibly. Was crisis averted owing to the herculean efforts to upgrade systems? Possibly. The argument continues today with little definitive answer. Quite likely the original diagnosis of Y2K was important but not near as dire as predicted.

And certainly the pulling forward of standardized, module-based ERP systems better prepared corporations for the digital future (smart phones, the internet, always connected always on arriving just at that time as well.)

I was leader of a global business doing that work. I do not believe it was wasted effort. I think it was strategically net beneficial. I cannot prove that.

And afterwards? System integrators contracted dramatically when demand evaporated, triggering a brief six month recession in North America and Europe.

And so here we are with Covid-19. Is the shutdown of the global economy commiserate with the benefits of avoided deaths? We don't know. We can't, at this stage, know. We simply don't have the data. And we don't have the luxury of waiting till we do have the data. By the time we know, death will be upon us or everything will be returning to normal because the reality we cannot yet measure with confidence will turn out to be pretty benign.

My suspicion is that this will end up being materially short of the catastrophe which is being threatened. That deaths will look like a normal flu season but with a higher incidence rate. The victims will be overwhelmingly aged and those with co-morbidities such as COPD, cancer, diabetes, etc. I suspect that drugs with prophylactic and ameliorative capabilities will be available within the month and will flatten the curve and better protect the at-risk population. That a vaccine will be available within two months.

That most of the most onerous restrictions will be relaxed within a month and that the economy will bounce back. But that we will have paid a 5% penalty in global GDP which will in its own fashion have large, but short of catastrophic, consequences.

Three months from now, we will be criticizing leaderships for both not acting earlier, and over-reacting to the detriment of the economy.

I also forecast that there will be a series of downstream consequences, including:

Monitoring - National medical institutions will be tasked with creating a better and more integrated global system of monitoring emergent conditions to circumvent the lost opportunity for earlier and more effective mobilization. The alerts out of China only emerged once it became impossible for them to hide. How much greater lead time there might have been is not knowable at this point but clearly in an ideal world, individual nations should not have veto over shared knowledge of emergent diseases.

Threat assessment - National medical institutions will be tasked with creating a better mechanism for assessing the true range of possible outcomes. In many ways this is an impossible task. When a new threat condition emerges, all we can rely on is past analogs and a thin current evidentiary record. We don't probabilities or vectors or rates or anything else we need to know. We are making educated guesses. And we cannot always plan for the worst possible scenario. None of the existing institutions have done a particularly good job of threat assessment and there is a real limit on how good it can actually be. But it could be much better, and as importantly, much more transparent.

Response - Follows from above. In some ways it has been remarkable. In four (or five) months, from emergence to now, we have gone from complete unawareness to global awareness and global uncoordinated action. There have been innumerable lost opportunities and missed steps along the way. An example which is not especially dire but is at least concrete - I think it is clear by now that masks are a useful guard against spread. The message from the experts has been narrowly accurate but also misleading. It is more important that first-responders have access to masks than the general population. But to curb the population's demand for masks, expert messaging has been that masks don't work. Technically that is true in that the most valuable use of masks when they are in short supply is by first responders and not the population at large. But it comes across as experts either not knowing what they are talking about or experts lying to protect their own interests at the expense of the public. An unnecessary own-goal.

More balanced and robust supply chains - Since the global logistics and supply chain revolution of the 80s and 90s, we have always known that the more precise and accurate a system, the more fragile it becomes. You can optimize for highest efficiency (lowest cost) and effectiveness but in doing so you winnow out excess capacity and flexibility. Excess capacity and flexibility are an additional cost. We have optimized the heck out of the global supply chains to everyone's benefit in terms of reduced cost. Excess capacity and flexibility can be viewed as unnecessary waste. And they are given a narrow definition of goals. But they can also be viewed as insurance. I suspect that the perceived insurance value of excess capacity and flexibility will improve.

Investment in a better distribution of manufacturing capacity across the globe - Virtually all the world's manufacturing capacity is concentrated in a dozen countries or so. I suspect that there will be efforts to expand and rebalance capacity not only among those 12 but outside of them as well. Some manufacturing which the US off-shored to China will return to the US. Similarly, some material amount of manufacturing capability to the old West heartland of the Industrial Revolution. However, I suspect a handful of other potential centers beyond the dozen or so will emerge as well.

Reevaluation of China's role in the global community of nations - There has been a loss of trust and status. Hence, the very active disinformation campaign China has going on right now. I do not think it will be effective. ThBelt and Road initiative will likely suffer some reverses. Everyone made a faustian bargain with the totalitarian and authoritarian state in order to gain access to that huge market. I think the value and terms will be revisited both economically and politically.

Increase in efforts to reduce smoking in emerging economies - So far those countries experiencing the highest death rates, the excess of deaths with co-morbidities, and the excess of male over female deaths all seem linked to impaired lung function from smoking (and/or pollution exposure). I suspect developing nation will have greater incentive to launch campaigns against smoking.

A painful, fraught and necessary review of end-of-life protocols and associated expenses - All nations with aging populations have already been going through this sotto voce. Netherlands, Belgium, UK pretty explicitly, others more quietly. How much money is society willing to spend on citizens at life's end where a greatly disproportionate share of medical expenditures are concentrated. Italy has been at the tragic epicenter of this with Covid-19 with medical personnel apparently having to make life and death decisions. In conditions where they have limited beds, limited time, and limited supplies, they have to choose who dies where and under what circumstances. This is not a national health versus private sector issue. This is a societal issue. We have the technical capacity to extend peoples live far into a grey zone of discomfort and incapacity but at great societal cost. What should we be doing?

Reinvigorated concerns about immigration and border security - Border control in an epidemic is a strategic capability, whether you use it or not. Whether you are an economics/humanitarian open-borders enthusiast, a pandemic highlights the importance of being able to close the border. Disease transmission via individual and population movements will impact on immigration debates. Pictures of Greek forces repelling immigrant surges across defended borders crystalize the issue.

I am sure there will be plenty of other second and third order consequences that are not occurring to me yet. The longer the shutdown, the more these topics will be revisited.