Charge up the tardis

A few years ago, I had a brief chat at a social event with one of the so-called TV football pundits.

He jokingly referred to some of the shockingly inaccurate predictions that he’d made over the years. I can remember one or two of the really bad ones but most fade into the memory.

If the pundit in question had worked for a big investment house and his level of prediction accuracy was that bad, he would have been out of a job very quickly.

But he’s not employed by the TV company in question to make accurate predictions. He’s employed to make entertaining predictions. There’s a big difference.

In all walks of life, we listen to the opinions of those who predict the future. Sometimes the ones we get to hear are loud, outrageous and yes most entertaining ones. The ones who are less entertaining are drowned out.

Sometimes we choose who we listen to maybe because they are the people who feed into our prejudices and hunches. Or maybe make us laugh.

As a result, we can miss valuable informed opinion which would help us make decisions about the future because it doesn’t correlate with our world view. Or is perhaps a bit boring. Or maybe needs us to do some work to properly understand what it all means.

What we’d really like is a Tardis. We are fascinated with the endless possibilities of being able to travel to the future and find out how certain things panned out in order to return to the present and use that knowledge for our own benefit.

This was best illustrated in Back to the Future 2 when old Biff Tannen travels back to the past and gives his younger self the Sports Alamanac which has the results of all sports events for the next 50 years.

But in the absence of a Tardis in the garage or a time travelling DeLorean, we listen to the opinions and predictions of others.

In our day to day lives, we have to predict the future all the time in order to try and make decisions. “What’s the weather going to be like – do I need an umbrella?”. Let’s look at the BBC weather. “What’s the traffic like – what time will I need to leave?” The AA.com.

In normal times, these are just part of everyday life.

There are so many certainties (low interest rates, gridlocked traffic on the M25, Piers Morgan saying something controversial) that we can focus on the uncertainties.

But now there are far more uncertainties to worry about.

In an email earlier in the year, a new client asked me for some advice about how to deal with a particular issue. I outlined three possible courses of action and the pros and cons of each. He replied back to say: “that’s great, but which one is the right thing to do”.

My reply was that the only way to answer that was to get a time machine, go forward ten years and look back to see whether the business had been a success, whether it had expanded into the other areas they were looking at, whether new directors and shareholders had come on board and what all the tax changes had been over those ten years.

I didn’t mention pandemics!

I’ve given that answer many times. It’s the easiest way to convey the risk associated with the decision-making process.

A big part of the work of a Principal Adviser at A4G is batting around the pros and cons of a particular choice with a client. Often, there is no right or wrong answer and we’re just searching for what we think (on the balance of probability) is the right answer. And sometimes the right answer for one person is the wrong answer for another.

Many times, these discussions culminate in me being asked: “What would you do?” I’m always happy to answer that question and I try to put myself in the shoes of the person concerned and think about the issue in terms of what’s important to them.

But that’s not the question I’ve been asked most often recently. The question I get asked most days by clients is “do you think we’ll have another lockdown?”

It’s a great question but I’m afraid I don’t know the answer. There are too many variables in terms of people’s behaviour, political pressures and impact on the economy not to mention understanding the science element.

As I discussed in my Accountant’s Angst article several months ago, it’s really all about the R number although you’d be forgiven for thinking that this is no longer relevant as it is barely mentioned these days.

In terms of theory, not much has really changed though. The collective human behaviour of our population is really what determines the R rate. If that collective behaviour means that each infected person passes the virus on to more than one person on average, then numbers will rise. If they pass it on to less than one person on average, numbers will fall.

But the news tends to focus on the total numbers. So, when cases are low and deaths are in single figures, restrictions are relaxed. People ignore the rules more. The R rate goes up.

But no-one notices because cases are small, and deaths are low. Until suddenly they’re not.

Some areas have more cases than others, so restrictions are increased, and rules are tightened.

The R rate drops below 1 and cases go down.

STOP. START. STOP. START.

Welcome to Pandemic Normal.

But how long will this last?

I’m an accountant so all I can do is try and draw some objective conclusions based on all the science.

Here’s what I do know about the science bit though:

• There are 380 trillion viruses in the human body. I know! Scary isn’t it? I only got told that this week and Googled it just in case
• There are similar numbers in other species
• The last few million years on planet Earth represents a war between humans and viruses. In most cases, (well 380 trillion of cases), we live quite happily alongside each other but every now and again we get a dodgy one
• Most of the dodgy ones have mutated and managed to jump from one species to another
• Viruses will only die out once enough people have had it (or been inoculated) and are immune and it becomes harder for the virus to find new people to pass it on to

But actually, we know what the virus is going to do don’t we? We’ve been following its behaviour for 9 months now. We know who is high-risk and who is low risk. We know that if you’ve had it once, you’re highly unlikely to get it again (although we don’t know how long immunity lasts).

That’s all well and good, but most of you have decisions to make about the future of your business. About which staff to bring back from furlough. About whether to close that office. About whether to invest or squirrel your savings away in a deposit account just in case.

And as we’ve already established neither you nor I have a real Tardis so we’d better start listening to people who have more idea than us about what Pandemic Normal is going to be like. And so with that in mind, we thought we’d devote the next few weeks of my Friday night musings to “Before and After Thinking”.

The sort of things we’ll cover are why some people are better forecasters than others, black box thinking, how cognitive dissonance and prejudice results in bad decisions, cause and effect and how you can influence your team into making decisions that are right for them and your business.

But first, we’ve got to try and forecast how long this nonsense is going to last and how it’s going to affect your business. There are three golden rules:

RULE 1 – If you want to know what the government is going to do, listen to politicians.

Most acts by government are not that much of a surprise. They usually start talking about them a few weeks in advance or do a deliberate leak. If there is a massive uproar, it probably won’t happen. If the feedback isn’t too bad, it probably will.

RULE 2 – If you want to know what the virus is going to do, listen to scientists.

This is tricky because there are lots of these opinions. But generally speaking, if 99 out of 100 scientists say one thing and 1 in a 100 says something else, the 99 are usually right. Yes, I know that every few hundred years or so an Isaac Newton or a Darwin challenges conventional thinking but most of the time the majority are right.

RULE 3 – If you want to know what the economy is going to do, listen to economists. Same theory as scientists on this one!

Do not listen to predictions by the wrong people about the wrong things. Do not listen to David Icke about anything!

This brings us to Donald Trump’s promise of a vaccine within weeks or as the cynics might say, “a time-period remarkably similar to the time until the date of the Presidential election”.

A far more likely prediction came from the eminent scientist, he was contradicting, Robert R Redfield. His testimony at the congressional hearings was really enlightening in terms of informing us about how long Pandemic Normal is likely to last.

His main point was that there is a lot to do to get a vaccine widely distributed. We know some of this already but over-optimism in the press can be misleading. Testing is still ongoing, then manufacture of the vaccine, distribution and finally it has to be administered. He suggested the most likely time frame was June / July next year. That’s a long time off if your business is losing money at the moment.

He also suggested that it’s possible that only 70% of those vaccinated will have the right response, meaning 30% of the population won’t be immune even after they have been vaccinated. In fact, holding up a mask, he said that it might be more effective than a vaccine!

I’ve paraphrased it a bit, but you get the point.

We are now in Pandemic Normal, so we better get used to it. This is not going away soon.

And no, I still don’t know if we are likely to have another national lockdown. But if the R rate goes up everywhere then there will be local lockdowns everywhere which would basically be the same thing.

As I said all those months ago, in one of my very first emails, The Optimists Died First.

Look out for Monday night’s email from my colleague Josh Curties “Keeping Everybody Safe in Pandemic Normal”.

Oh, and if you want to try and predict the economic future, make sure you sign up for our webinar with Phil Eckersley from the Bank of England.

Have a good weekend.