March 2020 was pretty scary.
On March 11, the World Health Organisation (WHO) declared COVID-19 to be a pandemic. New Zealand’s 4-tiered Alert Level system was announced on 21 March. On 23 March we moved to Alert Level 3, and on 25 March we moved to Alert Level 4.
We didn’t move down to Alert Level 3 until 27 April. We stayed at Alert Level 3 until 13 May.
We were in lockdown for a long time, and it wasn’t clear at the time it was going to work.
It was a period of massive uncertainty.
In retrospect, New Zealand fared extremely well (as a whole; some people suffered, especially in industries like hospitality).
Internationally, the effect of COVID-19 has been more significant.
We’re not out of the woods yet. But one year on, it feels like a good time to look back.
Be careful when looking back
As with all things, it’s easy to look at our experience with COVID-19 through the rear-view mirror. But if there’s one thing I learned studying legal history 22 years ago, we need to be wary of thinking anachronistically. In other words, applying the perspectives of today to those of yesteryear.
In that spirit, I’m in the fortunate position of having written lots of articles about the topic of COVID-19 that I can return to, 12 months’ on. I can ask myself questions like:
What do you think?
I'd love your feedback.
- What was I actually thinking at the time?
- What did I get right?
- What did I miss?
- What am I embarrassed about?
- What can I learn for the future?
Below I’ve linked to some of my articles – and observations – from that era.
All up, I’m pretty proud of where I stood. I’d make some minor tweaks to what I wrote, but most of the changes would be stylistic!
(Before I begin: one thing that struck me was that I wrote a lot around the topic of COVID-19 between March and April. After that, I had the privilege of returning to normal broadcasting. Phew! We were lucky.)
Articles from this period last year
(Click on each heading to go to the full article.)
On February 26, I began: “I’m pretty sure that in my lifetime there will be a major pandemic that causes a sizeable loss of life and has a big impact on the global economy…. Maybe it’ll be the coronavirus COVID-19. Maybe it won’t be.”
I also added: “One thing is for certain: no one knows exactly what will happen in relation to COVID-19.”
At the personal level, I concluded by asking:
- Are you prepared personally for a bad scenario?
- Are you prepared for a disaster?
- Can you deal with short-term economic shocks?
- How resilient are you from a slightly longer-term perspective?
In the same way that we don’t intuitively understand “the magic of compound growth” when it comes to investing, it’s also hard to grok exponential growth when it comes to bad things, like viruses.
Plus various other thoughts:
- This isn’t the Big Bad one – “COVID-19 might be really bad. But it could be much worse.” I still agree with this.
- We’re all in this together – “In a sense, society is like a rat king… If we all go down, we all go down together.” I’m sad to say, I’m less sure of this now, except for really extreme scenarios.
- “In some respects, GDP is a callous measure”.
- “Technology is amazing” – “We are in a much better place today [for dealing with a virus like this] than we would have been even 10 years ago.”
- “There will be blood on the streets. This is bad for some and good for others”
Interestingly, I wondered-out-loud whether I was scaremongering by sharing these thoughts about COVID-19. This may seem weird – but I published this article two weeks before New Zealand went into lock-down. At the time, lots of people were surprised when I would tell them I was preparing for schools to close down soon.
An email I shared with clients at the worst of the downturn – along with a 16-minute video I shared on Youtube and Facebook.
I urged readers not to make changes based on their predictions about the sharemarket.
However, I encouraged readers to reflect on their own circumstances and objectives. In light of COVID-19, had they changed? Has it revealed something about your personal tolerance for risk? If so, your investment strategy should have changed.
By the end of March I was feeling pretty certain I could have picked the downturn before the market tanked.
However, reflecting on this – including looking at what I’d written on the blog, personal emails, and text messages – I concluded: “despite my very human inclination to think I could have picked the market, I still wasn’t certain about what would happen at the time.”
I explored the tail risks of high inflation (terrible for cash!) and deflation (great for cash!). Conclusion? Diversification across asset classes is key.
Also, social capital is important, and especially important in times of crisis.
I call this blog NZ wealth & risk for a reason.
To quote another author: “speaking in terms of wealth is a mistake. We should instead speak in terms of risk”.
Also – managing risk isn’t just about stopping bad things from happening; it can also increase the potential upside.
- This isn’t an existential threat.
- This is a short-term shock
- This is a liability that has always been on our balance sheet (ie, a pandemic of some sort was inevitable).
- We could have been hit with something much worse than COVID-19.
- We were lucky with the timing (ie, that this happened in 2020 instead of, say, 1995).
- We’ll be better positioned to deal with future pandemics.
- At least we have a reason for the crash of March 2020.
- This is better than a war – we may not be productive during a lock-down, but we aren’t being destructive in the way that war is destructive.
I used COVID-19 as a starting point for sharing a framework for thinking about the future – and why this is an especially important exercise during times of volatility, uncertainty, complexity, and ambiguity.
“Talking to newbies about investing is like explaining sex to a virgin. You can describe it, but you can’t capture the full experience.”
Until you’ve experienced an actual downturn, you don’t acutally know what your tolerance for risk is. I was surprised that quite a few clients contacted me to let them know they were more comfortable with the big market drop than they expected.
- “The stock market isn’t the economy.”
- The sharemarket is a prediction market: “The consensus view is that we are moving from really-really-bad to really-really-bad-but-not-quite-as-bad-as-we-feared last month”.
After April, I didn’t directly write about COVID-19 very much. However, it had its fingerprints on much of what I wrote, especially:
A prediction from November 2020: “In terms of COVID-19, it seems pretty likely to me that we’ll see community transmission again, which will necessitate future high-level lock-downs before a vaccine is widely available.”
When things were at their worst, I thought that our family – and many other families – were going to take a massive financial hit. One of the things that made me feel comfortable with this prospect was that I saw it as a chapter of our life.
Life has many chapters. There were chapters before COVID-19, and there will be chapters after COVID-19.
That’s my retrospective.
What have you learnt from the experience?
In what way are you making different decisions today compared to this time last year?