Mauro F. Guillén - management.wharton.upenn.edu · How to Restart the Economy •Tradeoff between...
Transcript of Mauro F. Guillén - management.wharton.upenn.edu · How to Restart the Economy •Tradeoff between...
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Preparing for, and Dealing with,
the Covid Pandemic
Mauro F. Guillén
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1990 2016 2020
My Expertise
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https://www.economist.com/briefing/2020/03/12/understanding-sars-
cov-2-and-the-drugs-that-might-lessen-its-power
The Enemy
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https://www.economist.com/briefing/2020/03/12/understanding-sars-
cov-2-and-the-drugs-that-might-lessen-its-power
Replication of the Virus
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Preparedness
• Organizations, and society at large, always
prepare for catastrophic events like
earthquakes and hurricanes.
• Why aren’t we prepared for epidemics and
pandemics?
• Perhaps because we perceive them as being
rare events that are unlikely to affect us.
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https://www.who.int/emergencies/diseases/managing-epidemics-interactive.pdf
Epidemics Occur Frequently
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https://www.visualcapitalist.com/history-of-pandemics-deadliest/
Pandemics are as frequent as major earthquakes
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Neil B. Todd, “Cats and Commerce.” Scientific
American 237(5) (Nov 1977):100-107.
Diffusion: Cats and Commerce
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Bubonic Plague in the 1300s
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The Spanish Flu of 1918
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HIV
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Fake News
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Economic Impact
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Stocks
Data: Yahoo Finance. Chart by Mauro F. Guillen
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S&P 500 Volatility
https://www.policyuncertainty.com/media/StockMarkets_COVID.pdf
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Stock Buybacks
https://www.wsj.com/articles/if-companies-arent-buying-their-own-stock-who-is-11586079000
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GDP
https://conference-board.org/data/usforecast.cfm
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Oil
https://www.eia.gov/dnav/pet/hist/rwtcD.htm Chart by Mauro F. Guillen
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Recovery
https://conference-board.org/data/usforecast.cfm
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GDP Forecasts
https://www.economist.com/printedition/2020-04-04
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Consumer Confidence: US & CN
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Consumer Confidence: EU & JP
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Consumer Confidence: DE & FR
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Consumer Confidence: ES & IT
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Manufacturing PMI: US & CN
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Manufacturing PMI: EU & JP
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Manufacturing PMI: DE & FR
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Manufacturing PMI: ES & IT
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Job Losses
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Emerging Markets
https://www.wsj.com/articles/imf-world-bank-face-deluge-of-aid-requests-from-developing-world-11586424609
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Why is this crisis so bad?
• Population growth, especially in cities.
• Rise of global middle-class consumption:
– Mobility and travel.
– Interconnectivity.
• Global value chains.
• Fake news.
• Hubris, denial by politicians and the public.
• Anti-science attitudes.
• It’s a supply and a demand shock, all at
once.
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Air Travel
https://www.visualcapitalist.com/air-traffic-network-map/
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Growth in Air Traffic
https://www.iata.org/en/iata-repository/publications/economic-reports/air-
passenger-market-analysis---jan-2020/
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Value Chains: The iPhone
Source: http://www.wto.org/english/res_e/statis_e/miwi_e/background_paper_e.htm
iPhone-related
U.S. Trade
Deficit with:
Final
Value
(USD mn)
Value
added
(USD mn)
China -1901.2 -73.5
Japan 0 -685.0
South Korea 0 -259.0
Germany 0 -341.0
Rest of the
world0 -543.0
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Global Value Chain: Airbus
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http://www.businessinsider.com/graphic-boeing-787-dreamliner-suppliers-2013-1
Global Value Chain: Boeing
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https://www.oecd.org/dac/aft/MappingGlobalValueChains_web_usb.pdf
Global Value Chain: Nutella
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Tight Coupling
• The global system is more tightly coupled than
ever:
– Trade integration.
– Portfolio and direct investment.
– Cross-border banking assets.
– Global value chains.
– Travel.
• This means there are few degrees of freedom, no
buffers, backups, or cushions.
• A disturbance somewhere in the system diffuses
rapidly across the world.
Mauro F. Guillén, “Coupling,” In The Architecture of Collapse (Oxford University Press, 2016), pp. 49-74.
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Japanese Earthquake and Tsunami of 2011
http://personal.lse.ac.uk/leckcivi/JobMarketPaperA.Leckcivilize.pdf
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What To Do?
• When disaster strikes, “plans are worthless,
but planning is everything.”
• CEO must become “explainer in chief.”
• Establish a “War Room” (Churchill) or
“ExComm” (Kennedy).
• Organizations need to have protocols in
place:
– Communication.
– On-site versus telework & virtual teams.
– Enhancing wellbeing, motivation, and
productivity.
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Repair the Supply Chain
• Repair the supply chain if it is broken or
under strain.
• Create redundancies and buffers.
• Strike a different balance between
efficiency and resiliency.
• I am against government nationalist policies
regarding the supply chain.
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Engaging Customers
• Even if your business shuts down
temporarily, you need to continue engaging
customers.
• Think about laying the groundwork for
opening up for business and for taking
advantage of the rebound.
• Plan for pent-up demand.
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Shifts in Consumer Preferences
• Physical and mental wellbeing?
• Quality of life?
• Quality time?
• Safety?
• More space in the home?
• Small pleasures—the simple things in life?
• Introspection and soul-searching?
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The “New” Retail Normal
• Omnichannel?
• Prestige online channel.
• Click and collect.
• Social distancing at stores.
• Virtual reality.
• One-time samples.
• Maintaining brand loyalty.
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Saving Lives / Saving Economy
https://www.economist.com/printedition/2020-04-04
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How to Restart the Economy
• Tradeoff between saving lives and saving the
economy is tricky.
• Economic crises cause deaths, suicide, mental
illness, stress, and social dislocation.
• Recipe to restart the economy:
– Track, trace, and stop the spread of the virus.
– Certify virus-free communities.
– Segment the implementation of containment policies.
– Slowly reopen the economic and social interaction.
– Wait for relief & stimulus measures to work.
https://www.nytimes.com/2020/03/28/opinion/coronavirus-economy.html
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Longer-Term Implications
• Technology use.
• Declining fertility.
• Senior citizens: higher mortality and
negative wealth effect.
• Women: they take fewer risks and have
better anti-viral defenses to begin with.
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In Conclusion
• The global system is more tightly coupled
than in the past.
• Epidemics are more frequent than most
people assume.
• One can, and should, do planning for
pandemics.
• One can develop skills, protocols, and
systems for dealing with a crisis.
• It’s key to plan for the recovery.
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Resources
• Visit my website for free sources of
information, presentations, and
videos:
https://whartonmgmt.wufoo.com/form
s/covid19-resources/
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Online Courses
• Analyzing Global Trends for Business and
Society.https://www.coursera.org/learn/wharton-global-trends-business
• Managing the Global Firm. https://online.wharton.upenn.edu/leadership-and-management-certificate/
• Managing in the Global Digital Economy.https://online.wharton.upenn.edu/courses-global-digital-management/
• Globalization: Social, Economic, and
Political AspectsTo be launched in the Spring of 2021.
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Session Narrative Summary
What are the implications of COVID-19 for
businesses? How should they prepare for the coming
recession? The challenges affect not only global
supply chains but business continuity in general. One
must continue to engage customers with a view to
the recovery. Organizational processes need to be
overhauled to accommodate new work practices,
including telework and virtual teams. One must
prepare for pent-up demand and for other types of
demand before the recovery starts.
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Contact Information
Mauro F. Guillén
Zandman Professor of International Management
The Wharton School
University of Pennsylvania
2016 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
Email: [email protected]
Personal website: www.management.wharton.upenn.edu/guillen
WeChat: mfguillen
Twitter: @MauroFGuillen
LinkedIn: mauro-guillen
Pre-order my new book:
https://read.macmillan.com/lp/2030-mauro-guillen/