Known knowns, known unknowns, and unknown unknowns
Uncertainty pandemic: Everything you once knew about business and life planning is obsolete
In February 2002, then US Secretary of State for Defence told a Defence Department briefing: “There are known knowns. There are things we know that we know. There are known unknowns. In other words, there are things that we now know we do not know. But there are also unknown unknowns. There are things we do not know we do not know”. His sentiments will resonate with individuals and business owners as they attempt to plan for their post-pandemic futures, mid-2020.
Things we know we know There are many things that we know about the coronavirus and its economic, healthcare, and social consequences. We know that the virus will put tremendous strain on both private and public healthcare systems and result in many infections and deaths. It took fewer than six months for the virus to infect 4,5 million individuals and claim 303 000 lives (covidvisualizer.com, 15 May). We know that the virus will severely restrict our movements. It was estimated that a third of the global population was in some or other form of government-sanctioned lockdown by end-April 2020
We also know that the economic and social costs of the COVID-19 pandemic will exceed anything the world has ever seen. By mid-May 2020 experts expected global monetary GDP losses of US$76,7 billion for the ‘best case’ pandemic scenario. Jobless claims in the United States had risen to 36 million coupled with a forecast of a 2,4% contraction in GDP for 2020. And South Africa’s National Treasury has warned of GDP contractions as severe as 16% for the year, with countless business insolvencies, and up to three million job losses.
Our actuaries tell us that the coronavirus could cause between 50000 deaths and 90000 deaths depending on its duration and infection rate; but the same actuaries warn that the economic impact of an extended lockdown could cause 29 times more deaths due to poverty, over the long term. We know that these estimates are based on actuarial modelling that considered the known knowns at the time they were run.
Things we know we do not know There is a long list of known unknowns. We know that the economy is going to take a massive hit; but we do not know whether this damage will result in a 6%, 10%, or 20% contraction in GDP. We know that thousands of jobs will be lost; but we do not know whether the final tally will be one, three, or seven million. And we know that we will eventually emerge from South Africa’s national lockdown; but we do not know whether this will be in July, August, September, or later. Finally, we know that government is operating according to some or other lockdown plan; but have no way of knowing what this plan hinges on.
The lack of transparency as to what informs government’s decisions through lockdown is causing consternation for individuals and business owners alike. Government is currently ruling by decree through its National Coronavirus Command Council (NCCC) that has refused to make reasons for its often arbitrary decisions known. Journalist Ferial Haffajee, writing for the Daily Maverick, describes the NCCC “as powerful, but also opaque: nobody knows who sits on it, how it works, how it accounts to Parliament, and how it has come to dictate such a large part of our lives”.
Precious little detail Citizens are forced to tune into the infrequent situation updates delivered by a tired-looking President who imparts few facts. Countless commentators and political opposition leaders have dismissed President Cyril Ramaphosa’s latest feedback on the crisis, delivered 13 May, as “saying very little” despite its 35-minute delivery. “Essentially, he doubled down on what has been a tragically flawed approach that has wreaked catastrophic, unnecessary, and possibly irreparable damage to our country,” said John Steenhuisen, leader of the Democratic Alliance, in a 14 May statement. The official opposition repeated its call for the national lockdown to end swiftly.
In an article published on politicsweb.co.za, 14 May 2020, Imraan Valodia et al, highlighted two areas of COVID19 uncertainty: “The first is that it is too early to establish the effect of COVID-19 on people living with HIV [and the second is that] SA is not achieving the testing levels or reporting speeds required to contain the spread through diagnosis and contact tracing,” they write. They reiterated various points that have emerged from global experience with COVID-19, including that it is impossible to eliminate the virus; that approximately 70% of people infected with SARS-CoV-2 are asymptomatic or have a moderate, self-limiting illness; and that lockdown will delay rather than reduce the number of infections.
Things we do not know we do not know Our unknown unknowns stem from the measure of irrationality that infuses the lockdown regulations issued under South Africa’s State of Disaster Act. The decision to enforce bans on alcohol and tobacco, for example, are based more on the respective minister’s personal views on consumption of such items than any empirical evidence.
Other decisions that have been widely criticised include calling for social distancing while forcing citizens to stand in snaking queues for food aid and social grant collections; implementing a three-hour window for exercise; restricting the sale of e-commerce goods; and imposing a curfew between 8pm and 5am. The cherry on top was the ludicrous list of clothing items that consumers could buy during Level 4 of our coronavirus alert. A headline published on Bloomberg.com says it all: “Bizarre clothing rules for lockdown baffle South Africans”.
Time to chuck your Planning 101 textbooks The coronavirus has introduced a pandemic of uncertainty, making it difficult for business owners and individuals to plan for their respective futures. How does a business complete its budget and cash flow forecasts when it has no idea when it can reopen its doors; what, if any of its goods, it will be allowed to sell; and whether and when it will be able to resume cross-border travel. What certainty can a small business owner offer his or her staff when the extent of government’s financial support is ‘up in the air’ due to uncertainty over the allocation of these funds, including on race-based (transformative) criteria.
Individuals are equally restricted. It is impossible to make decisions about career paths; future job opportunities; study; or travel, when you are sitting in Level 4 lockdown with no idea when, or if, Level 3 and beyond are ever reached. A business or life plan is built on various knowns; with allowances for known unknowns; and some room to accommodate the unknown unknowns. But there is no guide that explains how to build that plan entirely on unknows. What needs to happen is clear. “The secretive, force-based, centrally-controlled lockdown should immediately be replaced with a transparent, trust-based approach that puts more decision-making power in peoples’ hands,” concluded Steenhuisen.