Michael Lewis can “unravel complex subjects like few others.” And few topics are called more complex — or more tragic — than America’s response to the COVID-19 pandemic, the subject of his latest book, The premonition: a story of a pandemic.
At the heart of Lewis’s narrative is a central question: Why did the United States fail in its response?
Lewis’ response, which he detailed in a wide-ranging conversation with Silver PlanetIt is Mary Childs to recent Alpha Summit by CFA Instituteis surprising and provocative: “People have actually been tricked into creating the wrong response to the pandemic. »
To demonstrate what he means and draw lessons for the world of finance, Lewis focused on the Centers for Disease Control and Prevention (CDC), the US national public health agency, and the experience of the central character of his book: Dean of Charity, MD, an expert in communicable disease outbreaks and former deputy director of the California Department of Public Health. Dean was a key member of the leadership team leading the response to the COVID-19 outbreak.
“Gut Check” for the United States
The United States has fared poorly in terms of COVID-19 cases and deaths. As of this writing, the country has recorded more than 33 million cases and about 600,000 Americans have lost their lives, according to compiled data. speak New York Times. (A new study estimates that the number of COVID-19 related deaths in the country is much higher, at over 900,000.)
“We have 4% of the world’s population and we have 20% of the deaths,” Lewis said. “No matter how you cut it, no matter how you dress it, it’s not a good answer, it’s not a good result.”
America’s response to the pandemic is “really serious gut control” for the nation, he said, especially since the country ranked first among 195 nations on the Global Health Security Index 2019pandemic preparedness survey.
Was the US response to the pandemic doomed from the start? It certainly looks like that, according to Lewis.
Part of the problem was a decentralized approach to the fight against the pandemic. As Tanya Lewis pointed out for American Scientist“the structure of the US government meant that much of the response to the pandemic was left to state and local leaders. In the absence of a strong national strategy, states have implemented a patchwork of largely uncoordinated policies that have not effectively suppressed the spread of the virus.
For a response to be effective, it must be unified, said Michael Lewis.
“You can’t have one state doing one thing and another state doing another thing,” he said. “The lack of unification at the top probably doomed him from the start.”
And Lewis is pointing the finger directly at the CDC.
“We have a company called Centers for Disease Control that is actually not created to control disease,” he said. “It’s kind of harsh, but if you had asked the Centers for Disease Control to maximize disease in America from COVID-19, they might not have acted so differently than they did. “
The CDC and Incentives
The problems at the CDC stem from misaligned incentives, according to Lewis, because institutions like the CDC have become politicized.
To understand what he means, we have to turn the clock back to 1984.
At that time, Lewis explained, the CDC “was the gold standard of public health around the world,” run by career civil servants kept out of the political process.
This meant that the person at the helm could not be fired on a whim by the president and could focus on protecting public health.
But something changed: In the mid-1980s, many federal government jobs moved from permanent positions to presidential appointments. This changed the incentive structure. Now, instead of being hired from a general pool of qualified candidates without regard to politics, staff are selected from a smaller, politically motivated pool.
Perhaps the worst problem of all with politically appointed jobs, Lewis said, is the short time horizon:
“You’re signaling to the organization and the person taking the job that this leader isn’t here very long, they’re going to be there at best as long as the person in the White House is there, and in fact the average term of these political appointments is from 18 months to two years.
Short-term appointments equal short-term incentives.
“Who on the planet would say it’s a good idea to make the CEO someone everyone knows is going to be leaving in 18 months to two years?” Lewis asked. “You’re not going to fix long-term issues.”
Key point: avoid short-term incentive structures.
How to be a Charity Dean
While Lewis has only barbed words for the CDC, he finds a ray of hope in the form of Dean and a group of doctors called the Wolverines who had all worked in the White House at various times and stayed in touch due to their efforts to fight epidemics.
Dean was among a cohort of scientists and doctors who raised the alarm about the COVID-19 pandemic early on, but were largely ignored.
As Lewis recounts, Dean came out of a turbulent time in her life when she became a local public health worker in California. The story Dean insists on telling himself is critical and can be summed up in one word: bravery.
“The story is that she’s responsible, even if she isn’t, for everything that happened to her,” Lewis said. “She’s going to take on that responsibility and she’s going to insist on being brave even if it’s painful.”
Dean writes inspirational messages on post-its and sticks them all over his house to remind himself of the importance of being brave. One of his favorite lines is “Courage is muscle memory”.
Why is this important? What can others learn from his example?
If Lewis taught a “How to be a Dean of CharityOf course, he would start with the importance of the story we tell ourselves. “(Dean can) look in the mirror and look at all the ugly parts, all the parts that she disapproves of,” he said. “Rather than shove them under the rug, she consciously always holds herself to the highest standard.”
What this allows her to do is recognize that sometimes what holds her back is cowardice.
“Being aware when you give in to some kind of weakness becomes an art form,” Lewis said. “It becomes something that you develop muscle memory for and if I teach someone how to be her, I would say develop that muscle memory.”
Key Takeaway: “Courage is muscle memory.”
Probabilities vs Narratives
Risk is a topic that Lewis explores often in his books. No matter the character or the story, one element always strikes him: the disconnect between people who manage risk well and the rest of society.
“You would think markets would be more efficient,” Lewis said.
To illustrate his point, Lewis pointed to baseball, a game he covered in his classic silver ball. Baseball has been played pretty much the same way for about 100 years and players do their job in front of millions of people and have stats attached to their every move.
“You can assess the risk of baseball players, and you could have done that a long time ago,” he said. “The fact that nobody did it until the Oakland Aces came to see some ready-made stuff that was written by Bill James and started thinking about it, that tells you there’s something in the human brain which is very slow to think in the terms it needs to think intelligently about risk.
The main idea that Israeli psychologists Daniel Kahneman and Amos Tversky had about risk, which Lewis examines in The cancellation plan, is that people are “not probabilistic machines”. So what happens most of the time is that instead of calculating probabilities, people make decisions based on stories.
And that observation can be applied to the COVID-19 calamity in the United States, Lewis said.
The narrative was that “America is the richest and most prepared country on the planet,” he said. “We have this place called the Centers for Disease Control. They will take care of it.
The problem with this approach, according to Lewis, is that almost no one besides Dean and the Wolverines was thinking in probabilistic terms.
“It’s one of the big ideas,” he said. “Even people whose job it is to manage risk on some level – and everyone manages risk in their life – don’t think in hard, cold analytical ways. They think in other ways that skew their judgement.
Remember: When assessing risk, calculate probabilities. Don’t trust stories.
Finance as a force for good
While finance can have a positive influence on the world, Lewis believes the reality is not that simple.
The financial sector has been very successful in preserving its profitability, he explained. So when innovation arrives and threatens that profitability, innovation has a harder time gaining traction than it would outside the financial sector.
“(Finance is) a very important part of economics,” Lewis said. “But the forces of good within are struggling to make their voices heard.”
When finance is at its best, it’s usually pretty boring, he says.
As for young professionals embarking on a career in finance who want to be a force for good, Lewis had this to say, “Remember who you are now, because you would never imagine yourself doing things what you could be doing three years from now when there’s a lot of money at stake.
And in the future, when you find yourself in a “zero-sum moment”, having to choose between doing something that is in your financial interest but not in the best interest of your client, don’t be seduced by the money.
For those already established in the investment industry, Lewis’ advice was simple: Control your spending.
“Live a modest enough life that if it all goes away it’s not a disaster, so you’re not in a position where you have to make those bad decisions.”
Key Takeaway: Remember your fiduciary duty and live modestly.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect the views of the CFA Institute or the author’s employer.
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