3. Our Cognitive Biases in Action – I’ve written quite a bit in the past about how our minds are inaccurate and we form erroneous beliefs based on irrational feelings.

Coronavirus is interesting because people seem to default to either panic mode or denial. It’s either, “The world is ending!” or “What’s the big deal?”

The truth is, as usual, somewhere in the middle. Individually, most of us are not at much risk. Systemically, we are at great risk. It’s exactly these scenarios ... where there’s a large mismatch between individual and systemic risks ...

That’s because our minds default to view things through how they affect us, not how they affect the country, the community, or the world. We have cognitive weaknesses when it comes to stuff like that—and no, I don’t just mean being bad at math. For example:

We all tend to think linearly, not exponentially – Paul Graham had an excellent tweet about this where he said, “People aren’t surprised when I tell them there are 13,000 Covid-19 cases outside China, or when I tell them this number doubles every 3 days. But when I tell them that if growth continues at this rate, we’ll have 1.7 million cases in 3 weeks, they’re astonished.”
The economist Tyler Cowen pointed out that the people most alarmed about coronavirus seem to be people accustomed to thinking exponentially—people in tech, finance, and science. People who seem to think this is a bunch of crybabies crying about crybaby things are used to thinking about problems linearly.

We tend to focus on first-order effects, not second- or third-order effects – If I wreck my car, I’m most likely to be upset about my wrecked car (first-order effect), not how I’m going to pick up my kids from school each day or how higher insurance premiums will affect my monthly budget (second-order effects), even though the second- and third-order effects will have a bigger impact on my life than the damaged car.

Much of the analysis I’ve seen on coronavirus stops at the first-order effects. “Stay healthy, wash your hands, you’re going to be fine.” Hell, that was basically my analysis a few weeks ago.

But the second and third-order effects of this could potentially be quite large.

...one example: the US healthcare system is utterly broken. Roughly 60% of Americans can’t afford to pay for an unexpected emergency and 10% of Americans don’t have health insurance at all. Medicare (which insures old people) is already on shaky financial ground. 20 million extra people hitting the hospitals over the next year could cause a different type of epidemic: bankruptcies.

Another potential second-order effect: de-globalization. Quarantines and broken supply chains will force countries to adapt by reinvesting resources within their own borders, cutting off trade ties, making them more skeptical of travelers and business relationships and causing all sorts of shifts in the political zeitgeist.

Another one: coronavirus is most dangerous to the elderly. And the elderly vote more than anybody else and tend to be the most politically conservative demographic. The United States, South Korea, Greece, and Poland are just some of the countries with major elections this year. With 10-20% of the elderly population unable to vote, that could shift electoral results in many places.

Another one! Western countries and Japan are generally older populations. They have more old people than young. The Middle East and Africa are incredibly young countries. Some countries will come out of this far more unscathed than others simply due to their age demographics. That means lower health care costs, smaller losses in productivity, less fear and panic in markets, etc.

I’m not saying these things will happen. I’m just saying these are some of the things that aren’t immediately obvious that we could be thinking about.

We tend to focus on one-off solutions, rather refining daily habits – And finally, as I’ve written before, we are biased towards single, big changes in behavior to accomplish something rather than accumulating many small, regular changes that create bigger benefits. For example, wearing a mask is almost useless. Whereas eating a healthy diet of fruits and vegetables and taking vitamins C and D regularly will boost your immune system immensely. Honestly, the single best thing you can do right now to protect yourself from coronavirus is all the same shit you should have been doing anyway: eat well, drink less, smoke not at all. And yes, wash your goddamn hands.
I’m sorry if this feels all doom and gloom.

Here are a few useful things to remember:

First, things like this are the norm throughout human history, not the exception. We’ve been spoiled lately in the disease department. We’ll make it through it. We always do.

Second, I know we call them economic “crises” but really, economic contractions are normal and healthy things for an economy. It’s where we cull the dead weight and sort out which businesses are actually creating value for society and which ones are just leeching off the rest of us. Or as Warren Buffett puts it, “Only when the tide goes out do you discover who’s been swimming naked.”

And finally, we don’t know what we don’t know. There could be a miraculous vaccine discovery next month. Warm weather might eradicate much of this thing by summer. It might randomly mutate and become less lethal. The stress of this might force our healthcare systems to become more robust and cost-effective. The quarantines might change work-life culture across the world. Emissions might drop. Cybersex might make a roaring comeback. Who the fuck knows?

But if you look throughout history, the biggest and most necessary changes typically come in the wake of crises, much like our most important personal changes often come in the wake of our traumas. There’s always growth in pain. And there’s always opportunity for creation in destruction.

So stay safe. Stay clean. Stay home as much as you can. And… stay away from grandma for a while.