Thread by @niravstoons

The #CoronaVirus or #Covid19 is a classic #BlackSwan event.

No one could see it coming. (Ok @BillGates did highlight risk of a pandemic - but realistically not many planned for this)

...

Such a chaotic event is catastrophic for those who are #Fragile,
A downturn for #Robust
Good for #Antifragile

(Channelling my inner NNT)

What is fragility?

As per @nntaleb checklist

- too much concentration of power (can’t talk back to authority with honest feedback)
- one trick pony (export one commodity)
- too much leverage (financial or over optimised supply chain)
- experience of previous crisis

This #Covid19 is a big big shock to countries, companies, and individuals.

Each one should check - are we fragile? Can this event be catastrophic for me?

As many have pointed out - Singapore seems Robust to Antifragile in this environment.

- transparency has ensure no coverups.
- economy has a few engines (tourism hurt a lot, oil and gas and shipping too. Finance a bit less)
Biotech and other industries catering to ASEAN ok

- it’s obviously unlevered or underlevered. Has enough funds to spend more (as it did in budget) and free treatment of #Covid19 encourages people to get tested.

Also has enough spare capacity in healthcare as it’s not over optimised.

- lastly due to experience of #SARS in 2003 it is well equipped for the crisis. It has already a DORSCON system and raised alert level to Orange.

Now companies - who planned for this with a #BCP site (Business Continuity Planning) post 9/11 and SARS - paid rent for 19 years in an alternative site.
That’s being used now.

Business which wasn’t tied into single supplier - over optimised are ok at the moment.

Also financial leverage in such times could be a killer blow. Large Maturity of debt coming up?
Would be tough to refinance.
Over leveraged and ratings are falling?
Need to raise equity - thats even tougher, and you would be forced to raise equity at lower valuation.

Anti Fragile are those, who have a lot of slack and flexibility, and instead of just #FireFighting - have a plan and respond in a nimble manner.
Might be great to win market share.
E.g. JP Morgan steered clear of Mortgage Backed CDOs on its balancesheet pre 2008, was worth it

Say a company X in the US, boosted its share price by borrowing a lot, and doing share buybacks. They bought shares when high, and not refinancing debt might be tough, so would have to issue new equity when market falls.
#Leverage cuts both ways.

Its competitor Y - who wasnt levered, can focus on its supply chain, push on marketing, has inventory on hand - so doesnt have to stop manufacturing ...
Can easily win market share in this environment.

This company Y is #AntiFragile - it gains due to a shock

Looking at countries - particularly fragile ones
- OPEC members heavily reliant on Oil Exports (#OneTrickPony)
- Overly indebted countries overly reliant on China's #BeltRoadInitiative - as China is focussed internally will be saddled with heavy debts and incomplete projects

- US has high financial leverage in corporates (boosted its stock with #buybacks and over optimised supply chain with little inventory)
- Chinese exporters - many things have hit it, with #TradeWar #Covid19 and falling demand globally

Unlikely winners
- Vietnam, Bangladesh, Indonesia and India

As companies want to add redundancy on their manufacturing supply chain - will have duplication of capacity (atleast 10-20%) sourced from another location.
Which place offers the best deal wins.

India has shot itself in the foot with an expensive #LandAcquisitionBill , delayed its #DedicatedFreightCorridor for railways, and not built enough #WaterTransport

While infra is being built, with bad labor laws as well, its not positioned to take over business easily.

But its just #Robust as not too reliant on China. (Yes Pharma and other products do rely on Chinese imports, but not over reliant. Almost no chinese tourists)
Also while its equity markets dependant on foreign investments, debt markets less so.

At an individual level - if this #Pandemic leads to a global recession, need to have liquid cash to support through a downturn.
Dont be overly leveraged either in consumption (A house or a car you can barely afford) and investments (buying stocks or bonds like #CoCo on margin)

Given the new information of the event risk - as Volatility has risen, its prudent to reduce leverage.

If you are already underlevered - this is time to be #Antifragile and wait till the bottom, and buy assets cheap.

I think this #Pandemic will stretch a lot of people to their limits, and in this time, hopefully all stay safe, and dont lose their cool.

How one responds to stress, thats the test of character and resilience.

Forgot to add - India, Indonesia and Bangladesh also in this scenario are more lucky than smart.
This particular virus doesnt survive or transmit in hot and humid climate.

Unlike Korea, Japan, Northern Italy, Iran - where they have cold and dry winter.

As aside - I wish all the luck, and hope good health on all. Hope all the infected cases recover and this is contained.

Just wanted to highlight the importance of being prepared for Contingency.

Also in the Chinese language - word for crisis is WeiJi (危机 pronounced - Wéijī)
It means Danger + Opportunity.

Opportunity is for those who can bypass the danger, and are prepared.

Also adding - for a company - are you too reliant on one customer or one supplier?
Is there transparency in decision making and information both from top to bottom and back?
Do you have a backup plan?

This is necessary since smooth operations in crisis leads to opportunity