current events

Flattening The Curve

covid1

We have worked to understand as best we can the coronavirus. There are a lot of aspects to it: the health and safety of our family and friends, public health considerations, economic and investment effects. All this, while sorting through information and misinformation of varying quality.

Which of these are true?

“Most people experience negligible symptoms, or those of a typical case of the flu” or “The virus can cause rapid respiratory failure and death”?

“People who have no other health problems and are below age 60 have little risk” or “It is important for everyone to do what they can to slow the spread of the virus”?

“The experience of other countries should comfort us” or “The experience of other countries should concern us”?

Get your mind wide open, because all of these things contain some truth. Those who are below age 60 and healthy will likely only get mild symptoms with a low risk of death. But healthy people can spread it to at-risk people.

Do you have an elderly neighbor? A young cousin with asthma? Relatives with diabetes or cardiac disease? Are you around people that have organ transplants? Or being treated for cancer? No matter what course the virus takes in the weeks and months ahead, some people with those conditions are probably going to be struggling to stay alive. Not all will survive.

To protect ourselves and others, it makes sense to do what we can to slow the rate of infection. If cases spike up rapidly, hospitals will be overwhlemed, with catastrophic effects on care. (This happened in parts of Italy.) If the rate of infection is more moderate, health facilities have a better chance to stay ahead of the curve. It makes a difference on the death rate.

The experts call this moderating effect of slower infection rates “flattening the curve.” It’s a good thing.

The extremes are not where we want to be: the virus is not going to kill us all, but neither is it a big hoax. Clients, if you would like to talk about this or anything else, please email or call.

Culture vs. Strategy

© Can Stock Photo / Cebas

Long ago, we conceived the notion that a well-grounded enterprise had values as the foundation. Principles arise from values, strategy builds on principles, and tactics align with strategy. So ultimately, everything you do every day has your values at the bottom of it.

Our initial thought was to get a nice graphic of this structure so we could explain it to clients more clearly. But the only way to truly convey values is to live them, day by day and year by year, and let others draw their own conclusions. So we dropped the idea of talking about them.

We were reminded of the structure recently, when an airline made a public relations disaster by dragging a bloodied customer off an overbooked plane. The next morning, the value of the airline dropped by more than half a billion dollars in the stock market. In the aftermath Tom Peters, the dean of business gurus, attributed the problem to the CEO for having a defective culture.

This prompted us to look up ‘organizational culture,’ a concept developed by MIT professor Edgar Schein in the 1980’s. His academic work parallels our old notion about values, with some differences in terminology.

Schein is credited with a business classic: “Culture eats strategy for breakfast.” So when we think about the airline, we know the strategy is to increase the ‘load factor’ or utilization rate because fuller planes make more profit. But that strategy is not grounded on any deeper value than short-term profit.

The airline we prefer to fly on is known for trying to get their customers where they are going in the most pleasant and efficient manner possible. That is their culture. The staff smiles a lot, and deals honestly and tactfully when any issue arises. Paradoxically, it is the only major airline operating in the US today that has never booked a quarterly loss.

The difference between the two airlines perhaps illustrates that culture eats strategy for breakfast. This is a useful lesson for us in selecting companies in which to invest, and for you, in choosing where to do business for any product or service. Clients, if you would like to talk about this or any other topic, please email or call us.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risk, including possible loss of principal.