Don’t underestimate the economic effects of the coronavirus outbreak

February 21, 2020, 10:11 AM UTC

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Good morning.

Financial markets are down at the moment on news that the coronavirus is continuing its spread. But for the most part, markets have been laid back about the virus, for reasons Neil Irwin of the New York Times analyzes smartly here.

When it comes to all things health-related, my go-to expert is Fortune editor-in-chief Clifton Leaf, who wrote this for yesterday’s Brainstorm Health newsletter:

“While it’s possible that the outbreak can be brought under control in the coming weeks or months, the concern among many experts is that things will get far worse before they get better. There are three reasons.

“Call the first naïveté: Humans seem to have no or little existing immunity to this novel strain of coronavirus. Second is pathogenicity: The virus has the ability to replicate efficiently in our bodies and can cause death or at least serious illness in many. And third is transmissibility: The microbe appears to pass easily from human to human. These are the textbook conditions for a pandemic.

That’s reason enough to stay concerned. Cliff quotes GAVI CEO Seth Berkley, a certified expert on such things, saying: “Is this the big one, or not?…Who the hell knows? But if this is not the big one, it’s a very expensive and severe dress rehearsal for the big one.” Either way, I’m guessing the economic effects will be bigger than the liquidity-soaked markets currently suspect.

In the meantime, since it’s Friday, some feedback:

My Wednesday post on companies chasing Robotic Process Automation rather than doing more creative A.I. projects generated some interesting responses:

S.F. said that while my post was accurate, it was too negative on RPA. “RPA has been a fantastic starting point to get (companies) thinking about automation more broadly and how to improve their business with software.” Jumping headlong into A.I., he said, is only useful if the company “has a way for that AI insight to ‘act’ on the organization. Otherwise, it is just an interesting report or piece of information.”

G.M. also cautioned against trying to do too much A.I. too quickly. “Billions are being spent on irrational ideas…Companies need to take a deep breath and think before they spend the company’s money.”

But J.R. agreed with me that automation needs to be focused on creating value for customers. “If customers are not integral to your continuous improvement or innovation program, then your continuous improvement or innovation program isn’t integral to your organization.”

More news below.

Alan Murray


Morgan Stanley

Morgan Stanley (shares down 4.6%) is to pay $13 billion for E*Trade (shares up 21.8%) in the biggest takeover by a U.S. banking giant since the dark days of 2008. E*Trade CEO Michael Pizzi comes along with the deal, which will beef up Morgan Stanley's wealth-management arm as it takes on the merging Charles Schwab and TD Ameritrade. Wall Street Journal

Wexner out

It's official: L Brands is selling a controlling stake in Victoria's Secret to private equity firm Sycamore Partners, and Les Wexner is stepping down as chairman and CEO. The longest-serving CEO of any S&P 500 company, Wexner will retain the title of chairman emeritus. Stepping into the CEO spot is Andrew Meslow, who currently heads up L Brands' Bath & Body Works chain. Fortune

Samsung chairman

Samsung Electronics has a new board chair in the shape of Park Jae-wan, South Korea's former finance minister, who was already a non-executive director at the troubled giant. Park's predecessor, Lee Sang-hoon, belatedly quit last week after having been sentenced to 18 months in jail back in December, for sabotaging labor union activities. Park was, notably, also South Korea's labor minister before he took the finance role. ZDNet

Tesla Germany

Environmentalists have lost a court battle to stop the clearing of a patch of forest near Berlin for Tesla's first European "Gigafactory". A court originally granted the campaigners a temporary injunction while it considered the matter, but yesterday it decided the clearing could go ahead. Tesla still hasn't received planning permission for the plant, though. CNBC


Climate emergency

"We cannot rule out catastrophic outcomes where human life as we know it is threatened," write a pair of economists in a new, non-public report seen by the BBC and environmental campaigner Rupert Read, who tweeted that it also includes the sobering words: "Although precise predictions are not possible, it is clear that the earth is on an unsustainable trajectory. Something will have to change at some point if the human race is going to survive." The report doesn't come from a group like Read's Extinction Rebellion; it was written by…a pair of J.P. Morgan economists, whose employer has been criticized for its fossil fuel investments. BBC

Huawei pressure

The U.S. is still badgering the U.K. to reverse its decision to allow Huawei limited access into its 5G networks. The top American cybersecurity official, Robert Strayer, warned that "if countries adopt untrustworthy vendors in 5G technology, it will jeopardize our ability to share information at the highest levels." White House (permanently-acting) Chief of Staff Mick Mulvaney also met with top U.K. officials Thursday, trying to apply pressure—apparently to no effect. BBC

Illegal likes

A Swiss federal court has ruled that merely liking and sharing defamatory posts on Facebook can amount to defamation in itself. The court yesterday upheld a lower-court ruling that fined someone for liking posts that—in the context of a squabble between animal-rights activists—accused someone of antisemitism.

Against T-Mobile-Sprint

Seven leading economists write for Fortune that the T-Mobile-Sprint merger should have been rejected, for a variety of reasons. They write: "This decision, to a large extent, disregards the interests of consumers. They will pay in the form of higher prices every month, while the testifying CEOs will celebrate the huge bounty they made off this transaction. The rest of us can take bets on how many years it will take for DISH to build its own network—if ever." Fortune

This edition of CEO Daily was edited by David Meyer.

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