Batten down. We could be dealing with this all year

March 16, 2020, 10:13 AM UTC

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Good morning.

A good friend wrote over the weekend that he would like to see “more optimism” in CEO Daily. What he misses is that I am being optimistic. I have great confidence that governors, mayors, sports executives, concert producers, ski resort owners, and even, after a few false starts, the federal government, are doing the right thing. The American people will make the necessary sacrifices to reduce the human toll of this virus.

But what does that mean for the economy? Take a look at the model that Nicholas Kristoff wrote about over the weekend, here. The “social distancing” policies being enacted can “flatten the curve.” That reduces strain on the health care system, and ultimately saves lives. But it also prolongs the need for “social distancing,” since the virus will take longer to reach its natural peak and dissipate, after a sizable segment of the population—experts say 30% to 70%—has been infected. Under the model Kristoff is using, under the best scenario, we will be playing social distancing games into 2021—which of course will extend the economic impact. This is exactly what China is dealing with now. The Chinese have effectively slowed the spread of the virus; but they don’t know how to reignite their economy without reigniting the virus as well.

There is, of course, the oft-cited hope that warm weather will curb the virus. But the most knowledgeable experts—Tom Frieden and Michael Osterholm top my hit list—say that’s only a hope, not a known fact. And even if it does recede for the summer, it could come roaring back in the fall, as the 1918 Spanish flu did and as we witnessed with the H1N1 influenza pandemic in 2009. So batten down. There’s a decent chance we will be dealing with this all year. That’s why former Treasury Secretary Lawrence Summers said yesterday the coming recession could be as bad as in 2008.

By the way, here’s one problem that needs to be addressed urgently. In order for optimistic scenarios to come true, sick people should aggressively self-quarantine. But assuming that they can get tested and determine if their illness is from Covid-19, what if they can’t afford to? A report out last week from my former colleagues at the Pew Research Center finds 24% of U.S. civilian workers—or roughly 33.6 million Americans—don’t have paid sick leave. That should be priority number one for government and business. Walmart and Uber are moving in the right direction; McDonalds, Subway and others need to do the same. (By the way, that doesn’t even address the strain put on parents when their children are not in school.)

Separately, big business has moved into the lead position in the U.S. in responding to the climate crisis. I’ve written here about the efforts of Microsoft, Starbucks, and others. But how far can business go, and how big a difference will it make? That’s the issue Fortune explores in a package of stories in its April issue, available to subscribers online this morning here. This is the kind of deeply reported dive that only Fortune can do, and it deserves your support. Please subscribe, and read. It pays to know.

More news below.

Alan Murray


The markets

Today will not be pretty. The Fed may have cut its benchmark interest rate to almost nothing yesterday, while also pumping $700 billion into the economy, but central-bank action is not impressing the markets. Asia was a sea of red today, with the Nikkei 225 down 2.5%, the Hang Seng down 4%, and the ASX 200 down 9.7% (that's down around 30% from its recent peak). Europe then rose and did not shine with a roughly 9% plunge in the Stoxx 600, only a bit of which has been recovered at the time of writing. U.S. futures are around where you'd expect them to be in this context. New York Times

European borders

The European plunge is likely related to the fact that borders are slamming shut between the bloc's member states—the EU isn't quite like the U.S. in that it's not a united country, but it largely operates like one, so this is roughly analogous to American states sealing themselves off. Germany is the latest, partly closing its borders with France, Switzerland, Austria, Denmark and Luxembourg; no need to do the same with its Polish and Czech borders, as those countries have already shut them down. BBC

Universal CEO

Following the news last week of BT CEO Philip Jansen's coronavirus infection, another major chief executive has come down with the bug: Universal Music Group's Lucian Grange, who has been hospitalized—and who reportedly partied with Apple's Tim Cook and Eddy Cue a couple weeks back. Bloomberg

British Airways

British Airways owner International Airlines Group is cutting its capacity by at least 75% during April and May, in line with the travel restrictions that are being erected everywhere. And IAG CEO Willie Walsh—who was supposed to be retiring as group CEO this month—will defer his handover to Iberia CEO Luis Gallego for a few months, again to deal with the crisis. Irish Times

Apple antitrust

The French antitrust authority today hit Apple with a $1.2 billion fine for putting illegal restrictions in its contracts with French wholesalers Tech Data and Ingram Micro, thus harming resellers. It is by far the heaviest fine ever implemented by the Autorité de la Concurrence. Reuters


Stores shut

Nike, Apple and Abercrombie & Fitch are among the latest retailers to announce massive temporary store closures in the U.S. and elsewhere, in response to the pandemic—all three of the companies will continue to pay their staff regardless. Fortune

Vaccine play

One of the most mind-blowing stories out there—and competition is strong these days—involves an apparent attempt by the White House to take over the German biotech CureVac, to create a coronavirus vaccine exclusively for the U.S. German politicians are outraged, as well they might be considering that the German government has partly funded CureVac's research. The company's investors are reported to have rebuffed Trump's offer, and CEO Dan Menichella, who told President Trump about the company's work, has abruptly left the company. Politico

Google screening

President Trump may have told the world that Google is building a website to help Americans get coronavirus testing ("It’s going to be very quickly done, unlike websites of the past") but actually that wasn't true—another Alphabet division called Verily has been working on "a tool to help triage individuals for Covid-19 testing" in the Bay Area only. The Verge

TikTok turns

The Chinese-operated short-video app TikTok will stop using China-based moderators for content from outside the country. The move appears intended to allay official concerns about TikTok's Chinese ties, given that the app has become extremely popular. Wall Street Journal

This edition of CEO Daily was edited by David Meyer.

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