Comment

Some worrying calculations on Covid-19

Exponential growth curves are hard to intuitively understand, but the Prime Minister needs to urgently get her head around compounding growth rates, because right now we have more Covid-19 cases than Italy had just a month ago. And Italy went from three known cases on Feb 15th to 9,172 on March 9th, writes Sam Morgan.

I’ve been following the Coronavirus intently since about mid-January.  

While I’m no disease expert, I am quite globally connected through the community health investments of my foundation, my global investing activities, and through my frequent overseas travel to Africa, India, Asia and Europe.  

My trip this month to Senegal, Liberia and Oxford was just cancelled because the SKOLL conference in Oxford has been cancelled. A prudent precaution given the UK now has 323 known cases, up from eight just a month ago.  

The Covid-19 virus interests me a lot. Not least because I have friends in Dubai, Japan, and New York who have had their kids sent home for at least a month. Help!

The first WHO situation report was on January 21st. It said a single case was identified in China on December 31, 2019 and that there were now 282 cases, of which 278 were in China. There were two cases in Thailand and one in Japan and one in South Korea.  

You read that right. On Jan 21st, South Korea and Japan each had one known case and China cases were growing at a rate of about 30 percent per day. Holy moly.

It’s now been 50 days and Situation Report #50 is just out. There are now 117 countries with infections, including New Zealand. There are 113,702 known cases and there have been 4012 deaths. Cases grew at about 13 percent per day over those 50 days. New Zealand now has five confirmed cases.  

In finance it is said, by Warren Buffet no less, that nobody intuitively understands the power of compounding growth rates.  

If a company like Xero, where I sat on the board for 10 years, grows at 60 percent per year for 10 years it becomes 110-times larger. We listed Xero at $1 per share in 2007 and it recently peaked at about $90 per share. That’s about 57 percent annualised compounding growth in the share price.

$100,000 in the bank earning 7 percent interest will double in about 10 years.  At present government bond rates of 1 percent, it will take about 70 years to double your money. When rates drop another 0.5 percent later this month, that will become about 140 years. 

Compounding percentage growth rates and exponential curves are just completely unintuitive. We’re seeing it confound people now with this virus.  But now we’re talking daily compounding growth percentages.

The coronavirus is currently doubling every five days or so. That’s a DAILY growth rate in the number of infected persons of about 14 percent.  In just 30 days, left unchecked at 14 percent daily compounding growth, it will grow by a factor of 64. Each infected person walking around will infect 64 new people each month.  

At this rate, New Zealand’s five Covid-19 cases might grow to 320 in 30 days and 20,480 in 60 days.  And this is a disease that results in 20 percent of those infected needing hospitalisation, many needing a breathing tube. Of those infected over the age of 80, 14.8 percent die. It is not the flu.

If this seems a bit hyperbolic, consider that Italy went from three known cases on Feb 15th to 9,172 on March 9th.  That’s what 23 days and a daily compounding growth rate of 32 percent can do. South Korea grew from 28 cases to 7,478 known cases in the same period, a daily growth rate of 27 precent. Iran went from zero reported cases to 7,161 in that period. China went from 278 initial reported cases to 46,550 just 23 days later – a daily compounding growth rate of 25 percent. The UK from 8 to 323 in a month – a 13 percent daily compounding growth rate.

Italy has now been entirely shut down. You are basically not allowed outside and Austria just shut the land border. We know that Covid-19 is in New Zealand. We actually have more cases than Italy did just a month ago.

The only effective strategy we have right now is social distancing for everyone and social isolation if you are infected. No hand shaking, no hugs, no mosh-pits.  We should be promoting that strategy now. 

We know people carry this disease and can be non-symptomatic for many days before they show signs of sickness – that’s partly why it spreads so quickly. Auckland airport continues to welcome travellers from Italy and Iran. We cannot possibly know of every case in New Zealand. We’re certainly not testing everyone.

Yesterday, Prime Minister Jacinda Ardern gave the go ahead for The Pasifika Festival and the national remembrance event for the mosque shootings in Christchurch on Sunday. I’m supposed to be going to WOMAD in New Plymouth to join an all night mosh-pit. There are artists from all over the world coming. Sadly, Ziggy Marley has cancelled.

The only effective strategy we have right now is social distancing for everyone and social isolation if you are infected. No hand shaking, no hugs, no mosh-pits. We should be promoting that strategy now. 

This strategy is critical because health systems need to “flatten the curve”. They can’t cope if too many people get sick all at once. In Italy, they’re out of beds and breathing tubes and reports tell us they’re being forced to let people die. By getting everyone to stay home they’re trying to flatten the curve so they can save lives.

The infections that happen this weekend and the infections that come from those infections are all on her because these risks are both obvious and easily mitigated.

What is the likelihood of us seeing infections at the events this weekend?  What is an acceptable level of risk given our five infections could become 10,000 in just two months, threatening to overwhelm our health system and kill one in every seven old people?

Our Prime Minister must think we’re much smarter than Italy, Japan, China, the UK and everyone else at pandemic control. In letting large gatherings, concerts and public events to go ahead she is ultimately exposing our loved ones and assuming a risk nobody can reasonably measure. We know an infected person attended the Tool concert at Spark Arena on Feb 28th. He’s now in isolation, so hopefully he won’t be at WOMAD.

Iranians are coming to New Zealand for the Christchurch event. The Pasifika event welcomes families living in multi-family living situations who can’t easily self-isolate. Mosh-pits are hotbeds of involuntary fluid swapping.

Ardern has made the wrong call on this one. I’m not happy that she is increasing the risks to the older folks in my life. I urge her to get her head around the wonder of compounding growth rates.

The infections that happen this weekend, and the infections that come from those infections, will be the direct result of risks that were both obvious and easily mitigated.

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