I recently came across this presentation on LinkedIn by Breakwater Strategy, a communications and strategy consulting firm. It’s an excellent piece of research and thinking that will be useful in the short term and interesting to revisit again a year from now:
The presentation details four plausible COVID-19 scenarios for the future world of early 2021. Whether or not any of these scenarios play out as described is less important. Instead, the key lesson we can learn is to think probabilistically about the future and consider how different kinds of future paths can impact ourselves, our families, our companies, and our countries.
See a summary of the report below:
Scenario Planning is a method that helps us overcome our biases by forcing us to imagine several plausible future states of the world in a systematic fashion.
Applying Scenario Thinking to plausible future states of the world involves asking probing questions about what has caused those future states to come about and what implications are for (y)our businesses, markets, and countries.
While you can sketch out a wide range of more or less plausible scenarios, Scenario Thinking asks us to identify 2 independent variables that are very important for the future and also very uncertain with regards to our ability to predict them.
Scenario Thinking is not an exercise in precise mathematical modeling with probabilities, but rather a structured approach to think through a few distinct possible futures and how we ought to react to new information as time passes, helping us overcome biases such as optimism bias.
The authors at Breakwater Strategy draw out four scenarios for the US (and the world) of 2021 as a result of COVID-19 based on two variables:
- The mortality rate
- The state of the economy
Leading to four different states:
- Infections and death far exceed current estimates
- Infections and death well below current estimates
- Prolonged economic recession/depression
- V-shaped economic recovery
Combined into four plausible scenarios as of January 2021:
- The invisible Enemy Wins (bad economy + high death rate)
- Resilient America (great economy + high death rate)
- Fractured America (bad economy + low death rate)
- We Win (great economy + low death rate)
The Invisible Enemy Wins
- Repeated shutdowns as new outbreaks emerge, economy not restarting.
- Uncertain whether there will be any drugs/vaccines for treatment in near future.
- Waves of bankruptcy, S&P 500 has fallen by 40% or more and very few signs of any near term recovery.
- Violence and civil unrest spread as people get an apocalyptic mindset.
- Increased bipartisan politics undermines the Presidency (whoever it turns out to be).
- National solidarity spreads like during WWII and the country comes together, but with great losses. A spirit of “fighting the virus” takes hold of people.
- People have adapted to the implications of COVID-19 and life under restrictions and continue working anyway. The economy starts growing again in Q4.
- COVID-19 becomes the new normal. Infections and death rates are high but vast (privacy reducing) test and trace measure are employed.
- Both political parties are using the state of the world as a means of “proving” their own political narratives, leading to more bipartisanship.
- Low death rate due to effective social distancing but the economy has been hit hard. Unemployment above 10% with a potential long term depression looming.
- No effective pharmaceutical treatments on the near-term horizon leading to further social distancing guidelines and closures.
- Public unrest as many people are unhappy with the harsh lock downs leading to further polarization across the country. Rural vs urban areas, local vs nation, democrat vs republicans.
- Low death rate due to effective social distancing with good pharmaceutical interventions now available. A gradual reopening of society is possible.
- Regular economic activity returns as people engage in travel, entertainment and shopping.
- Rapid economic recovery. Unemployment below 10% with a lot of companies able to rehire laid-off employees, in part due to successful stimulus efforts.
Things to consider for yourself, your company, or your country:
What events and trends are likely to occur across all four scenarios, and how can you prepare for that?
What outcomes are relevant to you? In what way till the various scenarios impact you or your company the most?
What early indicators of the various scenarios should you pay attention to the most?