2020 has most definitely been a depressing year for the overwhelming majority of individuals, with political leaders and business owners for the most part not representing exceptions. However, “for the most part” is the operative term because time and time again, there are so-called antifragile businesses as Nassim Taleb calls them or in other words, businesses that gain from disorder in one way or another. As strange as it may seem, the exact same principle applies on an even larger scale to countries themselves, even if realities are far more nuanced than in the business world, with casualties being involved pretty much everywhere and leaders therefore being reluctant when it comes to using the term “winning” for obvious reasons.
The ChinaFund.com team, however, owes it to its readers to analyze developments in a brutally rational manner and as such, we firmly believe it is impossible to wrap your head around what has happened in 2020 without deploying level-headed thinking and an analytical framework which revolves to as low of a degree as possible on emotion.
As such, we will get right to it and, in no particular order, enumerate the various entities that have gained from disorder in 2020:
- Entities involved in the production and/or distribution of essential items, with prices skyrocketing when it comes to certain products, for example medical equipment, for obvious reasons. The attitude of authorities varied and opinions are mixed in such instances, with pro-interventionists believing the state needs to step in and set price caps and non-interventionists claiming that by doing that, governments would be discouraging creative entrepreneurs from stepping in and filling the supply void
- The companies behind the products and services which have become considerably more used due to the quarantine measures that have been implemented all over the world. As such, Netflix shares soared, as did stocks associated with remote communication services such as Zoom, in light of the fact that more and more individuals found themselves looking for solutions to a wide range of problems during their quarantine, from the need to be entertained (Netflix) to the need to work remotely (Zoom)
- Certain key players in which confidence has been placed with respect to finding a solution to the COVID-19 problem, anything from biotech companies that were and are working on vaccines and other options (antiviral drugs, symptom relievers, etc.) to tech companies that are working on various ingenious ways to tackle the crisis and avoid future calamities
- Investors and/or traders who were either short pretty much any asset other than safe haven ones (US Treasuries, for example) or long safe haven assets back in March. During times of extreme panic such as the COVID-19 episode, it should come as no surprise that a wide range of assets (risk-on assets, of course) become correlated, as market participants scrambled to generate liquidity by panic selling left and right
- Countries that have reacted in a swift and effective manner to the COVID-19 outbreak, for example South Korea or Singapore, and have made it clear that they represent administratively mature geopolitical players. A valid case could be made that China is also included in this category, with two important mentions however. On the one hand, that its initial response left a lot to be desired (minimizing the coronavirus threat and suppressing the free flow of information) and on the other hand, that it risks being “punished” by other nation due to the supply chain complexity reduction trend that has emerged as a result of the pandemic
As can be seen, there are definitely entities that can be considered “winners” from a strictly economic perspective. When it comes to other perspectives, that can no longer be stated because again, the COVID-19 pandemic resulted in a huge number of victims and as such, glorious words such as “victory” should be used sparsely in our view.
Furthermore, even from the previously mentioned economic perspective, the situation is trickier when it comes to some “winners” compared to others, with China yet again being in the proverbial spotlight in this respect. If we are to limit our analysis to the containment measure effectiveness dimension then, of course, China can be considered a clear winner in light of the fact that its draconian containment measures (with Wuhan being a textbook example to that effect) most definitely worked.
However, upon closer and longer-term-oriented analysis, it becomes abundantly clear that a just as compelling case can be made that in the mid to long-term, China might also end up being a loser on certain fronts. To be even more specific, a wide range of economic and geopolitical actors have been made aware of the fact, more so than in the past, that relying on Chinese exports excessively can lead to bottleneck situations precisely when the exact opposite would be needed. This became more than obvious with medical supplies, as Western sellers found themselves forced to face the reality that they were dependent on either importing the final product from China or at least on key components. Regardless, the end result was the same: a severe shortage crisis which resulted in apocalyptic images involving doctors who worked in some of the world’s most efficient medical systems (Northern Italy, New York and so on) that were forced to improvise in the absence of much-needed medical supplies.
As always, time will tell and this much is certain: while there have without a doubt been entities that have come out ahead in one way or another, the term “winners” is very risky to use in light of the fact that the moral dimension needs to be considered on the one hand and on the other hand, in light of the fact that as illustrated when analyzing China’s situation, today’s apparent winners risk being anything but if the COVID-19 crisis “contributes” to a perfect storm situation in the mid to long-term.