America is entering the coronavirus J-curve. This means we are going to see rising levels of anxiety, fear, and even panic. Unfortunately, there is no way around this: You can’t sidestep a J-curve. Once you’re in one, you can only get through it.
J-curve theory has applications in fields like economics, geopolitics, and venture capital. The basic message of the J-curve is that “sometimes, things have to get worse before they get better.”
- In economics, the J-curve applies to currency devaluation and trade deficits. If a country devalues its currency to make exports more competitive, the trade deficit will “get worse before it gets better” due to rising prices for imports.
- In geopolitics, the J-curve applies to the relative stability of dictatorships versus democracies. Dictatorships are stable but rigid, while democracies are stable and flexible. For a country to switch from dictatorship to democracy — an obvious improvement — it first has to endure high instability (chaos and possibly bloodshed) before the improvements of democracy take hold.
- In venture capital, the J-curve represents the idea that, to make a company profitable or turn a company around, the financials often have to get worse before the total picture improves.
The reason they call it J-curve theory is because this worse-then-better transition looks like a capital J tilted on its side (as you will see in the chart below). The round part of the J is where things are at their worst, before rising to a better state than before.
With a little bit of adjustment, J-curve theory can apply to the coronavirus outbreak — or any public health crisis for that matter — via the sharing of public knowledge and the psychological response of crowds.
In the initial stage of a public health crisis — like the outbreak that is overtaking the country as you read this — the public is complacent but uninformed.
At this stage, the general population is broadly unaware of basic facts like:
- How many cases there actually are
- How fast the virus is spreading
- How serious the symptoms are
- What type of measures the government will take
- What type of headlines they are likely to see
This uninformed period is represented by step one in the chart. It is the “calm before the storm,” born of complacency and a lack of general awareness as to what is actually happening.
In order to contain the coronavirus — and ultimately to beat it — the level of public knowledge will have to rise. But as public knowledge rises, so does the potential for anxiety, fear, and panic.
Take the total number of coronavirus cases in the United States, for example. As of this writing, the Johns Hopkins University Global Cases dashboard is showing just 177 cases in the United States.
And yet, based on reporting from Washington state alone, we know that number is wildly wrong. The low number of reported cases is due to a lack of testing, and the true number of cases is almost certainly in the thousands by now.
The U.S. government has ordered a rush on coronavirus test kit rollouts. If things go according to plan, more than a million Americans will have access to test kits in the coming weeks.
What this means in terms of public knowledge, however, is that the number of confirmed cases will explode. That will increase overall levels of anxiety, fear, and even panic in the general public.
When dealing with a public health crisis, a rule of thumb is that the authorities should be as open and transparent as possible. That is because of the way the J-curve works.
If important information about a public health crisis is hidden, suppressed, or played down, it eventually comes out anyway. And if it comes out as a surprise, the instability trough of the J-curve (see point 2 on the chart above) is made that much worse.
As you read this, the flow of news around the coronavirus is at or near a tipping-point threshold. On the complacency side of this threshold, the news can be shrugged off or ignored. On the other side, there is greater potential for severe anxiety (or even panic).
To cite a few quick examples, the governor of California has declared a state of emergency over the first state-related coronavirus death; the governor of New York has said fighting the coronavirus is “like trying to stop air”; and Washington state is shutting down schools.
When anxiety, fear, and even panic bubble up in the trough of the J-curve, it usually isn’t the fault of news organizations or sensationalism on the part of the media. It is simply the reality of facts on the ground as the public attempts to process them.
Consider the very real possibility, for example, that American cities will experience a shortage of hospital beds and ventilators in the near-to-medium term venture. If this happens, and there is a significant probability it will, the public will have to be alerted. That will move things further down the J-curve.
The good news is that the coronavirus appears containable; with sufficient response measures and logistical muscle, we can stop it. Countries like Singapore appear to have slowed down the virus dramatically, if not halted its spread completely, and countries like South Korea have significantly lowered the coronavirus fatality rate by testing everyone in sight.
The problem, though, is that the serious measures required to contain and minimize the coronavirus are likely to stir up panic by default. Emergency actions, necessary to get us through the crisis in a responsible manner, will push us through the J-curve trough before making it to the other side.
The J-curve also explains why the coronavirus is such a threat to economic activity, consumer spending revenue, and businesses large and small. It isn’t so much the logistical impact of the virus itself, but the psychological impact of moving through the J-curve.
The message of the J-curve is ultimately positive. Getting all the way through — to point 3 on the chart as shown — means arriving in a better place. It is possible to have more stability than before, and more calm than before, having worked through the worst of the issue.
But when it comes to the coronavirus, our trials have only begun. That means bracing for an explosion of confirmed cases (as testing ramps up), a sharp elevation in the death toll, and the possibility of hospital bed and ventilator shortages (not to mention public venue shutdowns and mass quarantines).
When dealing with a J-curve, an old phrase to remember is, “Hope for the best, but prepare for the worst.” As we enter the trough of the curve, it’s better to be calm and overly prepared than suddenly surprised and panicked.