By Property Soul (guest contributor)
Survival of the fittest is a Darwinian evolutionary theory that believes through natural selection the weak die, leaving only the strongest to continue living and reproducing.
With coronavirus lingering for over two months, we’ve learned that this disease is unbiased during infection but discriminatory in fatality. We all have equal chances of getting it. But patients who are obese, smokers, the elderly, or suffering from chronic illnesses, including diabetes, hypertension, heart disease, and high cholesterol, have a much higher death rate than those who are not.
We should have all listened to the advice of Health Promotion Board to reduce sugar intake, eat more fruit and vegetables, be active and take the stairs instead of the elevator. Just like what our parents told us: All kids fall sick. But the weak and naughty ones will surely catch a cold.
Similarly, a financial crisis impacts every single one of us indiscriminately. However, every economic downturn or recession tends to punish much more heavily those who are financially weak or ill-prepared for the unexpected.
Save those who can be saved first
Survival of the fittest is the philosophy behind British Prime Minister Boris Johnson’s original coronavirus strategy of “herd immunity”: After a high percentage of the population has been infected, recovered and become immune to the virus, it will naturally protect the rest who don’t have the immunity.
He knows very well that the country’s medical facilities will be overwhelmed treating all the infected patients. That’s why he encouraged patients to stay home and recover on their own instead of rushing to the hospitals, then wait for the strong ones to get well and come back stronger.
He is simply applying what Nassim Nicholas Taleb said in his book Antifragile: Things That Gain From Disorder: What does not kill me kills others.
What did not kill me did not make me stronger, but spared me because I am stronger than others; but it killed others and the average population is now stronger because the weak are gone.
In Spain, as the death toll of coronavirus surged, there was a serious shortage of protective gear, test kits, ventilators, and hospital beds. The doctors were facing difficult decisions on which patients to let go. A doctor at the intensive care ward revealed that they were choosing younger patients over the older ones because the former has a higher chance of survival. In some nursing homes, staff had no choice but to leave infected residents to their fate.
In Belgium, the hospitals didn’t have enough ventilators for everyone. A 90-year-old infected grandma volunteered to give up her ventilator for a younger patient. She died two days later.
In the event of a large-scale calamity, under the restrictions of limited time and scarcity of resources, how do we decide who to save first? We can’t save everyone. We can only pick those who are stronger and have a higher possibility to survive. On normal days, we protect the vulnerable. In an emergency, we save those who can be saved.
We can’t save everyone in a crisis. Some of us have to sacrifice so that others can survive.
This brings us to the second point in Taleb’s book: What kills makes others stronger. Those who perish contribute to the overall safety of others. Those who die in accidents prompt the authority to improve safety standards. Those who have been cheated in scams help to alert others. Those who lose money during the financial market crash remind others of the risk of investment. They fail for others to succeed.
Saving those hit by the coronavirus crisis
During these difficult times, different parties hit by coronavirus are urging the government to give them a helping hand. Almost everyone is impacted by the gloomy economy in certain ways. How do we decide who deserves to be saved first? And how many rounds can we afford to help them?
Should we help individuals, business owners or selected industries? Should we support government-linked companies or SMEs first? Should we protect the employees from the loss of jobs, or ensure the survival of the corporations? Mind you, employers and employees have different priorities which are conflicting at times.
Some individuals, companies and industries may have financial difficulties even before the onset coronavirus. Should we protect the most vulnerable, save the dying ones, or focus our resources on those with a higher chance to pull through after the government’s help?
Taleb may have the answer.
Without the strong cashflow of national carriers, Virgin Atlantic is now badly hit by the pandemic. The airline’s owner Richard Branson has approached the UK government and the Rothschild investment banks for a bailout amounting to hundreds of millions of pounds.
Taleb singled out Virgin Atlantic as “least deserving’ for a state-sponsored bailout in the aviation industry. He accused Branson of using taxpayers’ money to cover fixed costs while putting all staff on unpaid leave. Besides, Branson lives in the British Virgin Islands and pays no taxes to the UK government all the while. He urged the UK government to let the airline go bankrupt: “Let him go bust. Planes will fly with new owners!”
When a company asks the government or the public for help, let’s ask ourselves the following questions:
1) Where will the company make use of the taxpayers’ money: to save jobs and help customers (or tenants), or to cover imminent expenses and debts in order to make the next quarterly result look better?
2) What is the financial situation of the company before the coronavirus outbreak: profitable with healthy financial standing all these years, or struggling with huge losses for years?
3) What is the past growth strategy of the company: growing the business step-by-step conservatively, or over-expanding and buying market share everywhere aggressively?
4) Where did the money go during the profitable times: all go into the pockets of the founders and top management; or return to shareholders and re-invest in the business?
The survival of the fittest
The success of a business or a company is not measured by how well it does when times are good, but how it performs when times are bad.
Business owners are always juggling the options between “big” and “long”. You can grow your business and make it “big” during the good times. But can you preserve your business and make it last “long” during the bad times? Are you expanding too much and too fast? Do you have enough cash reserves for unpredictable events like coronavirus that can last one to two years?
I like what Andrew Grove (founder and former CEO of Intel) chose for the title of his book: Only The Paranoid Survive.
Think property developers that bid and acquired land sites at record-high prices during 2017 and 2018, or those who are fed on cheap money from the banks and keep issuing debts for expansion, how well can they pull through this crisis?
You may be a top property agent when the market is doing well. Have you built up your reputation and network of loyal customers so that you can survive the bad days with referrals on sales and rental deals?
Moody’s just downgraded the outlook for Singapore’s banking sector from stable to negative. All our three local banks are heavily vested in the property sector. With total exposure of close to 50 percent when combining lending for housing loans and building and construction industries, can they remain profitable during the bad times?
The same goes for property investment. As John Templeton said, the most successful investors are defined by their actions in a bear market, not a bull market.
When property prices are going up, you can buy any property in the market and make a profit. You can give yourself a pat on the back and boast about the money you make. But when the property market is distressed, do you have the holding power to survive a prolonged downturn like the one from 2002 to 2006? Can you bear the opportunity cost when things are finally cheap but your money is being stuck elsewhere?
Buying properties is like sailing in the open waters. When the wind and waves are in your favor, it doesn’t matter what you buy, everyone makes money. It is such a no-brainer that it is almost impossible to lose money when you buy a property and sell it when prices are on the way up.
The trend is your friend, until it stabs you in the back.
Once the wind changes direction, you try your best to stay afloat when in fact you can’t even control where the waves will carry you to.”
– “How far can pigs fly?”, PropertySoul.com
What doesn’t kill us makes us stronger
It is always a dilemma whether we want the authority to offer its helping hand. When the Federal Reserve cut rates to zero and launched a quantitative easing of $700 billion on March 15, the next day the fear of a deep recession brought the Dow to its worst-ever loss.
Whenever a government comes out to announce a support package, the people know that things are not looking good. Likewise, whenever the government waives a home purchase restriction or introduces stimulus measures, we know the property market is in very bad shape.
The Straits Times Index has fallen 31 percent from a high of 3,231 in February to 2,233 on March 23. During the last financial crisis, the Singapore index plunged 60 percent from peak to bottom. For a long time, the stock market is going to repeat the pattern of one step forward two steps back until it finally reaches the bottom.
According to the flash data released by URA, prices of private residential properties dropped 1.2 percent in the first quarter of this year. In fact, the Q1 data is only reflecting the weakness of the property market in Q3 and Q4 last year. It is because home sellers need at least a few months to find a buyer and another two to three weeks to exercise the option and lodge a caveat. The actual picture of the decline in home prices caused by coronavirus will only be reflected in the data two quarters later.
This is just the start. Things will get much worse before they get better. The market will be showing us a much worse set of data quarter after quarter before it can finally show us some encouraging numbers again.
During these frustrating and depressing times, we have every reason to say the “F” word. Feel free to say it aloud after me: Face it. Fix it. Find help. There is always a silver lining behind every dark cloud.
We are not born to be strong. We grow stronger going through every challenge, crisis, hardship, failure, defeat and downfall. We pick ourselves up and get up from where we fall. We learn our lessons, refine our strategies and fight till the end. After we ride through the storm, we become a better person. Then we can proudly prove to the world that it is survival of the fittest.
By guest contributor Property Soul, a successful property investor, blogger, and author of the No B.S. Guide to Property Investment.