Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Category: Economics

  • Bill Gates on the first modern pandemic

    https://twitter.com/donnelly_b/status/1252086026887192576?s=20

    After watching the docuseries, Inside Bill’s Brain, I couldn’t help but think that the work he and Melinda are doing isn’t getting nearly enough exposure. Here they are working tirelessly to eradicate global diseases, like polio, and find new ways to combat climate change. And yet relatively little was done after Bill went on stage five years ago and warned us that a global pandemic could strike at any time. Why? Probably because most of us thought it wouldn’t happen to us in the developed world.

    But obviously it did happen and along with that Bill has emerged as a level-headed voice of reason. He is calm, serious, and matter of fact about what we know, what we don’t know, and what is going to need to happen for us to make it to the other side of this. In his latest long-form blog post (which is also available for download as a PDF), he calls our current situation “the first modern pandemic”, as well as Pandemic I. That should signal to you that he continues to believe there will be others.

    In it, he summarizes the innovation that will need to happen into five categories: treatments, vaccines, testing, contact tracing, and policies for opening up. Among many other things, he gets into the realities (and timelines) of developing an effective vaccine for the world, as well as the shortcomings of the contact tracing tech that many companies, including Apple and Google, are currently building. I would encourage all of you to have a read.

  • The global gym market and gyms per capita

    Many of us are now working out from home. The Financial Times just reported that Peloton experienced its highest level of participation last week. Some 23,000 people tuned in for one of its streamed classes. Naturally, anything that was possible to go online has gone online.

    I’ve never really been a class guy, but I’ve been a regular at a gym since high school and it’s one of the things I’m most looking forward to getting back to as things subside. For many, the gym is a kind of third place. Though I would imagine it’s not the best place to hangout during a pandemic.

    According to FT, the fitness industry was among the first to suffer in the UK (~£5.1bn industry), showing signs of decline even before any government lockdown. The UK also had one of the most profitable fitness industries in Europe. Here’s an interesting chart comparing gym penetration to revenue per club.

    It’s interesting to note some of the outliers. Latin America has low penetration and low average revenue per club. And parts of Asia — notably Hong Kong and China — have relatively high average revenue per club, but still have fairly low penetration percentages. Do only rich people go to the gym in Hong Kong?

    This chart maybe makes it seem like nobody in Latin America is working out. But if you, instead, look at the number of fitness clubs in each country, the data looks vastly different. In this case, there are two very clear outliers: the United States and Brazil. (The below chart is from Statista and is based on 2017 data.)

    But Brazil also happens to be the most populous country in Latin America with around 209 million people. So let’s consider this chart on a per capita basis against, oh I don’t know, the US (~328 million), the UK (~67 million), and Canada (~38 million). Once again, the ranking switches. Brazil and Canada now come out on top with around 16 fitness clubs per 100,000 people. (I guess we’re just as body conscious as the Brazilians.) This is in comparison to 12 per for the US and 10 per for the UK.

    So what does this all mean for our post-COVID-19 world? Who knows. But I’ll sure as hell be at the gym.

  • What’s next for cities? Probably more of the same.

    I am surprised, although maybe I shouldn’t be, by how quickly many seem to be allegedly turning their back on cities. According to the New York Times, cities were “losing their allure” well before this pandemic, and this might just be the tipping point. The underlying argument: Density is bad. We should probably all move somewhere bucolic, where the cost of housing is less and work isn’t so stressful. Zoom only when necessary.

    But as the chief economist for Indeed, Jed Kolko, rightly points out in the article, how people behave (and think) during a global pandemic is probably not a great indicator for how they will want to live their lives when this is all over. It’s also not clear that urban density is really the contributor of spread. Hyper-dense cities such as Seoul and Hong Kong have been performing relatively well. (Joe Cortright has some thoughts on this.)

    Once we get to the other side, we will see the data and we will get a better understanding of this current situation. And then in hindsight, we will find ways to rationalize the outcomes to ourselves. In the interim, I’m not about to bet against cities. Here’s how Paul Romer, professor at New York University, put it in this recent interview in City Journal:

    “I think the underlying economic reality is that there is tremendous economic value in interacting with people and sharing ideas. There’s still a lot to be gained from interaction in close physical proximity because such interaction is a large part of how we establish trust. So I think that, for the rest of my life, cities are going to continue to be where the action is.”

    Photo by bady qb on Unsplash

  • How Europe is reopening

    Just over a month ago, as North America was beginning its lockdown, the Europeans were the ones showing us how to stay sane in quarantine through balcony orchestras and viral internet videos. Now we’re looking to them for how best to reopen the economy and minimize the number of fits and starts.

    • This morning Spain recorded its lowest daily death rate from the coronavirus. It is beginning to prepare for a phased relaxation of its lockdown rules. Things will not return to normal overnight. [Financial Times]
    • Spain allowed construction activity and manufacturing to resume this past week. As a reminder, Spain’s strict lockdown started on March 14. [New York Times]
    • Bookstores are open in Venice, but that’s about it. Customers have to enter one at a time, or schedule an appointment. Hotels, restaurants, and cafes remain shuttered. It is believed that at least 1/6th of all Italian restaurants and bars will not survive. Reopening is not happening uniformly across Italy’s 20 regions. [Wall Street Journal]
    • Last week, Denmark became the first country in the Western world to reopen elementary schools. The desks are far apart and teaching outside is being maximized, but some/many are concerned that this is too soon. Are we prioritizing the economy (i.e. free up the parents) over the health of our children? [New York Times]
    • The Czech Republic currently has one of the lowest number of cases on the continent. But hardware stores and bike shops are some of the only nonessential businesses that are allowed to be open. The Easter weekend saw an over 60% increase in year-over-year sales. Biking is something to do right now. [Wall Street Journal]
    • On Monday, the lockdown will be further relaxed by the Czech government. Weddings of up to 10 people will start to be allowed. Gyms are expected to open on May 11, but their change rooms will remain closed. (I’m surprised by this one.) Malls, hotels, and indoor restaurants aren’t expected to reopen until June 8 at the earliest. Should the number of new daily cases exceed 400 going forward, the government has said it will reimpose a lockdown. [Wall Street Journal]
    • The UK is not yet considering a relaxation of its lockdown. As of Sunday, the situation remains “deeply worrying.” The UK currently has the 5th highest national death toll. [Globe and Mail]
    • On April 13, Emmanuel Macron announced that France would begin a phased reopening of its economy — schools and some businesses — starting on May 11. This is a unique approach. He gave a firm date, well into the future. What if this doesn’t make sense when the time comes? Clearly the government felt that the psychological benefits of a firm date outweighed the potential risks. Minimize uncertainty during an uncertain time. [Le Monde]
    • Lots of discussion around the porosity of borders. Logically, there’s a view that unless there’s a common strategy, it’s better to keep borders closed. But what are the economic implications of doing that? [New York Times]

    Photo by Grant Lemons on Unsplash

  • It’s time to build

    Marc Andreessen’s recent essay, called “It’s time to build,” is destined to ruffle feathers. In it, he not only sings the virtues of building in its broadest sense — everything from healthcare and housing to education and manufacturing — but he calls out the western world for smug complacency with the status quo. We are no longer choosing to build. And a good example of that is how we have been managing (and mismanaging) this current pandemic.

    Here’s an excerpt:

    In fact, I think building is how we reboot the American dream. The things we build in huge quantities, like computers and TVs, drop rapidly in price. The things we don’t, like housing, schools, and hospitals, skyrocket in price. What’s the American dream? The opportunity to have a home of your own, and a family you can provide for. We need to break the rapidly escalating price curves for housing, education, and healthcare, to make sure that every American can realize the dream, and the only way to do that is to build.

    Marc has also included a suggested reading list if you click through on the above tweet. By the time you do that, I am sure there will also be a lot of discussion around his essay.

  • China’s meat supply chain is the problem

    There is a growing global concern around China’s “wet markets.” Last week, Dr. Fauci was on the record saying that they need to be shut down immediately and that it boggles his mind that we continue to allow something which very clearly results in zoonotic viral infections. This is as China begins to slowly reopen its economy — including its wet markets.

    The more precise problem is China’s meat supply chain. Last month, Bain & Company published a brief arguing that this current pandemic — it was still just an outbreak at the time of publication — highlights the need for China to shift away from open-air markets toward the cold-chain model that is common in North America and Europe.

    Here is one of their charts comparing China and Europe:

    There are both upstream and downstream problems. The downstream problem is its “wet markets.” Chinese consumers apparently prefer “hot and fresh,” as opposed to chilled and frozen meat. But there are going to need to be changes, including stricter safety regulations and widespread food-tracing so that epidemics can be quickly identified and quashed. Now is the time for these changes.

  • COVID-19 in the developing world

    One of the things that Bill Gates mentions in his recent TED talk about the coronavirus is that we need to be aware of what might be coming in developing countries, particularly in the southern hemisphere with winter about to arrive. (There’s some evidence of a relationship with temperature.)

    So far, countries like Brazil have been criticized for taking a laid-back approach to fighting the coronavirus. But the same could be said for many, or perhaps most, countries around the world at the outset.

    However, in the case of densely populated slums — like Brazil’s favelas — the problem is expected to be more severe. Without the ability to socially isolate and without proper services, it is questionable whether they will be able to “flatten the curve” in the same way that some developed countries have. There’s also a lack of government oversight in these communities.

    Incidentally, the Financial Times is reporting that organized crime has started to step in to fill this void — and it is happening over WhatsApp. Here is an excerpt from the above article: “Whoever is caught on the street will learn how to respect the measure. We want the best for the population. If the government is unable to manage, organised crime resolves,” read one message sent to residents of a Rio de Janeiro slum.

    One hope is that rich countries will be largely through their outbreaks by the summer and that a vaccine will be well on its way.

    (On a related note, here is an excellent slide deck from the London Business School on the economics of this pandemic. It’s very comprehensive and worth a read.)

  • How to respond to the coronavirus

    I just finished watching this TED talk with Bill Gates. For those of you who are up on their TED talks, this is not the one from five years ago where Bill predicted a pandemic and told us all that we were nowhere near ready. (We, of course, didn’t listen.) This is one that was published a few days ago and talks about how we should be responding to the outbreak that we are currently living through. The Bill & Melinda Gates Foundation has been committing significant resources toward solving problems exactly like this one. So it’s interesting to hear his thoughts. In case you’re wondering, herd immunity isn’t the answer. We need (1) widespread testing and (2) to be extremely disciplined about our social distancing. In his words: “But money, you know bringing the economy back and doing money, that’s more of a reversible thing than bringing people back to life.”

  • The latest coronavirus figures

    The Financial Times has some of the best charts/graphics that I have seen on the coronavirus and its impact. They’re also free and regularly updated. Below is the cumulative number of deaths, by number of days since the 10th death (last updated March 23 at 21:00 GMT). I prefer this to the number of cases because it is more precise, though impacted by things like demographics. The number of cases is impacted by how good you are at testing. Some countries have been far better than others. And what we are continuing to learn is that lots of people were and are completely asymptomatic.

    Seeing China (and Iran?) continue to flatten out is encouraging. (Note the logarithmic scale.)

    Here has been the impact to the Chinese economy. It’s slowing coming back.

    And here are traffic volumes around the world. This chart was published on Sunday, March 22. At that time, Tokyo looked to be largely business as usual.

  • How temperature impacts the transmission of COVID-19

    The Financial Times published the following chart last night. It shows the cumulative number of COVID-19 cases around the world, across the number of days since the 100th case in that particular country. The message here is that most western countries appear to be on a similar trajectory. (The grey dotted line represents a 33% daily increase.) Whereas in Asia, and in particular Hong Kong and Singapore, they have seemingly managed to slow the spread.

    Now, there are a number of possible explanations for the outliers; everything from stricter quarantine rules to more rigorous testing. There’s also an argument that Hong Kong and Singapore were better prepared as a result of the SARS outbreak in 2002. (More on these explanations, here.) But the other factor at play seems to be climate.

    A recent study (by Jingyuan Wang, Ke Tang, Kai Feng, and Weifeng Lv) has concluded that, like the flu, the transmission of COVID-19 appears to be significantly impacted by both air temperature and relative humidity. In their research, they looked at the reproductive number (R), or the severity of infectiousness, for all Chinese cities with more than 40 cases between January 21 to 23, 2020. (Large-scale government interventions began on January 24, 2020 and would have therefore skewed the numbers.)

    What they found was that for every one degree Celsius increase in temperature and every one degree Celsius increase in relative humidity, the reproductive numbers drop by 0.0383 and 0.0224, respectively. Air temperature, in other words, has more of a positive impact on containing spread than relative humidity — which feels right. That is also apparent when you look at the above charts. Take note of Korea, Iran, and Italy near the top left corner of the temperature chart.

    If you’d like to download a full copy of the research paper, click here.