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An Update of COVID-19's Economic Impact
Phil Powell | Associate Dean of Academic Programs—Indianapolis and Clinical Associate Professor of Business Economics & Public Policy at the Kelley School of Business
Description of the video:Glad you could. Hi everyone. Glad you could join us. This is a follow up to economic forecast I provided on April second. My how long ago that was. Anyway, you can see my slide deck here. And unfortunately, you know, back in April second, the message was the following. And that we expected sort of an eight to 12 week hibernation in, in the economy with the hopes that the disease, there might be some peaks, but it wouldn't be as bad as we've experienced. And the idea was, is that we, we erred on the positive side, so the businesses were ready to enjoy any up any uptick in the economy. We have had an uptick in the economy. We have had improvement. And you'll see that in the data that I'm about to present. But I think relative to the x. But economic expectations of the diseases is, as you know, more than anybody else. Given your frontline work. As physicians, this diseases is deaf a living up to its, its stubbornness that, that, that it revealed as it, as it came about strong on a global scale in March and April. So this is an update on the Suzana and Rachel and Christopher asked me to give this update and happy to provide, provide it. Also, this course falls within right when we're for the I have, we have the cohort that graduates in May is currently taking my Macroeconomics course. So in some ways this is, this material is, falls right into the course. So we'll definitely, this will definitely fee discussion in our next residency. So without further ado, let me get into it here. I want to I want to make, I want to make a point here. And that point is that at its most fundamental level, the reason we are experiencing an economic contraction is because we can't do business. We want to do business, but we can't do business because we put others at risk with a disease that has a, so a very unacceptable high rate of mortality. The risk of just, the risk of engaging in economic exchange is too high. And we can't trade. You can't buy things. There's no income, there's no value creation. And that's why the economy comes to a halt. And so one of the most fundamental parts of human existence, which is trade. And again, if you've been in my course, you know that I argue that our, our, our desire to trade, our desire to exchange is as natural as our desire to procreate and eat where humans have always been, they've always traded. And so we IC, market exchange. Economists see market exchange as really a socio biological phenomenon. The ultimate expression of symbiosis among homo sapiens. And when you look at it through that lens, instead of a philosophical lens, a political, political or philosophical lens. And all of a sudden this kinda takes on a different meaning. When we're, when we have to socially distance and we can't trade, that's going to slow down the economy. And this is what we've always assumed that, that we can have. And so how do you adjust to that? How do you adjust to that reality? Our economy has experienced this before. It experienced it with the Spanish flu around, around 1918. And there was about a two-year, had a two to three-year impact. And I think this is this is tracking to have a similar type impact. The real challenge is how do we make business decisions under huge uncertainty? And given an event that's really a once a century type of event that no current managers are, no current business, business folks have any experience with. And everybody looks to economists just for some guidance and hopefully I can provide some today based upon just some basic macroeconomic understanding. But at the end of the day, we're not. This is driven by the disease. This is driven by the, the social health aspects until we, until we have a vaccine or, and, or a clinical intervention that ameliorates the, the impact of, of getting the disease until we have that. Until that lowers risk to addicts socially acceptable level, we're going to have some level of, of economic slowdown. So really we are at the mercy of our, our life sciences industries to, to come to, to deliver a solution. And I have a lot of faith in that industry. A lot of you work in that industry have a lot of faith in that. But there's still a lot of uncertainty and ethical questions about how fast that can be discovered and approved. And then we have a supply chain questions of how quickly it can be delivered. And we, and I know that, that all of, of, of US industry is rally. And I have faith that that that that will come out on that that that the whole delivery and discovery process will will deliver in or or will perform in a robust fashion. But again, it's faith. We don't have full certainty right now and that's the difficulty. So let's talk about what's happened and where we're headed. And pardon the part in the graphics here. I'm gonna shrink this a little bit so you can see the, oh, well, my graphics had a little bit of chance and in, in, in translating here. But in February 19, in February we had, we had a labor force of about a 165 million folk. We had a 165 million Americans in the labor force. And in February, before this thing became an issue, 3.5% of that labor force with algebra unemployment rate was 3.5%. And again, our labor force as anybody that wants a job or that once, once a Java can't find it or that has employment. Remember the unemployment rate is presented labor force, it doesn't have a job. It's not the percent of the adult population. And For this analysis, I want to keep that labor force number constant. You'll notice that the actual unemployment rates are, are actual deployment, right? Knock now nationally is about 8%. But that actually understates the impact of the job loss because a lot of folks have dropped out of the labor force. A lot of folks just have given up on their job search. A lot of folks have because their kids can't go to school. They've had to drop out and an homeschooled their kids. This has huge impact. So when you see my percentages here, and again, sorry for the graphic translation in, on my PowerPoint. So little crowded in the screen. Hopefully mother screens aren't the same way. But you'll see this number is bigger than, than what you see is the unemployment rate. And that's because I've I've I've, I'm I'm correcting for what we call disenchanted workers. But what if those people stayed in labor force? So when this thing hit on it are effective unemployment rates bite to 19%. April was, was, was, we didn't know it was going on. It was the onset. The fear was high. And just to reference that number, the unemployment rate and the Great Depression hit 25%. And we haven't seen unemployment rates beyond 11% since really the early eighties, even the great recession was, was not as bad as that. And you've seen since April that are our numbers have come down a progressively as as businesses have figured out how to mitigate the risk in delivery of service to their customers. In and just and just the warmer weather. Restaurants can, can, can, can serve meals outside. There's been a lot of adaptation. And so at the end of the day, we're at, we're at 10.3%, were at 10.3% jobless rate right now. And again, that's relative to hold the labor force constant. If everybody is when the labor force in February, we're still looking for a job. 110 and labor force still cannot find a job. And that's kinda flatlines. Notice that it's kind of from August to September. We've really kind of hit the bottom of what we can given the state of, of the disease. And this is where we really see the impact going forward. Now if you think about the job loss, how much of the economy does that represent? Well, you'll see some numbers that are familiar to you. So the question is, how much have we lost? And how strong has been the policy response from the, the congress and the president of the president congress, which acted very quickly. And how about the Federal Reserve? How about, how about our central bank? If you'll notice here, we have, again, this is actual data. So for those of you who are enrolled in my course, this is data straight from the US macroeconomy dataset was I've made available. Our economy has lost in, in net terms more than $2 trillion and output. And, and that's, that's significant. That's about five to 10% reduction and output. That's a huge and that's a, indicates a huge on it's quick onset of that. However, if you think about how much we lost, at the height of our contraction, we lost almost about $7 trillion. This is when our unemployment rate was hitting the 19% in April. That represented a set on an annualized basis, a seven Train dollar shrinkage in the economy. Now, if we had not had a fiscal stimulus, this is basically the pay, the paycheck protection program, the small business grants, the additional unemployment benefits, everything that the Congress and the White House rushed to its past. And May was, it was a record response by Washington. I know there's a lot of lack of faith in the ability of the Democrats, Republicans to work together. But they, they, they, they responded here. They responded faster than the Great Recession. And they were plotted by economists. And basically the fiscal stimulus was $3 trillion. And that's basically $3 trillion that the government had to borrow. Me mindful my time here. And in, in, when we talk about fiscal stimulus, we talk about the multiplier effect. When the government cuts taxes, are spends money that's income to somebody else. But then, but then households spend that money. When they spend that money, it becomes income for other people. And the less, the less that a household saves, the less that a household pays in taxes, the less that a household spends on imports, the more that spending stimulates more economic activity. So what you can do is not to get too technical, but, but, but, but we, we like to quantify these three measures we called the leakages. We total up their percentage of the economy. Take the inverse of that ratio and it gives us our income multiplier. The income multiplier basically tells you that for every dollar of fiscal stimulus, how much of an increase in GDP going to guess how much of an increase in economic output, or you're gonna get. Coming into the end of 20 of 2019, that multiplier was $1.80. But that took a fall actually that the, that the fiscal stimulus was actually less powerful by the time it was passed. Because our income multiplier had fallen from it from 1.8 to 1.4. Now, what's the big deal? I don't want to fill it in. I did sign up for a lunch conversation for technical dribble from an economist's. What does that mean? So what does that number mean? We'll notice that, yes, the fiscal stimulus of $3 trillion did produce a lot more than 3 trillion in economic recovery. I mean, you had to make up for 7 trillion. But notice what happens. Notice the private savings went up about 3 trillion. The multiply. Most of most households, most businesses took the cast that came from the government and their sit in on it. Our savings rate in the, in the economy went from about 15% to between 40, 50% in just two quarters. If businesses and households are not re, spending this fiscal stimulus for not responding it, it doesn't. Multiply income and it doesn't have the power that it's supposed to have when it was passed by the Congress and White House. So observation number one, households and businesses clammed up and they started to save lots of money. And that's natural when you have a lot of fear. But if you think about it, we've got to close a $7 trillion output gap. 3 trillion times 1.4. That's going to be, that's going to be about 4.2 trillion that this fiscal stimulus was able to close. That still leaves us with what? Over $2 trillion to close. That the fiscal stimulus is still, that's still the output gap that we didn't close. So takeaway number one, stimulus was healthy, stimulus was quick. But it's the, the, the, the power of it got gum duck. Because we saw this huge spike and savings driven by fear and the economy. And then there's the Federal Reserve. There's two ways you can stimulate the economy. You can give tax rebates and, and government bailouts and all sorts of stuff through fiscal policy. Or the Federal Reserve can inject more cash into the system. And again, we, that we have a multiplier effect there to unprecedented response by Chairman Powell, NO relation. But Chairman Powell basically took it had to understand too, that cash has a multiplier effect. At the end of 2020, in the fourth quarter 2019, our economy was $21.7 trillion, but it's supported by 3.3 trillion in cash to the banking system. And I'll save, I'll save a lesson on, on, on money multiplication for you. But just understand that there's a multiplier effect here, just like there is in the fiscal policy side. In six months, the federal reserve increased cash by over 52nd% quarter this year. We had 5 trillion in cash. And the idea there is that that 5 trillion, if you multiply it times 3.9, that's how much impact or the $1.7 trillion increase for every dollar of new cache. The number say that that should create $3 NIH since more in gross domestic product. However, notice that's way down. That's about 40% down from what that number was. At the end of the year before the pandemic. What's happened is, is that these numbers have fallen. Not only because households, not only because households and businesses are not spending their money, which is why we see a reduction in velocity here. Velocity is how often money and bank turns over and over and only turns over if people are spending money. But also it depends upon how much are banks lending money. When banks get cash, the more they loan out, the more it multiplies in the system. But when banks hold back and held really high reserves. Because they're afraid everyone's going to default on their loans. Again, the system gets ganged up. So this one, so, so we see this fall of, of, of a willingness of banks to lend from 4.57 to 3.54. That's roughly about 20% fall in two months. Banks or hold back. So again, we see the cash stimulus does not deliver what was expected. Together. The cash stimulus in the fiscal stimulus should make up for all of the lost economic activity. But because of changes in behavior driven by fear, our ability to get back to where we were, our ability to get unemployment down even farther as handicapped. And also the reason that the power of, of, of new cache is reduced is something called a liquidity trap. When interest rates hit 0%, you'll reach a point where just thrown in more cash is going to handicap your ability to turn the economy around. And that's where we are. That's where we are. There's there's not much ammunition left for the Federal Reserve right now. That ammunition has to come from another round of fiscal stimulus from Washington. Now, again, the good news is, is that we've been able to reduce unemployment. The effective unimportant, my effective unemployment rate down to ten. The published unemployment rate is 8%. If you measure it the traditional way. We like our deployment to be close to five. So we've actually been able to close this gap impressively because of the reaction of the Federal Reserve and of Washington DC. But this comes with a cost and but it's had the impact. And if you look at these indicators, the fiscal and Cass stimuli have, have kept evictions and bankruptcies at bay. These are the two measures that economists look at. To go into red alert situation. This r is the average household, or is, is, is, is a household in the lower income deciles, the lower end of the income distribution. How is it affecting them? And so obviously, most, you know, as you, as you move down the income spectrum, a higher share of households rent. And if you'll notice here that, I mean, here's a little bit, a little good news. The stimulus has worked. It has completely close the output gap. It has a completely brought published unemployment down to 5%, which is what we consider the full employment level. But notice what this isn't a left hand side here. Is the rate of of late the percent of rent rental payments that are late. So once you count in the 13th of the month, this is the percent of of rental payments that are on time. And if you'll notice as we've gotten September-October, Yeah, it's a little bit lower and that's I mean, that that does impact the business. But we haven't seen a catastrophic fall in, in real payments. All the stimulus has, has, has, and the savings behavior. Households paying the rent. And he probably see the same thing with mortgages. Bankers haven't seen the defaults happening yet. I was talking to one of a bank CEOs here in Indianapolis and they said that they felt they process a lot of small business loans to the Federal program. They haven't seen any defaults. So everybody's hold on. There. There's a there's been a responsible businesses, are households or are being conservative in what they spin. And notice, notice that in 2008 2009, we go from 2007 to 20082 thousand Look at the spike and bankruptcies. And again, unemployment during that time, goddess didn't get above 11%. Our unemployment shot up and one month to 19%. But notice our bankruptcies are now just starting to creep up. That's like this is on annual basis. They expect about a 2520 to 25% increase in bankruptcies, which again, is to be concern of financial markets. But given the type of economic contraction that we've had, we would expect a lot more of a catastrophic fall off in businesses and declaration of bankruptcies. Now, just because a, a business can still close, but it does, it doesn't mean it goes bankrupt. We have seen a dramatic number of business closures, especially in hospitality, restaurant, and travel. In fact, in New York City, they say that probably half of the restaurants and half of the bars will permanently close. So we've kept the economy from Catastrophe. And that's something to be celebrated because this is a macroeconomic event that we've never encountered in modern, in modern history. Since the develop of modern macroeconomics, since the, you know, in 1918, the Federal Reserve had only been chartered for five years. We're much farther and our knowledge than now, but we've never dealt with a pandemic. They might say, Well Phil, okay, we staved off catastrophe. But what about the debt? What's going on here? Can we afford this? This does worry economists. And this is big. Notice that what I've highlighted, the debt to GDP ratio over time. And we've gone in the 19 seventies to basically our debt being 35% of GDP. You may remember the 990s with Ross Perot was, was really worried, or the independent candidate in 1992 really worried about the debt. Back then, it was only 52%, are between 5258%. Notice in one year, we've gone from a 104% to a 136% of GDP. That's the highest it's ever been. It's just, it's just past it. We were around a 125% in the late forties and early fifties. But that's because of the debt that we had incurred to fight World War II. Now how does handicap us in the future? Can we afford it? Can't, can we borrow this money now? Absolutely. The federal, the federal government has huge borrowing power right now. The mark, mark financial markets will purchase government securities that no purchase government IOUs at the going market, I think going no risk market interest rate. But at some point this does run out. It's not going to run out. We have we have all the runway we need to get out of this out of this recession for, for the pandemic. As long as we can get some sort of medical intervention within the next 18 months. But this will handicap us long run. Because with government debt, you only have three options. You, you either raised, you gotta, you gotta run a surplus to pay it back. How do you do that? Where you raise taxes or you reduce spending, right? So the few to the labor force of the future is going to have to pay higher taxes. And for those of us within the window of the next 30 years, depend on so security, the security benefits program we lower. So in that, so what happens is when you borrow lots of money now, it constrains the government's ability to respond to future recessions. The other thing they can do is to sell all the government bonds to the Federal Reserve. The Federal Reserve prints a bunch of money and the government, the government just prints money. That's a, that's an, that would, that would leave lead to financial disaster and hyperinflation. And that would basically ruinous as a, as an economic, a modern economic power. So the third option is not really viable. So the takeaway here is, you know, are we gonna be able to continue to get credit? Can we continue to run to, can we continue to borrow money to fund stimulus packages? We can. The financial markets are willing to give that to us. But we're, we're, we're exacting a huge cost on, on future generations right now. And if we have another pandemic or another global catastrophe, the government's ability to borrow money is going to be severely constraint where we're trading relief now for relief later. And that is a risk. But there's no short-term risk. There's no short-term worry. The government can borrow the money it needs in the short run. In the next few years. They might say, okay, fail. Well we've, we've State, we've, we staved off economic catastrophe. Peoples to pay their rents in their mortgages. The bank, even though a lot of businesses close or not having the bankruptcies that are happening. And also the stock market's gone up, right? Everybody saying the stock market's gone up? Well, yes, it has. The market's up about 40% since if it slows in March has been pretty impressive. But it is an illusion. What's happening is, is because everybody is saving money right now. They don't know where to park it. And they they park it with their parking and stock market. Right? Also, if you look at our, our financial account, are our foreign, foreigners saved in the United States because of global fear, foreigners are sending more money into our stock market. So what's happened is, is because there's more savings, you got more cash. Chasing a finite pool of equities and stocks and corporate bonds. And so it's artificially bid up the price. The only time that an increase in the stock market can sustain itself is when is, when is when companies can make higher profits. This is why we look at the price earnings ratio to ask ourselves, are the increases, inequities, are the increases in stock prices that we're seeing? Are they sustainable? What I have up here is a graph of, of what's called the Schiller price earnings ratio. This is basically the, the ratio of the average stock price to the average dividend on an average share. And it's corrected for the business cycle. So that's what the Schiller means. It's just a more sophisticated measure of the price earnings ratio, the long-term average. Going back to the 18 seventies. And this is a very, this is a robust measure that people look at. Its been about 16, right? So what this tells you is if your price earnings ratio is higher than the average or it's higher than the threshold, the mark is probably overvalued because the price, the numerator relative to the amount of profit that you're bringing in is, is historically high. We'll notice here. Again, this graph gives you a long-term perspective. And some argue that we should use more of the average of the last 30 years, which would be around between 2025 round about in here. But you'll notice that before a big stock market crash, you see a huge run up in price earnings ratio. Here's Black Tuesday, that was in 1929. That's what started the great recession. The great depression with a D. People were buying stocks on margin. Again, artificially bidding up the prices of stocks because they had access, access to funds. This is the Biggs the.com bust of two thousand, two thousand one. When, when when when.com equities were overvalued. Here's where we were before. The Great Recession. Not as inflated as other times in history, but again, mostly inflation. There was an mortgage-backed securities not in stocks. Notice we are right now, our price earnings ratio is very high relative to history. This suggests that a stock market correction has to occur in the medium run for the United States. So don't let the stock market full yet right now. It's an illusion because everybody's bidding up the price of stocks. It's not because companies are, are, are, are being resilient in their ability to earn profit right now. In fact, corporate earnings, you can see this in my slide here. Corporate profits fell 22% in the last two quarters. So and they continue to fall. So, so this is so yeah, yeah, the stock market state up. But actually this one is, is, is more of an illusion than the other two. I mean, the other two indicators of folks paying their rent and avoiding bankruptcies, that, that's a more durable measure of resilience so far. Now. Where does this leave us though? The news isn't good. We're stuck. We're going nowhere. There's a traffic jam, right? I think that's vegas, actually. Ironic, ironic example, huh? The economy's going nowhere. And again and again, apologize for the graph of the misplaced graphics here. Let's go nowhere. And it comes back to my fundamental point. Until we can trade or until we can figure out how to better trade virtually. And there's a lot of innovation there right now, right? But that innovation can't keep pace with a sudden loss of the ability to trade. But we're stuck. We're going nowhere. Households can spend money that they can't get out, right? Like a lot of you, I'm not even restaurants. I want to go to a restaurant, but I can't because I took to me the personal risk of going inside to restaurant is too high. And again, everybody has to make their own judgment. And also households are scared. So not only they want to spend money, can they not like they usually would. But even if they want to spend money, they're probably not going to spend as much money because they're scared. They're going to save more money. Sort of what's happening? Householder sit noncash. If households sit on cash that can stimulate the economy, they get, they get up, they get a check from the government, they put it in the bank. That's responsible personal finance. But at the aggregate level, that doesn't help the economy. That's why we've seen a $3 trillion increase in personal savings in just two course. Also, businesses aren't making any profit. The profits are falling. Bank C that they fear a default. Private equity. They don't, they sit up, sit on cash. I don't wanna make a bad investment. So you've got household sit non-cash. You got banks sit not cash. Cash makes the world go round. Cash makes the traffic flow. It's not going to happen until either we have innovation that allows us to broaden our economic exchange in spite of the pandemic or the pandemic ends. Now, in total. In total, the economy's not going anywhere. But there's a big pocket, a value creation right now. In the technology area, right? The technology's allowing us to do things by distance we've never done before. You know, the market capitalization of x2. All of all of the big technology stocks are doing well. And that's not an illusion because they're creating value, right? And we have a big problem-solve. How do we, how do we, how does technology adapt to the fact that we can't trade in person? That creates huge disruptive opportunity for companies to be entrepreneurial. That's where you can make money, right? How can we get people to engage exchange or they couldn't before? Because technology held him back. Well, this, this spurs a renaissance of technology. The problem is, is that our labor forces under educated. We don't have enough talent to drive the innovation that's needed. In a pandemic pandemic laden economy and an opposed pandemic accompany. And so what happens is, is that the innovation that needs to occur can't happen fast enough because we don't have enough educated labor. The unemployment rate among, among folks that know how to drive value the technology space. There's no, there's, there's, it might take longer to get a job these days because it just labor market matching. But if anything, the demand for those skills have gone up and the last two quarters. But because we don't have that pool of educated labor, It's, it's, it, it slows the economy down. And where does that leave us? That leaves us in a situation of deflation. 0 interest rates, interest rates means that it's hard to make a rate of return. Typically interest rates are high and economy, an economy that generates very good rates of return. But we can't generate profit when nobody's spending money and you don't have the labor force to drive the type of innovation that you need. There's not going to be much place to make money. And this leads to structural unemployment. On April second, we thought the folks losing their jobs, that it was cyclical, that the economy wasn't hibernation, that they're good at their job back and 8-12 weeks, once the economy woke back up. And hopefully we hoped that covered wouldn't be as bad as we thought. But no, it was what we call cyclical unemployment, which is a temporary loss of your job. Leased to structural unemployment, Your job disappeared. Your skills, whatever skills you're putting to work and earning a paycheck for are now obsolete. Structural unemployment is a much bigger problem. Structure. Unemployment creates huge concern for society in communities. And this is where the news gets even worse. Our, our, our income inequality is higher than it has. It has wasn't the 19 tens. Economies go through these cycles where there's, there's, they go through these industrial revolutions. In fact, people say we're the fourth industrial revolution right now. With automation and artificial intelligence, there's going to be a renaissance of that. Once we get that in any way, the pandemic has sped up some of those innovations. But our income inequality is as high as it was when the quote, Robber Barons, the JP Morgan's of the world and the Vanderbilt's and the, and the Rockefellers, wherein we had huge concentrations of wealth and just a few family, those days have returned. When we see an increase in income inequality, we see an increase in populist politics. We see an increase in political risk where people feel like the current system. They have nothing to one of the current system. And they, they revert to crime or political violence or rioting or unproductive expressions of political preference. A more, a better way to put it perhaps. So the factor having this pandemic. At a time when our income inequality is higher than it's been in a century, it makes the alarm bells even louder. Because that means that as people are displaced in the economy, more and more and more people will fill like the current system, the current rules of the game. That they don't, they don't get anything from them. And that they need to change the system in order to get to a place where they can meet their basic needs. That's a very dangerous development in the history of any nation. Here's your perfect storm scenario. And I promised the news gets better after the slide. I got, it's got a couple more slides. And then we'll go to question and answer. Here's, here's the scenario that keeps me up. And unfortunately, this scenario can happen within a matter of weeks. Not next week, not two weeks, but perhaps 5678 weeks. This becomes realist, this could happen. This is the perfect storm scenario. I don't think this is going to happen, but there's measurable risk that this could occur. And this would send the United States into an unprecedented period of social and political change. We could see a wave of large company bankruptcies. A large companies are living off their cash reserves in their access to credit. Usually big companies reach, reach a point where they wake up one day and they go, we can't sustain this any longer. We have to declare bankruptcy. They do massive. They lay off thousands and thousands of workers. A lot of those workers would be among the highest paid workers. A corporate headquarters are at factories that were, were, were manufacturing their, their, their core products overnight you can have these wave of corporate layoffs driven by corporate bankruptcies. And all of a sudden, you can see this sudden spike in, in, in people being unemployed. Not a gradual increase in unemployment. That's exactly what happened in April. The most of those workers were service workers in an industry that just couldn't couldn't operate anymore because of the close down. Hayes would be companies that can operate, but they've run out of cash. Also. State governments, local governments, even the federal government, has put cat, have prohibited evictions or prohibited more disclosure or foreclosures. Those are starting to expire. And unless their renewed, you could see a sudden flood of evictions. So not only do people lose their, not only do people lose their job, if they lose their house, their homeless, on the streets? That is a bad scenario. Also, you saw the high price earnings ratio. My guess is that just looking at the data, that the stock market needs about a 20 to 30% correction to get back to a price earnings ratio that makes sense for where we are on the economy. So large wave of bankruptcies, large wave of layoffs, sudden flood of evictions, and then 20-30 percent correction stock market. All that can happen at the same time on top of perhaps uncertain election results. So these are the next, the next several weeks are critical period for the United States. However, I am optimistic. If, if he told me to give an objective forecast, which I do for all my physician MBAs when they take my course. This is what this again, this isn't this isn't my preference. I'm not I'm lucky if this is looking at the data. And given my knowledge of economics and in political institutions and how countries evolve. If you've stuck me corners that Phil, Give me the scenario that you think has the highest probability. This is the scenario. Now remember, it's a forecast, just like a web or whether a, whether, a, whether professional weather meteorologists will forecasts something. And it's not always exactly the same as close. But this is, I think what the data is objectively telling us given poles and, and historical, historical patterns and also what we've learned in terms of economic impact from a pandemic. Clear Vic, clear Biden victory. In the election of 2016, the models gave Trump about a one in three chance of victory. Right now those same models, or giving them a one in ten chance of victory. Again, we don't know what's going to happen, but we have to put odds on things. And I think that there's a lot of pressure right now for, for some sort of stimulus. And I even think that the Republicans and Democrats would come together to override any veto from the White House. Because of the necessity of another round of stimulus is, is, is high. And financial markets will lend the US government that money. It will further increase our debt ratio, but we really have no choice right now. Restaurants, a lot of, a lot of places that have been able to stay open in a socially distance matter can, because of the warm weather that's disappearing, restaurants are going to close for the season, if not forever. And I think we're going to see, and as the, as we see a spike in, as we see this big second wave for this big wave of, of, of infections. We're going to, we're going to see, we're going to see dark days through February, dark days. These are going to be dark days economically. And I think you're going to see my jobless rate climb back up to between 14, 16%. Measurable unemployment will probably be between 1012 or 1113 through the first quarter, through, through February, March, between now and the end of March, very critical period. Dark days. Dark days both for the, for the disease and dark days for the economy. I think we'll see, I would expect a ten to 15% fall in stock market physics through the first quarter. If not worse, there will be, there'll be, there'll be a nice bouts. There'll be a now. If Biden wins, the market will like that result. Just again, what the data's telling us. If they pass a stimulus package that will help delay a fall in the stock market. And if we see some sort of early success on the vaccine front, even if it's not deploys yet, that'll help. So that, that would, those type of positive developments would, would work against any, any, any stock market correction. The expectation is, is that, you know, something that the life sciences industry going to start to point something, maybe not on a mass basis, but they're going to start to point something by, by, by early spring. And again, there's a lot of uncertainty there. If they don't deliver that. If we don't see progress on the vaccine or other interventions that had these dark days will just continue and it will be real pain for this economy. However, if, once we start to see the first stages of vaccine development and then deployment and production. You're going to, there's all this pent up demand in the economy. And its people start as, as, as the risk of interacting socially goes down, people are going to be busting at the seams to spend money and to travel. And that's going to, that's going to lead to this huge rebound in demand, which actually could be inflationary given all the cash that's out there. And that's one thing that the Federal Reserve needs to look at. So the good news is, is that once we get those side of this, there's a lot, there's a lot of money. People are still a lot of cash. They can quickly deploy that and spend it. An economy could quickly find itself over employed again, which brings it, which will be better than it is now. But that brings a host of other problems or challenges. Alright, so let me, let me start to land the plane here. There's the short-term impacts and then there's the long-term impact. It's what I'm calling the big reset. And it would've thought there's five trends that I would look at right now too. To redefine the US economy. This is like the big reset. Industries in themselves are being reset. Industries like restaurants and convinces are being laid to waste. And it's all going to start. It's all going to start. It's almost like an asteroid hit the industry. It has to start from an another. A recreation of the industry. Work at home is gonna stick. That's going to permanently depressed commercial real estate markets. The concept of downtown is going to fundamentally change. I think you're going to see a redesign of the social safety net coming out of this pandemic. That, you know, if you think about it, our current social safety net is, is rooted in the 20th century. The concept of cyclical employment, where you lose your job within your job comes back once the economy rebounds. We did a social safety net that addresses two things, structural unemployment and racial equity. And the sources of that. Both of those have to do with skills and access to good education. And this is embedded in, this is a complete disruption of higher education with a fall in the price of academic credentials. We're going to see a reshoring of manufacturing capacity. Stuff's going to come back, that's going to, that's going to play well for Indiana. Given that we have the highest share, that our economy, our state economy, has a high share of manufacturing in either state in the union. I think we're gonna see vertical integration of health insurance in care delivery. I'll talk about that in a minute. And my final slide. And this is going to, the USA is going to start to fade here. Just like Britain did in the early 20th century. We're going to start fading in the early 21st century. And what, what historians have called the pox, Pox Americana is going to be replaced by the Pacific century. And this is a, this is a transition that's been occurring for decades already. We knew this was coming. The pandemic just accelerate. For health care. This is I said this not April second and I'm going to say it again. Population health will become the new National Crusade. It doesn't feel like it right now. But the political will, and if you watch the way that the US has responded to national calamities, there's always a convergence of political will, even though it doesn't feel like it in the moment. But I firmly believe that there's going to be a convergence of political will to make the investments in health care that we haven't made before. And I don't think it's going to be medicare for all or state-run single-payer system. I think it's gonna be an enhancement of the of the Affordable Care Act or Obamacare. Because Obamacare basis itself upon it creates market mechanisms. And I think what's going on with this? What's going to win at the end of the day are going to be physician-led health care systems that monetize Wellness. And the only way to do that, the only way to monetize wellness, to be financially rewarded and health care system, if you have a more healthier population, is to integrate, to vertically integrate insurance with delivery. And so that's, that's where, that's where I think that's why things can save the system. What does this mean? Of course, gotta bring it back to the physician MBA program. This is going to increase the demand for physicians who can lead, manage, and deliver positive change. And again, sorry for the, for the text matching my version of PowerPoint didn't match to the one that loaded on my butt big office machine. I promised the one that you'll see as a follow up will be, will be, will be, will be fixed. But at the end of the day it's time for a physician takeover, right? The folks who went to medical school should be the ones leading this new healthcare age. Anyway, I know, I know we have a lot of lumps that current students on this webinar. But if you are thinking about this program, it is a phenomenal program. Teaching this program's been one of the biggest honors of my 24 year career at the Kelly School. It's one of my favorite things to do. As an associate dean, I get, I get to teach us a couple of classes here. I love teaching this Macroeconomics course that I'm teaching now. And so please, I hope, I hope this webinar gives you a little taste of what we talk about and, and some of the concepts that you get. A lot of this data straight from the course that I'm currently teaching. And please, if you consider the program, please follow up with our team or business medicine team. There's our email address or phone number and the website for more information. So with that, I'm going to exit here. And Susanna almost stopped the share. I'm going to ask your questions as that sounds. I love it. Well, first off, I'm you're right. It's a, it's a dose of both good and bad, right? There's some bright spots, but boy, we need to just keep on going to get worse before it gets better. Yeah. So for those of you who are here at the bottom of your screen, you see two buttons. One's a Q and a button, the other is chat. Click on either one of those through any question there that you've got fulfill, that you'd love him to go further along. A question you've got already healed up here to fill. This is getting back into the rental and delinquency that you talked about close to the beginning, is that lack of of rental delinquency stimulus related, or is it loan forgiveness from the bank industry? It's a, well, rents are it's a combination. So it works it works upstream, right? So you've had the protect protection program has kept people's paychecks come an ant even though they're not working. You had the tax rebates. So you have household saving a lot more money. So you have, you have households legitimately paying their rent and mortgages. Banks are smarter than the word 2008. They realized that in the long run, if they can work with their either business or residential mortgage holders to for forbearance where they sort of forgive them, like they might say, okay, don't pay a mortgage for four months. We'll just add for much to the end of your of your mortgage and in charge of that extra interest. You're seeing that. So that is some loan forgiveness that, but also some of the, some of these, some of these new loans to businesses are subsidized by the federal government. So it's accommodation thereof. Obviously, banks and lenders can only, they can only forebear alone for so long. But, but there's enough resilience in the system right now that we haven't seen, we've only seen a couple of minor cracks. Excellent question that came in from, from one of our alumnus who's recently graduated, Dr. Jodi. Great question. What's another stimulus after the election going to do? If we're seeing this increase savings now, is that stimulus can produce the same increase savings or is it going to change consumer behavior? But depends on how the federal government directs it. So all the stimulus that was directed at lower-income households, that money was not saved. Now they might spend that more slowly, but the lower-income households can barely meet their own needs. What happened was, is a lot of the stimulus found itself in the hands of businesses which can save money. And also upper and middle income households. And they're going to save more money. So I think that the answer to that question depends on how much of that one to 2 trillion is actually directed to the poorest of the in the economy as an economist. And this is my recommendation, the governor's office, because I said it was economic advisory Task Force. Is that and this is how they're spending down there, their money and actually they follow this advice is that direct all of the stimulus money, the low into the bucket because of the savings effect. Otherwise it's kind of wasted stimulus. We won't feel the stimulatory effect until the pandemic is over. And those wealthier households start to spend their money. What will happen as everyone's sped them at the same time? And it'll cause inflation, it will create any economic value. Interesting. Yeah. So am I IV sparked a question in my mind, but I'm going to pass on and keep in mind for those of you in the car here, Q and A's at the bottom, and the chance of the bottom hit either one of those and ask any questions you may have. The next question comes in from a physician currently in the program. And I think this is important when to recognize. Maybe polls are showing one way. You've said that you believe that we're going to see it when from Biden. But obviously, you know, you get a sort of prone, you gotta look at both sides of the issue here. Would your predictions that you gave B the same if the kerning president wins his bid for re-election. If Trump stays in, let's say, let's, let's say Trump, Trump wins. We'll see a stimulus. And so it would probably be money more directed up, up the income chain. So probably more or less stimulative effect. But I think we would see a 1 $2 trillion seamless package from whoever wins. So I don't see much change there. I think that, you know, that the disease management strategies are going to be different. I don't think it impacts the scientific trajectory of, of how soon we get vaccines out. So at the end of the day, there's not a lot of material difference in the outcome is there is a material difference in how the psychology people would have and how that would affect markets, or how that would affect political risk. But in terms of the fundamentals, there's not much different in the fundamentals. It's just a matter of who would benefit more from the stimulus package. So that's a great insight. Thanks. Well, any closing thoughts that you would say in summary, okay, here's how you as an individual can help sort of push the economy line. If you were in the chair making some of these decisions, what would anything you would want to influence herself be and was sort of a closing kind of somewhere anyway. So let me, I'll just reflect on this as an economist and as somebody who's a, who's haven't, who's a faculty member in the business and the physician MBA program. This is, we're going to get through this. The next four to five months are going to be very, very painful. They're gonna feel dark. They're just gonna feel dark. And it's going to be a real test, a psychological test for the nation. However, history shows that we will get through this. And the place to escape during these dark days is to think about those days when we do recover. Because this is phenomenal opportunity for innovation. And if there's ever a time to drive innovation in healthcare, it's now. And knowing that that's going to be true, we want to be first movers on those changes. And one thing, one message that I always deliver in this program is that all of our physicians have the ability using the concepts they learned, the business concept, they learn our program to start to, to be an inspirational leader is start to change the health care environment around them. Physicians, you, whatever. However Jay did you feel about the system. However much hope you've lost in the system, you have the power to change how you project yourself as a manager, as a decision-maker. And you can start to change the system from the inside out. And is it ever going to, is if everybody, it's time to do that where the stars are aligned. So for positive change is now. So I encourage all of our physicians alarms, current students and those thinking about it to grasp on to this, to this, to this ride and dive in. Because ya'll are the first, you're going to be the, the, the, the first-mover generation of physician leaders. And we need, we need this change. And in our economy is asking for it. So let's, let's, let's get to work. Yeah, absolutely. We produced an army of change agents is when I often like to say so let's, let's, let's dictate deployed. Absolutely honestly was think of, think of the opportunities that about me a light in the darkness. But you gotta turn that light on yourself. Yeah, I love it. Well, I know that many are quite thankful for you sharing your perspective, your thoughts and your expertise and your passion. Always, it's an inspiration to spend time listening to you. And I think I share the thoughts of those who are on this call. So as Phil said, if you, if you are not a graduate of our programmers in our program, feel free to reach out to us. I would love to talk to you myself personally about your interest in the program. But for those of you who are in the in the program, who graduated from the program, regardless of where your dad thanks for spending your time with us today and thank you Phil for your time and sharing your expertise. Absolutely. By everybody.
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Description of the video:Greetings everyone. >> My goodness, how the world has changed. >> I'm Professor Phil Paolo. I'm Associate Dean of Academic Programs. >> I'm also a proud faculty member in the business of medicine physician MBA program. >> It is my favorite teaching gig and has been in my career. I teach the Macroeconomics course and it's an honor and privilege to kick off our coded 19 seminar series that we hope helps you as physicians on the front line fighting this once in a generation war against a virus, we can equip you to understand what's going on and to lead positive change in health care, especially as we try to address the crisis in front of us. >> I want to welcome our alum's. >> I want to welcome the current students who had the pleasure or displeasure of having me in class. And I most especially want to welcome our prospective applicants or prospective participants in the position MBA program. >> What you're going to see tonight is a, is a taste of what has my class. >> I promise to keep it understandable if you haven't been in my course. >> But we want to talk about take what we've learned in the program. >> But what you will learn in the program and try to figure out where were the economic side of this is headed. >> So buckle your seat belt and let's try to figure out what's going on from a process perspective. >> Our Executive Director, Susanna Gower, I'm sure many of you have talked to will be at the end. >> We'll take some Q and a. >> You can see my e-mail there on the title slide, ph power at indiana.edu. I welcome any of you to email me afterwards. I'll be happy to respond to any questions that you have. >> And I know there's going to be a lot more questions than we can answer within the hour. >> We promised to end at eight o'clock sharp Eastern time. >> So let's jump into it. >> So how does an economist look at this? >> I'm going to talk about the economy and then I will end, I will end with some prognostication or what's going to happen with US healthcare. >> And it's very relevant to what we see, what, where this program is positioning our graduates. >> But it's important to understand that this recession is, is, has been sparked in a very different way than what we're used to. Most of the recession in US history going back to the Great Depression, were sparked by a pullback of spending by the business sector Whether that was overvaluation of opportunity misalignment in financial markets. A sudden dose of pessimism where businesses pull back on their spending on their investment. And then what would happen is, is that pullback, an investment would lead to layoffs, which would lead to a reduction in consumer spending or household spending. >> And that's exactly what happened in 2008. >> And that's exactly what happened in 1929. >> This is different. What's happening here is, is a sudden pullback of household spending that will then lead to a reduction in investment. >> Before late February 20-20, our economy was sound. >> The fundamentals were good, balance sheets look good. >> Business was optimistic. >> But we have the sudden onset of a, of a, of a once in a century pandemic. Any immediate place that's happened is with households. >> Households can't go out to eat. >> They can't go to the movie theater. They're afraid to go to the store. And so my best guess is that we're seeing an overnight Paula consumer spending of between 20, 25%. >> Now how do we get? >> How did I get that number? So I got that number. I pulled up this pie chart, US Department of Agriculture. And what this pie chart does is it lays out the average share spinning and categories by the average American household. >> So I went through and I just made an educated guess on where you'd see a pull back and spending. I would invite you to do that yourself. >> I come down to 20 to 25%. >> Now that's, and that's overnight. That's just like a sudden unexpected fall and consumer spending. >> Now what we learn and what we know and what you learn in my course is that a sudden shock and this makes complete sense. >> You want to take my course to understand this concept. When there's a sudden shock to the economy, there are ripple effects. >> So all of a sudden, when folks don't go to the restaurants, they're not spending money. That's a reduction in income to the restaurant owner, to reduction in income to the folks that work there. If you're not shopping or you're not going to the movie theatre or you're not flying an airplane, money that you would have spit would have been income to somebody else and then they would have spent their income. >> And their income or their spending would have been income for somebody else. >> It's what we call the income multiplier effect. >> And when you run the numbers, and I'll do it in a minute. The multiplier effect based on, ON night on 2009-10 data is about 1.8. So for every $1 for unexpected fall and spending, it actually creates a $1.80 reduction in economic activity. Now you have to understand consumer spending is about 68% of the time. >> Though if there's a 20 to 25% reduction in 68% of the academy. And it then has an ultimate impact of 1.8 on the economy. >> That translates to the following outcome. >> Without the stimulus and its eye popping and it, it sounds nightmarish. >> What we're going to look at here on an annualized basis. Without any intervention by the Federal Reserve or the government, is a 2424 to 30% fall in gross domestic product. That's a 24 to 30% fall in economic activity. This makes complete sense. We can't be in person, we can't shop, we can't conduct business. >> We can't conduct commerce where he can't come together in trade and commerce, you don't create economic value. And so this is a scary number. >> In the Great Depression, GDP fell by almost a half. So we're not nearly knows levels, but our jobs, this would translate into a job loss of 19 to 24 million. >> You might have seen the press last week and I think a jobs report might have come out today. >> Just last week, we saw 3 million reduction in jobs without any kind of stimulus that the 2 trillion that we're seeing, and we would see that repeated six times over were barely there. So this is scary, but the good news is, is that we have a good stimulus package that I think is no pun intended, what the doctor ordered. >> And this is going to be this is going to be a much shorter recession we're used to, the pain is going to be deeper than we've ever felt. >> It's going to be more sudden than we've ever felt, but we're going to bounce back out of this once we get some clarity on the cycle of the virus, which is still unknown and lies in the hands of the doctors and epidemiologists instead of the Communists. And I'll share with you some of the assumptions I'm making it in just a second, which are certainly debatable. >> And I don't pretend to be a health care expert. >> Alright, so for those that are our prospective students, please don't be scared by the diagram for those that are taken my course. >> This that you'll represent, you may you may recognize this if you haven't erased your memory. >> But, but we're using, I just put this in here sort of as a blast from the past, but also a little, a little refresher on how we apply the tools. >> Now, some of our prospective students in college, you may have had economics and you might have had good old-fashioned supply and demand analysis. This is basically supply and demand analysis applied to a US economy. >> I'm not going to go to the mechanics, I'm just gonna give you the conclusions. >> But, but those that have taken my class will be able to reference and understand what we've got here. Let me just try to at least give you some sense of, of, of what we're measuring. >> On the vertical axis is the general price level. So think of it as the consumer price index. >> So if your consumer price index goes up, you have inflation. >> If your consumer price index goes down, it's deflation. >> Obviously with the recession, we always have deflation. >> In the Great, in the Great Depression, prices actually fell 25%. >> So I think we're going to see a little deflation coming up, but I don't wanna get ahead of myself. >> On the horizontal axis Measurement of economic activity or GDP, gross domestic product. >> Gross domestic product is the value of all commerce in the economy in the United States in a year. >> And then that moves inversely with a variable we'll call you or unemployment. >> Unemployment is the percent of the labor force. >> That is the percent labor force. It has a job. >> So to find a labor force as any adult that wants to work. So there's about a 160 million people in the labor force. >> Now it's February when our economy was, was operating it at more than maximum capacity, the economy was over employ. >> Our unemployment rate was 3.5%. >> So you can see sort, if you go far right here, you can see the number 3.5% unemployment was actually overcapacity, which we think of the capacity of the economy as being about 5% unemployment. >> So starting point for this economic retraction was actually an economy that was over employee, right? >> And how do you have an over employed economy? Over plot economy exist when his labor shortages and sometimes you're hiring people that you wouldn't otherwise height. >> So that 3.5% unemployment rate was supporting an economy of annual output of $21.4 trillion. >> That was the output in 2019. Now suddenly, if there's a sudden, Now I'm going to take the upper end of my range. >> I'm going to give you two scenarios here. So this scenario that you're seeing on this graph is the worst-case scenario. >> And so I said that when you look at that, that pie graph from the US Department of Agriculture, you're looking at between 20 to 25% sudden fall in consumer spending money. Keep track my tiny, Yeah, that's what I'm looking at. And so if you run the numbers a 25%, but the upper into that range, the worst case scenario in my mind, a 25% follow consumer spending. When you, when you run the multiples, He's going to cause a 30% fall in GDP. So we go from, so basically willingness to spend or demand is going to shift from D to D one. And that's the downward shift is the willingness of households and businesses and governments to spend money, it's going to fall. >> In short run, prices are the same. >> So what happens is as we go from $21.4 trillion economy to a 14.9 trillion huge fall. And, and he cannot. >> In macroeconomics, we know that for every 1% your below your GDP, for every 2% that you're GDP, GDP goes down, your unemployment rate goes up by a point. >> So this, this worst-case scenario without the stimulus would lead to a 30% reduction in GDP or 18.7% unemployment rate. Jack, Gaza, that's none of us have seen that in our lives. >> None of us have seen that. >> Not kinda remember the worse it's ever gotten in our lifetime since I'm assuming nobody's lived through the Great Depression, is 10. >> The highest unemployment has been since the Great Depression was 10.8% in 1982. >> And the Great Recession in 2009 got close to that. This is this is close to double the number that we've seen in our, in our like. >> Now the good news is, is that a stimulus package was just passed by the Congress, which was a number which is basically about a half for households, whether it's unemployment checks or these $1200 checks that I go to, every adult who makes below 9 thousand makes a 1000 or less. >> And the rest, the other half is for businesses where there's grants and aid or, or, or, or, or credit backed by the US government. >> Now the question is, is that $2 trillion stimulus package enough? Well, again, just like we have a reduction in spending, every dollar fallen, consumer spending is going to translate to a $1.80 fall in total economic activity because of that ripple effect, a stimulus has the same impact the other way. So even though it's going to be a $2 trillion stimulus, pretty immediate. You're looking at a, at, at a multiply that times 1.8 for the Olympics GDP. >> So 2 trillion becomes 3.6 trillion total impact. >> And for those that went through my course, I laid out sort of the may remember the math, how your multipliers related to the leakages when people don't spend money. And that gives you the math there again, another blast from the past. So what happens with the stimulus is, is It adds 3.6 trillion to what we would've been at. So 40.9 trillion instead becomes 18.5 trillion with the stimulus, 18.7% instead becomes 10.3% unemployment, which brings us to a level which is within a reference point. >> At least it's still very painful. >> But to foreshadow, the good news is, is that this recovery is going to be much faster than the recovery out of 1982 or 2008, the two most painful periods since the Great Depression in the US economy. >> Now let's look at the more optimistic scenario. >> So now let me, let me back up. >> So what can happen here? >> How are these? >> How long is it going to take for the stimulus to have an impact? June to September. So it is possible that unemployment could temporarily dip close to 18 points. >> I'm close to 17, 18% before it starts Tibet, before the stimulus starts to hit. >> So inhabit, it will be a quick fall and get a quick uptake because of its stimulus. I've never seen a fiscal policy stimulus pass so quickly by the congress and signed by the President. >> And it will have such a quick disbursement checks back to US households. >> That's exactly what we want. >> So even though you might see a dip that goes 1213, 15%, it'll quickly comeback to more than 9, 10% range. The better case scenario here and that impact, well, the, the, the impact that stimulus is not felt until really between June and September. >> So this stretches this this economic pain, this very acute economic pain stretches into the fall, into the early part of the fall before it really start to see recovery. Now let's look at the, the, remember I said between 20, 25% sudden fall in consumer spending, this is the worst case scenario in my range. >> Here's the better case scenario, a 20% fall in consumer spending. And again, if you run the numbers, 20% fallen consumer spending implies a 24% fall in GDP or a collapse of 19 million jobs. >> Again, that's better than what we saw on this slide, 30%, 24 million jobs. >> So we go from 2421.4 trillion in GDP under the better case scenario, down 16.2 trillion. >> So our unemployment rate could go as high as, as 15.5%, 16. >> But, but when the stimulus kick in, we come back. >> Instead of 9% unemployment, we're looking at about 7% unemployment and 19.8 trillion. So I give you a range here that really depends upon how households are reacting to this. And my best guess again is 20 to 25% fall in consumer spending. So that's, you know, by September, August, we're looking at unemployment between 7, 10% after it's gone way below that just for a very short period. Now, what does this mean more fundamentally? Now? And now what I've done is I've factored in only the impact of the, of the fiscal policy stimulus. I've not factored in the monetary policy stimulus, then monetary policy is a little bit more of a, of a complicated animal. >> The Federal Reserve is separate from the Congress and the president, right? The Federal Reserve as our central bank. >> And in very basic terms, it basically controls our supply of money by controlling the supply of cash that it feeds to the banking system. >> So when the, when the central bank wants to make sure the system extends more credit, it, it makes cash cheaper by lowered interest rates. And those filter through our, our banks are, are the chase or, or a Bank of America, right? >> And, and so really we're talking about monetary policy. >> It comes down to credit. >> And credit, the credit through the banks is different, has a different impact than when a government is spending money on, on unemployment benefits or loans to businesses. >> That's fiscal policy. >> Monetary policy is when the central bank lowers interest rates and makes it easier for banks to extend credit. Now I have not factored in additional benefits from monetary stimulus. The impact to the monetary stimulus is very, is questionable because we've hit 0% interest rates. >> And even though the Federal Reserve, drone Powell, The Federal Reserve Chairman, John Powell What I'm class I, I, I, I, I call Uncle Uncle Uncle Uncle Jerry. He's not related, but same last name. >> But when we hit 0%, when we hit 0% interest rates, the Federal Reserve has run out of ammunition. >> And so even though the Federal Reserve might, might flood the banks with cash that makes not, might not be willing to lend it. >> Because all of a sudden there's very high credit risk. There's very high chance that people are not going to pay back their loans. >> And this is what happened after 2008 with quantitative easing, the Federal Reserve radically increase the cache miss system. >> They went from one to 3 trillion the amount of cash available. >> But banks did respond because they didn't wounded. >> And so this is why the impact of monetary policy might be stunted, but it will add and it will cushion, it will add some more recovery than what you see here. But it's questionable here. The power of monetary policy is questionable because we've sort of hit 0%. >> Interest rates. We can't take interest rates are far lower, can take them in negative territory. It has very perverse effects on the economy and banks are going to be very scared about the credit risk. >> Now to small businesses, the Small Business Administration loans are backed by the federal government. >> So any of those loans are not going to be halted by the banks, but just general credit. >> Why you, why you may assume it. >> Mode b very available with very low interest rates. >> It's, it's not, it's banks. You gotta be hesitant. I'm going to be watching the behavior makes over the next several weeks. >> So what are we talking about here? Turtle timeframe. >> So I'm going to make an assumption. Alright, this is a debatable assumption, but let's assume, let's assume that any future peaks of the disease are not catastrophic. They don't require absolutely the absolutist, disruptive type of social distancing that we have. >> Now that's another debate. And if we do have to have another hibernation period in the fall, this is going to be really bad economic. >> So I'm operating on the assumption that we can get back to business after that. >> This, that what we're experiencing now is very effective in at least containing future outbreaks to level that the system can handle. That doesn't require says in her house for several weeks and allows us to conduct commerce. >> So that's true, and I think that, you know, when you look at China and South Korea, and in fact, they're opening back for business gradually. >> And we looked at back, there was no second there was no catastrophic second peak of MERS or SARS. That it's not an unreasonable assumption. >> Again, I'm not a public health expert and it could happen. But if we assume no catastrophic second peak that allows that has to shut the economy down again. >> What we're looking at here from an economic perspective is about three months of absolute paralysis. Basically, the US economy goes into hibernation. >> And then three months of a slow crawl out, right? >> And so China and South Korea and Singapore, I've entered the slow crawl out period, the kinda pick it out of their houses. >> You know, certain people can go back to business, certain cities or open it up. >> If you're, if you're, if you're trained in China, you're wearing masks. >> This is going to be about a three month crawl out write once read the crawl out fear period. >> Then we have a very robust recovery. >> People get or get back and it's trying to get back. >> Now in terms of unemployment, we're going to see two phases of unemployment. >> What we're in is the first phase, which is this app is immediate in mass layoffs of service workers. That's why we're seeing for a brief 3 million a week hid the unemployment rolls. Once all those folks have lost their job, then that starts to affect business in the second stage. >> And that's when the white collar folks start to get laid off. >> In fact, those have started, I saw one statistic, very scary statistic at 10. >> And that should be white, not while that one in five of all white-collar workers are now furloughed. Very scary statistic. It is happening faster than expected. Good news though is after that six month period, we'll see a bounce back and it's very quick. >> And this recovery is going to be much, much, much quicker than the long recovery after 2008. >> And even, even in 91, which was the last very mild recession, because the economy was very solid. >> If the public health threat disappears, there is no reason that the economy cannot return to a similar level. >> What will prohibited from getting back to the same level it was at is the fact that a lot of businesses will have gone bankrupt and people's preferences will changed. People have discovered, for example, they can cook at home or they might be scared to go out. And that's just going to affect consumer household bind patterns. But we will get back to a level of at least 5%, around 5% unemployment fairly quickly. >> And what do I mean by fairly quickly? >> So six, so three months of absolute paralysis, pretty much of a slow crawl out, nine to 12 months to get back to full employment. >> So we're looking at a bit of a net 50 month impact here, unwelcome. >> But to recover, you know, the real recovery from 2008 took about 24 to 36 months. >> So we're looking at at least half the time it took to come out of the hole in 2008. >> So right now at the Kelly School, we've partnered with the Indianapolis Chamber of Commerce. Our faculty are offering advice on a real-time basis to small businesses. >> And what I'm about to share with you our seven pieces of advice that we're given businesses. >> And then I'll talk about healthcare. >> I'm very conscious of the time and we'll leave some time for Q and a. >> So given given what I've laid out from an economic perspective, what is the, how should businesses cope? >> Well, there's, there's seven pieces of advice that we're given businesses. Now, healthcare is a very different enterprise. >> So this might apply to some healthcare businesses, but, but I'll save, you know, since this kinda Business School as physicians, you learn sort of the fundamentals of business and then translated to healthcare. >> Here's a very, a 100% business perspective on how to manage the impact of covert 19. >> In really the the goal is to survive. >> We're telling businesses that you go into hibernation, UV, and you do everything that you can do to avoid bankruptcy and stay solvent so that the day that the customers come back ready to business. >> Because if you're ready to do business, when it bounces back, you can you can make up for the lost revenue and some of the extra depth you, you, you've incurred. If you're a small business, one thing you want to do is you want to scale back operations to a point where the revenue that you're still earning is greater than the variable expenses that your variable expenses are the expenses that you incur as long as you are selling and earning revenue. This is wages for staff. >> This is ROM material that goes into your products. >> It's keeping a, whatever utilities you're consuming, right? >> And so for example, a lot of restaurants are scaling down. So a restaurant on a weekly basis might make a $100 thousand and have a waitstaff 40. They've now scaled down there. >> Take our businesses maybe 10 thousand a week. >> And maybe they've gone from 40 staff members to eight, right? But they still want up, they've still wanna make money on that revenue that they're Ernie relative to the variable expenses. >> So scale down advice number one. >> Advice number two is you want to reduce your fixed expenses. Your fixed expenses are expenses that you incur even though you may not be ducking business. So it's mortgages, it's paying off your debt or your whatever loans you've incurred. >> Its leased, leasing, least leases that you had to pay for. >> So businesses were Tell them to reduce their fixed expenses by approaching their leasing agents, by approaching their creditors, and renegotiating short-term payment terms. So for example, negotiate for the next six months, really low DADT or at lease payments in exchange for the next six months higher payments. And businesses are going to find that they're leasing agents in the creditors are much more willing to negotiate. >> And they thought because the creditors and leasing agents have as much interest in their businesses staying solvent as they do. It's hard to forget that sometimes we're also telling businesses advice. Point number three, try as hard as you can to keep your core staff. >> You can pull from cash reserves. >> If you can pull from credit lines to give them grants and aid, it might be a fraction of what they aren't but give them grants in aid or, or reduced wages because you want the core staff ready come back to work when the economy recovers. >> And if they're not coming back and you have to take time to hire new people, you're gonna miss the bounce back. And if you can't afford to pay your workers through some sort of reduced wages. If you have to lay them off, make sure that they have access to unemployment. >> The unemployment benefits and basically doubled under the, under the legislation that was passed by the Congress. >> And connect with them emotionally, column up every couple of days, let them know that they have a job waiting for them when they come when the county bounces back. >> And that you care about advice. >> Number four, this says managers and executives should reach out to their, to their, to their employees. >> They should also reach out to the customers, right? >> And one thing you do is you reach out and you proactively reduce prices for, for business when economy returns. This not only helps you maintain the promise of business, you can actually lobbied and lock into revenue early through a contract to the reduced price. And also it also signals to your customers that you know, that they're suffering to there's something, there's something to be said for the humanity right now of what we all face. The managers and executives that embrace humanity and do things that people don't expect. You're going to pay back dividends once. >> Business returns. >> Advice number five, and this is this is, this is, this is one. >> Use downtime, We're going to hibernation period. Uses downtime to clear tangible and intangible business clutter, whether it's cleared out, clean it up, a credit storage room, whether it's it's conducting maintenance on piece of equipment or even to sit down as a team and clearing up some misunderstandings, right? >> Rebuild that sense of family repair divisions that have developed in the organization. >> Data misunderstandings, That's also what we call intangible clutter, killing stuff cleared out. It's going to make you more productive when everybody gets back to that. Again, this is about hibernating. It's about, it's about doing everything now to position yourself for success once we get out of this, because we're going to get out as part of that too, is an addition declared clutter. Reinvent the business now in six months when we expect business to be back, get back to full steam. >> It's not going to be the same economy, it's not going to be same market, it's not going to be same community. >> Your customers are going to be a little bit different. Innovate, innovate, innovate, reinvent the business. Now, what does this mean? Even now you can launch new products to address new pain point based by your customers. >> That's how you can deliver value even before the social controls are listed and we get back. >> Horrible. >> Lastly, Back to the Prime Directive being Survival. >> Your business owner. Every day you wake up and you're not in bankruptcy, you'd be thankful and you wake up to make decisions that keep you solve it for another day. >> So he can wake up tomorrow morning and be thankful that you're not in bankruptcy. >> That's how survive these next six months. So what does this mean for US healthcare? And again, I bring opinions not as a physician, not as a person like you that on the front lines, but as an economist that sort of studies this sector. >> And I want to bring sort of an economic lens and a management lands. And these are my predictions. >> This is what I would predict what we're experiencing. >> And I think a lot of you will agree with this, and it's just base, it's not rocket science, you would probably arrive at the same conclusions. What we're experiencing is a sea change for the US health care system. >> It is a radical transformation. >> What we're seeing is that this a pandemic lays waste. American individualism. >> What makes the American economy so great is entrepreneurship. >> And what makes us such great entrepreneurs relative to other nations statistically, is a fact that we celebrate individual response to opportunity. And that's what drives a very dynamic economy. There's a very negative side to that. >> And that is that we just were obsessed with ourselves. We're absolutely obsessed with ourselves as individuals, more than, than, than, than in Europe where there is a strong sense of individualism, but it's tame, whether it's identity politics on the left or it's, you know, anti-government sentiment on the right. We're obsessed with ourselves and a pandemic, fighting a pandemic is all about the collective nature of the nation, not the individualistic nature. So we're going to come out of this with a whole different perspective on American individualism. And you might say, will fail now, it's not going to happen now. >> No, no, no. >> Look at look at look at US history. >> Events like this change the nation. Think of, of, of the American Civil War. Think of the Civil Rights Movement. >> Think of, of the Great Depression. >> We come out of these huge shocks, these huge unexpected shocks to our country, completely different. And here is a visual that's going to stick instance contrast of doctors and nurses dying on the front lines versus the insurance and hospital executives working from home or from their vacation home, right? >> These are going to stick in the minds of Americans. I'm going to stick more in four weeks. >> They are now. But this is the equivalent of, of, of, of armchair warriors. >> Direct the doctors, ya'll are the warriors. >> Now folks, y'all are fighting the war. You're the soldiers and the folks that benefit and profit from the system or not on the front lines. >> They're sitting at home safe with their families. >> That that's not going to compute going forward. And it's just starting to register with folk. I've been seeing the posts from, from, from, from doctors and I'm connected to a lot of our lumps. And you just see this, this, this, this contrast that doctors are pointing out, but how to go into the war. But they're getting there, getting their payments and the reimbursements reduced by these hospital CEOs who are not physicians. That's just not gonna stick. >> And, and so what this means is There's going to be changed, and we'll talk about that in a minute. >> A lot of, a lot of, a lot of a lot of failure of the system that we're experiencing is because of the academic bad management that's in healthcare. >> You read the literature, one out of every three health care dollars is because of bad management, not bad medicine. >> And you, the physicians have to deal with that. >> And I know that's why many of you have completed the MBA, are completing the NBA, are interested the MBA so that you can turn this around. But the chickens are coming home to roost on a, on a system that is very poorly managed. Whether it's it's planning or personal protective equipment, whether it's having a contingency. You've been able to set up a temporary hospital at a moment's notice, whether it's it's it's it's having gloves and the protective equipment that you need to be there. These are all management questions there about resources and supply chains. This is stuff we teach in business school. And American health care is such a market failure, but it's going to kill an unnecessary number of Americans because of it. >> And again, the deaths that we see are going to be because of bad management now because of bad medicine. >> And it's incumbent upon the Kelly School to come upon you as physicians who have some, many of you I know are leaders to come upon you to make this point and now it's time to change the system. >> Think of night 11911 was our last biggest event that really changed the nation. >> What was the obsession coming out of 911? >> It was security and terrorism. As a nation, we were willing to spend trillions and trillions of dollars on wars related to that security. >> Now I'm not, I'm not criticizing them, I'm just making a sociological point that even Democrats were willing to support President Bush's response because we wanted to conquer terrorism, because it led to 911. It led to this event that we never thought could happen to the United States and attack and home territory. Well, that's similar. >> Now if you think about what's going to be the new National Crusade, dot can be terrorism, it's going to be Population Health. Now you may look at me and say, fill the systems to broken for that to happen, I dare to defer. Our country always radically changes after these unexpected events. And we don't realize it until after the fog of war, or the fog the event has cleared. >> But here's the news folks. Population health will become the new National Crusade. Because not only is bad management leading to needless deaths, but a unhealthy population scarred by diabetes and heart disease and, and, and, and, and even bad mental health. >> And of course, obesity is leading to immediate deaths. >> Population health and not only helped to dress the management issues, but also having a healthy population best match so vulnerable to a pandemic, so that they have stronger immune systems. >> So what are we going to say? Where does the two things that I think are be willing to put money on both of these. >> We're going to see public funding for health services capacity, medical research, and medical education rise significantly. The voters are going to demand that in the long run, there is a huge new increase in medical research spending. And in just the bill that was passed by Congress and the sudden there's this lack of investment in new medical training capacity that's going to that's not going to be the case anymore. So for those of you in medical education, you're going to get the call to action to increase the number of doctors that are that we produce. >> That's good news. >> Unfortunately comes on the backs of needless deaths and the system. >> Here's the other thing. >> The other suggests. >> The other thing that I'm going to see, I predict that the system, the country is going to look for those systems that are able to, to, to, to enable better management and IT to enable a better population health. Where do we see that? We see that it physician-led health care systems that are vertically integrated with insurance coverage, like Inter Mountain healthcare in Colorado, or in the west like the Cleveland Clinic and the Midwest. >> This will define a new wave of institutional change. I think as a country, we're not ready for a single-payer system. But physician let you know when you look at Inner Mountain health care. >> When you look at Cleveland Clinic, we look at other examples led by physicians. There's a solution there that can solve the problem and be culturally acceptable to what Americans look for in terms of the relationship between health care and the market economy. So this has direct implications on our physician MBA program about to, about to finish up here. >> This has direct implications on our physician MBA club. If you thought there was a premium for physicians who can lead, manage, have business knowledge, and deliver positive change. We thought that the man was strong. Now that that increase, that demand is going to accelerate in this new age of population health, an age that is as strong as the focus on terrorism was after 911. >> You as a position with management knowledge that can step in and be the CEO and replace the white coat with the suit and build a health care system. >> Our transition healthcare system to vertical integration with the community insurance platform. >> With population health at its core, you're going to be the new savior. >> That's what Americans going to be, that's what the US is going to be looking for. So you might have thought you're interested an MBA, the completion of a Bay was a sort of a casual interest. Now it's your duty to deliver because now it's upon you to help save the system, to help transition the system to one that does work. >> And that leads to a population that isn't better health. >> That the next time we have a pandemic, we can, we can deal with it. And it's at the core of it, folks. It's it's, it's it's about a physician takeover. >> And I've talked about before those are they've gone through the program. >> I've talked about this when you when you are with me to talk about the program, now is the time for physician takeover. You had the medical training. >> All you lack is it's a little bit of business training to make you a much better leader than these folks that are leaving the system and sit at home right now directing the hospital while you're in the frontlines, putting your life on the line, and you know, it's time for regime change. We talked about regime change after 911 and the age of terrorism and security. Well now we're going to talk about regime change in healthcare. >> And we talked about in the program, we talked about, this is our mission before the pandemic. Now this becomes one of, of evangelical zeal. And so this is a picture of our graduation. I think it might have been for 2017. >> These are these are the physician or the physician executives that we put out into the world. >> We invite for those that are prospective students. We want you to be standing on that stage. >> And a couple of years, those that are already in the program, you're gonna be standing on stage very soon when this clears, its going to be your job to go out and completely change the system and we're going to equip you how to do that. >> So join this position, led a revolution. I can't, I can't help but make a pitch here. I know we have a lot of you that are considering this program. This is not a, this is not an MBA program. >> This is a, this is a, a miss. >> This is out. >> This is this is a mission from the Kelly School. >> It's it's our it's our y, right? You talked you talk to Susanna, you talked to Chris reporter, who's on our faculty chair. >> You talk to any, any of us faculty that teach in this program? >> We wake up and teach you not because we enjoy it, but we know that we're helping the system to save more lives. It's only the Kelly School can help save more lives by equipping you to go in and match evidence-based medicine with evidence-based management. >> And if you talk to any of our alarms or even our students in a system, they're already making huge difference. We just launched a new website today. Very. >> Susanna and our external relations team and Rachel have done a great job. Build this new website. Where you'll find this new website is it's all about the stories of these physician innovators that have graduated from our program, Dr. 14, Dr. Breuer, Dr. Arthur story are highlighted on our website along with a lot of others. Please go and see their story. >> Doc doctor 14 was able to figure out how to serve 25% patients in the lower income without increasing our budget, Dr. Breuer completely changed the way surgical nursing teams, or CSI, critical care teams talk to each other and communicate it and handed off patients. Dr. officer in her hospital system figured out how they could still have the same outcomes and treating children with 25% fewer antibiotic prescriptions. Just in her class project, she was able to save a $100 thousand in her pediatric clinic. So this is just a this is an amazing story for those of you considering the program. >> You want a way to reconnect why you went to medical school. You want to join a brigade of physicians equipped to change the system for the better. And to get us on the other side of what our system should look like. We're the place for this. And I know when I walk in the classroom, I'm helping to equip our physicians to do that. I get a little passionate about this. So anyway, I'm I'm done. >> I'm done. >> I'm gonna hit that. Suzanne is going to come online here. I'm going to stop sharing and we're going to go face-to-face here. And as Suzanne has been collecting questions and we're going to feed it to Mason. We were gonna go for about ten minutes here, but then I'm always open to other questions. You can always email me. Dh Powell at indiana.edu. Madam director, What questions do are are are are wonderful crowd have Japan. >> I'm pretty sure you instill the line and green enthusiasm. Marino, we always love your passion. And this question actually isn't new money here. They've just completed your course is following the jobs report today. So until he noted that the jobs report was 6.6 million jobs lost and we already lost about 10 million jobs and two to three weeks. So we didn't see that. No. We'll start sort of backwards up. I think seemingly who's in the first year the program, he asked an important question and that is the supply chain failures for PPE seemed to be due to the need to minimize inventory on hand and production cost due to competitive pressures to maximize margins. How do these underlying pressures change to prevent a reversion to business as usual. >> So this is a classic example of positions. >> How being in charge, right? >> Traditionally trained MBA's, I didn't go to medical school say, hey, we should be reducing our inventories, just-in-time inventory, right? Well, positions are going to proceed very differently because they're going to understand how important the contingencies Rob rate's going to be. The risk tolerance, the way that the physicians to find risk there's going to be different. So what we're finding here is that as another failure, I've just importing lessons from other industries straight into healthcare without adapting it, I would, I would love to run a study bed, would evaluate how physician executives have dealt with that inventory issue because they bring that perspective that is traditionally trained business people are going to have excellently. >> A couple of questions for Ben to this sort of turned that you presented or the estimates dependent on health care expenditure or with the percentage of healthcare expenditure also increase in the GDP expenditure I have. >> When I look at that pie chart, my assumption was there wouldn't be much change at the average level in the short run because people are sort of locked into their insurance plans. If people are at home, they might not be getting treatment, but they got folks that are scared and sick that might go to the hospital or consuming lots of resources. So I think in the short run kind of washes out. I don't see any route. >> I don't want to be very clear. >> I don't see any change in health care spending really impacting the economic numbers that I presented him. >> Coming up. And also thinking mode 2008, what happened to the questions about the housing market? Do you think the monetary stimulus bill is going to impact the mortgage rates? And then looking forward, sort of the next three to six months, do you see the shift being from a seller to a buyer market? I think that it will be a seller market. >> I think what's going to happen is, is that when we do into recovery again and people get their job back and they've got these great mortgages that they can fund, we're going to see a little pop in residential real estate. In fact, I shared that in another webinar that I talked about today. So whoever gave me that question, I think, is thinking along the right lines. >> It will be a seller market. >> So there's one silver lining if you're trying to sell your house or you want to upgrade where you where you want to move to your family Course. >> Sorry, it's kinda hard. That's a very rosy thing to think about right now. Turn on the news. But but yeah, there'll be a pop in the rows and the real estate market, residential, commercial, I'm not so sure. >> And then see the stimulus bill Thinking to mortgage rates. >> Mortgage rates stay low for a long time because the Federal Reserve is just gonna be flooding, flooding banks with credit. >> And there's going to keep those rates down. So again, I don't expect it to bounce. >> I don't expect a huge, you know, I think rating a stay where they are for another another another few months yet. >> And there isn't no and I'll just throw this in here for those of you who've taken Phil's course at any point in time? Several him asked if they can on their own and memo correct. And predicting the economic change. I'm thinking you probably didn't have anybody who can. >> Now, I criticize a lot of those memos for being too optimistic, so gotcha. >> Yeah. So a good question. Sara Joe rattling in our second year course, what's the impact either negligible or significant above the Reconstruction happening and all the hospitals converting things to ICU's, et cetera. This is a dramatic adjustment of the physic physical infrastructure. >> I think that this is going to be part this is going to initiate complete rethought on, on hospital remodeling. And, and, and thanks. Now, obviously in the short run, it is increases the cost for hospitals and it puts them in more financial strain. And there's going to be a painful period of having it through that. But when as you know, the hope is and why I predict as, as we see it, a complete take this, these, this the traditional way may hospitals managed consider Qj scrutiny and huge criticism that they're going to be new visions of what it means to go hospitals. And it might be that you reconfigure hospital space so they can be changed quicker, right? >> Or have I can I can now imagine in, in five years it'll be normal to have a pop-up hospital kit that's that standardized manufacturing. >> Every hospitals got it. >> Maybe a storage shed and a field just off the emergency room. >> But in the short run, this is going to increase the cost of hospitals and put them under more financial stress, which unfortunately could hit physicians with salary cuts, which is even more, which adds insult to complete injury and fully cuisine, anything is on everyone's mind. >> If there is another way, that fiction that recent Mrs. later this fall, how does that affect the economic recovery that you're discussing? >> Can takes the air out of it completely. >> It takes the air out of it completely. >> If we have a catastrophic second spike, you know, I keep telling people there's not going to be great depression. >> Because as our students have learned during the great you're 1929, there were, there was no fiscal stimulus ever because people didn't believe in, didn't believe in it. There was the Federal Reserve raised interest rates instead of Lorine it. >> And there was no FDIC, right? >> And as protectionist right now, however, if there is a catastrophic second wave and the fall that could put could put another hibernation period of eight weeks. Wow. >> That then we're just in a very, very painful period that I don't even, I just can't imagine it. It's now fear of this could really drive people to save money and hold back on the recovery. So that's a good question because even if it's just a threat, it might, it might actually slow down. It could, it could dramatically slow down this return to business that I've been optimistically forecasting the last 53 minutes. >> And Philip view, perhaps we can indulge for maybe tonight are sending more minutes because you're made a few questions and I think you would want to hear one question. There's a few people asking for this telemedicine thing in terms of the Innovate there, I guess I'll just leave it at telemedicine now is getting reimbursed. So how does that change with more focus on telemedicine continued impact both costs in the healthcare industry, but also sort of the insurance economy and so forth. Any comments on sort of that growth of telemedicine? >> Yeah, so this is somewhat similar education, right? We have the sudden shift online teaching. You've got, you've got schools of business like the Kelly School with the number one ranked online MBA program in the nation. I understand that number one online MBA program a nation. And we bring that same online teaching to the business of medicine program. >> Were half of your time with us as online, great experience. >> But for us, this transition was not a big deal. All of a sudden we got other business schools. Are, are other, just even med schools. I teach this stuff online is going to be a lot of bad online teaching, right? So the question of telehealth is how much bad telehealth is you're going to be? And how much good telehealth is there going to be? I would argue that this creates an opportunity for entrepreneurial physicians because this medium takes away the monopoly of location owned by the hospitals. So I think if your physician look at, look at this as an opportunity to wrestle away the control of the hospital and this older complex because it used to be that they own the building. >> Now as long as you have a connection, you're going to be good. >> And that we have one graduate in hernia surgery that's based his his his hernia surgery centers all is all is all. But besides the actual surgery itself in the follow-up visits, it's all virtual. So I think there's an opportunity here to actually jump on it and shift the power to the physicians. >> And to speed up this, this regime change that we want to see, the police just take o will give me two more questions. >> We'll run over about three or four minutes here. >> Problem one firm from one of our fearless alumnus who, and you are getting a lot of thanks for the great insights with lots of comments. Thank you. The the medical education piece, you mentioned this about others, but do you see that in the medical education side that the data from this can be used to develop population health, population wellness programs looking at decreasing costs, improving outcomes? Or is there some systemic change that we can? How do you see the systemic change? >> I think the evidence is just going to hit his flat in the face. >> Right. We've got basically there's been no Population Health Management. United States, right? >> Our public health system is set up to track diseases and respond, not be proactive. And we were very unhealthy. What is first or second highest obesity rate in the world? So this just hit you, flatten the face and the number of lives are going to be lost is going to motivate a zealots, a zealot, a zealotry of changing the way doctors are time and population health is going to be one of them. But also it could be just management document, right? >> Medical schools have advocated the way they train. >> You know, they've advocated the ability physicians to, to, to, to run the system. And I know deans are realizing that they're trying to make up for lost time, but unfortunately that's hidden. That's making this worse. >> That should be excuse me. >> Yeah. Let's make this the last question, but I know we're going to be missing a few. So for all of you who your questions didn't get answered because we're running out of time. Just shoot filling email. I know that he would love to answer it for you again. Your email addresses ph power, Indiana. I think this is a good question from, from Peter mainland here. What you're up for? Salvation. I'm the companies that are currently hiring furiously agglomerate Amazon. What's their take on the health care, population, health opportunity, ETC. Both at economic ship happening, but also potentially being market entry for healthcare. >> You mean like Amazon come into healthcare? >> Sure. I mean, I think in terms of home delivery, could you have a model, for example, where they deliver, tell him medical equipment? >> Imagine, imagine, imagine the following. Imagine you've got a physician practice that does all tele medicine. >> Maybe some house calls, right? Because I'll tell medicine a vertically integrated with the hospital insurance scheme for hospital ONE insurance came and then, and then they have a way to deliver the home stuff from Amazon, right? >> And you avoid all the traditional distributors and the kickback so happened there. >> So I think there's opportunity there. >> And of course, there's lots of issues dealing with Amazon. And that just because you can deliver books doesn't mean you can deliver oxygen equipment to home. >> But there is a, there is a expertise there and a responsiveness to people at home that you don't find with McKesson or some of the other big distributors. So yeah, at the margins, I think there's a lot of opportunity for position run delivery, new-generation delivery, to partner with new partners and just completely bypass this, this, this medical industrial complex that is, you know, it's, it's filled with what people want to do the right thing. >> But if the system is a complete market failure, Absolutely. >> I think a second, all the participants here, which we have created crown joining the conversation to say thank you, thanks for sharing your expertise. Thank you for sharing your passion. Thanks for this opportunity and for those of you who did it, and we will send you the recording insights from this. Thanks. >> Just a shout out to everybody considering the program. This is an awesome program. >> This is the best investment you can make in your career. >> And we've seen it for the folks who graduated. >> And I look forward to seeing if I haven't seen the classroom yet, I look forward to seeing all of you in the classroom when we can talk about the US economy that's bouncing back. >> And we can look back and see if my predictions came true. >> Everyone think unite.
Leadership During Times of Crisis
Christopher O.L.H. Porter | One American Endowed Chair, Professor of Management and Physician MBA Chair | Kelley School of Business
Description of the video:All right. >> Well, welcome to our webinar on leadership during times of crises. >> My name is Crystal reporter. I have a number of roles here in the Kelley School of Business. The role that I am most proud of is my role as the chair of the business of medicine physician MBA program. >> And we had been really concerned about our physician MBAs. >> We've been concerned about the health care community more broadly. >> And we were looking for ways to stay connected with our students and to reach out and provide a way of saying sort of thank you for everything that you're doing, but also an opportunity for us to share some information with you that comes from the types of things that we study and do research on, the types of topics that we explore and the things that we teach in our classes. So this is yet another opportunity to sort of inject some business knowledge directly to physicians in a way that hopefully helps them during this ridiculously crazy time that we're in. >> So I worked with a colleague, Brittany amber, to develop a presentation specifically about crisis leadership. >> And that's a distinction that I'm going to make both now and later in the presentation and sort of distinguished leadership during crisis from crisis management, I actually think they are somewhat unique topics. And I, and certainly Kelley is a training ground for physicians that have become physician leaders. I want those of you who are part of our program, those of you who are thinking about our program to be thinking about leadership in addition to management. So the good place to start is just kind of talk about what a crisis looks like. >> It's sort of more broadly are generally. >> So a crisis essentially is, you know, what's the worst that could happen? And that's a question that I'm going to keep coming back to. And it's a question that I'm going to encourage all of you to think about constantly What's the worst that can happen, unless the worst that can happen. So when we think about what a crisis is, Merriam Webster defined it as a situation that's reached a critical phase. >> It's a pretty broad definition. >> I don't know how useful it is. >> So I'm going to sort of move us to another definition of a crisis. >> It's an event that can destroy, effect, or affect an entire organization. >> So keep in mind, from my perspective as an organizational scholar, the work that I do tends to look at how things impact organizations. And organizations are social entities at, at their core, their social entities comprised of employees. And those employees are oftentimes hierarchically structured. And the organization tends to be hierarchically structured. But as a leadership scholar and as an organizational leader, as a positional leader, one of the things that's always gotta be on your radar as your organization's performance. And so a crisis, by this definition, is any event that can effect or destroy it. Get off one more definition that I think is a useful one for thinking about the responsibilities that we have as leaders when we're dealing with crisis. And here, crisis is defined as the low probability, high impact event that threatens the viability of an organization is characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be made swiftly. >> So that's a bit of a mouthful. >> But low probability events that have high impact that threaten organization, right? >> We tend to sometimes be unclear about what's the cause the impact is going to be, and how do we resolve it, right? >> But we find ourselves in a situation where decisions really have to be made quickly. So regardless of how you want to define a crisis, I think at the end of the day we know one. When we see one, we all know that what we're dealing with, with COBIT 19 is certainly a crisis and is from that lens, I would like for you to sort of think about what your organization's response has been, how you might change that response in the future and how your organization is going to forever change after this crisis has passed. So at its core, a crisis includes a couple of things here. >> They are unexpected and does not suggest that we can do some predictions that this is a completely unforeseen sort of event, but they tend to be unexpected. >> It's our job as organizational leaders to sit back and sort of examine the landscape of bigger out and ask that question, what's the worst that can happen? Because that's the only way that you can prepare for prices. >> They are non-routine. >> So any event that happens on a weekly, monthly, annual basis, that's probably not a crisis or is not a crisis that seriousness to serious enough to rise to sort of level that we would sort of think about it as a leader, as a, as a crisis event. These are non-routine things. They certainly produce some uncertainty. But I want you to keep in mind, and this is, I think what helps distinguish true leaders from others in organizations is that uncertainty is not just for the people who are sort of outside external stakeholders, whether your organization is also for the employees as well. >> And that's a theme that I'm going to come back to. >> Organizational leaders absolutely must have their, they must be dialed in on their pupil during a crisis event and they threaten a high priority goals. >> So by high priority goals, it could be everything from employee safety to saving lives, to efficiency, to profit making, profit maximization. >> Anytime an event like this threatens the very essence of what the organization is about, and then we're in a crisis situation. Now, a minute ago I talk specifically about the importance of decisions needing to be made quickly, and I want to revisit that for just a sec. There are a couple of non-decisions that I think are important for us to discuss, for us to talk about a little bit. >> Because I think we see some elements of each one of these currently and we see the effects. >> So let's talk first about the decision, not decisions not taken. This is essentially when an organizational leader, organizational leaders decided essentially to do nothing. >> They don't do anything. >> They don't put together a team to look at who's, you know, let the response ought to be o, start coordinating other people's efforts. Essentially, it's sort of a, the show must go on or business as usual, sort of attitude and perspective. This is almost, I can't think of really any situations where this is good for a forgotten for leaders to not act. Crisis situation demands some action in some way. >> Now I want to distinguish that from decisions not to make. >> Alright? >> So this is when a leader, organizational leaders past the decision-making off to other people, right? >> They don't step in and they don't make any changes. >> They don't address the crisis themselves. They essentially outsource the crisis management. They outsource the decision-making. And I cannot think of a clearer, simpler example of a outside of what we saw at the federal level around this particular crisis, where there were a lot of decisions that weren't being made at the federal level because those decisions were being pushed down to the state puppets. And it was, and it was and continues to be justified, is the right response to this situation. As you can all see, I suspect when you push decisions down the leader, when leaders don't make decisions and rather push them down to other folks and policymaking down to other folks. >> It's sometimes looks like chaos, right? >> There's time and place for that strategy. >> But in response to a crisis like the one that we're currently going through, where it has to be coordinated efforts. >> The decision not to make approach tends to just simply lead to chaos, right? >> And, and I think that I would predict that it's going to exacerbate the extent of the crisis because people are not moving in lockstep with one another or states are not working in lock step with one another. >> And in fact, we even see that, we see the effect that it's having on the supply chain, even in terms of states competing with one another. >> Then there's finally the decision not to act on. >> And this is when leaders actually make a calculated choice to not interfere, to not make decisions. >> So you've, you're choosing in action over a specific action. >> Again, this can look a lot like you're not making a decision, and that's one of the problems here. >> But it could be that you have a different sense of, that's my pressure. >> You have a different sense of the perceptions of threat. And so we can certainly find ourselves in situations where leaders might intentionally decided they don't want to act. I think part of the challenge here is that from an outsider's perspective, and I'm going to talk about stakeholders in a minute. >> But from an outsider's perspective, it might look like empathy. >> So when we think about crisis, we also, we generally think about crisis management. >> We like to sort of identify it and we call these different topologies. >> So I'm going to share one or two with u. >> So this one, what happens in this particular typology is you're classifying crisis events based on what originates the crisis. >> And as we see on the vertical axis. So sometimes a crisis can be the result, but sort of technical or economic failure of some sort. >> But sometimes they can be the result of humans are social behavior. >> On the vertical axis, what you see is sort of how it's initial rooted is it's sort of a normal, is it something that happens as part of a normal, non-routine everyday event, which again, I would I would say that, you know, based on some earlier definitions this year, this might not necessarily fall into the crisis category, but this isn't typology to events that are true aberrations, things that don't happen. >> So, you know, I'll give you some examples here. So the mega damage might be something like an environmental disaster. >> When we think about things on that sort of bottom left quadrant, the things under the psycho, this could be things like terrorism, it could be things like sexual harassment complaint and an organization, right? In terms of like an occupational health disaster that's sort of at the intersection of all these things. >> Here we'd got like as an example, like a hepatitis outbreak because at a restaurant, right? >> So the reason why I share this, this taxonomy with you is because as an organizational leader and as a physician leader, it's your job to take time regularly to evaluate the various types of crises that can occur and that can affect your organization beauty. >> I think that what we're going to find is that there were folks asleep at the wheel as it relates to this particular pandemic. >> And that there were opportunities for us to see what was coming ahead. And people weren't necessarily perceiving the threat and didn't think were used, utilizing what I would call a faulty thinking. And I'm going to talk about some of those different types of faulty thinking shortly. >> So let me show you another way of sort of thinking about crisis. >> Crises. >> This is another taxonomy. This one essentially looks at the speed in which the crisis develops. >> So it could be sort of fast or it can be slow and then house quickly, it resolves. >> Is it does it resolved or determinate fairly quickly, or does it take a while for it to, to terminate? And so we might think of things from a slow, fast borrowed in crisis situations. And we see organizations deal with them long time back. >> If you, if you're, you know, many of our students, for example, had, have moved into administrative positions or they came back to the program. >> They came to the program because they Or saw a change and a move to administration. And they were maybe spending less time doing their clinical work or saw that there was a need for them to spend less time doing some of their political work. And so you've seen different crises sort of unfold within your organization. >> Some do map and pretty quickly, they come about quickly and quickly, but they can have profound effects on the organization. >> Somethings are these sort of slow burners sort of build up, build up, build up. I think history will, time will tell to what extent could 19 was a crisis that was sort of where it fits in terms of this type biology. But I think it's pretty clear there were signs that were available that simply weren't weren't considered, weren't given serious consideration. But we'll get a chance to look back on that now, analyze that at some point it's going to make we're an excellent, very several excellent business cases, I'm sure. Here's another way of sort of thinking about crisis events. This is a taxonomy that's what we looks at the different phases of a crisis lifecycle, everything from what warnings were there some assessment of risks that need to be made? How we will respond with a response to the crisis. There's the management of the crisis, it resolves, and then there's some recovery. >> So this is one way to sort of think about all the various things that you can anticipate. >> And I think what's, what's, what's coming? >> Now I do want to make a comment about this model because this model was very linear. >> We go every row from warning through to recovery. >> And I don't think that this crisis is going to be battling. I think this crisis is going to be very different. >> And in fact, I actually wouldn't anticipate, and I would love to be wrong, that there will be management and resolution. >> But if the management of this crisis is not coordinated from the top, then I think we're going to find ourselves back in another situation we're going to have to respond on again. And I think we see that, we see examples of that right now. >> So if you all are probably well aware will on open back up yesterday, but they're doing it very tentatively there. And we're going to start to see more places come back online. >> There's gotta be a, there's going to be multiple responses and multiple attempts, I think, to manage this before we get to meet a recovery state. >> Here's another one with you in terms of the management of this crisis. And this is a five phases model where essentially you start off, and this is what you would think about from an organizational perspective. >> All of you physicians out there who are leading and plan OLED. >> You need to be thinking about what signal should we be attuned to? >> What should we be paying attention to the environment? >> What are we going to do to prepare? And to what extent are we practicing our preparation? And one of the things that a lot of organizations are going to have to ask themselves is, what things we do previously that undermined our ability to manage this crisis. >> So for example, in our efforts to get so mean, did we eliminate the possibility of having stockpiles or extra inventory in the event of a disaster, right? There's gotta be some containment. >> Okay? >> Then you see that recovery again. >> And what I love about this model is that learning is a part of this process. >> And I think that that is one of the things that leaders ought to be focused on and ought to be emphasizing every day during this crisis, you should be focused on the learning piece. >> And in fact, if I was going to, if I was going to tweak this models, I did reading, I've been talking about this and thinking about it. >> This is not our model. >> But if we were going to critique this model or add something to that, I would insert learning when all those little pants, because I think that the learning can cap it immediately. >> And I think it's a mistake to think. And it's a mistake for your organizations that think that once we get through this, then we'll start learning. >> Well, then we'll then we'll do our our after-action reviews and then we'll do we'll wait until that late date. >> They're going to be things, lessons that will be loss. >> There will be information, it won't be captured that would be relevant in the event that this circle cycle starts all over again if you don't engage in the learning process immediately. >> So it's something I would like for you to keep in mind. >> It's a perspective that I'm hoping that all of our Kelley physician MBAs are taken back to their organizations to make changes immediately. So I'll share with you a couple of quotes from folks who I think I thought about crisis management, or we're in the midst of the crisis management. Heb got very interesting right up in Texas Monthly because of their ability to manage the crisis and make sure that food continues to be on the show and at the supply chain is not disrupted. But it's because they had been practicing all along. They go through lots of efforts year-round to make sure that they're ready when a crisis occurs. So for them it's not if it's way in a very interesting perspective, another perspective, and I just want again to highlight something that I think is really important. >> Andrew Cuomo said about a week ago, you don't fight the last battle. >> So what does he mean by you don't fight the last battle? What he's talking about is looking forward. >> So he's not concerned about what happened last week. >> He's trying to plan for and anticipate what's going to happen the next week and the week after that, as opposed to spending too much time focusing on the paths. >> And I think it's a very delicate balance. >> And I think that's what leaders have to have to do. >> They have to find a way to focus on the past just enough to make sure that they're learning. But in a soap, but they're not preoccupied with it and it's a hindering their ability to move forward. >> So with that, I'd like to move to crisis communication because this is sort of the basics about dealing with the crisis. >> And it's incredible how many organizations are not getting this right, even as we speak. >> So part of what we try to do when we manage a crisis is communicate effectively, communicate to the right folks. So who are those right folks? Well, this slide is my effort to try to help you understand all the people who are affected by how your organization is dealing with the crisis. >> And you can't leave any of these people out. >> So let's collectively call them stakeholders. >> You've gotta be attending to all of these stakeholders and you've gotta craft messages sometimes for each one of these stakeholders, right? >> So we would talk and suppliers, competitors, our employees, our stockholders. >> If we've got stockholders, we gotta be prepared to talk to the media, right? >> And as a physician leader, don't ever think that you should not be prepared to interact with the media or does provide a message about how your organization is dealing with crisis. >> I woke up the other day. >> I saw an Eskenazi dot on one of the national news channels, so it could be new. >> And as it relates to that couple of things that you ought to know as it relates to crisis communication. The first 24 hours of a crisis is the most critical for you to be communicating a message. And I'll talk a little bit about how to communicate that effectively later, but set that understand. >> Time is of essence, right? If, if, if anything, you've taken away, one of the first English they're taken away was the importance of time urgency. >> Here I want you to keep in mind that you, if you don't provide information, others will fill in the information for you. >> So people don't do well with information gaps and they're looking for them to be felt. >> And I think as a physician leader, it's your responsibility to jump in and try to fill in those gaps when you have good information to provide. But you cannot have these long periods of silence where people aren't hearing from your stakeholders are not hearing. It's important to make sure that you're telling the truth up front and width. That you need to make sure you're providing honest, accurate answers. So I am saying I am opening the door for you to provide a non answer if that's what it takes for you to make sure that you're being accurate. I would much rather, and people will have much more confidence in a leader who was willing to say, you know, I don't know the answer to that question in either handed off to someone who can answer that question or you assure that the person who's asking that question, but who would who you're communicating with that you will provide some follow-up at a later date. >> Even better, if you can let them know when you're going to be providing that follow-up. >> But it's just important to make sure that you're being truthful and you're telling people exactly how it is right up front. >> Couple other keys to communicating effectively when everything's going crazy BY president and time. >> And yes, I said it again, time, time, time, time is so important in crisis management. I just can't overstate it. So you have to be present in it. >> It has to be timely. >> You simply cannot show up. Just is not an option. I say that you should also, I would say that you also need to use multiple media types of media and communication and methods. And this is important to understand because some messages get out to some people in certain ways and they don't necessarily translate to messages that other people may understand. So in a situation like this, ball calls might be appropriate. >> Email might be appropriate. Putting something on a website might be appropriate. >> Don't simply use one path to communicate and cut off the opportunities to communicate through other ways. >> People want to see their leaders at a time like this, we're looking for our leaders for some certainty and some assurance that so you just want to make sure that you're there for them as many ways as you can. >> Again, be honest, don't spin, right? >> Most people are savvy enough, smart enough to realize when they're not being people aren't being truthful with them. >> And even if they're not, they will realize it later. >> So it's important, I think, to just be up front. >> I think that leaders ought to be able to communicate the plan of action. >> And if there's a plan that's being developed, they should communicate that they are continuing to work on the play or the plan might change. But you might let folks know that you have one. I think you need to be sensitive with the people who were affected sometimes. >> And it's interesting to me that we have all this research that talks about the types of people who move into leadership positions. >> Sometimes they're not the most sensitive folks. >> But this is a time where you really need to show us some ability to feel what other people feel and to help them through it, avoid conflicting messages in this information. >> And this is part of the reason why a lot of times all these certain people will be, that should achieve communicators in crisis situations. But if you choose that perspective and choose that plan, you need to make sure that you've got a backup per person who was just as informed as you who can jump in when the time comes or if it's a pro, this is one that people don't necessarily pay a lot of attention to think about. But it's important to deliver information in bite-sized chunks, smaller chunks. >> And the reason why I say that is because our cognitive capacity is everyone's cognitive capacity is limited. >> Some is more limited than others. >> And a crisis situation with stress and uncertainty, people's cognitive capacity oftentimes will just decrease. >> So my point is there's not so much that people can take in at any given time. >> So you can make shorter messages. >> More cuts limit the amount of content. >> The understanding that people can't consume so much at IIT that sort of break it down into smaller pieces, that would be a much better way of communicating effectively. You need to show that, and I think this has to start immediately starts showing that you've got a plan that try to avoid a repeat of that crisis, even when that crisis is not your fault, right? So if I'm an administrator in a hospital right now, I might be having conversations about how we're going to be prepared for that. How are we going to start to incorporate stop pumps, right? Or how we're going to start making sure that equipment that we're using is not outdated and all these other sort of things that we do for Disaster Management. >> I'm going to start talking about the things that if I hadn't been doing it, what I'm gonna do golf on. >> Don't make excuses for the, for the leaders in the organization. Don't make excuses for the organization. Be straight up with books. It's an important time to make sure that you are being focused on the people who are affected, not so much to yourself. And I know that's tough, especially when a situation where healthcare workers who are our heroes. >> By the way, >> But why healthcare workers are also being affected just like the general population. >> So I'm not suggesting that you don't focus on yourselves, but what I'm suggesting here is that people need to see empathy, right? And there are lots of crisis situations where you might not necessarily be affected like you are now. >> And those are situations in which you really do need to show people that you care about them. And as you're thinking about them and you're in this with them, you don't want to make sure that people never feel like they're alone, go the extra mile. >> And then the last thing I would say is make sure that you understand that the media is linked to public. In a crisis situation is not a time where you want to have a war with the public because they can be used to your advantage, helping to get your message out. Now having said that, I want to talk about some of the things that typically undermine our ability to manage the crisis. And this is in fact part of where I think we start to differentiate good business from bad business and good good management. Good leader share from sort of this with typical leadership that we might see your management, we might see a lot of organizations don't ever let any of these things affect you, your thinking, or your approach to crisis management. Some organizations take the prospective basis or every crisis is so unique, so different that we can't possibly prepare for them. >> Again, that's unacceptable, right? >> I talk a lot of times with students about carving out time to do better stuff, right? >> And it sounds kinda crazy, but yet you really do have to carve out time to do liter, stop it. So what do I mean by leader stuff? >> Leaders have to put time in their schedule so they can sit back and think about the organization at a strategic level. >> Strategic thinking, right? >> What's your landscape look like? >> What's the environment look like? >> What are the threats that we're facing? This situation ever in has highlighted the importance of making sure that as you take that time to do that liter stuff, part of it is thinking about the various types of crises that might affect your organization. So you might go back to those typologies I provided and you say, what, what's the worst that can happen? What's the worst thing that could happen immediately and have an effect on our ability to take care of our patients. >> Well, what's the, that could happen from a technological perspective? >> That could, could, could damage our reputation, right? >> Or put our, our physicians and our staff risk. >> Those are the kinds of things that, that leaders have to do. >> And so I'm simply giving you the playbook to use to start doing those things. And I'm also telling you the sorts of excuses that you can not use to, to not to jump to that. By not engaging in that process, you cannot buffer yourself from your environment, right? You can not be the type of organization at punishes employees for speaking up right? >> Where people won't identify things that they can see coming on the horizon because out of fear, hey, don't assume that when a crisis happens or crisis occurs, that you've gotta be able to be objective and rational, right? >> And that's it. >> All the decisions that you make because we know that people are people, right? And so there's a certain amount of irrationality that we can all expect to deal with, especially in a situation where there's a crisis. >> Don't assume that crisis and remote thought resolved themselves, or they're throwing enough money at a problem has gotten effects that these are just some of the things that death does have to keep in mind. >> And then finally, I want to talk a little bit about, well, you know, I don't want to skip this one. >> Reputation is important, but it's certainly not the most important thing. You should, your efforts should not, in a crisis be focused on making sure that your reputation stays intact, especially if the crisis is somehow another your fault. You've gotta take responsibility and you gotta understand that are more important things than just an organisation's reputation. But I do believe it's important to think about ways that you can improve your reputation because of the way you handle that crisis situation. >> And then finally, this idea that crises are only negative. >> I certainly don't want anyone to take that away from anything that I said. >> In fact, they'd be inconsistent with the model I showed you that showed learning as a part of that loop. >> These are there opportunities here, and I'm going to come back to that in a minute. >> So let's talk a little bit about the things that I think make Kelly students well suited to lead and a moment of crisis. >> As Kelly student, you haven't had any yet. >> You will root spinner. We're going to spend a quarter talking about all things leadership subtopic I love. >> And it's a topic that I think is practically important and valuable. >> I want to address some of the things that you've heard me say in class. I'm in this next section about leadership specific to crisis. >> I mean, if you're a student who had, not had me yet, you get this is what you can look forward to when we see each other soon. >> So if you're a prospective student, this is what we're about at Kelly, Dealing with hard stuff. So couple of things that leaders ought to do that I think real leaders do S6 things that real leaders do. Vision, mission values, those are the things that ought to drive your response to any crisis. You can never loose, loose sight of those very important things. And they should factor into the types of decisions that you make in response to the crisis. >> Number two, team efforts is not a leader's job to handle a crisis in isolation and handle a crisis all by themselves. So the best decisions we make are when they are driven by other people's or driven in part by other people's input. >> So you never want to forget that. >> But I would also suggest that you ensure that there is a diversity of perspectives about the decision and about which you're facing as opposed to a single singular sort of perspectives. As I've noted already, it's important to learn, but you don't have to wait until this is the crisis ends for you to start learning. You don't have to wait until recovery for you to start. Learning. Should be learning every step of the way. >> It's incredibly important that you project confidence. >> You gotta understand again, people are dealing with uncertainty. >> If beer there, folks are afraid of all sorts of things. We're in the midst of the Big Bang, the beginning of a recession. >> And even though I've certainly I've got colleagues who were predicting this recession won't be a long one. >> Who knows? So there's all types of uncertainty there. We looked our leaders to assure us that things are going to be OK. And you do that by projecting confidence. >> Now I don't want to conflate or you to conflate confidence with knowing everything. Because again, I would much rather have a leader who's willing to admit what they don't know. >> Because that way I'm confident that that person who go and secure the information they need from people who do, who do actually know. >> So don't, don't confuse confidence with arrogance or hubris. >> I think that good leaders use, take, use of symbolic gestures. >> I've always said that I said that I would, I would advocate the use of symbolic gestures even when times are good. >> So when times are bad, people really are looking at their leaders to show their willingness to perhaps make a sacrifice for them. >> To make sure that for people who want to see that their leaders are asking them to do things that they're not willing to do. And I will echo what my colleague being Powell, said about a week ago. I do believe you will see the rise of physician leaders as a result of this event. >> I think people are going to want to see physicians in charge. >> I've been actually telling everyone that I talk to you, that this is the year of this scientists. >> This is that right? >> Yeah. >> And I think that those who are studying, who had made a career out of studying and learning and putting those sorts of talents to use right now are going to come out. >> What they do now, what you all do now. >> And I would include you in that, that scientists, sort of practitioner bucket of folks, I think it's all going to pay dividends later. And I do think that it's important to talk about the future. >> And this is another way to help people feel better, to remind them that there's a future to look forward to. >> Again, I'll go back to Andrew Cuomo, who said last week that this is a, if I remember correctly, I think what he said is this is it is going to be a tremendous opportunity, that this presents tremendous opportunities for us. And what he was talking about is entrepreneurial spirit, talking about some of the changes that, the way that we're living right now and the way that you're practicing medicine right now are going to solidify. It's part of the conversations that we're having even in class right now about the sorts of eye opening, sort of things that we're seeing. >> What potential is there. >> And I don't think, and I think talking about those things give people confidence there's going to be another side of this. When it's all said and done. >> Okay. >> The last thing I'll share with you is that I'm going to go a little further in terms of things that real leaders do. >> But these are things that are real leaders do for others. >> And this is where I think you really see a difference between physician leaders and managers. >> You have to recognize and validate the feelings of other people. >> Certainly, Raul focused on the task at hand. I know you all go to work every day, focus on the task, but you have to be sensitive enough to wet your employees are feeling and their fears and their concerns and their uncertainty. >> And I think it's important to not only recognize them, but be willing to be in that space with them and talk with them as well. >> You've gotta understand also that you gotta facilitate people's sense-making. And by sense-making here, it's what it sounds like. It's, you know, we're all looking around trying to make sense out of what's going on. As a leader, you can help people with that process. >> You can talk about your concerns and, and you can talk about what you anticipate seeing down the road. >> And you can help them understand why you're doing the things that you're doing, and why they need to do the things that they're doing. >> All that counts as sense-making. You've gotta work really hard to try to reduce people's fear and uncertainty. And again, I think if you're trying to be present, if you're trying to be consistent, if you're trying to be fact base, that you will do those things. You gotta make a special effort to help employees cope. And by the way, all of this is sort of tied to this idea and try and emphasize the importance of emotions at work. >> We cannot ignore how contagious emotions are where people come in, you come in and people see you rattled. >> As a leader, you're rattling them. >> And that's gonna, this is contagious, right? Emotional Contagion, right? We see that happen all the time and organizations, even during normal times. >> So that spirit that you bring to work, that tenacity that you bring to the work that you know, those are the things you have to do, that confidence to bring. >> Those are the things you have to maintain in the interests of others. >> You absolutely have to set the example again, you would not want to be led by somebody and I asked you to do things that you wouldn't do, actually do things like that, that day themselves would not do. >> So you certainly want to set an example, which also have to set an example for how to deal with the tough times. And finally, you also make sure that you're providing resources for people's wellness and for their coping. One of these things that we understand is that emotional exhaustion as dynamically tied to physical exhaustion. >> And you can't work 24 hours straight, right? >> And then not think that it's going to have to take an emotional toll. And I was disappointed to see how slowly some organizations, we're recognizing the drain emotionally and physically that some of this was putting on their employees. >> Got to be an advocate, an advocate for them. >> But you also have to understand that relationship is dynamic, right? And so I did, I restarted see organizations come up with systems to make sure that people are getting a chance to recharge and get well so they can come back to work. So as a leader, are those are, those are certainly some priorities that he did not realize. >> We're all on your plate. >> They absolutely should know your plate. >> So with that, again, I could not be proud to be affiliated with Kelly, Right? >> No. >> And to have connections to all of you who are doing this very, very important work. >> I'm Suzanne and I helped me to field some questions from you that might have come up as I was talking. >> And certainly for those of you who are not as closely connected to the program, we certainly would love to hear you talk about some possibilities. >> Board engagement, excellent, amazing insights. And it's interesting to see so much in the query here. And I think that's in the interest-bearing participants, a couple in nodes. At the very end, you see a box that says Q and a. So if you click on that type of question for Christopher at this point and I will moderate them, but noting some of the theory trace here, who's a graduate of our yeah, revamping though I'm Welsh, he's made some observations about sort of how this crisis was handled and how it may or may not align with that theory. Do you have any comments on that? And he's talking about sort of the incident command at multiple levels, local, city stay, regional, Federal, et cetera. And the preparation aspect that you are talking about. Any thoughts you want to share on a theory behind that? >> Well, theory is just theory, right? So I'll start, I'll start with that. Oftentimes we try to talk about, and in these cases, these models try to articulate what are the best case, best-case scenario, how the eye with the ideal response would look like. >> And I know, you know, as I said, things don't always look that way. >> And this certainly as it unfolded that way, I think that is that as a leader in an organization, that's the, these are the, these are the life cycles that you should anticipate. These are the responses that you should be planning for. >> You'll be better at the end of the day dealing with the crisis if you've taken those models into consideration. >> But absolutely, tray, you're right. >> Things Walton won't necessarily happen or unfold the way that we'd like them to. >> But I think the best organizations are prepared with those models in my brain. >> If we're sorted further alone and we didn't have the minerals in marine and we're in sort of a reaction. And this gives it a couple of questions. People are asking, meaning from this effort and how do you interact with neither explain what's right to disagree with the approach they've taken. How do you start changing that course? >> Yeah, so all of, all of the students who have me know that I'm a big advocate for not waiting around for someone to allow you to lead and jump in and you start leading right away. Right. >> So i >> This is no different of the situation. >> Now, I do think if you've got the ability to be in the year of leader and leadership team or the management team. >> Or if you're already in a position where you can do this, I think you can start putting together tombs like today to take on certain aspects of the, of this tags. >> So you can have a team that's focused on gathering and sites you could find ways to debrief people, whether it's after a chef Bill or after a few chefs, or maybe it's weakly to find out what's working and what's not working. >> Because if we see this, as many anticipate this, you know, potentially another flare up. And we've gotta be able to respond better than we did the first time. >> And that's, and that's sort of the key. So good. I put together a team that's going to work specifically on learning? Could I put together a team that's gonna get us ready in terms of our stockpiles, in our ability to to do inventorying, even right now? Absolutely. >> Could I be reaching out to other organizations rather than, for example, I'm working at this problem as if I'm the only hospital and how can I be reaching out to other hospitals to find out what they're doing that's working well, right? >> And that's, you know, there are other, there are external, but they're certainly part of the, part of the process, right? >> So you might find out that they've put a new process in place that's helping them to manage patients better or helping them to reduce infection rates and their staff that are. So this is a time to be collaborating all over the place. >> That brings up a question from Dr. Linda. Linda and another array he talks, he's bringing up the question, this sort of aspect of change management and the change agents that you can be in a time of crisis. And do you have any thoughts or strategy you would recommend to make sure a return to usual, not the shapers of healthcare moving forward, that we see. Some of that change aspect that we really do need to see so that we're more prepared as a health care system. >> Yeah, I absolutely would agree with the idea that we will not return to normal. >> I think there's, I think there will be some things that will return. I think there will be lots of changes and I think that changes happen. >> So folks who've had me Orlando has knows that I that I believe that oftentimes there has to be the bits that initiate change. >> This is a huge event. >> The opportunities there, I can't imagine. >> And I know all the all the barriers to change that we typically see and typically deal with. I know they're there, but I can't imagine being the healthcare organization that is going to want to return back to the status quo at when this is over. So I mean, part of the urgency, I guess around making the changes, not to be the organization that's left behind. And you have to also understand that the general public is going to look at healthcare organizations very differently as well, right? And so they're going to your, that the people who you serve and take care of are going to have expectations. >> About changes and, you know, they're going to be folks out here. So, you know, if I could have gotten disappointment done via telemedicine, Why am I why am I in a doctor's office? >> Or if there's a being in the doctor's office is going to increase the likelihood that I'm going to get sick or my family member, Buddhists say, what sort of things can I not necessarily see or go to a big hospital for if I'm more likely to get sick and, and bigger hospital. >> So I think the train has already left and an organizations just have to get on. >> But now would be a great time to brush up on your skills about to most effectively manage change and how to identify the people who can help you do that. >> And so the things that we talked about, the change management class and the leadership thinks. And I think this is num only rate for physician leadership. So I'm excited about the potential that will recur to go a few things more from that crisis management piece you mentioned sort of the piece of sometimes information needs to be limited just to prevent ASP piece. >> Can you comment a little bit? >> How does that argument Wow, yeah, so I can hear all of what he said, but I think that you might have been asking about this, trying to find this balance between giving people all the information, but also giving them the information in smaller chunks and, you know, being honest and being incredible. >> So at the end of the day, you cannot let your credibility suffer during a crisis. >> And that's why I kept talking about being timely and being present and being accurate. >> There will be information that you're privy to. >> There will be things that, you know hopefully, and I think it's your responsibility to share them, but you share them in a way that doesn't scare everyone. >> Adapt now, and I guess part of the challenge is that a situation like this, the reality is scary, right? >> So saying we could see a 100 thousand deaths in the United States is a scary thing. You, it's inevitable that people will be scared with that information, but that's still a better approach than burying that information some way or are being deceptive about what that number is. >> And in fact, I think that we will look back on this and say not having those types of numbers, are being upfront about those numbers. >> And that potential early on is what I'll prolonged us getting to a point where we can start to fight back against, against this. >> So whatever information you get, we get people to true, I think people can in fact, hailed literature, but you can still break that information up. >> And there's sharks that will allow people to, and you can turn away and allow people to absorb the information that they can absorb when they can absorb it. >> So >> As a as a clear case in point, I would not want to have a four hour meeting with my team in the midst of this crisis, right? >> Could we do a 30 minute meeting and then revisit it in and see each other again the next day and do another 30 minutes. >> This is just people are overwhelmed. And so I think it's a delicate balance. >> I, I would, as a leader, I would love to have a, a follower who I have a good relationship in that team, who can give me some social cues and maybe sort of tapped me and say, you probably reached that point where people are getting it anymore or people are consuming the information, it'd be nice to have someone imbedded in the team who can help you make those decisions. >> If you're not necessarily all that sensitive to those cues or your understanding of the situation is so different from other people that you can handle that information in ways that most of your followers might not be able to. >> You're getting quite a few questions around the UPA asserting the areas people scream to me through the braces and also trained to lead towards the evolution, a change. Maybe it's just maintaining. Let us say that last part one more time. You might kind of went, sorry, trying to manage towards profitability or I've ability, but also that larger goal dancing system. Looking at all the different levels of care. A lot of people are asking about what's the solution? What's the approach? How should people at this point we with that larger objective? >> Well, I think that, you know, that I think the reality is that before this crisis, performance was multi-dimensional. >> After this crisis, mole performance will be multidimensional. And certainly I think that students are asking about what folks were asked about is in the midst of this crisis, performance is still multi dimensional. >> And so your eyes as a leader have to be on multiple targets, right? So before I talked about, you know, organizations by ability being threatened. >> If you and I, and I know I have a colleague who does a great job of talking about the myth of the non-profit, or it is to all of you are in an organization or you're trying to maximize profits, certainly, you know, helping people understand that that's still part of the goal. You're viability, your ability to sort of survive as an organization is still a priori what your priorities can share from time to time. >> And so it takes, I mean, leaders have to be able to talk about the big picture, right? >> And so while you might not be doing things that aren't profitable right now, while you might be using procedures, not procedure, but you might have processes in place or you might have processes in place that weren't the safest form of employees. >> Maybe edition, right. >> To talk about where you want to ultimately get back to is exactly what leaders ought to be doing. >> This is part of being future-oriented. >> They, I'm talking about what that future looks like. >> And it might include being back to profits and being back to seeing X amount of patients. So whatever criteria you use, but leaders also have to be sensitive enough to, to help folks understand was so certain goals are going to be put on the back burner for the time being to get through the crisis is still part of the survival of the organization. >> Interestingly, you want to hear when they move, right, in saying that people are living with this right now, he doesn't actually have much just flow as nice. >> Thank you. >> Yeah. >> So if you had to capture a leader right now, that you would say is an example of the theory you're talking about. >> Anybody would mean absolutely brilliant I or wherever this conversation as we were putting this together for you all, I watch him every day. >> In fact, I think a good chunk of people are watching him everyday. Andrew Cuomo is doing. >> If it's uncanny how, how his ability to do the things that we've been talking about it so much so that I actually had made the comment and to Brittany that it seemed as if he was working with some crisis, like a leadership scholar or crisis management scholar. Also just to sort of refine what he was doing on a day-to-day basis. He's he's being fact base, he's being forward-looking. >> He's empathizing with folks. >> He's showing that this is touching him to, you know, he made a point to talk about his, his own fears so people can, so you can show people that he can relate to them. >> He's given people an opportunity to control their destiny to some extent. >> But then he's also been firm when he couldn't do it anymore because people were making bad choices. If you want a lesson in leadership, I would say watch him every day for his hour, 45 minutes or so, press conference where he's keeping people informed on a day-to-day basis. >> It is is just ridiculously what he does is ridiculously good. >> And there's another example that I'll quickly mention is the day that they were moving with the National Vergara came and he talked about being Yep. How he would not put them any place that he wasn't willing to go to. Yeah, it was one of those who had patent moments. >> It was it's, it's, it's amazing. >> But I would look, I would look at him and politics aside, I would look at what he's doing. >> I will look at how he's communicating. >> I will look at his approach. I will look at how he's delegating responsibilities to folks and how he responds to questions when he doesn't know the answer. >> I mean, he does he's just doing all the right things and, you know, time will tell if he's made all the right decisions. >> But I don't think that that's that should be, I don't think that's necessarily the standard or other criteria which leaders will be judged in situations where there's this much uncertainty and there's no row label is going to be how you lead. >> Excellent, excellent. Can you hear me now? >> I think I hit a tech problem. >> I'm sensitive to our time, so if you don't mind, I was going to share our information on CMEs. Everybody has it. Can you see? It doesn't seem to be technology, doesn't seem to be my friend here. >> In this moment, I stop sharing easily is your nope, I got it, right. >> And so for those of you who are on the screen right now, we do have CMI available to you. And if you're not able to see, I'm just going to tell it out loud to you right now. So you'll see get a follow up email from us with the information on that and the specific code for the meeting today, if you've already got the email from us, is 52070. Again, that's 52070 would be the code that you text to get your CMEs for today. So Christopher, thank you. I think this has been incredibly insightful. The feedback from the group here as they're going is just that this has been what they're dealing with and you have hit it right at the head while also giving them solutions or how to go forward. So I really appreciate your sharing your expertise today. >> Yeah, I I I'm happy to do it and I'm I'm happy to continue doing it. >> And so I look forward to seeing all of you who were part of the program. >> And for those of you who are thinking about your next steps, I do think that this is an opportunity, is really an opportunity. I think we're going to see seismic shifts in health care. >> That part of that shift will be folks like you taking charge a even more so than you already do, and having a real impact on our ability to manage these things better in the future and maybe even prevent them. >> Absolutely. >> Well, thank you all for the work that you're doing. >> Thank you, Christopher, for your work. Have a great day, everyone.
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