For What It’s Worth by
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The coronavirus pandemic engendered a global financial meltdown orders of magnitude greater than the 2007-2008 debacle.  But the two share a fundamental feature: uncertainty.

The first question is, “what if we’re wrong?”  The second, larger question is, “what if we can’t know?”

Last time around I was still consulting in the financial services area, and one of the enormous issues was the valuation of securities.  The upheaval in the markets made it problematic to assign values to certain classes of securities, and valuing those securities was instrumental in facilitating transactions of all kinds.  For instance, a mutual fund offers and redeems shares every day, and the offering and redemption price is determined by the aggregate value of the securities held by the fund.  If securities are overvalued, an investor redeeming shares is overpaid at the expense of continuing shareholders; if undervalued, the redeeming investor is underpaid and continuing shareholders reap a windfall.

I am an attorney, not a financial analyst, and while I have significant training in economics I am no expert.  But through years of advising clients I had gained sufficient knowledge and experience that in the 2007-2009 period I found myself on several panels presenting programs on hard-to-value securities.  My panel colleagues were financial analysts, and they offered useful advice about development and use of various “models” to determine an agreed value to these hard-to-value securities.  I was always bemused by their presentations because each implicitly suggested a level of definiteness that was entirely unwarranted.  Being unafraid to be the skunk at the garden party I offered criticism, and suggested that in these situations one should factor in an uncertainty “haircut” (discount), because the level of uncertainty in the process was material.  I never had any takers but my point stands: we have to acknowledge – and deal with – the fact of uncertainty.

And boy do we have it now.  Many unspoken words hang in the air -“when?” and “what if” and the like.  When will there be a treatment, when will there be a vaccine, when will reopening occur?  What if the economy is slow to recover? What if job losses persist?  Etc.  The simple answer to each is the right answer: We. Just. Don’t. Know.

So it falls to us to learn to manage the uncertainty.

At a “micro” level, we already know how.  Or at least have ways of coping.  For example, one of the earliest effects of the emerging pandemic was that store shelves were quickly emptied of toilet paper.*  Game theory demonstrates this is a no-brainer.  In a decision-making situation, or game, we intuitively look to see if there is a dominant strategy, a “move” that is better for us regardless of what our “opponent” does.  We have a choice: make no change in our supermarket behavior or acquire and hoard tp.  Ideally no one changes his/her behavior.  Store shelves remain stocked in ordinary course.  However, from my perspective, if I make no change and others go the hoarding route, I am at a loss.**  If I, too, hoard, along with everyone else, I at least get my share.  And if I alone hoard while others do not change behavior I can buy a lifetime’s worth, but no worry, no “best if used by” date applies.  So regardless of what “you” do I am better off if I hoard.  This is a familiar result in game theory: the societally preferred result is disincentivized.  But this “micro” phenomenon is of only passing interest to me.  It’s managing the “macro” level of uncertainty that’s of interest.  And here game theory is of no use.

I believe the “macro” uncertainty issue presents at least two distinct but interrelated questions.  As we experience uncertainty we make certain assumptions to attempt to manage the uncertainty, e.g. “well the coronavirus pandemic will be in the rear-view mirror by (pick a date)”, and “the economy will be on an even keel by (pick a date)”.  The first question is, “what if we’re wrong?”  The second, larger question is, “what if we can’t know?”.  Larger because the question addresses the crux of the matter: we do not like uncertainty and want to feel that any period of uncertainty is finite, that there will be an end.  But now apply the first question.

I wish I had a solution, or even useful practical advice to deal with macro uncertainty, but I don’t.  But I do have a perspective.  Governor Andrew Cuomo of New York, in his daily briefings, has several times mentioned the question he most often hears, “when will be back to normal?”  His answer: we’re not going back to normal.  We need to take the lessons of this pandemic emergency and reimagine our futures.  There will be a new normal.  I believe that one of the linchpins of the “new normal” will be an acceptance of uncertainty.  As I tried to tell my panel colleagues those many years ago, by all means pursue measures to reduce uncertainty but let’s not put too much faith in our conclusions.

– – – – – –

* What is it about toilet paper?  Is butt-wiping somehow a primal activity that must be safeguarded?  Or are we just collectively full of . . . something?

** Of course, there is an apt colloquialism for my situation here, but decorum precludes direct mention.


Profile photo of Tom Steenburg Tom Steenburg
Retired attorney and investment management executive. I believe in life, liberty with accountability and the relentless pursuit of whimsy.

Characterizations: funny, well written


  1. Thanx Tom, as always your story is well written and full of good humor, altho this financial dummy lost you after the “hard-to-value securities”.
    Just stay safe!

  2. John Shutkin says:

    Terrific analysis of uncertainty, Tom. It puts both the micro and macro in perspective very nicely, right down to the TP issue. Of courswe, I was hoping you could somehow provide a nice, certain (and, hopefully, happy) ending, but that’s not the way uncertainty works. Right?

  3. Marian says:

    Excellent analysis, Tom. In the 1980s, I was fortunate enough to study with Dr. W. Edwards Deming, and he said that there will always be “stuff” that is unknown and unknowable. Your economic uncertainty analogy applies to the biology of the virus and the pandemic as well. Biology doesn’t operate like a set of zeros and ones, but we do our best to understand and narrow down the treatment and vaccine candidates. That’s where randomness, if it’s positive (aka “luck”) might help us, but we just won’t know until we experience it.

  4. Your featured photo is the perfect illustration to your story. Just looking at it makes me nervous. I have what my husband calls an irrational fear of fog…when we take a road trip and I can see a fog bank moving in, I go right into anxiety mode without passing Go. I think we’d all prefer to know what’s coming so we can prepare for it, no matter how bad it is. It’s the not knowing that keeps us awake at night. It will be interesting (to say the very least) to see how we manage it from now on.

    Re your apt colloquialism, I may be sniffing up the wrong tree (sorry!) but thought I’d just mention the show I’ve been binge watching (along with Suzy’s son’s show)…it’s called “Schitt’s Creek.” It’s one of those shows you either love or hate, but I’ve yet to watch an episode without laughing out loud.

    Stay safe, Tom!

  5. Suzy says:

    Well, you picked a great song for your story title. It was running through my head the whole time I was reading the story. And indeed, your point is that “there’s something happening here, what it is ain’t exactly clear.” Thanks for giving us your analysis of the current crisis in highbrow economic terms. It’s always nice to have your voice here on Retrospect!

  6. Laurie Levy says:

    This is a very interesting take on what is at the heart of all of the coronavirus craziness — the uncertainty. It is so hard to live with not knowing when the staying home and social distancing will end. I can accept the idea that there will be a new normal. I just can’t deal with not knowing when the new normal will begin. Thanks for sharing your unique perspective, Tom.

  7. Betsy Pfau says:

    Thanks for that analysis, Tom. My husband was a management consultant (mostly around IT strategy for financial institutions), so I’ve heard your terminology, without necessarily understanding all of it, for years. But yes, risk and uncertainty is scary. And we’ve got lots of it right now, though I still don’t understand why people need to hoard TP.

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