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Globalization in the age of the coronavirus

29/12/2021

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Technology has been driving global trade and opportunities for investors
From Stockholm to Singapore, and places in between, I’ve come to see the rapidly growing global trade in services as part of the international opportunity set for investors. The tremendous expansion of the internet globally really drives this trend.
For example, inexpensive, high-quality telecoms make customer service centers available at any time of day, while online entertainment almost instantly spreads the latest music video or TV series instantly over computers or phone screens around the world.
More importantly, technology allows new ways to trade services. For example, technology is becoming more embedded in goods; think electronics that run everything from cameras to cars to kitchen appliances. This means that services such as research and development (R&D), engineering, sales, and marketing can increase sales across borders.
Trade is just as important as ever, but the composition of trade is changing.
Trade is still creating jobs, profits, and investment opportunities, but services trade is growing faster than goods trade. Investors who want to take advantage of this trend may need to be more selective and focus especially on the U.S. and, next, China, India, and increasingly Southeast Asia.
This geographical selectivity potentially oVers investors a strong advantage that investments in the rest of the world likely will struggle to match over the coming decade. What’s more, these geographic preferences align well with recent additions we made to our strategic allocations in U.S. Large Cap and Emerging Market equities.
Many of the S&P 500 Index sectors that we expect to outperform in a post-pandemic world, such as those focused on technological innovation already have some of the largest weights in the Index. Most notable are Information Technology, and Consumer Discretionary and Health Care. A more cyclically oriented sector, such as Industrials, also may benefit.


And there are other trends at work: The pandemic has resulted in what I to call “the Big Rethink”.
Broken supply chains, a realization that some overseas industrial supply chains are more strategically important and more vulnerable than we had thought, and the politics of pandemic are leading to a reassessment of 
goods trade across the globe. The U.S. and Europe have identiAed critical industries, for example, those providing basic health care supplies such as cotton swabs and personal protective gear that need to stay closer to home.
Moreover, as U.S.-China competition heats up the political rhetoric, China has prioritized national self-su\ciency for its technology and consumer goods needs. As a result, the share of global trade in manufacturing output has been shrinking and we are seeing a rise in local or regional production and trade networks.
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Weighing potential market threats from inFLation

29/12/2021

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Short-term investments were about the only game in town back then, beyond gold and other tangible, or physical assets. That put the spotlight on money market funds, capable of taking full advantage of then Fed Chairman Volcker’s efforts to break the back of inflation by raising short- term rates to unprecedented levels.
Volcker’s successful effort was the catalyst for a decades-long decline of inflation, or disinflation, propelled increasingly by fundamental changes to the economy. These changes ranged from diminished union power, deregulation, an aging population, and the migration to low-cost suppliers abroad under the banner of globalization. The resulting fall in interest rates accompanying those declines laid the groundwork for the golden era of bonds and stocks, by sending bond prices higher and allowing equities to accommodate higher valuations.
Disinflation’s climax came during the economy’s pandemic-induced free fall, serious enough to trigger declines in the CPI during the spring of 2020. Inflation is playing catch-up following its deep dive during the economy’s free fall last year. Increases already are emerging. Services inflation is rebounding from a 10-year low, propelled by increased airfares, hotel rates, entertainment costs and other frontline industries hit hardest by the pandemic. Goods, or merchandise, inflation is weighing in with outsized increases in used car prices and other sizable increases contributing to the largest one-month increase over 55 years. Increases in goods and services prices could be sustained by labor-market dislocations and by supply-chain disruptions created by a V-shaped recovery of global economic growth and world trade.

​What’s next for inflation?

These likely are temporary supports for re-inflation, begging the question of inflation’s outlook beyond increases extending into early 2022. Will inflation continue to rise beyond its pre-pandemic peak, reversing its decades-long decline? Our view is that inflation will face hurdles to sustaining a rate that’s expected to climb to a 13-year high in 2021. Here’s why:
By the early part of 2022, economic growth may well throttle back to a more sustainable rate easing demand pressures on capacity as the impact of the economic stimulus subsides.
The economy has shown an ability to grow more rapidly than its measured potential for sustained periods during 1996 – 2000 and again in 2018 – 2019 without a material acceleration of inflation, partly because of the fundamental restraints mentioned earlier. Those fundamental restraints on inflation, though eroding, still appear strong enough to keep a lid on in&ation, much as they have since the 1980s.

Potential pitfalls and opportunities for investors?
For investors, a moderate rise of in&ation does have its potential beneCts. The outlook for corporate proCts likely will improve if more rapid price increases are being propelled by economic growth strong enough to lift sales volumes and business pricing power. That same lift to corporate proCts can help support credit quality among corporate bond issuers.
Still, be mindful that even a modest rise in in&ation and interest rates can have an impact on certain types of securities that happen to be unusually sensitive to interest-rate changes. These securities may include longer- dated bonds and income-generating areas of the stock market such as dividend paying stocks and REITS that may not look as attractive if bond yields are in a sustained rise.
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AFTER THE STORM

29/12/2021

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Courtesy of V. WILLIS - WELLS FARGO Investment Institute
We think that a storm is a good analogy for COVID-19. It came through and shattered lives, jobs, and entire economies. And while we’re certainly not at the end of the pandemic, we seem to have reached the point where we expect things will gradually improve over the months ahead.

Thanks to many individuals’ hard work, e@ective vaccines are available and their distribution is ramping up. And, as is the case after a major storm, when we Onally put the pandemic behind us, we don’t believe the world will reset to where it was. We expect it will be somewhat di@erent.
It’s that changed landscape that we think investors need to prepare for now.
What will the new investing landscape look like?
At the Wells Fargo Investment Institute, we’ve been spending a lot of time thinking about the conOguration of the new landscape. Although we haven’t seen a pandemic on this scale for over a hundred years, we do think that we can learn from other similarly disruptive periods in our history.
As we’ve worked through di@erent scenarios, I was interested to see that several trends began to emerge that favor areas of focus for me early on in my career, among them commodities. Driving these trends is a drop in supply as weaker companies have gone out of business and cheap debt. Access to low-cost debt has allowed smaller companies to invest in new technologies, suggesting that they may emerge from the pandemic in a stronger position to compete.
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Four ways to help those who might lose out in the green economy

3/3/2021

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To begin with, it’s crucial to recognize that this transition will happen in an economy that is already incredibly dynamic. The demand for workers can shift quickly from one sector to another, and from one geographic area to another. And these changes aren’t just driven by clean energy—other factors like automation and robotics play an essential role too.
By and large, this dynamism is good for the economy. I think that’s going to be true in the clean-energy transition too, because it will create so many new opportunities for workers. In some cases, their skills will transfer directly. For example, if green hydrogen fuels turn out to be a big business, we’ll still need pipelines and trucks to move them around—just as we move around oil and gas today. Mining skills could also be useful in sourcing minerals, like lithium and copper, that are used in the production of clean technologies and will be in increasingly high demand.
There will also be jobs involved in constructing and running all the infrastructure for the green economy: wind and solar farms, modernized power grids, battery factories, refineries for sustainable fuels, facilities for long-duration storage of electricity, direct-air capture facilities, and more.
But you don’t have to be a climate skeptic to see the challenges with all this. These new, clean solutions may not use the same workforce or be located in the same regions as their conventional counterparts. (Most of America’s wind power is in the middle of the continent, not in coal country.) Some new jobs may not be as good as the ones that are lost. And some new technologies may need fewer workers than the ones they’re replacing.
For example, electric vehicles need less maintenance because they have fewer moving parts than cars with internal combustion engines. In a future with lots of EVs on the road, fewer people will be needed to repair them and to work at gas stations. Whether the shift to EVs ends up being good or bad for America’s automotive industry will depend on whether governments act now to encourage manufacturing—in existing and new plants alike—throughout the entire supply chain, from parts to assembly.
Over time, dozens of industries will go through their own evolutions as they reduce and eliminate their emissions. Workers and communities across the country will be affected: coal miners in West Virginia, factory workers in Ohio and North Carolina, automakers in Detroit, cement makers in Seattle. And it’s not just in the United States—the same changes will affect workers around the world.
What can be done about it?
Unfortunately, there’s no single solution that will work in every industry or every community. The federal government can provide guidance and funding, help connect regions that are facing common challenges, and create incentives to make good clean-energy jobs accessible to everyone. But in the end, it’s really state and local leaders—from the public and private sectors, labor groups, and community groups—who will be crucial.
There are four principles that should guide the transition:

​Think big and start now
​
The deadly power outages in Texas are a painful reminder that unpredictable weather is going to be more common, and there’ll be times when it affects the ability of entire regions of the country to function effectively. Governments should invest now in upgrades to make the power grid and all U.S. infrastructure more resilient. That process is an example of how this transition can make the country better prepared to prevent a climate disaster while significantly increasing opportunities for good jobs.
The sooner this transition starts, the better off everyone will be. New technologies like clean cement and sustainable aviation fuel will need manufacturing facilities, supply chains, and distribution networks—all of which will employ many people in construction and operations. Whoever builds the first of these will have a leg up on building the next ones, and whoever figures out the operations side first will able to scale faster than their competitors. Each of these pieces of infrastructure should be thought of as large construction projects requiring a significant amount of labor. They’ll also be long-term investments—these plants and refineries will remain in these communities for decades. 
There’s also tremendous economic opportunity in research and development funding. R&D money creates immediate jobs in the communities where it’s spent, and it also gives them a head start on growth—since the places where that money is invested are often the places where new companies take root. Meanwhile, the federal government can adopt policies that encourage innovators to demonstrate and deploy their new ideas in the communities where they discover them.
In choosing where to make these investments, equity needs to be a driving factor. Polluting industries are disproportionately located in communities of color, to the detriment of their health and well-being. And these communities tend to be more economically vulnerable and have fewer safeguards, so they will often be hit harder than others. In the transition to clean energy, people in disadvantaged communities deserve opportunities for good jobs that won’t put their health or the environment at risk.

Learn from promising examples
​
Toledo, Ohio, has been a hub for the glass-making industry for so long that its nickname is “the Glass City.” After its manufacturing base hit hard times, local leaders identified a new area where the city’s glass roots were especially relevant: making solar panels. This work has become a key part of the local economy.
In Pueblo, Colorado, business and government leaders are transforming a historic iron mill—once the only steel-making company west of the Mississippi—into the world’s first electric arc furnace powered primarily by solar energy. That project will ensure that at least 1,000 steelworkers keep their jobs and create hundreds of construction jobs.
And in New York state, all offshore wind projects are now required to pay prevailing wages to the workers who are installing wind turbines. Local unions played a crucial role in pushing for the agreement.

Commit the resources to make it work
Making sure the transition is just and fair won’t be cheap. Germany, for example, is planning to spend more on this than on research and development into clean-energy innovation.
But it’s not simply about spending more. If it wants to compete with Europe and China in the green economy, the U.S. will need a generation of engineers and scientists who focus on these new areas—so the energy transition is another compelling argument for improving America’s education system. Even relatively small improvements in schools would help graduates be more adaptable as they move from one job or career to another.
Innovators at universities also need to be connected with entrepreneurs and investors so their ideas can get from the lab into the market—which will spark the creation of new companies that create jobs and opportunity. The University of Toledo, for example, has been an important partner in the transition that city has undergone.

Stay on track

Nearly every political party in Europe is committed to avoiding a climate disaster. So when they make 10- or 20-year commitments to funding innovation or building infrastructure, the private sector can take them seriously. But in the U.S., when there’s a change in leadership in Congress or the White House, it can mean that priorities and policies change too—which makes it hard for companies to raise the capital for, say, retooling steel and cement factories. A serious long-term commitment to fighting climate change by all leaders would make a big difference.
Moving to a green economy is the biggest challenge the world has ever faced. I’m optimistic we can do it, for all the reasons I explain in my book. But it needs to benefit everyone—including those workers and communities who depend on the fossil fuels that we need to get rid of.

This originally appeared on 
gatesnotes.com.

​
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COVID 19 - PANDEMIA Opinion by BILL GATES

30/4/2020

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Pandemic I:
The First Modern Pandemic

BILL GATES
PANDEMIC I - THE FIRST MODERN PANDEMIC
The coronavirus pandemic pits all of humanity against the virus. The damage to health, wealth, and well-being has already been enormous. This is like a world war, except in this case, we’re all on the same side. Everyone can work together to learn about the disease and develop tools to fight it. I see global innovation as the key to limiting the damage. This includes innovations in testing, treatments, vaccines, and policies to limit the spread while minimizing the damage to economies and well-being.
This memo shares my view of the situation and how we can accelerate these innovations. The situation changes every day, there is a lot of information available—much of it contradictory—and it can be hard to make sense of all the proposals and ideas you may hear about. It can also sound like we have all the scientific advances needed to reopen the economy, but in fact we do not. Although some of what’s below gets fairly technical, I hope it helps people make sense of what is happening, understand the innovations we still need, and make informed decisions about dealing with the pandemic.
Exponential growth and decline
In the first phase of the pandemic, we saw an exponential spread in a number of countries, starting with China and then throughout Asia, Europe, and the United States. The number of infections was doubling many times every month. If people’s behavior had not changed, then most of the population would have been infected. By changing behavior, many countries have gotten the infection rate to plateau and start to come down.
Exponential growth is not intuitive. If you say that 2 percent of the population is infected and this will double every eight days, most people won’t immediately figure out that in 40 days, the majority of the population will be infected. The big benefit of the behavior change is to reduce the infection rate dramatically so that, instead of doubling every eight days, it goes down every eight days.
We use something called the reproduction rate, or R0 (pronounced “are-nought”), to calculate how many new infections are caused by an earlier infection. R0 is hard to measure, but we know it’s below 1.0 wherever the number of cases is going down and above 1.0 wherever the number of cases is going up. And what may appear to be a small difference in R0 can lead to very large changes.
If every infection goes from causing 2.0 cases to only causing 0.7 infections, then after 40 days you have one-sixth as many infections instead of 32 times as many. That’s 192 times fewer cases. Here’s another way to think about it: If you started with 100 infections in a community, after 40 days you would end up with 17 infections at the lower R0 and 3,200 at the higher one. Experts are debating now just how long to keep R0 very low to drive down the number of cases before opening up begins.
Exponential decline is even less intuitive. A lot of people will be stunned that in many places we will go from hospitals being overloaded in April to having lots of empty beds in July. The whiplash will be confusing, but it is inevitable from the exponential nature of infection.

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PANDEMIC I - THE FIRST MODERN PANDEMIC
As we get into the summer, some locations that maintain behavior change will experience exponential decline. However, as behavior goes back to normal, some locations will stutter along with persistent clusters of infections and some will go back into exponential growth. The picture will be more complex than it is today, with a lot
of heterogeneity.

Have we overreacted?
It is reasonable for people to ask whether the behavior change was necessary. Overwhelmingly, the answer is yes. There might be a few areas where the number of cases would never have gotten large numbers of infections and deaths, but there was no way to know in advance which areas those would be. The change allowed us to avoid many millions of deaths and extreme overload of the hospitals, which would also have increased deaths from other causes.
The economic cost that has been paid to reduce the infection rate is unprecedented. The drop in employment is faster than anything we have ever experienced. Entire sectors of the economy are shut down. It is important to realize that this is not just the result of government policies restricting activities. When people hear that an infectious disease is spreading widely, they change their behavior. There was never a choice to have the strong economy of 2019 in 2020.
Most people would have chosen not to go to work or restaurants or take trips, to avoid getting infected or infecting older people in their household. The government requirements made sure that enough people changed their behavior to get the reproduction rate below 1.0, which is necessary to then have the opportunity to resume some activities.
The wealthier countries are seeing reduced infections and starting to think about how to open up. Even as a government relaxes restrictions on behavior, not everyone will immediately resume the activities that are allowed. It will take a lot of good communication so that people understand what the risks are and feel comfortable going back to work or school. This will be a gradual process, with some people immediately doing everything that
is allowed and others taking it more slowly. Some employers will take a number of months before they require workers to come back. Some people will want the restrictions lifted more rapidly and may choose to break the rules, which will put everyone at risk. Leaders should encourage compliance.

Differences among countries
The pandemic has not affected all countries equally. China was where the first infection took place. They were able to use stringent isolation and extensive testing to stop most of the spread. The wealthier countries, which have more people coming in from all over the world, were the next to be affected. The countries that reacted quickly
to do lots of testing and isolation avoided large-scale infection. The benefits of early action also meant that these countries didn’t have to shut down their economies as much as others.


 
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The ability to do testing well explains a lot of the variation. It is impossible to defeat an enemy we cannot see. So testing is critical to getting the disease under control and beginning to reopen the economy.
So far, developing countries like India and Nigeria account for a small portion of the reported global infections. One of the priorities for our foundation has been to help ramp up the testing in these countries so they know their situation. With luck, some factors that we don’t understand yet, like how weather might affect the virus’s spread, will prevent large-scale infection in these countries.
However, our assumption should be that the disease dynamics are the same as in other countries. Even though their populations are disproportionately young—which would tend to mean fewer deaths from COVID—this advantage is almost certainly offset by the fact that many low-income people’s immune systems are weakened by conditions like malnutrition or HIV. And the less developed a country’s economy is, the harder it is to make the behavior changes that reduce the virus’s reproduction rate. If you live in an urban slum and do informal work to earn enough to feed your family every day, you won’t find it easy to avoid contact with other people. Also, the health systems in these countries have far less capacity, so even providing oxygen treatment to everyone who needs it will be difficult.
Tragically, it is possible that the total deaths in developing countries will be far higher than in developed countries.
What we need to learn
Our knowledge of the disease will help us with tools and policies. There are a number of key things we still don’t understand. A number of studies are being done to answer these questions, including one in Seattle done with the University of Washington. The global collaboration on these issues is impressive, and we should know a lot more by the summer.
− IS THE DISEASE SEASONAL OR WEATHER DEPENDENT?
Almost all respiratory viruses (a group that includes COVID) are seasonal. This would mean there are fewer infections in the summer, which might lull us into complacency when the fall comes. This is a matter of degree. Because we see coronavirus spreading in Australia and other places in the Southern hemisphere, where the seasons are the opposite of ours, we already know the virus is not as seasonal as influenza is.
− HOW MANY PEOPLE WHO NEVER GET SYMPTOMS HAVE ENOUGH OF THE VIRUS TO INFECT OTHERS? WHAT ABOUT PEOPLE WHO ARE RECOVERED AND HAVE SOME RESIDUAL VIRUS—HOW INFECTIOUS ARE THEY?
Computer models show that if there are a lot of people who are asymptomatic but infectious, it is much harder to open up without a resurgence in cases. There is a lot of disagreement about how much infection comes from these sources, but we do know that many people with the virus don’t report symptoms, and some portion of those might end up transmitting it.
− WHY DO YOUNG PEOPLE HAVE A LOWER RISK OF BECOMING SERIOUSLY ILL WHEN THEY GET INFECTED? Understanding the dynamics here will help us weigh the risks of opening schools. It is a complicated subject because even if young people don’t get sick as often, they might still spread the disease to others.

 
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− WHAT SYMPTOMS INDICATE YOU SHOULD GET TESTED?
Some countries are taking the temperature of lots of people as an initial screening tool. If doing this helps us find more potential cases, we could use it at airports and large gatherings. We need to target the tests we have at the people at greatest risk since we don’t have enough tests for everyone.
− WHICH ACTIVITIES CAUSE THE MOST RISK OF INFECTION?
People ask me questions about avoiding prepared food or door knobs or public toilets so they can minimize their risk. I wish I knew what to tell them. Judgments will have to be made about different kinds of gatherings like classes or church going and whether some kind of spacing should be required. In places without good sanitation, there may be spread from fecal contamination since people who are infected shed the virus.
− WHO IS MOST SUSCEPTIBLE TO THE DISEASE?
We know that older people are at much greater risk of both severe illness and death. Understanding how gender, race, and comorbidities affect this is a work in progress.
The Gates Foundation’s role
In normal times, the Gates Foundation puts more than half of its resources into reducing deaths from infectious diseases. These diseases are the reason why a child in a poor country is 20 times more likely to die before the age
of five than one in a rich country. We invest in inventing new treatments and vaccines for these diseases and making sure they get delivered to everyone who needs them. The diseases include HIV, malaria, tuberculosis, polio, and pneumonia. Whenever there is an epidemic like Ebola, SARS, or Zika we work with governments and the private sector to help model the risks and to help galvanize resources to create new tools to stop the epidemic. It was because of these experiences that I spoke out about the world not being ready for a respiratory epidemic in my 2015 TED talk. Although not enough was done, a few steps were taken to prepare, including the creation of the Coalition for Epidemic Preparedness Innovation, which I will discuss below, in the vaccine section.

Now that the epidemic has hit, we are applying our expertise to finding the best ideas in each area and making sure they move ahead at full speed. There are many efforts going on. More than 100 groups are doing work on treatments and another 100 on vaccines. We are funding a subset of these but tracking all of them closely. It is key to look at each project to see not only its chance of working but also the odds that it can be scaled up to help the entire world.
One urgent activity is to raise money for developing new tools. I think of this as the billions we need to spend
so we can save trillions. Every additional month that it takes to get the vaccine is a month when the economy cannot return to normal. However, it isn’t clear how countries will come together to coordinate the funding.
Some could go directly to the private sector but demand that their citizens get priority. There is a lot of discussion among governments, the World Health Organization, the private sector, and our foundation about how to organize these efforts.


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Innovation to beat the enemy
During World War II, an amazing amount of innovation, including radar, reliable torpedoes, and code-breaking, helped end the war faster. This will be the same with the pandemic. I break the innovation into five categories: treatments, vaccines, testing, contact tracing, and policies for opening up. Without some advances in each of these areas, we cannot return to business as usual or stop the virus. Below, I go through each area in some detail.
TREATMENTS
Every week, you will be reading about new treatment ideas that are being tried out, but most of them will fail.
Still, I am optimistic that some of these treatments will meaningfully reduce the disease burden. Some will be easier to deliver in rich countries than developing countries, and some will take time to scale. A number of these could be available by the summer or fall.

If in the spring of 2021 people are going to big public events—like a game or concert in a stadium—it will be because we have a miraculous treatment that made people feel confident about going out again. It’s hard to know precisely what the threshold is, but I suspect it is something like 95 percent; that is, we need a treatment that is 95 percent effective in order for people to feel safe in big public gatherings. Although it is possible that a combination of treatments will have over 95 percent effectiveness, it’s not likely, so we can’t count on it. If our best treatments reduce the deaths by less than 95 percent, then we will still need a vaccine before we can go back to normal.
One potential treatment that doesn’t fit the normal definition of a drug involves collecting blood from patients who have recovered from COVID, making sure it’s free of the coronavirus and other infections, and giving the plasma to people who are sick. The leading companies in this area are working together to get a standard protocol to see
if this works. They will have to measure each patient to see how strong their antibodies are. A variant of this approach is to take the plasma and concentrate it into a compound called hyperimmune globulin, which is much easier and faster to give a patient than unconcentrated plasma. The foundation is supporting a consortium of most of the leading companies that work in this area to accelerate the evaluation and, if the procedure works, be ready to scale it up. These companies have developed a 
Plasma Bot to help recovered COVID patients donate plasma for this effort.
Another type of potential treatment involves identifying the antibodies produced by the human immune system that are most effective against the novel coronavirus. Once those antibodies have been found, they can be manufactured and used as a treatment or as a way to prevent the disease (in which case it is known as passive immunization). This antibody approach also has a good chance of working, although it’s unclear how many doses can be made. It depends on how much antibody material is needed per dose; in 2021, manufacturers may be able to make as few as 100,000 treatments or many millions. The lead times for manufacturing are about seven months in the best case. Our grantees are working to compare the different antibodies and make sure the best ones get access to the limited manufacturing capacity.

 
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There is a class of drugs called antivirals, which keep the virus from functioning or reproducing. The drug industry has created amazing antivirals to help people with HIV, although it took decades to build up the large library of very effective triple drug therapies. For the novel coronavirus, the leading drug candidate in this category is Remdesivir from Gilead, which is in trials now. It was created for Ebola. If it proves to have benefits, then the manufacturing will have to be scaled up dramatically.
The foundation recently asked drug companies to provide access to their pipeline of developed antiviral drugs so researchers funded by the Therapeutics Accelerator can run a screen to see which should go into human trials first. The drug companies all responded very quickly, so there is a long list of antivirals being screened.
Another class of drugs works by changing how the human body reacts to the virus. Hydroxychloroquine is in this group. The foundation is funding a trial that will give an indication of whether it works on COVID by the end of May. It appears the benefits will be modest at best. Another type of drug that changes the way a human reacts to a virus is called an immune system modulator. These drugs would be most helpful for late-stage serious disease.
All of the companies that work in this area are doing everything they can to help with trials.
VACCINES
Vaccines have saved more lives than any other tool in history. Smallpox, which used to kill millions of people every year, was eradicated with a vaccine. New vaccines have played a key role in reducing childhood deaths from 10 million per year in 2000 to fewer than 5 million per year today.
Short of a miracle treatment, which we can’t count on, the only way to return the world to where it was before COVID showed up is a highly effective vaccine that prevents the disease.
Unfortunately, the typical development time for a vaccine against a new disease is over five years. This is broken down into: a) making the candidate vaccine; b) testing it in animals; c) safety testing in small numbers of people (this is known as phase 1); d) safety and efficacy testing in medium numbers (phase 2); e) safety and efficacy testing in large numbers (phase 3); and f) final regulatory approval and building manufacturing while registering the vaccine in every country.
Researchers can save time by compressing the clinical safety/efficacy phases while conducting animal tests and building manufacturing capacity in parallel. Even so, no one knows in advance which vaccine approach will work, so a number of them need to be funded so they can advance at full speed. Many of the vaccine approaches will fail because they won’t generate a strong enough immune response to provide protection. Scientists will get a sense
of this within three months of testing in humans by looking at the antibody generation. Of particular interest is whether the vaccine will protect older people, whose immune systems don’t respond as well to vaccines.

The issue of safety is obviously very important. Regulators are very stringent about safety, to avoid side effects and also to protect the reputation of vaccines broadly, since if one has significant problems, people will become more hesitant to take any vaccines. Regulators worldwide will have to work together to decide how large the safety database needs to be to approve a COVID vaccine.

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One step that was taken after the foundation and others called for investments in pandemic preparedness in 2015 was the creation of the Coalition for Epidemic Preparedness Innovations (CEPI). Although the resources were quite modest, they have helped advance new approaches to making vaccines that could be used for this pandemic. CEPI added resources to work on an approach called RNA vaccines, which our foundation had been supporting for some time. Three companies are pursuing this approach. The first vaccine to start human trials is an RNA vaccine from Moderna, which started a phase 1 clinical safety evaluation in March.
An RNA vaccine is significantly different from a conventional vaccine. A flu shot, for example, contains bits of the flu virus that your body’s immune system learns to attack. This is what gives you immunity. With an RNA vaccine, rather than injecting fragments of the virus, you give the body the genetic code needed to produce lots of copies of these fragments. When the immune system sees the viral fragments, it learns how to attack them. An RNA vaccine essentially turns your body into its own vaccine manufacturing unit.
There are also at least five leading efforts that look promising and that use other approaches to teach the immune system to recognize and attack a viral infection. CEPI and our foundation will be tracking efforts from all over the world to make sure the most promising ones get resources. Once a vaccine is ready, our partner GAVI will make sure it is available even in low-income countries.
A big challenge for vaccine trials is that the time required for the trials depends on finding trial locations where the rate of infection is fairly high. While you are setting up the trial site and getting regulatory approval, the infection rate in that location could go down. And trials have to involve a surprisingly large number of people. For example, suppose the expected rate of infection is 1 percent per year and you want to run a trial where you would expect 50 people to be infected without the vaccine. To get a result in six months, the trial would need 10,000 people in it.
The goal is to pick the one or two best vaccine constructs and vaccinate the entire world—that’s 7 billion doses if it is a single-dose vaccine, and 14 billion if it is a two-dose vaccine. The world will be in a rush to get them, so the scale of the manufacturing will be unprecedented and will probably have to involve multiple companies.
I am often asked when large-scale vaccination will start. Like America’s top public health officials, I say that it is likely to be 18 months, even though it could be as short as nine months or closer to two years. A key piece will
be the length of the phase 3 trial, which is where the full safety and efficacy are determined. When the vaccine is first being manufactured, there will be a question of who should be vaccinated first. Ideally, there would be global agreement about who should get the vaccine first, but given how many competing interests there are, this is unlikely to happen. The governments that provide the funding, the countries where the trials are run, and the places where the pandemic is the worst will all make a case that they should get priority.

TESTING
All of the tests to date for the novel coronavirus involve taking a nasal swab and processing it in a Polymerase Chain Reaction (PCR) machine. Our foundation invested in research showing that having patients do the swab themselves, at the tip of the nose, is as accurate as having a doctor push the swab further down to the back of your
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throat. Our grantees are also working to design swabs that are cheap and able to be manufactured at large scale but work as well as ones that are in short supply. This self-swab approach is faster, protects health care workers from the risk of exposure, and should let regulators approve swabbing in virtually any location instead of only at a medical center. The PCR test is quite sensitive—it will generally show whether you have the virus even before you have symptoms or are infecting other people.
There has been a lot of focus on the number of tests being performed in each country. Some, like South Korea,
did a great job of ramping up the testing capacity. But the number of tests alone doesn’t show whether they are being used effectively. You also have to make sure you are prioritizing the testing on the right people. For example, health care workers should be able to get an immediate indication of whether they are infected so they know whether to keep working. People without symptoms should not be tested until we have enough tests for everyone with symptoms. Additionally, the results from the test should come back in less than 24 hours so you quickly know whether to continue isolating yourself and quarantining the people who live with you. In the United States, it was taking over seven days in some locations to get test results, which reduces their value dramatically. This kind

of delay is unacceptable.
There are two types of PCR machines: high-volume batch processing machines and low-volume machines.
Both have a role to play. The high-volume machines provide most of the capacity. The low volume machines are better when getting a result in less than an hour is beneficial. Everyone who makes these machines, and some new entrants, are making as many machines as they can. Adding this capacity and making full use of the machines that are already available will increase the testing capacity. The foundation is talking to the manufacturers about different ways to run the big machines that could make them more than twice as productive.

Another type of test being developed is called a Rapid Diagnostic Test (RDT). This would be like an in-home pregnancy test. You would swab your nose the same way as for the PCR test, but instead of sending it into a processing center, you would put it in a liquid container and then pour that liquid onto a strip of paper that would change color if it detects the virus. This form of test may be available in a few months. Even though it won’t be as sensitive as a PCR test, for someone who has symptoms it should be quite accurate. You would still need to report your test result to your government since they need visibility into the disease trends.
A lot of people talk about the serology test, where you give blood and it detects whether you have antibodies
against the virus. If you do, it means you have been exposed. These tests only show positive results late in your disease, so they do not help you decide whether to quarantine. Also, all the tests done so far have problems with false positives. Until we understand what level of antibodies is protective and have a test with almost no false positives, it is a mistake to tell people not to worry about their exposure to infection based on the serology tests
that are available today. In the meantime, serology tests will be used to see who can donate blood and to understand the disease dynamics.

A lot of countries did a good job focusing the PCR capacity on the priority patients. Most countries had their government play a central role in this process. In the United States, there is no system for making sure the testing is allocated rationally. Some states have stepped in, but even in the best states, the access isn’t fully controlled.
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Testing becomes extremely important as a country considers opening up. You want to have so much testing going on that you see hot spots and are able to intervene by changing policy before the numbers get large. You don’t want to wait until the hospitals start to fill up and the number of deaths goes up.
Basically, there are two critical cases: anyone who is symptomatic, and anyone who has been in contact with someone who tested positive. Ideally both groups would be sent a test they can do at home without going into a medical center. Tests would still be available in medical centers, but the simplest is to have the majority done at home. To make this work, a government would have to have a website that you go to and enter your circumstances, including your symptoms. You would get a priority ranking, and all of the test providers would be required to make sure they are providing quick results to the highest priority levels. Depending on how accurately symptoms predict infections, how many people test positive, and how many contacts a person typically has, you can figure out how much capacity is needed to handle these critical cases. For now, most countries will use all of their testing capacity for these cases.
There will be a temptation for companies to buy testing machines for their employees or customers. A hotel or cruise ship operator would like to be able to test everyone even if they don’t have symptoms. They will want to get PCR machines that give quick results or the rapid diagnostic test. These companies will be able to bid very high prices—well above what the public health system would bid—so governments will have to determine when there is enough capacity to allow this.
One assumption is that people who need to get tested will isolate themselves and quarantine those in their household. Some governments police this carefully, whereas others simply assume people will follow the recommendation. Another issue is whether a government provides a place for someone to isolate themselves if they can’t do it at their home. This is particularly important if you have older people in close quarters at your house.
CONTACT TRACING
I mentioned in the testing section that one of the key priorities for testing is anyone who has been in close contact with someone who has tested positive. If you can get a list of these people quickly and make sure they are prioritized for a test like the PCR test (which is sensitive enough to detect a recent infection), then these people can isolate themselves before they infect other people. This is the ideal way of stopping the spread of the virus.
Some countries, including China and South Korea, required patients to turn over information about where they have been in the last 14 days by looking at GPS information on their phone or their spending records. It is unlikely that Western countries will require this. There are applications you can download that will help you remember where you have been; if you ever test positive, then you can voluntarily review the history or choose to share it with whoever interviews you about your contacts.
A number of digital approaches are being proposed where phones detect what other phones are near them.
(It would involve using Bluetooth plus sending a sound out that humans can’t hear but that verifies that the two

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phones are reasonably close to each other.) The idea is that if someone tests positive then their phone can send
a message to the other phones and their owners can get tested. If most people voluntarily installed this kind of application, it would probably help some. One limitation is that you don’t necessarily have to be in the same place at the same time to infect someone—you can leave the virus behind on a surface. This system would miss this kind of transmission.

I think most countries will use the approach that Germany is using, which requires interviewing everyone who tests positive and using a database to make sure there is follow-up with all the contacts. The pattern of infections is studied to see where the risk is highest and policy might need to change.
In Germany, if someone is tested and confirmed positive, the doctor is legally required to inform the local government health office. The doctor must provide all personal data—name, address, phone number—so that the health office can contact the person and ensure they isolate themselves.
Then the local health office begins the process of contact tracing. They interview the infected person, find out how to contact all the people he or she has met in the past couple of weeks, and contact those people to ask them to self- isolate and get a test.
This approach relies on the infected person to report their contacts accurately, and also depends on the ability of the health authorities to follow up with everyone. The normal health service staff can’t possibly do all this work even if the case numbers are fairly low. Every health system will have to figure out how to staff up so that this work is done in a timely fashion. Everyone who does the work would have to be properly trained and required to keep all the information private. Researchers would be asked to study the database to find patterns of infection, again with privacy safeguards in place.
OPENING UP
Most developed countries will be moving into the second phase of the epidemic in the next two months. In one sense, it is easy to describe this next phase. It is semi-normal. People can go out, but not as often, and not to crowded places. Picture restaurants that only seat people at every other table, and airplanes where every middle seat is empty. Schools are open, but you can’t fill a stadium with 70,000 people. People are working some and spending some of their earnings, but not as much as they were before the pandemic. In short, times are abnormal but not as abnormal as during the first phase.
The rules about what is allowed should change gradually so that we can see if the contact level is starting to increase the number of infections. Countries will be able to learn from other countries that have strong testing systems in place to inform them when problems come up.
One example of gradual reopening is Microsoft China, which has roughly 6,200 employees. So far about half are now coming in to work. They are continuing to provide support to employees who want to work at home. They insist people with symptoms stay home. They require masks and provide hand sanitizer and do more intensive
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cleaning. Even at work, they apply distancing rules and only allow travel for exceptional reasons. China has been conservative about opening up and has so far avoided any significant rebound.
The basic principle should be to allow activities that have a large benefit to the economy or human welfare but pose a small risk of infection. But as you dig into the details and look across the economy, the picture quickly gets complicated. It is not as simple as saying “you can do X, but not Y.” The modern economy is far too complex and interconnected for that.
For example, restaurants can keep diners six feet apart, but will they have a working supply chain for their ingredients? Will they be profitable with this reduced capacity? The manufacturing industry will need to change factories to keep workers farther apart. Most factories will be able to adapt to new rules without a large productivity loss. But how do the people employed in these restaurants and factories get to work? Are they taking a bus or train? What about the suppliers who provide and ship parts to the factory? And when should companies start insisting their employees show up at work?
There are no easy answers to these questions. Ultimately, leaders at the national, state, and local levels will need
to make trade-offs based on the risks and benefits of opening various parts of the economy. In the United States it will be tricky if one state opens up too fast and starts to see lots of infections. Should other states try to stop people moving across state boundaries?

Schools offer a big benefit and should be a priority. Large sporting and entertainment events probably will not make the cut for a long time; the economic benefit of the live audience doesn’t measure up to the risk of spreading the infection. Other activities fall into a gray area, such as church services or a high school soccer game with a few dozen people on the sidelines.
There is one other factor that is hard to account for: human nature. Some people will be naturally reluctant to
go out even once the government says it is okay. Others will take the opposite view—they will assume that the government is being overly cautious and start bucking the rules. Leaders will need to think carefully about how to strike the right balance here.

Conclusion
Melinda and I grew up learning that World War II was the defining moment of our parents’ generation. In a similar way, the COVID pandemic—the first modern pandemic—will define this era. No one who lives through Pandemic I will ever forget it. And it is impossible to overstate the pain that people are feeling now and will continue to feel for years to come.
The heavy cost of the pandemic for lower-paid and poor people is a special concern for Melinda and me. The disease is disproportionately hurting poorer communities and racial minorities. Likewise, the economic impact of

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the shutdown is hitting low-income, minority workers the hardest. Policymakers will need to make sure that, as the country opens up, the recovery doesn’t make inequality even worse than it already is.
At the same time, we are impressed with how the world is coming together to fight this fight. Every day, we talk to scientists at universities and small companies, CEOs of pharmaceutical companies, or heads of government to make sure that the new tools I’ve discussed become available as soon as possible. And there are so many heroes to admire right now, including the health workers on the front line. When the world eventually declares Pandemic I over, we will have all of them to thank for it.
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HEAR RICHARD BRANSON AND OTHERS ON "AI IN THE WORKPLACE" - I have a few FREE TICKETS

23/5/2018

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Paul Barnett
Hear Richard Branson and others speak about AI in the Workplace on Wednesday 20th June in London. The line-up also includes Matt Meyer, CEO of Taylor Vinters and a Fellow of the Strategic Management Forum. Here is a link to the event Brochure: https://lnkd.in/eYvxDzZ

I have a few FREE TICKETS. Email me to see if any are still available: paul@thesmfglobal.com (Please title your email "AI in the Workplace"). 
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FUTURE OF THE BOARD: INITIATIVE LAUNCH

12/2/2018

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Paul Barnett
Advancing the Professional Practice of Strategic Management & Supporting Independent Strategic Management Experts

On March 13th we are launching the Future of the Board initiative at a one-day conference in London.


Sixteen experts in various aspects of corporate governance and board effectiveness will deliver three keynote speeches and four panel sessions on key issues facing boards.

The full research-based initiative will last two years and explore eight broad themes linked to eight conferences and a series of eight publications documenting the practical insights that emerge.  

The project has a dedicated website http://www.futureoftheboard.com and a dedicated Linkedin group https://www.linkedin.com/groups/8641251 Both will support a growing global community of interest in the topic and the whole initiative.

Whilst the launch is in London, future conferences will also take place in other countries because we wish to ensure our research is global in perspective.

Today I published an article on the thoughts of Prof. Bob Garratt, one of the keynote speakers. He has been working in this area at the highest levels for many years and authored classic texts on the topic: The Fish Rots from the Head (now in its third edition), and Stop the Rot, published last year. See the article: https://tinyurl.com/yat7plk7 View Bob's profile: https://tinyurl.com/yb2ujtry See the profiles of other speakers: https://tinyurl.com/ydb9luel

Tickets are now on sale at the early bird price until Feb 28th. Get your ticket today: https://www.picatic.com/TFOTB-LON
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Crypto rebounds amid regulatory fears

19/1/2018

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Bitcoin saw another major swing on Thursday — this time in an upwards trajectory, CNBC reports. The cryptocurrency briefly passed $12,000, a nearly 31% surge from a low of $9,200 on Wednesday. Rivals ethereum and ripple also bounced back. While bitcoin has crashed multiple times before, “this current bubble comes against a new backdrop: a global tide of regulation against the inchoate cryptocurrency industry,” The Verge notes.
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Employee surveillance is becoming ever more pervasive in the workplace

29/12/2017

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New technologies make it easier to monitor employee performance and behaviour. Ian MacRae and Toni-Ann Murphy look at some of the potential problems.
Surveillance has already gone far beyond just CCTV cameras and the occasional performance review. It is now possible to monitor everything from all online communication, health and physiological information, potentially even with implants which allow the human brain to interact with computers.
To find out more about this topic, pick up a copy of Myths of Work, by Ian MacRae and Adrian Furnham
But what impact does surveillance have on employee performance, morale and perceptions of employers? How would you like to have a small computerised device implanted under your skin to replace a workplace ID card?
Employee ID implants are not science fiction, a company in Wisconsin called Three Square Market already uses them. The chip allows employees to do things like opening company doors, purchasing food and logging into company computers. No ID cards or passwords necessary, just a flick of the wrist.
Violation of privacy?
Not everyone likes to be monitored however, and a recent study by Samaranayake and Gamage found the more employees felt their privacy to be violated at work, the more dissatisfied they were at work.
When employees feel like surveillance is unnecessary or too intense, they are more likely to find ways to subvert that same surveillance. They may be more likely to sabotage surveillance systems or try to find ways to trick the monitoring.
It may seem to be useful to monitor employees, especially as the tools for monitoring employees become more pervasive, more refined and more cost-effective.
Yet when surveillance is excessive it can lead to employee stress, distrust of employers and lead to suspicion within teams and within the company.
When employees feel excessively monitored and controlled by the company it tends to detract from their sense of independence and autonomy, which can then reduce their productivity.
Intrusive and pervasive surveillance can be bad for motivation and consequently, performance.
Risks of surveillance
Employee surveillance and monitoring should not be mentioned without reference to the digital data being collected.
Employee surveillance
Monitoring employee communications: Whatsapp case raises concerns
Microchipping workers: What are the moral, practical and legal implications?
The smallest to the largest data collection systems will be stored digitally, and are consequently vulnerable to exploitation.
Data breaches in employee or consumer data is estimated by IBM to cost companies about $1.5 billion every year.
These numbers will certainly continue to rise quickly as the breadth and scale of electronic data collection continues to grow. The more sensitive the data, the more costly and difficult the breach of corporate data was to resolve.
Companies large and small have data stolen, which can cause serious problems. Consider examples such as communications company TalkTalk,  entertainment companies like Sony and even the Democratic Party have suffered massive data breaches.
Collecting data from or about employees must consider a cost-balance approach. What are the benefits and uses of collecting the data? And what are the potential costs or consequences if the data is compromised or stolen?
It should be assumed that any electronic data can potentially be stolen electronically. The benefits of collecting the data must outweigh the potential costs. And proper procedures must be put in place to deal with any eventualities in data leaks, hacks or release.
Data collection can be positive
So we have established that collecting data about employees does carry a risk. That said, there is some evidence to suggest that monitoring performance electronically can have positive effects.
There are a few important points, however, to mention. Electronic monitoring has been found to be effective when it is clear, specific and targeted at specific measures of performance. It should not be indiscriminate, it should be used for a clearly-defined and well-explained purpose.
Research into the impact of monitoring by Bartels and Nordstrom in 2012 found that when electronic performance monitoring was directly linked to rewards or consequences for performance,  it was effective.
Performance was not improved when employees were monitored with no explanation, when surveillance was not tied to performance measures or rewards, or when surveillance was used for vague purposes.
Monitoring is more effective when it can be combined with a clear performance management framework and linked with employee compensation and benefits.
The nature of the monitoring and reason for it should be clearly communicated to employees. When monitoring is transparent, sensible and proportionate, it is much more likely to improve performance.
Put simply, surveillance or monitoring can be useful when used in a careful, informed and strategic way. Indiscriminate data collection without direction can create more problems than it solves.
By Ian MacRae And Toni-Ann Murphy on 8 Nov 2017 in People analytics, Staff monitoring
 
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When Working From Home Doesn’t Work

6/10/2017

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IBM pioneered telecommuting. Now it wants people back in the office.
By JERRY USEEM

In 1979, IBM was putting its stamp on the American landscape. For 20 years, it had been hiring the greats of modernism to erect buildings where scientists and salespeople could work shoulder-to-shoulder commanding the burgeoning computer industry. But that year, one of its new facilities—the Santa Teresa Laboratory, in Silicon Valley—tried an experiment. To ease a logjam at the office mainframe, it installed boxy, green-screened terminals in the homes of five employees, allowing them to work from home.
The idea of telecommuting was still a novelty. But this little solution seemed effective. By 1983, about 2,000 IBMers were working remotely. The corporation eventually realized that it could save millions by selling its signature buildings and institutionalizing distance work; the number of remote workers ballooned. In 2009, an IBM report boasted that “40 percent of IBM’s some 386,000 employees in 173 countries have no office at all.” More than 58 million square feet of office space had been unloaded, at a gain of nearly $2 billion. IBM, moreover, wanted to help other corporations reap the same officeless efficiencies through its consulting services. Leading by example was good marketing.
Then, in March of this year, came a startling announcement: IBM wanted thousands of its workers back in actual, physical offices again.
The reaction was generally unsparing. The announcement was depicted, variously, as the desperate move of a company whose revenues had fallen 20 quarters in a row; a veiled method of shedding workers; or an attempt to imitate companies, like Apple and Google, that never embraced remote work in the first place. “If what they’re looking to do is reduce productivity, lose talent, and increase cost, maybe they’re on to something,” says Kate Lister, the president of Global Workplace Analytics, which measures (and champions) working from home.
IBM might have seen this coming. A similarly censorious reaction greeted Yahoo when it reversed its work-from-home policy in 2013. Aetna and Best Buy have taken heat for like-minded moves since. That IBM called back its employees anyway is telling, especially given its history as “a business whose business was how other businesses do business.” Perhaps Big Blue’s decision will prove to be a mere stumble in the long, inevitable march toward remote work for all. But there’s reason to regard the move as a signal, however faint, that telecommuting has reached its high-water mark--and that more is lost in working apart than was first apparent.

The communications technology offering the fastest, cheapest, and highest-bandwidth connection is still the office.

How could this be? According to Gallup, 43 percent of U.S. employees work remotely all or some of the time. As I look to my left, and then to my right, I see two other business-casual-clad men hammering away on their laptops beside me at a Starbucks just outside Chicago. They look productive. Studies back this impression up. Letting Chinese call-center employees work from home boosted their productivity by 13 percent, a Stanford study reported. And, again according to Gallup, remote workers log significantly longer hours than their office-bound counterparts.
Another batch of studies, however, shows the exact opposite: that proximity boosts productivity. (Don’t send call-center workers home, one such study argues—encourage them to spend more time together in the break room,
where they can swap tricks of the trade.) Trying to determine which set of studies to trust is—trust me—a futile exercise. The data tend to talk past each other. But the research starts to make a little more sense if you ask what type of productivity we are talking about.
If it’s personal productivity—how many sales you close or customer complaints you handle—then the research, on balance, suggests that it’s probably better to let people work where and when they want. For jobs that mainly require interactions with clients (consultant, insurance salesman) or don’t require much interaction at all (columnist), the office has little to offer besides interruption.
But other types of work hinge on what might be called “collaborative efficiency”—the speed at which a group successfully solves a problem. And distance seems to drag collaborative efficiency down. Why? The short answer is that collaboration requires communication. And the communications technology offering the fastest, cheapest, and highest-bandwidth connection is—for the moment, anyway—still the office.
Consider the extremely tiny office that is the cockpit of a Boeing 727. Three crew members are stuffed in there, wrapped in instrument panels. Comfort- wise, it’s not a great setup. But the forced proximity benefits crew communication, as researchers from UC San Diego and UC Irvine demonstrated in an analysis of one simulated flight—specifically the moments after one crew member diagnoses a fuel leak.
A transcript of the cockpit audio doesn’t reveal much communication at all. The flight engineer reports a “funny situation.” The pilot says “Hmmm.” The co-pilot says “Ohhhh.”
Match the audio with a video of the cockpit exchange and it’s clear that the pilots don’t need to say much to reach a shared understanding of the problem.
That it’s a critical situation is underscored by body language: The flight engineer turns his body to face the others. That the fuel is very low is conveyed by jabbing his index finger at the fuel gauge. And a narrative of the steps he has already taken—no, the needle on the gauge isn’t stuck, and yes, he has already diverted fuel from engine one, to no avail—is enacted through a quick series of gestures at the instrument panel and punctuated by a few short utterances.
It is a model of collaborative efficiency, taking just 24 seconds. In the email world, the same exchange could easily involve several dozen messages— which, given the rapidly emptying fuel tank, is not ideal.
This brings us to a point about electronic communications technologies. Notionally, they are cheap and instantaneous, but in terms of person-hours spent using them, they are actually expensive and slow. Email, where everything must literally be spelled out, is probably the worst. The telephone is better. Videoconferencing, which gives you not just inflection but expression, is better still. More-recent tools like the workplace- communication app Slack integrate social cues into written exchanges, leveraging the immediacy of instant-messaging and the informality of emoji, plus the ability to create a channel to bond over last night’s #gameofthrones.
Yet all of these technologies have a weakness, which is that we have to choose to use them. And this is where human nature throws a wrench into things. Back in 1977, the MIT professor Thomas J. Allen looked at communication patterns among scientists and engineers and found that the farther apart their desks were, the less likely they were to communicate. At the 30-meter mark, the likelihood of regular communication approached zero.
The expectation was that information technology would flatten the so-called Allen Curve. But Ben Waber, a visiting scientist at MIT, recently found that it hasn’t. The communications tools that were supposed to erase distance, it turns out, are used largely among people who see one another face-to-face. In one study of software developers, Waber, working alongside researchers from IBM, found that workers in the same office traded an average of 38 communications about each potential trouble spot they confronted, versus roughly eight communications between workers in different locations.
The power of presence has no simple explanation. It might be a manifestation of the “mere-exposure effect”: We tend to gravitate toward what’s familiar; we like people whose faces we see, even just in passing. Or maybe it’s the specific geometry of such encounters. The cost of getting someone’s attention at the coffee machine is low—you know they’re available, because they’re getting coffee—and if, mid-conversation, you see that the other person has no idea what you’re talking about, you automatically adjust.
Whatever the mechanisms at play, they were successfully distilled into what Judith Olson, a distance-work expert at UC Irvine, calls “radical collocation.” In the late 1990s, Ford Motor let Olson put six teams of six to eight employees into experimental war rooms arranged to maximize team members’ peripheral awareness of what the others were up to. The results were striking: The teams completed their software-development projects in about a third of the time it usually took Ford engineers to complete similar projects. That extreme model is hard to replicate, Olson cautions. It requires everyone to be working on a single project at the same time, which organizational life rarely allows.
But IBM has clearly absorbed some of these lessons in planning its new workspaces, which many of its approximately 5,000 no-longer-remote workers will inhabit. “It used to be we’d create a shared understanding by sending documents back and forth. It takes forever. They could be hundreds of pages long,” says Rob Purdie, who trains fellow IBMers in Agile, an approach to software development that the company has adopted and is applying to other business functions, like marketing. “Now we ask: ‘How do we use our physical space to get on and stay on the same page?’ ”
The answer, of course, depends on the nature of the project at hand. But it usually involves a central table, a team of no more than nine people, an outer rim of whiteboards, and an insistence on lightweight forms of communication. If something must be written down, a Post-it Note is ideal. It can be stuck on a whiteboard and arranged to form a “BVC”—big, visual chart —that lets everyone see the team’s present situation, much like the 727’s instrument panels. Communication is both minimized and maximized.
Talking with Purdie, I began to wonder whether the company was calling its employees back to an old way of working or to a new one—one that didn’t exist in 1979, when business moved at a more stately pace. In those days, IBM could decide what to build, plan how to build it, and count on its customers to accept what it finally built at the end of a months-long process. Today, in the age of the never-ending software update, business is more like a series of emergencies that need to be approached like an airplane’s fuel leak. You diagnose a problem, deliver a quick-and-dirty solution, get feedback, course- correct, and repeat, always with an eye on the changing weather outside.
I asked Purdie whether IBM’s new approach could be accomplished at a distance, using all the new collaborative technology out there. “Yes,” he said. “Yes, it can. But the research says those teams won’t be as productive. You won’t fly.” 
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