Tag: COVID-19

Something is out to kill you. How do you react? Do you respond based on whether you’re a Republican or a Democrat?

“One would hope that when your life is on the line that partisanship drops out, right?” said Olin’s John Barrios, assistant professor of accounting.

Wrong. It doesn’t. Not according to Barrios’ National Bureau of Economic Research working paper titled “Risk Perception Through the Lens of Politics in the Time of the COVID-19 Pandemic.”

Barrios coauthored the paper with Yael Hochberg of Rice University.

As COVID-19 began its epic march across the United States, politicians and commentators were divided on the severity of the public health threat. Barrios and Hochberg examined people’s behavior whose perceptions of risk were informed by the news media and those of the partisan leaders. They found that the partisan divide was reflected in the social-distancing behavior of individuals.

Their research shows that a higher share of Trump voters in a county is associated with lower perceptions of risk during the pandemic. As the share of Trump voters rises, individuals search less for information on the virus. They also engage in less social distancing behavior, as measured by smartphone location patterns.

Why patterns reverse

The patterns persist in the face of state-level mandates to close schools and businesses or to stay at home. They reverse only when conservative politicians are exposed to the virus or when the White House releases federal social distancing guidelines.

“Perception really matters in terms of how you behave,” Barrios said. “And it’s even more important in these epidemics because of the externalities that our behavior has.”

Some might be very cautious because they perceive COVID-19 as dangerous. “Yet if my neighbor doesn’t really care, it doesn’t matter how much I stay in my apartment if he knocks on the door after he’s been walking around the whole of Chicago,” Barrios said.

Barrios set out to understand how individuals perceive the guidance from both the Centers for Disease Control and Prevention and those in political power. “Our idea was: To what extent would we observe differences in the behavior of these individuals? Given that the political party in power at this point is a Republican president, while the House (of Representatives) is Democratic.”

Even after controlling for economic characteristics in an area and the actual risk of contracting COVID-19, “we still observe a difference between high-Trump areas versus low-Trump areas,” Barrios said.

Over the course of the pandemic, governments have issued various directives regarding closing nonessential businesses and schools and sheltering in place. On March 16, federal guidelines for social distancing for a 15-day period were announced. Compliance with the directives varied substantially across counties with high and low shares of Trump voters. “In high Trump voter share counties, there is a significantly lower reduction in both average daily distance traveled and in visits to nonessential businesses,” Barrios said.

Those patterns shifted dramatically once the pandemic began affecting Republican politicians. Barrios’ paper notes the emergence of COVID-19 infections among participants at the annual Conservative Political Action Conference early this year. On March 9, Texas Sen. Ted Cruz and the chairman of CPAC self-quarantined after exposure to someone with COVID. After that announcement, people in counties with high Trump voter shares shifted their behavior. They reduced daily distance traveled and visits to nonessential businesses.

“They’re kind of catching up,” Barrios said. “Democrat areas in the same time period are still becoming more conservative, they’re social distancing more. It’s just that Republican areas are now doing it at a higher rate because they’re catching up because they’re taking it seriously.”

Same risk, different perspectives

Barrios said  “it’s worrying” that partisanship affects compliance with public health policy. “We’re not saying that the Democrats were right or Republicans were right. We’re simply saying that it’s very noteworthy that despite being exposed to the same risk, we still see different perspectives,” he said.

“Our main point is: If you want to think about policy and compliance in this voluntary, free society that we live in, the sources of this information matter and affect how we perceive that information,” Barrios said.

“And the fact that we have either news sources or political leaders that have diametrically opposed views on subjects, for whatever reason, seems to affect the behavior of individuals in ways that have real consequences—in this case, human lives.”

The economy and coronavirus pandemic were two of the top issues for voters in the 2020 election, according to exit poll surveys. Notably, 52% of voters said controlling the pandemic was more important, even if it hurts the economy. But what if we didn’t have to choose?

In communities where masks were mandated, consumer spending increased by 5% on average, showing that a safety rule can stimulate economic growth as well, according to a new study from the Olin Business School.

Researchers found the effect was greatest among non-essential businesses, including those in the retail and entertainment industries—such as restaurants and bars—that were hit hard by the pandemic.

“The findings exceeded our expectations and show that we can have a strong economy with strong, commonsense public-health measures. Mask mandates are a win-win,” said Raphael Thomadsen, professor of marketing and study co-author.

Thomadsen, along with Olin’s Song Yao, Nan Zhao and Chong Bo Wang, analyzed the impact of social distancing and mask mandates on both the spread of COVID-19 and consumer spending. They used cellphone location data to track the degree of social distancing in nearly every county in the U.S. and compared that with community voting patterns, coronavirus infection rates and consumer spending rates.

The researchers found social distancing has a large impact on reducing COVID-19 spread, while the evidence on mask mandates is mixed. But while social distancing reduces consumer spending, mask mandates has the opposite effect. They also found that social distancing decreased in communities with mask mandates, magnifying the positive effect on spending.

Feeling safer to spend

“Preventive measures such as social distancing and facial masks should be considered as pro-business,” said Yao, associate professor of marketing. “When people feel safer to spend, or more importantly, when the pandemic is kept at bay, the economy is more likely to have a quick recovery. Not to mention the lives that will be saved.”

Perhaps not surprising given the political lines drawn over masks, they also observed that political affiliation had a significant impact on social distancing. Even after controlling for local characteristics such as the population density, income and other demographics, counties that voted for President Donald Trump in 2016 engaged in significantly less social distancing than counties that voted for Hillary Clinton.

“If the entire country had followed low levels of social distancing seen in Trump-supporting areas, we estimate there would have been 83,000 more American deaths from COVID to date, which represents a 36% increase over the current death count of 225,000 Americans,” Thomadsen said.

They estimate the tradeoff would have been a relatively small boost in the economy. Consumer spending dropped $605.5 billion from April to the end of July, compared with the same time last year. The country would have recovered $55.4 billion, or approximately 9%, had all counties remained as open as the most pro-Trump areas.To put it in more dramatic terms, Thomadsen said this means that opening up is only a reasonable policy if one values lost lives at roughly $670,000 each or less. This value was determined by dividing the hypothetical $55.4 billion boost to the economy by the 83,000 lives lost in this scenario.

“The calls to open up the economy come with huge costs of COVID spread and only modest benefits of increased economic activity,” Thomadsen said. “Opening the economy before getting the virus under control only makes sense if you put a very low value on life.”

New research shows consumers strongly prefer “natural,” not synthetic, products to prevent ailments.

Which presents a dilemma. Medical researchers are racing to create a vaccine for COVID-19. When they do, how receptive will consumers be?

Vaccines are far from “natural.”

“Vaccines are technically a treatment to prevent an ailment,” said Sydney Scott, Olin assistant professor of marketing. “Moreover, vaccines are unnatural insofar as humans create and alter them. Some people refuse vaccines as a preventative measure, preferring not to ‘interfere with nature.’”

As the world anxiously awaits a COVID-19 vaccine, however, perhaps consumers will view it as a curative for a societal problem, Scott said.

“Our research suggests that if consumers view a vaccine more like a curative to the epidemic, rather than as a preventative for the self, they will be more receptive toward it.”

Scott, an expert in consumer behavior and decision-making, is the lead author of “Consumers Prefer ‘Natural’ More for Preventatives Than for Curatives,” forthcoming in the Journal of Consumer Research.

Consumers’ beliefs

Consumers believe that natural products are safer and less potent than synthetic alternatives, the research found. And they care more about safety and less about potency when they’re trying to prevent problems.

“This research sheds light on when the marketing of ‘natural’ is most appealing to consumers,” Scott said.

Consumers often prefer natural versions of foods, medicines, personal care products and home products, according to the paper. “Natural” isn’t a legally defined and regulated term, but consumers’ definition is that a product has no additives and that humans haven’t tampered with it.

“This preference for natural is an increasingly important driver of consumers’ decisions,” Scott said.

Insulin, antibiotics, cortisone creams

In some cases, however, consumers abandon their preference for natural.

For example, people widely accept insulin, antibiotics, cortisone creams and synthetic stain removers, although they are evidently unnatural, according to the paper. “Thus, anecdotally, the preference for natural products looms larger in some situations than in others.”

The researchers focused on the relation between consumers’ judgments about naturalness and their beliefs about two important attributes—safety and potency. They examined when consumers prefer natural most strongly and why the variance in preference for natural occurs.

“Consumers widely desire natural products, but not always to the same degree,” Scott said. “We demonstrate that the preference for natural is particularly strong when consumers are preventing problems or illnesses compared to when they are curing the same problems or illnesses.”

Scott and coauthors Paul Rozin and Deborah Small, both of the University of Pennsylvania, present seven studies. One showed that consumers more strongly prefer the exact same natural product when preventing an ailment than when curing it. Another showed consumers search for and chose natural products to prevent versus treat cold symptoms.

Another, which examined consumers’ reports about their health choices over a year, found consumers prioritize naturalness in their preventative treatments more than in their curative treatments. And another showed that when consumers believed natural products were riskier and more potent than synthetic products, they preferred natural products for curing.

COVID-19

The research was developed with a focus on individuals making decisions for themselves among multiple treatment options (some natural, some synthetic). But the emergence of the COVID-19 pandemic raises important questions about the implications—and future directions—of their research.

For instance, the authors ask, do pandemics induce a macro-level version of a curative mindset?

“In other words, society may conclude that there already exists a problem (a widespread ailment) that needs to be cured, thereby placing more importance on potency relative to safety,” they write.

Relatedly, consumer acceptance of a prevention for pandemics and epidemics might be affected by the contagiousness of a disease, severity of a disease, scarcity of treatment options, and novelty of and lack of knowledge about the threat. And each might have downstream consequences on safety/potency tradeoffs consumers are willing to make.

Contributions

The paper makes several contributions. “Our primary contribution is to provide an organizing principle for explaining when consumers prefer natural products,” the authors write. The prevent/cure distinction explains variation in the preference for natural

• across distinct product categories such as food and medicine,
• within product categories such as different types of medicine,
• and for the same product depending on whether consumers used it to prevent or to cure ailments.

“In doing so, our research not only generates new predictions, but also helps unify past descriptive findings under one theoretical framework.”

From an applied perspective, “the identified organizing principle can help marketers predict when and where the preference for natural is likely to loom large.”

Marketers and managers often must make decisions about when to invest in a natural brand or product line.

“Our research suggests that, all else equal, natural products are most popular when they are used for preventative purposes.”

This was written by the current Olin/United Way Board Fellows Program students who agreed to share their feedback anonymously from a recent survey. It was compiled by Amy VanEssendelft, CEL Senior Program Manager.

The Center for Experiential Learning provides an opportunity for MBA, PMBA and EMBA students to serve for a full year as a voting member of a local United Way member organization’s board through the Olin/United Way Board Fellows Program.  Al Kent serves as the program director for this opportunity. Al has been a member of over a dozen nonprofit boards throughout his life.

Every year, he outlines goals (highlighted below) for the students who participate in this program.  Under each goal are comments from current students who are participating in the program. These comments demonstrate how each goal is in the process of being achieved, especially with, and in spite of, the current COVID-19 challenges.

Work to define and solve an ambiguous problem

“I really appreciate the support and autonomy I’ve been given for my project.  I have built an understanding of the board dynamic and have gained support from key stakeholders.”  

“As I go forward, I have continued to learn to be agile and adaptive and look at creative ways to develop the advocacy campaign within (my agency) despite the limitations the current environment has placed on us.”  

“The president of my board said something in my first meeting which I remember vividly: If an organization succeeds, everyone is responsible for that success.  However, if an organization fails, it is the board’s fault.” 

Deepen understanding of leadership

“This has given me a different perspective on the leadership role boards play, and is particularly poignant right now during this crisis as our board is faced with incredibly difficult decisions.”  

“Watching how the executive director navigates the board and rallies them to action has been an incredible learning opportunity for me.”

 “In the most recent board meeting, I was able to witness in real time how an organization’s leadership communicates about and responds to a crisis like the COVID-19 pandemic.” 

“I’ve observed how people bring their diverse backgrounds to the table and how interactions proceed when experienced leaders have a common goal.”

Understand how nonprofits work and learn board governance

“They are mission-driven and conscious about their budget/strategy/customer services just like any other entity.”

“I’m very surprised that a nonprofit could do such an amazing job and run like a corporation.”

 “Now, I see the crucial role they play in setting budgets, hiring directors, and truly deciding the direction of their organization.”  

 “Participating in all the board committee meetings helps me understand how everything comes together.”

Develop a professional network and build passion

“I have had the opportunity to interact with very high-impact individuals who are passionate about their mission and vision.” 

“It is clear that the board members are not just there because they are high dollar donors, but instead because they are incredibly engaged and passionate about the mission.” 

 “Their positivity is infectious and this motivates me to go forward.”

Because of the worldwide havoc of the coronavirus, supply chains have become a crucial new focus of the global economy. Sergio Chayet, director of the Operations and Supply Chain Management MBA platform at Olin, foresees changes ahead in several areas including making workers safer and strategies to guard against future massive stresses on supply chains.

“There is a new appreciation for retail store employees, factory workers and workers in logistics and transportation, energy, health care, education, and other industries responsible for sustaining life during shutdowns,” he told Bloomberg recently. (See “How supply chains jumped from business school and into our lives.”)

“Just like September 11 brought permanent changes to airport and port security, it is likely this latest crisis will bring permanent changes to operations and supply chain risk management as it pertains to mitigating worker health risks and establishing contingency plans to protect them.”

Would it be better for companies to produce from geographically diverse places or from one particular region?

“Having a geographically diverse footprint and carrying excess capacity is always valuable as a real option, since it allows firms to react to a wide variety of risks (social, political, macroeconomic, etc.) by shifting production to the most convenient location on short notice  with changes to the global economy.

“But such excess capacity is costly and must be justified by being exceeded with the real option’s value. A complementary strategy, when feasible, is having flexible contracts with supply chain partners. However, when several correlated risks happen in quick succession, partners will be unable to honor those flexible terms.”

What lessons are we now learning about supply chains?

“Over the last couple decades, driven by price and time competition, supply chains have evolved toward becoming leaner and more responsive, resulting in lower production and transportation costs. Reduced trade friction and international arbitrage opportunities in the form of wages, total cost, exchange rate, access to talent and raw materials, and other differences, has led to ever more global supply chains. Containerization, larger vessels and ports, and warehousing innovations have all contributed to lowering logistics and transportation costs.

“As a result, consumers have had access to unprecedented levels of product variety at low prices.

“But lean supply chains are more susceptible to disruption risk, and have to rely on excess capacity or being nimble in integrating new partners into them.

“When the crisis started, all eyes were on China, and organizations were evaluating contingency plans to mitigate risks affecting that portion of their supply chains. In the midst of companies evaluating those contingency and reactive measures, the crisis started to become more severe in Europe and subsequently in America, rendering many of those options obsolete.”

What’s an example of a situation that may not have been considered in the past?

“The demand shocks many retailers have experienced for commodity products. Some understandable, such as face masks, hand sanitizers and general purpose cleaners, and some less understandable, such as toilet paper.

“The familiar bullwhip effect in supply chains—driven by information and product lags, independent decisions by channel partners, and low levels of demand variability—has been overshadowed by unpredictable shocks to end-consumer demand.

“Take toilet paper: Because it’s a commodity, manufacturers have little influence on market prices. To be competitive they must control costs and usually rely on high levels of automation, low levels of labor and high-capacity utilization, with plants running 365/24/7. They can maintain high utilization only because of predicable demand, with low uncertainty and no seasonality.

“Such an unpredictable spike in demand—likely driven by a vicious cycle of panic purchases and perhaps some speculators planning to make quick profits in secondary markets—quickly depleted most of the channel’s inventory. With no excess capacity, we can expect a lag until those products are back on the shelves, which will probably be followed by more panic purchases and secondary spikes. Eventually, with so much forward buying, those supply chains will experience excess inventory.

“Interestingly, once consumers started their lockdowns, their demand for these commodities increased to supplement what they had previously used from supply chains serving the commercial market. For example, in addition to their use at home, consumers used toilet paper at offices, schools, restaurants, malls, etc. This has further strained consumer supply chains and will further delay the time it takes for manufacturers, distributors, wholesalers and retailers to replenish inventory to the new necessary levels.

“Because in several industries supply chains that serve the consumer and commercial markets are different (For instance, commercial toilet paper roles don’t fit residential toilet roll holders.), lockdowns have also created both shortages in consumer supply chains and surpluses in commercial ones. But simply shifting one to the other isn’t feasible, at least in the short term.”

Will the coronavirus change the study of supply chains?

“In supply chain risk management, planners start by identifying and assessing possible risks, which are classified according to their probability and anticipated impact. These are called foreseeable risks, and are managed proactively. Relatively likely risks should be mitigated by measures designed to lower their probability or impact before they happen. Because of limited resources, less likely risks are best managed by contingency measures, which are planned ahead but only triggered after the risk happens. Remaining risks are called residual or ‘unknown unknowns’ and can only be managed reactively. The only proactive measures for those are setting aside time, resources and flexibility to be used once the risks are known. 

“When major unknown unknown risks were modeled in the past, they were usually assumed to happen one at a time and independent of each other. COVID-19 turned out to be an unprecedented set of unknown unknowns all happening in rapid succession, including: A highly contagious pandemic, which quickly traveled across continents, sharp economic downturn globally, a large portion of the population under lockdown, etc.

“In the future a global pandemic of this magnitude will not only be a foreseeable event, but also will likely change how we model unknown unknowns. And depending on how likely similar pandemics are expected to be in the future, a whole slew of mitigation and contingency measures are likely to be considered.”

How long can supply chains withstand shock?

“When either demand or supply are affected, predicting how long supply chains can withstand a shock depends on the severity of the shock, the length of the disruption, and specific factors to each industry.

“What’s interesting about the current situation is that both supply and demand are being affected simultaneously. An important new factor determining the resiliency of each supply chain will be the relative changes in their supply and demand.

“A slowdown in economic activity may end up making it easier to restart some producers, in particularly those who will be able to operate with low overhead and be able to scale as demand picks up.”

Ben Dalton, MBA ’20, is an 11-year US Army veteran and lives with his wife and two children in Ballwin, Missouri.

Last week, in my final semester for an MBA from Olin Business School at Washington University here in St. Louis, I was supposed to be in Barcelona.

Three days before our departure, the trip was cancelled due to the global pandemic of COVID-19. When the class was cancelled, the fantastic staff and faculty at WashU utilized their networks and worked hard to provide an option for those students who needed the class to graduate on time.

Network contacts included Gerard Craft (Niche Food Group), Kevin and Chris Nashan (Peacemaker Lobster & Crab, Sidney Street Café), Chris Kelling (Elmwood) and JiaMin Dierberg (Hermannhof Winery). Charlie Downs and Dave Molina (Sugarfire) as well as Jason Bockman (Strange Donuts) previously prepared students for their trip to Shanghai, China, before the class was cancelled.

Businesses helped students finish coursework

These amazing local restaurateurs and hospitality hosts took time out of their businesses to help us understand what it took to run a business as well as wine distributor operations from different places in the value chain. This class was enjoyable for all students who opted to remain in St. Louis and complete the coursework, thanks largely to those local business owners who brought their expertise to our classroom.

A week later, guidance has been given to close these same businesses due to the global pandemic. Gerard Craft closed all locations (except Cinder House) immediately and complied with the plea for social distancing prior to any mandate, including not allowing pick up or delivery options because it would endanger his staff. Elmwood and Peacemaker dining rooms closed Thursday, and it sounds like pick up orders are still available.

Around the country, hourly workers for large sporting venues are getting help from the professional athletes and ownership. We need the same kind of help from our local community. Our local food scene is getting stronger with every new restaurant, and the community of small businesses seems to support and collaborate to the benefit of many St. Louis people.

Strange Donuts

Last year, I helped write a case study about Strange Donuts as they were supporting WashU with another learning objective and met some of the awesome people that work there as well. These are not people who make tons of money or could not work for a few months. While some of these businesses may be around in a few weeks, the livelihoods of many of their workers will not. Some options available include emergency unemployment benefits, elimination of payroll tax, and rent abatement for impacted workers.

Meanwhile, I hope you’ll contribute to the Gateway Resilience Fund, set up to provide short-term monetary relief to employees and owners of independent bars, restaurants and shops in the St. Louis area affected by closures and other circumstances brought about by the COVID-19 outbreak.

Photo: On March 9, Olin MBA students visited the Tin Mill Brewing Company in Hermann.