Industry the July/August 2020 issue

Disaster Deconstructed

A national security expert breaks down the issues we faced before and will continue to face after COVID-19, including manufacturing and supply chain, health and wellness, the economy and globalization.
By Maureen Brody Posted on July 20, 2020
Let’s start with an assessment from your national security and disaster response perspective on how prepared the United States was for a pandemic and, if we weren’t prepared, why not?

Historically, there’s usually three [pandemics] per century going back for the last 700 or 800 years. Some of the authorities within the infectious disease community believe that because of shrinking habitats we will have more interaction with novel animals and their zoology, for lack of a better word, and that we may have an increase [in incidence]. But, by and large, there’s about three per century. We had a small one in the first 10 years of the 21st century, and now we’ve had this one. So with regards to preparation, I think we were probably—equipment-wise and probably policy-wise—reasonably equipped for what we anticipated would be the initiation of an infectious disease outbreak.

Some of the nuances you have to take into consideration with regards to preparedness is it can be financially debilitating. Preparedness is always expensive in the short term and always, in hindsight, looked at as we should have done more. States have a particular role, the federal government has a particular role, and in hindsight, we probably could have been faster and we probably could have been more efficient. But in a novel situation that the overwhelming majority of the country has not faced, I think we were probably as prepared as we could have been given the myriad situations and iterations that had to take place.

The cost of preparedness seems to outweigh the benefits when we’re dealing with black swan events—until those events occur.

Companies and governments will be rethinking supply chains and critical nodes.

The private sector has the power to mitigate many problems identified by the COVID-19 crisis.

Read the sidebar, Health and Wellness as Disaster Prep

Is there something we can learn going forward about investment in preparation and its necessity?

There are always things to learn, but is there motivation to exercise that education? And what I mean by that is, preparation has a certain cost. It’s always cheaper to prepare than it is to respond, but we always seem to find the money for response and recovery. So we have an institutional problem across the board from my perspective, because many states have deferred their responsibilities to the federal government.

Over time, 250 plus years, there’s been this ebb and flow of states’ rights versus federal power, and the 10th Amendment comes into play. This goes all the way back to the Articles of Confederation versus the Constitution. A lot of deference has been given to the federal government because they’re the ones that hold the purse strings in terms of national response. In disaster-related settings, a lot of the states have, in my opinion, neglected to invest in preparedness because they take for granted that the federal government will bail them out. So taking that all into consideration, it’s a calculated risk, and they run risk models and they determine what they’re willing to invest in and what they’re willing to let slide, and it all caught up to us at once. That was probably to be expected, but no one ever really expects their worst case scenario to actually happen. That’s why they take those risks.

So what role can we first recommend to the private sector and then secondarily expect from the private sector in terms of its own preparation?

Our private sector is powerful. They can do many things. They drive the world’s most prolific economy. We had multiple nodes of distribution and manufacturing that could provide the things we required, but they weren’t in the United States. So from a national security perspective, we really shot ourselves in the foot because we distributed critical needs and critical nodes of distribution external to our country and those became captured by global market forces and global politics.

It’s a real problem…because we certainly did not want to have adversaries manufacturing our ammunition, our weapons, our requirements for kinetic warfare, our pharmaceuticals and our precursors, a lot of the personal protective equipment and other devices, and things required for response to a novel outbreak of an infectious disease with no known immunity. We really put ourselves in a bad way. We saw the end result of that in the fact that we did not have enough equipment and that the strongest, most vibrant economy in the world and a country that has unbelievable resources came up short.

So when we’re assessing our supply lines, as a matter of risk management and corporate disclosures, it sounds like it’s got to start being a top-line consideration, especially where a company is reliant on other countries that may be hoping to throw a wrench in our works.

With upstream and downstream supply chains, just-in-time logistics, and a really tightly coupled, complex adaptive system, which is what logistics are, and supply chains in the United States, they’re harmonized to the highest degree of performance possible to maximize yield. If there are no margins in the supply chains and there are no additional distribution nodes and delivery nodes when there’s a perturbation or interruption or a disruption, your supply chains have a very limited amount of flex. So you have these really tightly coupled, highly refined supply chains, and it doesn’t take a whole lot to disrupt them. … No one should be surprised that China withheld equipment. No one should be surprised that things that we paid for in a non-competitive, non-crisis space were interrupted.

The economy is a critical and complex adaptive system. And within that criticality, we have things that are third, fourth, fifth order of effects that we can’t predict, but we know things are happening. … For example, you have a high degree of what you could call wealth extraction taking place, you have the middle class that’s been compressed and crushed in a lot of ways, but we still have these expectations of the same standard of living and same mechanisms and methodology for driving an economy within the United States and the world. So we really have to understand and be open to the fact that mistakes, errors, lapses in judgment and bad policy have created a cascade of effects that demonstrate that things may not be as awesome and wonderful in our economic future as we had hoped. We’re going to have to do some critical work and reevaluate our expectations of what an economy can do.

In 2012 a National Intelligence Council trends report said pandemics ruin globalization, and I am wondering (a) if that’s true only in the short term and then over the long term we get back into our highly interrelated international economic culture and (b) if private businesses can provide an alternative to government in terms of global cooperation. For example, our CEO relayed a story about one of The Council’s members in China having a storehouse of masks in its office. Through The Council, that firm was able to reach out to another member organization in Italy, where these items were needed, and send them there. Is that level of micro cooperation from company to company a potential workaround for difficulties between states?

I think globalization is probably pretty much on its last legs. … There’s a refocus on self-government, self-care, self-determination, and, for lack of a better word, an emergent nationalism. Nationalism in most instances is thought of as negative. But if you redefine or reframe the word as a focus on self, where you have to take care of yourself first, that’s an expectation that is reasonable when again, as we said before, there are finite resources and infinite needs.

You have two schools of thought. You have the “great disruption” and Paul Gilding and the idea that this is all because of climate science, global warming, and we’re all kind of doomed and we’re all just going to have to manage and change our expectations. So that’s one. And then the other side is that this could be the beginning of the “great abundance,” the re-awakening of stability, and with the use of artificial intelligence, all sorts of things can come together.

I think both of those are really dangerous and wrong, but I think parts of them have the potential to change our expectations and our country’s economic performance. For example, if we assess ourselves and see information as a commodity and manufacturing as a commodity, we are going to have to reestablish and redetermine our role and our own economic future. I think if people realize that this [COVID crisis] may not be as bad as it could have been—though it’s certainly bad enough—and that we need to make significant changes to the way we do things, the way we convey our national intent, how we prepare our citizens for the future, we can make the future better through the decisions we make today. And if we don’t make good decisions, we will certainly pay for them later.

In the last generation, have we had the kind of strategic vision to prepare for a much more complex, competitive, and dynamic world? … It’s a complex question that requires really critical thinking, shrewd investment, and understanding that if we’re not all in this together we will separately hang.

And what about private companies working around governmental impasses where possible?

I do think that this COVID-19 response has separated, pretty clearly, those who are willing to work together for a good outcome and those who are tearing down. I think business leaders have a particularly relevant role to play in darning the fabric of society in these critical moments.

Networks and relationships exist to help one another, so, in those gray market spaces and in those network spaces where companies can shift around their assets to help one another, it’s a win-win.

We either capitalize on our roots, our investment, and our intellect, adaptations and innovativeness and move forward, or we will just be on the ash heap of empires like those who came before us. We have a responsibility, and I am going to do my best and you’re going to do your best. We have a responsibility both to our past and to our future to not have this happen on our watch, and it’s going to take hard work and collective sacrifice and investment in a different way.

Maureen Brody News & Copy Chief Read More

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