United Flight 232

April 09, 2020

When you've blown your rear engine on a commercial airliner with 296 people on board, and lost your control surfaces as a result, you might think it would be time to panic.

Captain Alfred Haynes thought it was time to do his job. In the ultimate manifestation of Top Gun's "this is what we have been trained for" moment, he stayed perfectly calm, staring death in the face, and with the help of his co-pilots used the throttles to lower United Flight 232 onto an Iowa runway, saving two-thirds of the passengers on that afternoon in 1989.

What's amazing is his voice. I go back to listen to him from time to time. He displays no emotion, no hysteria, no panic. Listen to him here.

I mention this now because it's inspirational as feelings start to run hot in our society. Keep Captain Haynes in mind as you move forward the next few months. You are going to hear a lot of emotion. The job for all of us is to put the airliner onto the runway.

Economists have been pushing the idea of an economic "pause" and a V-shaped recovery. They may be right, and the markets are now, shall we say, "friending" the idea. But as we advised to keep calm in the March drop, caution is in order now too as the markets look forward euphorically. Remember, markets trade based on where they think the world will be months from now, not where they are.

Irrespective of whether or not an economy can reopen without a spring-back in viral infections, here are two longer-term business trends to think about that might argue against a V-shaped recovery.

1. Fear and panic spread like wildfire, but it takes years for those emotions to dissipate. In that sense they behave like the inverse of trust, which takes a long time to build but can vaporize overnight. These emotions allowed our society to shut down immediately, but they're not a light switch. People may not "turn back on" right away. If there is a weakness in the field of economics, it's that it doesn't tend to model human emotion well.

2. Businesses will rehire gradually - they will be cautious for a long time. Many of you who run and work in businesses have expressed this to me the past few weeks, and I think it's correct. Especially given the debt loads that people and businesses are carrying, a conservative mindset will dominate. For example, no one is going to reopen a hotel and rehire everyone when only a fraction of the rooms are full.

I know a lot of you are confused by the wild swings in the market. Keep in mind that the market is confused, and it's trying to figure it out.

Stay calm, think about the principles we've discussed here over the years, and think long term.

Dan Cunningham

(1) If a wingtip hadn't caught the ground at the last moment, he may have saved them all. The success of this event has never been reproduced in a simulator.