The Math Behind Social Distancing
As we wait for scientists and healthcare professionals to develop a vaccine for COVID-19, there is another, more readily available tool at our disposal.
Social distancing, defined as measures taken to reduce physical contact, is the first line of defense for containing an infectious disease like COVID-19. That’s because these infections spread when people cough, sneeze, or touch surfaces on which the virus resides.
To help us grasp the impact these measures can actually have, today’s infographic illustrates how a reduction in social exposure can theoretically contain the spread of infection.
The calculations used to create today’s infographic come from Signer Laboratory, a stem cell research lab located in the Moores Cancer Center at the University of California San Diego.
Using a summation formula makes it possible to estimate the number of new infections over a 30 day period, across three scenarios.
|Scenario||5 Day Period||30 Day Period|
|No social distancing practiced||1 person infects 2.5* others||406 people infected as a result|
|50% reduction in social exposure||1 person infects 1.25* others||15 people infected as a result|
|75% reduction in social exposure||1 person infects 0.625* others||2.5 people infected as a result|
*For estimations only. It is not possible to infect only a fraction of another person.
To arrive at the figures reported above, Robert A.J. Signer, Ph.D., and his team made a number of key assumptions.
First, they estimated the basic reproduction number (R0) of COVID-19 to be 2.5, a figure supported by recent research. This means that, on average, an infected individual will spread the disease to 2.5 other people.
Next, they assumed that an infected individual will unknowingly spread COVID-19 over the median five day incubation period. After this period, the individual will begin to develop symptoms, immediately self quarantine, and no longer pose a threat.
Finally, they assumed a direct linear correlation between social interactions and R0. This means that when an infected person reduces their physical contact with others by 50%, they also spread the disease by an amount 50% less.
Timing is Everything
While the figures above are the results of mathematical estimations, researchers have actually studied social distancing from a variety of angles.
One study used simulations to determine the magnitude and timing of social distancing measures required to prevent a pandemic. The distancing measures simulated were:
|School closure||Teachers and students spent weekday daytime cycles at home, rather than at school.|
|Increased case isolation||Upon becoming symptomatic, adults (90%) and children (100%) would self quarantine for the duration of the infection.|
|Workplace non-attendance||Each day, a person had a 50% chance of staying home instead of attending their workplace.|
|Community contact reduction||Individuals reduced their physical contact with community members by half, each day.|
|Combination of all four||All four measures combined.|
The results, for a community of 30,000 people and an epidemic with R=2.5, are charted below. We can define the final illness attack rate as the share of people from an at risk population who ultimately catch the disease.
Results showed that when no action was taken, 65% of the population contracted the disease. However, if a combination of all four distancing measures were implemented instead, the attack rates were:
- 45% (distancing begins after a 4 week delay)
- 21% (distancing begins after a 3 week delay)
- 7% (distancing begins after a 2 week delay)
What’s clear is that social distancing was significantly more effective when implemented with minimal delay—the final illness attack rate rose quickest beyond the third week. These findings draw a parallel to the visualizations in today’s infographic, which showed us just how quickly a disease can spread.
Social distancing interventions are important as they represent the only … measure guaranteed to be available against a novel strain of influenza in the early phases of a pandemic.
Kelso, J.K., Milne, G.J. & Kelly, H., BMC Public Health 9, 117 (2009)
We arrive at a similar conclusion when it comes to the types of distancing measures implemented. In the simulations, none of the four measures taken on their own were able to have a similar effect as when they were combined.
We All Have a Part to Play
With the global number of COVID-19 cases still rising, many governments have issued quarantine orders and travel bans.
The math supports these decisions—reducing our physical contact with others, even when we aren’t experiencing any symptoms, is crucial. Studies like the one summarized above also prove that taking action sooner, rather than later, can go a long way in reducing the spread of infection.
The key takeaway from all of this? Social distancing is a powerful disease control tool, but only if we all participate.
How the S&P 500 Performed During Major Market Crashes
How does the COVID-19 market crash compare to previous financial crises? We navigate different contextual factors impacting crashes.
How the S&P 500 Performed During Major Market Crashes
Like spectacular market peaks, market crashes have been a persistent feature of the S&P 500 throughout time.
Still, the forces underpinning each rise and fall are often less clear. Take the COVID-19 crash, for example. Despite lagging economic growth and historic unemployment levels, the S&P 500 bounced back 47% in just five months, in a stunning reversal.
Drawing data from Macrotrends, the above infographic compares six historic market crashes—examining the length of their recoveries and the contextual factors influencing their durations.
The Big Picture
How does the current COVID-19 crash of 2020 stack up against previous market crashes?
|Title||Start — End Date||Duration (Trading Days)||% Drop|
|Black Tuesday / Great Crash*||Sep 16, 1929 — Sept 22, 1954||300 months (7,256 days)||-86%|
|Nixon Shock / OPEC Oil Embargo||Jan 11, 1973 — Jul 17, 1980||90 months (1,899 days)||-48%|
|Black Monday**||Oct 13, 1987 — May 15, 1989||19 months (402 days)||-29%|
|Dot Com Bubble||Mar 24, 2000 — May 30, 2007||86 months (1,808 days)||-49%|
|Global Financial Crisis||Oct 9, 2007 — Mar 28, 2013||65 months (1,379 days)||-57%|
|COVID-19 Crash***||Feb 19, 2020 — Ongoing||5 months+ (117+ days)||-34%|
Price returns, based on nominal prices
*Black Tuesday occurred about a month after the market peak on Oct 29, 1929
**The market hit a peak on Oct 13th, prior to Black Monday on Oct 19,1987
***As of market close Aug 4, 2020
By far, the longest recovery of this list followed the devastation of Black Tuesday, while the shortest was Black Monday of 1987—where it took 19 months for the market to fully recover.
Let’s take a closer look at each market crash to navigate the economic climate at the time.
After the Fall
What were some factors that can help provide context into the crash?
1929: Black Tuesday / Great Crash
Following Black Tuesday in 1929, the U.S. stock market took 7,256 days—equal to about 25 years—to fully recover from peak to peak. In response to the market crisis, a coalition of banks bought blocks of shares, but with negligible effects. In turn, investors fled the market.
Meanwhile, the Federal Reserve Board rose the discount lending rate to 6%. As a result, borrowing costs climbed for consumers, businesses, and the central banks themselves. The tightening of rates led to unintended consequences, with the economy capitulating into the Great Depression. Of course, factors that contributed to its prolonged recovery have been debated, but these are just a few of the actions that had implications at the time.
1973: Nixon Shock / OPEC Oil Embargo
The Nixon Shock corresponded with a series of economic measures in response to high inflation. Soaring inflation devastated stocks, consuming real returns on capital. Around the same time, the oil embargo also occurred, with OPEC member countries halting oil exports to the U.S. and its allies, causing a severe spike in oil prices. It took seven years for the S&P 500 to return to its previous peak.
1987: Black Monday
While the exact cause of the 1987 crash has been debated, key factors include both the advent of computerized trading systems and overvalued markets.
To curtail the impact of the crash, former Federal Reserve chairman Alan Greenspan aggressively slashed interest rates, repeatedly promising to take great lengths to stabilize the market. The S&P took under two years to recover.
2000: Dot Com Bubble
To curb the stratospheric rise of U.S. tech stocks, the Federal Reserve raised interest rates five times in eight months, sending the markets into a tailspin. Virtually $5 trillion in market value evaporated.
However, a number of well-known companies survived, including eBay and Amazon. At the time, Amazon’s stock price cratered from $107 to $11 while eBay lost 75% of its market value. Meanwhile, a number of Dot Com flops included Pets.com, WorldCom, and FreeInternet.com.
2007: Global Financial Crisis
Relaxed credit policies, the proliferation of subprime mortgages, credit default swaps, and commercial mortgage-backed securities were all factors behind the market turmoil of 2007. As banks carved out risky loans packaged in opaque tranches of debt, risk in the market accelerated.
Similar to 1987, the Federal Reserve initiated a number of rescue actions. Interest rates were brought down to historical levels and $498 billion in bailouts were injected into the financial system. Crisis-related bailouts extended to Fannie Mae and Freddie Mac, the Troubled Asset Relief Program (TARP), the Federal Housing Administration, and others.
2020: COVID-19 Crash
In 2020, historic fiscal stimulus measures along with trillions in Fed financing have factored heavily in its swift reversal. The result has been one of the steepest rallies in S&P 500 history.
At the same time, the economy is mirroring Great Depression-level unemployment numbers, reaching 14.7% in April 2020. In short, this starkly exposes the sharp disconnect between the markets and broader economy.
History offers many lessons, and in this case, a view into the shape of a post-coronavirus market recovery.
Although the stock market is likely rallying off Fed liquidity, investor optimism, and the promise of potential vaccines, it’s interesting to note that the trajectory of this crash in some ways resembles the initial rebound shown during the Great Depression—which means we may not be out of the woods quite yet.
As the S&P 500 edges 2% shy of its February peak, could the market post a hastened recovery—or is a protracted downturn in the cards?
This graphic has been inspired by this Reddit post.
How COVID-19 Has Impacted Black-White Financial Inequality
COVID-19 has worsened Black-White financial inequality, with Black Americans more likely to see negative impacts to their job and income.
How COVID-19 Impacted Black-White Financial Inequality
COVID-19 has disrupted everything from economic markets to personal finances, but not everyone feels its effects equally. When compared with White Americans, Black Americans’ financial situations have been disproportionately affected by the pandemic.
In this infographic from McKinsey & Co., we outline the financial vulnerabilities of Black Americans, their increased usage of financial services since the onset of the pandemic, and their lower satisfaction levels with those services.
Financial Vulnerabilities of Black Americans
Compared to White Americans, more Black Americans say their job and income have been negatively impacted by COVID-19.
|My job has been negatively impacted by COVID-19||My income has been negatively impacted by COVID-19|
Looking forward, Black Americans also report greater job security concerns and have less savings to protect themselves financially. In the event of a job loss, 57% of Black Americans report their savings would last four months or less, compared with 44% of White Americans.
With less of a cash buffer on hand, Black consumers are also more likely to have missed a recent bill payment.
|Skipped at least 1 payment||Partially paid at least 1 bill||Paid in full|
This includes being unable to pay for basic items such as utilities, telephone and internet, and mortgage payments.
How do they begin to manage these challenges?
Use of Financial Services
Black Americans increased their use of financial services more than White Americans.
Banking activities in the past two weeks, per March-June 2020 surveys
|Withdrew cash||Deposited cash||Deposited checks||Contacted bank for service on account||Opened new accounts||Received advice on digital tool usage|
For example, Black Americans were about twice as likely to request account service, open an account, or receive advice on digital tools. In addition, Black families were more likely to leverage a fintech platform and have been more active in opening fintech accounts since the start of the COVID-19 crisis.
However, as Black Americans seek out more financial help, some are not happy with the service they receive.
Satisfaction with Financial Services
Overall, Black families are less satisfied than White families across all types of financial activities. These differences were most pronounced for digital tool advice, where 38% of Black Americans were dissatisfied or very dissatisfied, compared with just 12% of White Americans.
Even though Black people were less satisfied with banking services, they were more likely to say that bank performance was above their expectations. This may suggest that expectations are lower for Black families than they are for White families.
Black Americans were also much less likely to trust their financial advisor.
|Do not trust/losing trust||Indifferent||Gaining trust/trust|
From March-June 2020, the percentage of Black people distrusting their advisors rose from 12% to 32%. Over the same time period, White people’s distrust of financial advisors remained stable at 10%.
A notable exception: White and Black Americans were both satisfied with fintech providers. Only 5% of White Americans and 8% of Black Americans expressed some level of dissatisfaction with fintech companies.
Time to Examine the Financial System?
COVID-19 has perpetuated Black-White financial inequality. Data shows that Black families are more likely to be financially vulnerable, and increase their use of financial services during the COVID-19 crisis. However, they are less likely to feel satisfied with these services.
Financial institutions can urgently review their remote and in-person customer service procedures to ensure the needs of all families are being met.
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