Bottom Line—Throw out the Rule Book
When Oil Prices Go Below Zero and There Are No Live Sports—Improvise
What is the evidence that we need to throw out the rule book and start improvising our way through COVID-19? Oil and sports. Yes, I said oil and sports.
Inelasticity of Oil
Three words I didn't think I would utter!
So here is my understanding:
Price Elasticity of Supply (PES) = (% change in quantity supplied) / (% change in price)
A perfectly inelastic good (PES=0) does not change in supply as the price changes (e.g. Rembrandt paintings).
The quantity of a good with relatively inelastic supply (0 < PES < 1) changes by a lower percentage than the percentage change in its price.
Oil often is the example of a relatively inelastic good because of the fixed costs to find, extract, deliver, and process oil into a consumable good.
We also just found out that it also is hard to turn off the supply even when future prices go below zero.
So what do investors do in this black swan event that defies any previous experience? There is no rule book to follow.
In a World with No Live Sports
I don't have to look too far to see the impact of no live sports. And no, it’s not my TV.
My son Alessandro (aka Alec) works on a Disney team that executes the media spends on ESPN. That means he has to figure out which ads get placed in which slots on ESPN even when there are no live sports! He and his team had to throw out the rule book!
Adherence to tradition can be particularly dangerous in times like these. It is a time to innovate.
So we recorded a podcast to explore how improvisation may be the answer to a world where the rule books don’t exist.
In short, his take is "that in improvisation and in the ‘yes, and’ there are no wrong answers. How are we approaching extraordinary circumstances with extraordinary responses? Adherence to tradition can be particularly dangerous in times like these. It is a time to innovate.”
Media companies have never imagined a world with no live sports and they have to improvise.
Scarcity Breeds Improvisation
I can’t possibly list all of the improvised solutions we have seen in the last few weeks when healthcare providers started to run out of personal protective equipment . We have seen home sewn masks and plexiglass intubation boxes.
But in many parts of the world, the scarcity of what we would consider the standard of care also has led to improvised solutions. Megan Swanson and her colleagues published a paper in 2018 entitled, “Evidence-based improvisation: Facing the challenges of cervical cancer care in Uganda.”
Part of the conclusion of this paper states that, “flexibility in the face of adversity, evidence-based improvisation through treatment strategies and teamwork across disciplines have been vital to the success of oncology care” at the Uganda Cancer Institute and Mulago National Referral Hospital.
Does this not sound familiar during our time of COVID-19?
What lessons can we learn from other parts of the world as they have had to improvise* as a means of survival?
How do we Lead Without Rule Books?
In the podcast mentioned above, Alec provides succinct advice on how we should be leading:
"Lead with compassion"
That compassion is not just for those we lead. We need to be compassionate with ourselves, other leaders, and even our clients.
With our messages and our behaviors, we should lead with compassion.
Be well and be compassionate.
N.B. For more information about improvisation during this time, please read my recent blog entitled, “Yes, AND” in the First Month of the pANDemic"