Lyrically Speaking: Hold Your Head Up!

And if it’s bad 
Don’t let it get you down, you can take it 
And if it hurts 
Don’t let them see you cry, you can make it

Rod Argent

The news of Moderna’s early clinical success with its potential Covid-19 vaccine is encouraging. Markets ripped higher today, spreads tightened, and there is hope for a return to a more “normal” existence.  Moderna’s novel approach to vaccine development using RNA instruction is very differentiated and has the potential to scale quickly. For the for record, I am hopeful, and without question, I am rooting for them as well as every other clinical research-based organization that is working so hard to bring solutions to the pandemic.

The history of clinical development for vaccines, however, is anything but linear. I say this not to be a downer, but to remind us all that we are far from through with the long-term effects that the virus is having on our individual and collective psyches—and therefore on economic growth. Even when a vaccine has been approved and there is widespread inoculation globally, none of us will be able to “unsee” the experiences we are now having. Some of the changes in human behavior likely will remain even after the pandemic subsides. Figuring out how things will look is the topic du jour. Every day. That is why I encourage you to “Hold Your Head Up!”

In that spirit, last week I highlighted to everyone at Cowen the process I have developed to maintain objectivity when making decisions and sharing advice. Here they are with a little more context.

1. Challenge Every Assumption
   As humans, we reflexively look to the past for guidance on the present and the future. In fact, we often reference George Santayana’s quote: “Those who cannot remember the past are condemned to repeat it.” Then something novel happens, something we have not yet witnessed, and old assumptions that underpin our basic analysis need to be reconsidered. The systematic (or should I say chaotic?) shutdown of the global economy because of a very infectious, potentially deadly virus with no known cure is such an event. Therefore, as we re-emerge from our homes, new paradigms will be in play, and many old assumptions will no longer apply.
2. Don’t Try to Be Too Smart.  No One Really Knows, Yet.
   Business leaders and investors are always making decisions based on less than perfect information. In times like these, amid so much uncertainty, it’s easy to become overwhelmed by factors beyond anyone’s control. Do the best you can to gather inputs that you believe are critical to your decision-making process—while realizing there are a lot of unknowns that even the experts cannot contemplate.
3. Pick Your Experts and Pay Attention to Small Changes in Their Assessments.
   Since most of us know very little about infectious diseases, we are surrounded by new, legitimate “experts” every day. Not only are there too many opinions to consume, but traditional media and social media also have not effectively filtered which opinions are worth considering. So, it is up to you to do that. Choose wisely but make sure you choose. It is the only way to keep from drowning in the firehose of information coming at you.
4. Measure and Monitor Your Own Level of Conviction.
   As things are moving quickly, you might have to change your mind as you learn more. If you haven’t taken the time to establish a baseline level of conviction on your underlying assumptions, then it will be impossible to adjust. For example, it appears to me as if a number of trends we were experiencing pre-Covid-19 are now accelerating at a rapid clip. Industrial and investment trends among my highest conviction ideas include: the importance of drug discovery and breakthrough diagnostics, the ability to work effectively from a remote location, increased consumption of media from the home and from mobile devices, the essential need for growing direct to consumer channels, and the importance of robotics in redefining global supply chains. No doubt you have some of your own to consider.
5. Remain Nimble.
   When contemplating decisions, focus on your high conviction ideas. Those are the ones that are most likely to play out based on your experience. At the same time, remain as nimble as you can. Be aware of signals that could occur which would change your mind—and be open to them. Compress your decision making and put continuous processes in place with your team to re-evaluate whether your decisions have been effective. If you are not achieving the desired results because of rapid changes in the marketplace, then change your strategy as quickly as you can.
6. Don’t Be Afraid of Negative Outcomes, Plan for Them.
   This might be the most important thing you can do as a leader. It is also the least fun. Nevertheless, good leadership must consider worst-case scenarios in order to plan for them. Our business continuity plan at Cowen is the product of planning for negative outcomes that we hoped would never happen. We were very thankful to have had it fully developed when the time came. Having excess capital to deploy in the event of a negative outcome may also be a consideration. Certainly, in this environment, having a solid balance sheet with plenty of liquidity is a strategic advantage.

Amid a pandemic that has upended much of the world, it is encouraging to have potential good news to celebrate. It reminds us of the indomitability of the human spirit and the collective genius that will eventually overcome Covid-19. But we’re not there yet—and we could face some setbacks, disappointments, and challenges ahead. No matter what comes, you need to decide what you will do, each and every day. 

Hold your head up so that you can see the future and your place in it.