Lessons in Fear and Wealth from the Coronavirus

As I write this, the biggest story in the entire world is a virus that is making its way around the planet, leaving a trail of sickness and death in its wake, while sending a much bigger shockwave of fear and uncertainty out front. Last week, the US stock market dropped 15% in just a few days, the most shocking correction since the 2008-2009 financial crisis (and the most interesting drop since the founding of this blog in 2011).

I am sure you’ve been hearing, reading or watching plenty about it already, but the real question is, what should we do about it?

The Scary Side

Is this a screenshot from the fear-mongering TV news? Nope, just a moment from a classic zombie movie, although sometimes it is hard to tell the difference.

The fear and doubt seems to be what the news stories have been emphasizing. The disease is highly contagious, and very sneaky. Each carrier seems to infect 2-3 additional people, which means exponential growth. And with an observed death rate of about 1% so far (on a limited data set of older people on a cruise ship) it may be several times times more deadly than the common flu.

On the news, we see rows of hastily installed hospital beds, people wearing paper face masks even here in our own country, empty supermarket shelves and shuttered factories and public venues.

And we are reminded that we ain’t seen nothing yet, because with mild symptoms that can hide for days, most cases are going unreported and the disease is pumping its toxic tentacles through the arteries of our economy, plotting its attack while we are left POWERLESS UNTIL THE RIOTS IN THE STREET START AND PEOPLE ARE SMASHING THROUGH OUR WINDOWS TO TAKE OUR LAST FEW CANS OF BEANS AFTER WE RUN OUT OF AMMO IN OUR SHOTGUNS.

Some people are just prone to this type of thinking, and I even have a few in my own life. They have warned me to gather “at least a few months worth” of nonperishable food in my pantry and make sure I have a generator and plenty of fuel, at the very least. And to reconsider my stance of not keeping any guns in the house.

The Not-So-Scary Side

I went out on the town early on in the scare. The reality was different from the news headlines, although restaurants did close a few weeks after this post was first published.

As I write this on March 2nd, there have been about 90,000 confirmed cases of COVID-19. And while the number is still growing rapidly, at the moment it is still a tiny number, about one thousandth of a percent of the world’s population. So even if it multiplies 100-fold, it would be a tenth of one percent. And out of these 90,000 people, about half are already recovered and have moved on with their lives. And the vast majority of the remaining ill, and all those who are so far undetected, and those who are yet to get infected, will also recover.

Past and current status of the outbreak.

But do we have any idea how bad it will get, before it gets better? As it turns out, we do. But first, some perspective.

Here are this year’s numbers for the tried-and-true traditional flu for the 2019 flu season in the US alone (and remember the USA is only four percent of the world population):

Wow, 32-45 million cases of the flu already, and tens of thousands of deaths. Even I had no idea it was that serious, and yet the flu is something I don’t even worry about – ever!

Even scarier: every year, about 2.8 million people die in the US alone, and a full 70% of these deaths (over two million people per year) are caused by “lifestyle factors”, which to put it plainly means ignoring Mr. Money Mustache’s advice about bikes, barbells and salads every day.

So if we start with the common flu, which is surprisingly scary, choosing car-based transportation and TV-based entertainment and consuming processed high-carbohydrate food and soft drinks should feel at least an additional hundred times scarier than that.

But do you feel the appropriate ratios of fear in these two situations? And a much smaller amount of fear about the Coronavirus? Probably not, because we humans generally suck at putting numbers, statistics and probabilities into perspective.

We Have Been Here Before

In my lifetime alone, we have seen the rise and decline of quite a list of worldwide health scares, each of which was covered in the news with similar intensity to what we see today. AIDS, Ebola, SARS, Bird Flu, and the 2009 Swine Flu pandemic, also known as H1N1. That one was particularly serious in retrospect, having infected between 11-21% of the world’s population and taking the lives of about 500,000.

Yet here we are, with that fearful event gone from the rearview mirror and a global economy that is far richer than it has ever been. Which is exactly what we will eventually be saying about the present moment in time, from our vantage point in the even more prosperous future.

And Math Can Help Create Perspective

Contagious diseases don’t just grow forever until everybody is dead. They follow an S-curve, like this recent prediction for Covid-19’s spread. It currently estimates that we may see things flatten out fairly soon, but more importantly it continually updates to new information and makes an educated guess – a great strategy for dealing with unknowns in life in general.

One mathematical model that a researcher is updating each day – image source.

On the other hand, some estimates are more pessimistic. Disease modelers at Northeastern University used different assumptions in mid-February to predict between 550,000 and 4 million cases in China*, before we reach the flat top of our “S”. That because of extreme quarantines, that turned out to be pessimistic as well and China flattened out well below 100k.

So let’s imagine that a 4-million outbreak happened in the rest of the world. That’s still only a twentieth of one percent of the world’s population who would even get the disease, and then a further 99% of those would recover. Again, it’s too early to guess the world numbers, and I’m not qualified to do so. But it’s always important to put things into context of the almost eight billion people on Earth – that’s a deceptively large number.

As a final source of information, when it comes to world health issues I always like to see what Bill Gates has to say. And sure enough, he written this great opinion piece in a medical journal and an even better Ask Me Anything on Reddit. His main point? The damage done by a virus really depends on how well our governments respond to it. Lots of caution and a quick response leads to much better results.

So there’s still a lot of uncertainty. But when faced with a lack of information, we can choose one of two options on where to learn more:

  • Good looking news anchors with fake tans and no scientific background, who make more money if they generate more viewership hours and advertising revenue, which is proven to multiply if they can cause their viewers to experience fear, or
  • Scientists and mathematicians who study this stuff for a living, and use incoming data to make a series of continually refined predictions.

As Mustachians, we get our information from scientists rather than news anchors and politicians, and then we choose a course of action based on what is in our circle of control. In the case of the Coronavirus, I would say that means taking the following steps:

  • Continue the usual program of living a healthy life. Just the incredibly simple steps of cutting cars, sugar and television out of your life as much as possible will virtually eliminate the 70% fatality risk factor of being inactive and unfit – and yet only a tiny percentage of people – even those lucky enough to still have fully able bodies – actually follow this advice. On top of that, this strategy will also greatly boost your immunity to Covid-19, and decrease your chance of serious illness or death if you do catch it.
  • Don’t try to out-guess the stock market. Just celebrate the fact that we have a temporary sale on stocks. While the endless stream of meaningless market commentary every day means absolutely nothing, one fact remains indisputable: stocks you buy today at a 15% discount from their peak, will be 15% more profitable for you over your lifetime.
  • And finally, still important but statistically less urgent is taking actual steps related to dodging this and other viral illnesses. Wash your hands a few times a day and avoid unnecessary large gatherings of people in close quarters, until the health organizations tell us we are in the clear.

Guns and ammo and a bunker full of canned beans not required.

* a really interesting quote from that same article about the size of the uncertainty around diseases:

” In the autumn of 2014, modelers at CDC projected that the Ebola outbreak in West Africa could reach 550,000 to 1.4 million cases in Liberia and Sierra Leone by late January if nothing changed. As it happened, heroic efforts to isolate patients, trace contacts, and stop unsafe burial practices kept the number of cases to 28,600 (and 11,325 deaths). “

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  • Anonymous March 27, 2020, 2:31 pm

    We’ve gone into lockdown in South Africa today, announced at 300 cases 5 days ago, now sitting at just over 1.1k cases and a single death.

    My only concern? Cant go outside anymore at all, no walks, no dogs, no nature, nothing. Oh and the police have started shooting at people on the streets. Shooting at journalists. You need a pass to be outside as a journalist, but police shoot first ask questions later. This is what a lockdown looks like when governments go power mad.

  • Bob March 27, 2020, 2:34 pm

    The police shooting at us in South Africa during lockdown is kind of a downer.

  • GailNYC March 27, 2020, 5:23 pm

    March 3rd seems so long ago.

  • Larry M March 27, 2020, 11:05 pm

    When you said nobody knows what is going to happen. That includes the “experts” who each give their take on the situation… and to seem relevant it has ti be different than mos t others. Look at the facts but keep your own council. For a better idea of what is actually happening, I would suggest the Johns Hopkins dashboard. They have one piece of information the formerly mainstream media always leaves out. That is the number who have recovered completely. As of right now that number is about 25% of the total infected to date and is much smaller than the ones who have died.

    We have to be careful and pay attention but we can’t become parallized by all the “might happen” stories the talking heads give us to increase the number of viewers. If you check out the JH site you see thousands are recovering every day. Don’t get stupid, but you don’t have to cower in a corner either.

  • MnStash March 29, 2020, 11:48 am

    For those of you buying stock index funds, now or whenever, the Vanguard FTSE Social Index Fund made a recent change in their environmental screening criteria to exclude companies with primary business activity in coal, oil, or gas. This change just went effect on March 23, 2020 and you can find a good summary here: https://advisors.vanguard.com/pub/Pdf/spi223.pdf

    So there is finally a Vanguard index fund where you can own most of the companies in the stock market but not fossil fuel companies. What I enjoy about MMM’s unique take on financial independence is that it incorporates a better and happier approach about how to live within the natural environment.

    • Jason Middleweek March 29, 2020, 9:40 pm


      Last year I purchased a huge chunk of international holdings as a Vanguard ETF ex fossil fuel companies. Turns out that it was a good idea as many fossil fuel companies are now struggling (and they were struggling prior to Coronavirus). Despite me lucking out with the timing, choosing ethically where there was an ethical option available seems to have been a better choice in hindsight. Something to celebrate.

      • MnStash March 30, 2020, 10:48 am

        Jason–would you mind sharing what international ETF that was? My impression is that Vanguard has been slow to offer funds that allow you to divest from fossil fuel companies. And they’ve been taking a fair amount of criticism for their funds like the Total Stock Market Index and the Vanguard 500 Index that have the effect of providing a lot of capital to these companies because of the enormous amount of money in these funds. That’s why I was encouraged to see their very recent changes to the FTSE Social Index Fund.

        • Felix April 1, 2020, 3:30 pm

          I think this would be a great subject for a future MMM post. I know he’s mentioned it before, but it would bear repeating and especially so if there are a new options available now. Name that ETF please!

          Are you better off by donating the difference you save by buying the S&P500 at 0.07% OFC compared to investing in the more expensive socially responsible fund?

          • MnStash April 2, 2020, 10:21 am

            The Vanguard FTSE Social Index Fund is still a low-cost index fund, with a relatively low expense ratio of 0.14. That is higher than the Total Stock Market Index Fund and the Vanguard 500 Index Fund, which have enormous amounts of assets in them. Climate change will take serious government action and a lot of technical innovation to solve. I’ll let others debate the impact of small, individual actions like this, but I don’t think we should be providing capital for growth and expansion of fossil fuel companies.

        • Jason Middleweek April 2, 2020, 1:38 am

          VESG on the ASX which is the unhedged stock ETF, in Australian dollars. Screened for fossil fuels do a bit heavier in financials, tech and health

          VBND is on the ASX which includes treasuries from around the world and ethically screened corporate bonds

  • Doug March 29, 2020, 7:30 pm

    Hello MMM.

    I’m SOCAL and am a true believer in MMM principles. But times are a bit sucky for LA and SOCAL in general according to the CA governors projections.

    I’d super really love to hear another MMM advisorial post on this post MARCH.

    Thanks for your leadership !!


  • vinita Giri March 30, 2020, 2:20 am

    That was a totally different illness in an altogether different time! Essential sanitation and the germ hypothesis of illness had just begun increasing mass acknowledgment in the most present-day regions of the world a couple of decades sooner. It was during WWI and the Russian unrest! It additionally excessively hit the youthful and sound because of immune system impacts, something contrary to Covid-19 (and most influenza-like infections). Scarcely tantamount. On the off chance that you don’t have explicit defenseless individuals throughout your life, you are just doing yourself hurt by agonizing over something you can’t control at any rate. Try to avoid panicking, wash your hands, and read the news less.

  • Carmen March 30, 2020, 7:41 am

    Usually love and heartily agree with most of what you write MrMM, but on Corona virus, you are too complacent. Here in the UK, we are locked down and most agree it’s the right thing to do. Up to 40% of people with this virus (a brand new virus, not a flu virus) will have NO symptoms. But they will very easily infect the people who could be hard hit: anyone over 70, anyone with diabetes, a heart condition, a lung condition, asthma, overweight, auto immune disease, pregnant and so on, plus random very healthy people. Up to 20% of EVERYONE infected will need hospital care, about 5-10% will need ICU care and between 1-2% will die. No country currently has the hospital provision to cope with this unchecked, so the only way to stop people dying in their homes, in the queues to the hospital and anywhere else is to slow the infection rate RIGHT DOWN. Going about saying ‘eat less sugar (ffs), exercise, fill your cellar with food, you’ll be fine’ is breathtakingly selfish. Right now, we need to think about protecting the people who will really suffer if they get this and protecting our doctors and caregivers, who are literally fighting a war out there in the wards right now, from being overwhelmed by sheer numbers. Also, the more people get this, the more chances this virus has to mutate and the harder it will be to create an effective vaccine. So stay at home. Slow the spread. Flatten the curve. Do the right thing, people.

  • Anonymous April 1, 2020, 6:41 am

    Massive MMM fan, but was disappointed when this was first posted. I know a lot of friends who were spreading this kind of opinion too. I think it comes from a place of optimism and hope.
    I was watching what was happening in China and could see how it was progressing.
    People make mistakes, but you have to be careful when a lot of people listen to you and hang on your word.

  • Op April 2, 2020, 1:52 am

    I feel like keeping a count as of one Month Later on April 2
    Coronavirus cases according to GIS is 938,783
    The United States has 216,722 record cases more than the whole amount of counted cases when this post was made.
    With estimates of 100,000-200,000 deaths
    Outnumbering the Flu with significantly fewer cases and significant government intervention on a global level with the biggest mobilizations since WWII.
    At this rate, it will surpass Tuberculosis
    I feel the solution is to go back to what worked in the 50’s once this isolation ends.

  • chc4444 April 2, 2020, 10:11 am

    Hey MMM please write another post about this because we’d like to hear how you are handling the pandemic now that we are moving farther along the graph. Thanks, Claudia

  • TomTX April 2, 2020, 2:57 pm

    A month after this article was written, and we’re at a quarter million cases in the USA, with a thousand people dying from COVID-19 every day – and we’re still at a very scattershot response with no end in sight.

  • Jane April 30, 2020, 8:36 pm

    I’m a little creeped out (to put it mildly) by the idea that AIDS wasn’t that big of a deal because the stock market rebounded. 32 million people died.

  • Angela Gagliardo May 14, 2020, 2:48 pm

    Thanks Mr. Money Mustache, it’s really helpful to put things in perspective. Another source that helped me start investing was Julie Jason’s book ‘Retire Securely.’ She really breaks down hot to set up your own buying and selling rules, and goes over how to go over down markets. I encourage you all to check it out!


  • Donnie July 30, 2020, 6:06 pm

    This post sure didn’t age well…

    • Mr. Money Mustache July 31, 2020, 10:18 am

      I agree, but perhaps for the opposite reason you are implying – COVID-19 has turned out to be about three times less deadly than the 1% fatality rate I had used when writing this article, and even so more biased towards the oldest people (over 40% in nursing homes, where average life expectancy is only 13 months to begin with).

      On top of that, places New York and Sweden seem to have reached herd immunity already, even without a vaccine, and the second-quarter GDP in the United states dropped 9.5%, which while a record, is far lower than I would have guessed when looking out at the empty streets in April.

      What data have you been looking at when judging the aging of this post?

  • Dominic February 24, 2021, 7:30 pm

    What a crazy year this has been in retrospect. I’m glad I didn’t sell, even when my net worth was cut down 40 percent at the bottom of the market. I would have bought more, but I was out of a job for a few months. Fortunately I found a new job, was able to move from Baltimore to Phoenix which I love, and got a much better paying job in a lower cost of living area. I also get to ride my bike along the Salt River about 3 miles on the way to work. My net worth has since doubled over the past year, and I was fortunate enough to be one of the first vaccinated (health care worker). Plus all those 401(k), HSA, and traditional IRA contributions kept me below the cutoff for stimulus (which of course went straight to VTI in the brokerage account…). A wild ride for sure, but definitely worth the trouble.


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