 Okay, we're back. We're live. I'm Jay Fidel. This is think-tech looking from the east with Steve Zercher in Kobe, Japan Kansai Gadae University is where he teaches. He teaches business and entrepreneurship When he's not teaching in the Shidler College of Business right here in Honolulu. Welcome to the show Steve It's always nice to talk to you Thank you very much Jay. It's a pleasure and I'm sure you want to know if I'm wearing a mask now or not And the answer to that is no, I'm not and the answer to the question the next question is why not? Well, it's just me in my house right now and Jay, you know, I don't know where you've been lately But I think between the phone here. I'm pretty I'm safe at least I'm hoping I Think you ought to be concerned if one day we have one of these shows, you know And you can see me and I am wearing a mask that would be of great concern But so far we're not we're not there yet and and we have no that I know of do we have reported guests that reported Just you know cases of the virus here in Honolulu. I don't think we do. I don't think we do In any event there's been no deaths here. So the question we're gonna talk about today is coronavirus I mean, that's on everybody's mind. In fact, the US stock market went down a thousand points today. That's huge That's like 2008 already. It's it's it's profound and Where it has it that this is all because of fear over the the economy the global economy that will result from this as it expands and in fact Italy took a hit today hundreds of cases reported and You know what you clearly have is it is a global may I say pandemic? If you look at the map of the world and see where all the cases are the cases are everywhere So we need to address, you know, what's happening and and actually more to the point What will happen? So big question. What's happening in Japan? Japan had a whole affair with that princess Cruise liner and I'm sure that you have some thoughts about that Yeah, I do And I saw her a couple weeks ago in Los Angeles chatting with her briefly about this, of course, this is a crisis for them but just to catch up everybody who's listening on The number of cases worldwide. I just checked before our show started J and there's almost 80,000 cases reported worldwide 2629 deaths. So the mortality rate is 3.2 percent Of course, China is number one and Korea has just leaked left up to second place in terms of number of infections So that country probably has crossed over Into a pandemic. I don't know exactly how the government responding to that And then the number three is has a separate category. It's within Japan, but it's what you mentioned the diamond princess line And the number of cases there is is quite high Almost 700 cases now in the diamond princess. Wow In Japan Yeah, yeah, it's about 20% of the people on the We're on the ship. Although there's still a thousand on the ship. Those are employees that are still under quarantine And I'm sure they're being tested quite a bit. But yeah, 20% of all people on the boat Have become infected and three Have died out of the 690 that have been diagnosed with the corona virus so far But let me let me just return to what's going on in Japan in general J Before you do that Steve before you do that there was a there was a bit of an issue About returning the passengers from the princess line To the United States. Yeah, and apparently the yeah, go ahead Yeah, I do want to talk about that because this has become a Controversy now within Japan, but but let me just briefly cover what's going on in Japan Okay, outside of the diamond princess and then we can return to the diamond princess. So the general conditions here in Japan Of course people are concerned This is the number one news story on a daily basis outside of the diamond princess, however the number of Infections is still relatively low considering that we're a country of 120 million people. There's a hundred and sixty cases outside of the ship But people are Responding to the perceived threat or to the threat itself The people the number of people wearing masks It's quite high. I was applying just recently. I left Japan 100% of the Japanese people who got on the plane were wearing masks Of course being within a plane is a perfect environment for this Transmission of these types of viruses though. Yes, very very concerned and this daily reports by the government on What's what's happening the new it the new cases that are surfacing and what the government is attempting to do In order to try and make sure that we don't have a repeat of what's going on in China Certainly, that's the worst case scenario or what's going on in Korea with the the high number of cases being reported in the last week or so So that's that's the general conditions. I people are still on the trains not wearing that I think I would say that there is a general high level of concern But there's not a fear we haven't crossed over to the point where people are really concerned when you There's still Chinese tourists here in Japan My wife went to a ski resort over the weekend and there were Chinese people there So they're being led into the country if they're from Wuhan They're not being led into the country, but if they're not from that region, they're being led into the country. So There's again, there's high concern, but we haven't crossed over to the point where there's a Real sense of urgency about this or for example, the Japanese government is Not close so far as I can tell Danny all Chinese tourists from coming into the country or frankly that may extend if it is if it is done It would extend the Koreans now as well since the Korean Incidents rate is going up so highly. So that's what we are. So what is what in fact is the Japanese government doing? You know, Jay, I don't we talked about a month or so ago about this and you asked me that question and I said the Japanese government seemed to be doing a fairly good job in reasonably Informing the public about the risk rate and putting up additional screening, for example for tourists coming into the country. So I was reluctantly Admitting that the government was doing a good job. However, now with the diamond princess Incidents and how that was handled the Japanese government is perceived as really stale to protect the Japanese population so That is primarily focused on how they handle the diamond princess. How did they handle the diamond princess? Yeah, yeah Yeah, let me go go into that. So currently There's 690 people who have been infected with the virus That again is 20% of the total number of people on the boat and that number is increasing every day There are three people who have died that were on the boat from the infection The criticism that's being focused on the government right now is how they handled this So what they did is they forced the diamond princess to basically go into a quarantine So they wouldn't let anybody in or while he wouldn't let anybody off or if you were going in you had to wear protection for 14 days and I thought was at the time that well, we can't let these people off the boat until they go through the two-week quarantine period But what happened in reality is that more and more people got infected on the boat. It was like a petri dish Basically they created the environment where the infection rates just took off The ship was not able to protect their customers from the infected customers from the customers who were non-infected Then so that's one thing then at the end of the 14 days they allowed a Thousand people to go off the boat that had tested negative to go straight into the public So they went right off the bus right off the boat and got into taxis and trains and buses And went home and what's happening now is those people are becoming Synthetic now. They're they're actually infected. So they were released into the public negative at the time coming off the boat But then the incubation period they haven't figured this out or how the transmission has occurred with this disease And they're now in the general public. So the Japanese public is going Why did you do that knowing the case of the United States or other countries that took their citizens off the boat and Then flew them back home. They immediately went back into quarantine again So for example the American citizens that were taken off the boat They were flown to some Air Force base I think it was in California and they were put under watch for another 14 days But in the case of the Japanese government, they just let these people go So that's being deemed as irresponsible and not recognizing the significance of the threat So to answer your question right now There is a lot of criticism of the government for number one forcing the boat To go through a quarantine which actually made the infection rates go up I mean, I guess they had good intentions, but the outcome was not positive And then how they handled the release of the customers of Japanese ones coming off the boat letting them go directly into the public So what what have we learned boiling all that down? What have we learned about it? I guess we've learned that the incubation period could be longer than 14 days or maybe it's the secondary Yeah, I don't know how secondary incubation period right in other words. Somebody is infected It gets through the 14 days fine, but in the course of the 14 days He's in fact infected a number of others whose 14 days Begins running sometime in the middle of the initial 14 days right something like that That seems very reasonable very logical that to have that thought I I don't know why they figure that the clock started for Everybody on day one. You're exactly right J The infection could occur on the 10th day or the 12th day while these people were cooped up on the boat Yeah, and they're released and they're not showing any signs of the virus and then they get out and go home And they do So that's happening in Japan right now. Yes so the result the The ratings the support for the government is beginning to go down a bit. This is not the only factor The economy last quarter short by six percent That's a few four two thousand nineteen and without a doubt because of the corona virus The economy is going to shrink here Again in Japan. So technically Japan will go into a recession one on economic because of economic reasons there's a recent tax increase in Japan that forced to go force the economy into a into a Shrinking environment and then the corona virus. So you mentioned the stock market impact of this The economic impact of this virus on Japan the fastest growing industry I guess up until this quarter in Japan has been inbound tourism it's moving a year over a year and Now it's beginning to trail off and I suspect the numbers are actually going to turn negative In terms of inbound tourism for Q1 This is a side note Kyoto which is As experienced over tourism for the last five years is now running a campaign called empty Kyoto Come to Kyoto now because it's empty come to Kyoto because in the hills in Kyoto There's more monkeys than there are people. It's the first time that that's happened in ten years So already Japan tourism industry is feeling the pressure of the lack of foreign tourists coming in because of the corona virus So also I noted you and I were talking before the show I get email on travel deals The cruise lines are offering five-day tours for $100 So clearly the general public has Looked at what's happened to the diamond princess and the fact that cruise ships are and environments where this type of This virus can easily transfer from one person to another The PR on the diamond princess and I'm reflecting on the cruise lines overall is very negative So as a result they're slashing their prices and trying to get people to get on these boats So I don't know Jay what your risk tolerance is but you can take a five-day cruise in the Caribbean for a hundred and twenty four dollars now if you want Well, you know my my wife and I were going to go to Vietnam In the middle of March we canceled that trip Not only because of the risk of Contagion on the ship or in Vietnam But because of the risk of contagion and we would call it travel difficulties getting to Vietnam and getting back from Vietnam Very threatening to somebody, you know, I'm on in years And it's very threatening to me and my wife to will be in that kind of environment so we're not gonna we're not gonna take trips like that and Going forward and so sure I can understand they want to charge a hundred dollars for a four or five-day trip Two factors come to mind one is when you get on that ship They'll find other ways to raise raise the the gross off your presence there You know, that's only that's only the admission Or the cover charge But but as you as you spend the time on the ship for the four or five days They'll make other money But that doesn't change the basic circumstance the basic circumstances that you can't have a ship You know with how many passengers were on the we're on the princess cruise the thousands and thousands of them How many yeah, three thousand nine hundred. Yes, huge nine hundred huge and so if that if that ship stops operating Okay, crew or no crew. They still have to maintain it Crew or no crew. They still have to have daily fixed expenses that are enormous and imagine that ship just stays stays at the dock Just the the cost of staying at the dock are enormous So they're really Jeopardized and they're really, you know concerned about the viability of their cruise companies They make a lot of money in the good times, but this is the bad times and some of them I think are going to go out of business Nobody's going to take any trips on cruise ships for a while and this leads me to my next question to you Steve You know, so that's just travel That's just travel in China People haven't been going to work although the government now wants to you know start them working again We restart the economy so to speak. I'm not sure how successful or smart that idea is but what about Japan? What about other countries where people don't want to go to work? It's not a matter of wearing a mask. Yeah, it's a matter of staying home Yeah Yeah, that's an interesting question here in Japan. There are a number of conferences Actually, I was scheduled for two entrepreneurial conferences this week and both of them had been canceled in In respect or in regards to the possible risk of spreading of the coronavirus the city of Osaka has suspended all meetings Period for the next month So through March 20th, I believe there will be no conferences no large meetings at all that are sponsored or have anything to do with the city of Osaka So that's occurring sporadically throughout the country and then there's an economic impact there now to your question about work that came up last week and What the government was recommending that businesses do is to allow Their employees to telecommute basically to call in and or do zoom or do like what we're doing right now And it remarkably the company said no that's not allowed. This is a this is a cultural issue in Japan In Japan, you're not doing work unless you're sitting at your desk Even if you're doing absolutely nothing and the white collar productivity for Japan is one of the worst in the developed world So many of them are absolutely actually doing nothing at their desk The cultural perception the way businesses view their employees is that you have to physically be present in the office for you to be doing work so despite the threat despite the You know the hundred and sixty people who've been affected and One or one or two people who have died in Japan and the fact that this could spread potentially to something much much worse The Japanese companies are saying no our employees cannot call in our employees cannot work at home They have to get on the train, you know, and you know how crowded the trains are in Japan Oh, yeah, of course is a high-risk area for transmission. Yeah, but it's business as usual. I'm you know, I'm not Thinking upon there's business as usual In terms of how Japanese companies are asking their people to come into the office where they can watch them work And then therefore be credited with actually working Oh, I think they're gonna have a problem with that. They don't have a quarantine going Yeah, they get to and and without a quarantine and asking people to continue to go to work They're asking for a, you know, a Multiplication of the virus, right I teach a class about marketing and culture. This is a very good example of how culture is dominating potential infection risk Because Japanese businesses don't feel you can work unless you're in the office sitting at your desk where they where you can be observed They're overlooking the potential risk of this virus becoming much more serious in the country now If Japan follows Korea and all of a sudden instead of 160 cases We have 16,000 cases Maybe the government will just issue an edict and say, you know, employees need to work from home But right now at the level of threat that's perceived by the businesses They're insisting that their people come to work as per normal Well, whether they work, you know in the office and do very little Because their business partners aren't doing very much in this crisis or whether they work at home and do do it from home They're still doing less than they might have done had the crisis not taken place and you find that, you know It's not just the cruise lines. It's not just the tourism industry It's going to be the mom and pops the stores down the block factories, you know Everything and everybody is going to be impacted by this not only in Japan But in in any country where either the people or the government or both are concerned about public health and when you add to that You know the crisis in confidence on Wall Street today Thousand points down and when you add to that, you know the fact that we have we have a world map Which was published in the New York Times Showing red for every country which has been affected and gee a huge number of countries have been affected some some in substantial numbers and Including Europe and most recently including Italy which which has a you know a huge increase in the number of cases You have a global may I say panic? You have a global pandemic at the least and this has got to have an effect and I'm really asking here this has got to have an effect on on the global economy and I wonder if you can spend a little time on Your views about that and what happens, you know when the global economy is affected Is it is it going to affect you and me? Is it going to affect our way of life or quality of life? Is it what it what is good? What happens when the global economy all comes down at the same time? Wow, Jay, that that's a that's a big question I agree with the basic premise behind it that this virus Even in its current level will have a profound impact on worldwide economy travel is 10% of the worldwide GDP I think that number is approximately correct and this is just like you who canceling your trip to Vietnam I just got a note from my my son's teacher. She was going to America. She's canceling that now as well so the airline industry the trap with the hotel industry all of the Businesses affected by travel the mom-and-pop stores like you're talking about the catered foreign tourists all of them are going to be profoundly Impacted and that will affect the GDP in individual countries and and worldwide You know if this continues unabated and the numbers of infection Go beyond the 80,000 you know going to the 200,000 or 300,000 or even you know Haven't forbid into the millions of people Yeah, we could have a worldwide depression. I mean I don't want to be I don't want to overplay this but this could slow certainly make the worldwide economy turn negative and maybe The numbers could be significantly down if this has a freezing effect on worldwide trade You know for example, it's not just people it could be products as well. I think from two respects Jay one the Japanese manufacturers of cars and so forth are not not getting supplies from China because Various locations are being quarantined. So there's no workers to make the parts that the Japanese companies need We're gonna take a short break. We'll be right back with Steve Zercher In Kobe, Japan and Rusty Komori host of Beyond the Lines I have a TV show based on my book which is also called Beyond the Lines It's about leadership creating a superior culture of excellence and building winning teams We are having a fun drive for think tech Hawaii and please please please please help us keep these shows going Please go on our website think tech Hawaii comm to donate. Thank you We started okay. All right Steve. Let's let's hear more about the global economy Yeah, as I was saying The immediate impact of course is the freeze that this is This occurring when it comes to international travel Already subsidies are being given to Korean Airlines and Chinese Airlines by the governments because their their planes are flying nearly empty now The impact there is very clear and apparent and that's going to Certainly negatively impact the worldwide worldwide economy But then also This is my own speculation. This did not happen when SARS broke out in the early 2000s But it could be unless scientists figure out how the transmission occurs There could be some concern that the virus can be latent on a on a product Rather than being transmitted by a person now I'm not a doctor or scientist But if that occurs if people become Fearful of actually using products that are coming from highly infected areas like China for example That would have a secondary negative effect on the worldwide economy Well, let me let me add something let me add something that is that is very personal to think tech So we order things through Amazon all the time all the time. They are our main supplier for studio gear And one such piece of gear maybe more than one Is it's fabricated in China and in fact it tells you that on the Amazon site and in fact for details on the order You you call a number in China and they talk to you in you know from China With a Mandarin accent everything Okay, so they have to fabricate this thing and then they're going to send it to us as they have in the past and It's going to come in a cardboard box And it'll be delivered because right now. I think there's no constraint on that It'll be delivered through the Amazon system and we will receive it here at the studio and I am thinking I've been thinking ever since I ordered this thing That gee whiz what's what's on the box? You know, is it possible that the virus travels on the box or take the box off? Yeah What's what's on the on the the equipment that is within the box? How do I protect myself? Do I spray the box? Do I let the box sit there for a month or two or three or four? Before I open the box. So, you know, this is just me and I'm not really that worried about it But but the fact is that when you're getting something from China is being made in China You ask yourself that question and I think a lot of people must be asking themselves that question Why should I order this from China when we don't know exactly how the virus is transmitted? Yep, so yeah, it was my up the top of my head idea, but the J Seems like you share that concern and I'm sure there are millions of people right now that are asking them that question And themselves that question unless we can determine that this virus is only transferred Human to human, you know scientists can tell us that Then there is a concern about how this is actually being transferred. I Don't know. I'm not You know the scientists the doctors the researchers I'm sure they're spending a lot of energy on this, but I haven't seen anything. Maybe Jay you can correct me as To how this is actually transferred what the incubation rate is And so forth. So there's still a lot of questions at this point We'll figure it out my understanding from the shows we've done on the subject is that a If somebody coughs or sneezes at you, we're near you You're gonna pick up the the droplets and they're going to get into your respiratory system that one's easy But be and this is more complicated is if you go into an environment where people have their hands They slough off the virus right and people have their hands on yeah on the seats in an airplane Anything they touch and then you later touch that Then what you have is a a situation where you're you're touching your hands then have the virus on them now later on You might decide to touch your face or your nose or your mouth or the food that you're eating or your eyes So all these are entryways And so it could be it could be a combination or an accumulation of these various These various ways of the modus operandi where the virus can get at you and I agree with you We don't know but you know we I think we have to be conservative in evaluating how this all works The big question for me is how long does the virus last? Before it goes inert. I mean, I don't know if we have an answer on that one Doesn't seem to be so To get back to your question that the clear negative impact on world-wide economy Maybe even to the point where the worldwide GDP was negative in Q1 this year is on the travel industry and then secondarily it's the potential risk of product the person or you know physical Item the person infection which we don't know the answer to right now. Hopefully scientists will figure that out but that could potentially have a secondary strong impact on the world-wide economy so I'm hopeful far as I remember I was in Asia back then You'd have a major economic impact But most of it had to do with the tourism industry and there weren't secondary effects beyond that But this of course is much much bigger Much much more broadly spread well from an entrepreneurial point of view Steve from a you know Business an entrepreneurial point of view evaluating what happens. Let's assume that a lot of business can't can't do businesses Let's assume that the you know the gross product is substantially reduced Let's assume that When you want to go to work, whether you're working at home or in the office There is no work because the company is just going out of business They're not earning any revenue and they can't continue. I like the cruise ship problem I think the cruise ships are in jeopardy right So what happens? So how does it how does it trip down the scale? How does it affect? How does it get from there as a global phenomenon? To me at home in my house. How does it how does it get down the track that way? Can you talk about that? Yeah, I guess it depends on what business you're in If you're dependent your business is dependent on international trade or tourism. You're at significant risk There could be upside towards some businesses that are more domestically oriented. Like for example in Japan domestic Travel may take off For my own answer for my own personal perspective I'm the dean of the Asian studies program at Kansai Gaida University. We're very dependent on foreign exchange foreign exchange students So we have 317 this semester But perhaps in the fall that number will drop by half Because parents are not going to want to send their students to Asia I my business could be dramatically impacted and if that happens Then we have we could have way too many teachers Then then we need we'd have to reallocate them the way it works in japan is you can't fire people As as you can in the United States and many of these professors have 10 years So we would have to reallocate them maybe to domestic students only So it could have a profound effect on my business Actually jay that had not occurred to me until you asked a question But that's something i'm going to have to begin to plan for We could face a 50 drop-off on the number of students that comes to japan because of the Risk of the coronavirus here. Yeah. Well, I think it's something like the domino the domino theory You know one thing begets another thing begets another thing And then it goes logarithmic where everything is affected and and the effect is is bad the only the only You know point of optimism. I think which is which is a real possibility is that this will burn itself out It'll burn itself out in a matter of time. Uh, and the and the question is how long I was just looking at the uh Second by second updates on the number of uh cases and it's It's a linear scale. It's actually it's it's beginning to show signs of platforming out I'm looking at it right now and February 15th and the number was around I'm just guessing you're about 75 000 or so In february 21st. We're just under 80 000 So there the purge if you follow and projected forward shows that maybe it'll plateau out Who knows who knows I mean cars Yeah, in cars it did plateau out. I don't know that there was anything that science did. It's just the virus ran its course And then the infection rates began to drop. Yeah, we can only hope Anyway, Steve, we have to follow this going forward We'll talk again in two weeks and maybe things will be different. I hope they'll be better Or at least a sign of light at the end of the tunnel Steve Zercher I look Kansai Gada University in uh In Kobe, Japan. We look forward to talking with you again, Steve. Aloha Always a pleasure jay. Thank you so much