Most of us are not gamblers. We may have the occasional flutter on a famous horse race, but the stakes are always small. Most of the time we prefer not to risk our money, even when the odds are attractive. We prefer that boring form of inverted gambling known as insurance.
Year after year, each of us pays hundreds if not thousands of pounds in premiums to insurance companies. We do not think of it this way, but we are essentially betting that our houses will burn down, our cars will crash, our health will fail or our holidays will be cancelled. Insurers know that all these mishaps are predictably rare and take the bet. We lose our money, over and over again, but have “peace of mind”.
We who only gamble in such unsophisticated ways are fascinated by true gamblers: those who frequent not only casinos and stock markets, but also the pages of history. We normal folk tend to think of two types of gambler. There is Fyodor Dostoevsky’s compulsive gambler, who cannot resist the lure of the roulette wheel — who ruins himself by betting and betting, despite knowing that, in any gambling establishment, the house is more likely to win than not.
Then there is the gambler as master speculator: Charles Dickens’s Merdle, Anthony Trollope’s Augustus Melmotte — both loosely based on Nathan Rothschild — or our own age’s George Soros. This kind of gambler calculates the odds of each bet very carefully. He scales each wager according to the strength of his conviction and the ratio of reward to risk. The speculator doesn’t always win, but he wins much more often than he loses, and sometimes he wins big. This second kind of gambler becomes very, very rich.
Yet there is a third kind of gambler, who lies between these two extremes. This gambler neither ruins himself nor becomes as rich as Croesus. He wins some; he loses some. He does not gamble to become a billionaire. He gambles for the sheer love of gambling.
The risk-lover does not calculate as Soros does. He bets every day on the basis of his intuition — his gut. To him, the bet is an act of will, intended as much to dominate the counterparty as to make money. The bravado is the point, regardless of the size of the bet. I’ll bet you I win this round of golf. I’ll bet I can make this casino more profitable if you lend me the money to buy it. I’ll bet I can become president of America. I’ll bet this coronavirus is nothing bigger than the normal flu.
Donald Trump, as you will have guessed, is a type-three gambler. He did not blow the money he inherited from his father; nor did he turn it into a mega-fortune. He has made many a disastrous business bet, as his creditors have learnt the hard way. Yet Trump has gambled his way from property to reality TV to real power. And now he is making the biggest bet of his entire life.
He is betting that the number of Americans who die of Covid-19 will be about 40,000 — in other words, approximately the number who die of influenza each winter. (That was the number cited by one of his Wall Street friends last week, after a call with the president, as a “worst-case scenario”.)
Very obviously, Trump’s chances of re-election now hinge on how severely the pandemic hits America. Natural disasters, if they seem to be mishandled, can be political disasters, too — think of George W Bush’s loss of popularity after Hurricane Katrina. And recessions reliably spell doom for incumbents.
America is now in a pandemic-induced recession. The stock market, despite last week’s remarkable rally, is still more than 20% below its February high, effacing most of the gains investors have made since Trump’s election. The combination of public panic, rational social distancing and state-level orders to “shelter in place” has thrown the US economy off a cliff. Jobless claims soared last week to nearly 3.3 million, the biggest jump — by a factor of almost five — since records began.
The president’s bet is not as crazy as you might think. It is, as I said last week, unlikely that America as a whole will have as disastrous an encounter with Covid-19 as Italy. Americans are less crowded together, use less public transport and kiss one another less than Italians. It is also possible the virus will claim many more victims in the big Democratic-voting states of the American coasts — New York and California — than in the smaller, Republican-voting states of the heartland. Thus far, only 19% of Covid-19 deaths are in counties Trump won in 2016.
Those writing the obituaries of this presidency have written them many times before and been wrong. They must have read with incredulity the results of last week’s Gallup poll, which showed a majority of voters — and in particular a majority (60%) of registered independents — approve of Trump’s handling of the pandemic.
The problem is that this time Trump is gambling with people’s lives on the basis not of calculated risk but of total uncertainty. We simply do not know enough about the virus Sars-CoV-2 to have any conviction about how many Americans it will kill. In the absence of adequate testing around the world, we still don’t quite know how many people may already have caught the virus and be just fine. We don’t know just how infectious it is. And we can only guess at how lethal it is, on the basis of widely divergent case fatality rates from around the world.
Pandemics are not like house fires or car crashes: they are not normally distributed along a bell curve but governed by a power law, which means we cannot attach a probability to the timing or scale of a pandemic. Covid-19 could kill 40,000 Americans. But if the virus spreads as far as H1N1 — swine flu — did in 2009, so that 20% of us get it, and the US has the (very low) German case fatality rate of 0.7%, we could have 400,000 dead. As my near namesake, the epidemiologist Neil Ferguson, demonstrated last week, small changes to the variables in an epidemiological model can produce mortality projections that differ by an order of magnitude.
All we can say with any certainty is that most of east Asia and most of Europe have taken much more drastic steps to contain Covid-19 than America has yet taken. And the president wants to see even those restrictions lifted in a mere two weeks’ time.
Such is Trump’s gamble with American lives. The one thing to be said in his defence is that, like his British counterpart — who very nearly gambled on a strategy of herd immunity and has now tested positive for Covid-19 — he has skin in the game. Trump too will be at risk if this gamble goes wrong. In Italy, the case fatality rate for the president’s age group is one in 20.
Niall Ferguson is the Milbank Family senior fellow at the Hoover Institution, Stanford