Time value of money: Wimbledon edition

You’ve all probably heard that Wimbledon paid $2 million per year for the past 34 years for pandemic insurance and now will receive $141 million.

Sounds smart. Maybe it is.

But these are the wrong numbers to determine that.

The right numbers are the rate of return and opportunity cost.

The rate of return on a $2 million annual investment for 34 years with a $141 million payout is about 3.9% per year.

Had they invested that $2 million a year in an S&P 500 mutual fund, they would have had $246 million, so their opportunity cost of that insurance has been about $100 million in today’s dollars. The opportunity cost may even be higher if the markets happen to rebound once things get going again.

Or, that means the folks who gave them the insurance are about $100 million ahead. Not bad for them.

Granted, Wimbledon also wouldn’t have had the coverage had the pandemic happened sooner, but they would have had some nest egg to help them through.

Simple solutions to stop the spread

I’m a sucker for simple and effective solutions.

Social distancing and hand washing are good examples.

Another solution is to over test and isolate the infected, and those they have been in contact with, as early as possible, as S. Korea did.

We missed the boat on this one. Hopefully, this will be a lesson learned for the next go around.

Because we missed that boat, we shut down large gatherings, which was the best move in the absence of other measures, but not quite as simple.

Treating with a malaria drug may prove to be another simple solution.

Another potentially effective simple solution that Arnold Kling advocates, and is part of S. Korea’s containment package, is wearing a mask or scarf to cover your nose and mouth.

Some are skeptical of the effectiveness of this solution. But, I think it’s compelling that S. Korea was able to get better results than areas that instituted shutdowns, without  shutdowns. At least that’s my understanding. Let me know if that’s wrong.

Some have pointed out that S. Korea figured these tactics out out with the SARS virus, so hopefully we’ll learn our lessons on this one so we don’t have to repeat this mess.

A commenter on Arnold’s blog suggested that locales exempt people from lockdowns if they wear mask or scarf. I think that would be a good way to get people over the cultural hump we seem to have against masks.

Finally, the other reason I like S. Korea’s efforts is that I read somewhere that they did something we have not. They prioritized solutions that were compatible with their high regard for freedom.

I have not heard our officials even acknowledge that.

My concern is that busy-bodies might see get the idea from this that it’s okay to yank our freedom whenever they feel there’s a case that they’re doing it for our own safety.