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Why We Need To Start Investing In Resilience
In 1964, as the financial revolution was gathering steam, an MIT economist named Paul Cootner published a collection of essays called The Random Character of Stock Market Prices. Based largely on an obscure dissertation by a forgotten frenchman, it laid the foundations for a new era of financial engineering.
Yet among the papers included was one that told quite a different story. Written by Benoit Mandelbrot — a mathematician not an economist — it showed that the seemingly sophisticated models significantly underestimated volatility and risk. In effect, he was predicting that these models would massively blow up one day.
No one disputed Mandelbrot’s facts, because they were clear and indisputable. Nevertheless, reputations were invested and there was of money to be made. So Mandelbrot’s warnings, although not altogether forgotten, were put in the back seat and we paid an enormous price. Clearly, then as now, we failed to invest in resiliency. Will we ever learn our lesson?
The Path to Pandemic
The Coronavirus crisis, for all of its severity, shouldn’t have been a surprise. There was the SARS pandemic in 2003, the Swine Flu outbreak in 2009, MERS in 2012 and, of course, Ebola in 2014. Each of these had potential for global catastrophe that was, thanks to some decisive action and…
