I’m off to Virginia Beach later this month so it seemed fitting that today’s post has a beach theme. This quote comes from Chapter 7 of Nathan Englander’s book “The Ministry of Special Cases” and you should remember these words whenever someone like me asks you to think about your organization’s risks. “It’s like standing in the ocean and facing the beach. It’s up to you to know what’s behind you. There’s always another wave coming, building in force and crashing down.”
If you’ve ever had the pleasure of putting many people in a room to discuss and assess risks you’d know that not everyone assesses every risk the same way. To some a particular risk is high, while to others it is low or non-existent (“C’mon, that’s not a risk!”) But why is that? In a 2011 article by Dan Lovallo and Daniel Kahneman, they explain that executive are “overoptimistic” which can be traced to “cognitive biases – to errors in the way the mind processes information – and to organizational pressures”. They go on to write that this optimism is…
My 14-year old son recently bought himself a not-so-inexpensive bike with his own money. On the Monday after the purchase he wanted to take the bike to school. I advised against this as he had a pretty lousy bike lock. “C’mon, dad”, he replied, “who’s gonna steal my bike in this neighbourhood?” (After all, we live in the suburbs and not in the worst part of Toronto where ruffians often steal $500 bikes so they can buy drugs and iPhones.) “C’mon ______” is a routine response heard by many risk management professionals and fathers. Bad things happen, but they won’t…
There’s an old joke about two campers that are awakened by a hungry bear. The first guy yells ‘run’ but the second guy stops to put on his running shoes on first. The first guy asks if his companion really thinks that the shoes will help him out run the bear. To which the second guy replies, ‘no, I just have to out run you”. Sometimes risk management is the same way. You don’t have to have the best risk management system, just one better relative to the next guy.
I am always amazed that despite the enormous square footage of our planet and the tiny amount of poop produced by a bird that it is possible for my car to get hit. But it occurs despite how unlikely it would otherwise appear. Shit happens. We know this because history tells us it does. Shit happening is a universal truth. We do our best to live our lives and manage our businesses but the shit is always there. Look up or look down and it will be there. Call it bad luck, a black swan or an I-told-you-so.…
In Stephen King’s novel, Under the Dome, a small town in Maine becomes suddenly cut off from the outside world by “an invisible barrier of unknown origin”. If that sounds a bit too much like the Simpsons Movie or science fiction for you, simply replace the dome with any other sort of hazard (earthquake, avalanche, flood), force good (and bad people) to fend for themselves and watch mayhem ensue. It was an excellent book. Without getting into the details of the plot and characters it made me think about disaster preparedness: lots of folks had generators but not enough…
If there are two things you have noticed about this blog, I often write about zombies and the Moment of Risk Enlightenment. Today’s post combines both. (Note: This post contains spoilers about season two of the Walking Dead.) I was catching up on season two of the “post-apocalyptic” television show The Walking Dead this week. In episode seven the survivors learn that the Greene family barn is full of walkers (zombies). Up to this point the farm represented a safe haven; they had not seen any walkers on the farm since they arrived. Impact and likelihood were low. But was…
In the series A Song of Ice and Fire which begins with the book A Game of Thrones, by George RR Martin, we are introduced to the Wall and the Night’s Watch. The Wall is an immense fortification on the northern border of the Seven Kingdoms that defends the realm from “what lies North of the wall”. It was created over 8000 years ago and measures 300 miles in length and 700 feet in height. The protectors of the Wall are a military order clad in black known as the Night’s Watch and they are as old as the…
Yesterday I wrote about a white paper “Black Swans Turn Grey” from PwC. Here’s a footnote to that post. I had a good chuckle when I read about these “new black swan risks”. The authors suggest that all these unknown unknowns and unpredictable events are happening more frequently these days. This of course is not true. We are seeing the same sort of thing in the NHL with respect to concussions. For the longest time players have been getting concussions; the only difference is that now more players, coaches and people in the media are paying attention to them.…
A website dedicated to the popular show Lost published a post a while back about how each of the characters on the show would make a peanut butter and jam sandwich. I have borrowed this idea to illustrate how some finance or risk management professionals might make their own sandwich. In my first PBJ post, we looked at how Nassim Taleb, author of The Black Swan might make a sandwich. In today’s post we look at how one of my Twitter chums, Donald van Deventer, founder of Kamakura Corporation, might make a sandwich. How to Make a Peanut Butter Sandwich: Donald van Deventer Take Starship…
