Reply To: Questions regarding DPF.

[Rezwan]

benf wrote: Correct me if I’m wrong in my understanding of the Black Swan, but what was “just” an exploding oil rig killing some workers has now turned into more of a Black Swan type of event, including birds and other animals soiled black with oil.

That would be a black swan if the industry didn’t think that sort of thing could happen and didn’t have precautions in place to prevent it. Did they think oil rigs were fool proof as compared to tankers? If they didn’t see it coming, it’s a black swan. If they have an insurance policy for it, it’s part of their business as usual, risk strategy. (not acceptable from an eco-view, but then again, 40,000 deaths on the highways every year doesn’t stop us from driving off to work every day.) In other words, we’re addicted to oil. Oil spills are acceptable. Just like the occasional exploding meth lab is worth it to those addicts.

The black swan is more the things you aren’t planning for – the “unknown unknowns” as opposed to the “known unknowns.”

Example from the book, a Vegas Casino’s risk management division was geared toward
1) reducing losses resulting from cheaters
2) sophisticated surveillance (to thwart an “oceans 11”)

Their four largest losses and risks, however, “fell completely outside their sophisticated models”. They were:
1) Loss of $100 million when Roy was maimed by a tiger. In scenario analysis, they had considered the tigers attacking the audience. But not attacking Roy. Seems so obvious now.
2) A disgruntled contractor, injured at work, was insulted by the settlement they offered him and attempted to dynamite the casino (explosives around the pillars in the basement). He was thwarted – but if he had been successful…?
3) An employee whose job it was to file a special form with the IRS simply didn’t. For years. No one noticed, until the IRS did. Tax violations and negligence could have resulted in loss of gambling license or suspension. They ended up paying a huge (sum undisclosed) fine. (I wonder what happened to the employee).
4) Casino owner’s daughter was kidnapped (!). This caused him to violate gambling laws, dip into casino coffers to pay ransom. (I thought K&R didn’t happen in the US.)

And more! Such drama.

C’est la vie.