A Wildcard to Top them all
Thursday 17 November 2011
I alert you from the outset that I'm about to make a massive leap of potentially an supportable scientific theory in discussing a potential Wildcard event. If you're only interested in the concrete real stuff, head elsewhere after you get about half way. I'm going to make a massive leap first of all and then having done so, give you a Wildcard event I'm yet to see mentioned anywhere. In the operational realms of Strategic Planning, Risk Management and Forecasting it is rare that the 'not to be countenanced' event is included as one of the thinking outputs. Being beyond consideration it therefore loses its strategic value in shaping the understanding of the future operating conditions for the organisation. And Organisations are the poorer for such an approach to thinking.
John Petersen's 'Out of the Blue – How to Anticipate Big Future Surprises' was the first real tome that considered Wildcard events. In that book, Petersen lay the ground-rules for what a Wildcard event was – 'a low probability, high impact event that would severely disrupt the human condition...'.
In other words the event is unlikely to happen (low probability) BUT if it did happen, we'd be in serious strife (high impact) and the coping mechanisms available to us will be insufficient to deal with the crisis (disrupt the human condition). I assessed Petersen's Wildcards approach in my paper 'Wildcards – signals from a future near you' and a few years later, Nassim Nicholas Taleb's 'The Black Swan' provided perhaps the most popular understanding of Wildcard events.
Right now there are two timely observations – Petersen's rule that thinking about a Wildcard event AFTER it has happened provides no strategic value; and secondly that the Eurozone financial crisis is an example of a Cascading Discontinuity set. For those of you yet to read my Wildcards paper a quick explanation of a CDs is warranted. Where Wildcards are typically described as a singular event that leads to a massive level of disruption, the CDs achieves the same outcome through a series of smaller, sometimes disconnected events that also overwhelm the ability for the system to cope. A current example is the Eurozone fiscal problem which is a CDs. It was triggered by an excess amount of Chinese capital inflows into the US that enabled a credit bubble to form through (arguably) pretty poor fiscal regulation in the USA which saw unjustifiable lending on houses of minimal value to people with minimal potential to service the loan. The lending practises expanded into Europe which had the added input of a pumped up southern European zone with few structural securities of their more disciplined northern European members. Life on easy credit seemed a dream come true for quite a few countries until someone asked if it would be okay for a loan to be repaid and lo and behold, the dream burst as the myth was exposed.
The Eurozone CDs is the tumbling of a stack of cards with one issue after the other and on top of another placing greater stress on the ability of the system to cope. But that is not the CDs I want to really focus on, I just used that one to help you picture the way things can cascade ontop of each other.
If you remember the warning I gave you at the start of the paper, here's where I bid you adieu as I step off into beyond belief thinking. My only support is Petersen's rule that encourages us to think about potential Wildcard events BEFORE they have occurred so that our thinking and planning might be better designed.
It is my hunch that right now we have a Cascading Discontinuity set of massive proportions forming. You know it more as the idea of Climate change or Global warming.
As a CDs it goes something like this: Population growth leads to increased city sizes and a stressed transport network. Rather than build public infrastructure to cope, countries overload their already diminished physical space with a road network to house private vehicle options. Rather than diminish transport stress, the car network increases delays in shipping and other factors and, as more cars flood the roads, delays in peak times increase. These delays increase pollution (mainly through stop start traffic demands) and add to temperature rise. At the same time we're feeding ourselves using last use foodstuff (meat) which also adds to significant pollution. The increased demand for meat means forests (that both clean air AND cool the planet) are razed to farm livestock and the cycle continues. As heat increases ice-melt at the Arctic (and now Antarctic) sees once 'white' landscapes laid bare and the dark rock is exposed to sunlight. You know what happens next – rather than reflect the light and heat back into space, the heat is captured and we create a heat sink, just like the clay tiles your architect advises you to put in your kitchen which will capture heat during the day and slowly release it at night. Now, rather than cool down overnight at the polar caps, things stay just a little warmer and the cycle continues.
You know where all of this is headed so I need not go on. Small, arguably disconnected stressors on parts of the system conflate together to overwhelm the whole system.
Okay that's a solid scientific theory but not the great leap I promised. I approach the promised great leap with a question for you and go with me here – what happens if you take a balloon and slowly heat it up?
That's right, it expands. You can heat a balloon in one of two ways – from the outside, or from the inside. Back to our balloon – as you heat it, the air molecules inside it expand and as it expands, pressure on the inside increases causing the surface of the balloon to stretch as those air molecules look for a way to create more room.
I know that sounds simple but I'm talking specifically about our earth and how for the first time in our species existence, it is being heated from the inside and outside at the same time. Think about that balloon expansion for a moment with regard to the earth.
Another question for you – if you were in a position to watch the earth from a safe distance as you heated it up, what do you think would happen to the surface? Yeah that's what I thought too – it would expand and knowing what I know about the earth's outer construction, that surface stretching would likely lead to increased seismic activity.
And there's the great leap I promised (though not yet the Wildcard) – what if Global Warming was increasing the level of seismic activity of the planet? What if all this heating was leading to stretching and expanding of the earth's crust and therein increased earthquake activity?
What if? Sure, a low probability high impact event potential but not the big one, which is as follows:
Global warming increases seismic activity through expansion of the earth's crust; which leads to increased level of friction of the tectonic plates; which leads to increased internal heat across the globe and finally; the eruption of Mt Erebus at the Antarctic for three months; which leads to 40% of the 4000m deep Antarctic ice sheet melting.
You want to talk about increased tropical storm activity through increases in water vapour? You want to consider rising sea levels beyond a foot or so? Then here's a Wildcard to consider:
A CDs currently leading to the heating of the earth's crust leads to the eruption of Mt Erebus in the Antarctic. And dare I suggest it, the end of a life as we now know it. We don't need to look at asteroids for the father of all catastrophes – we have one waiting right here on earth.
Quick now back to reality - what potential Cascading Discontinuity Sets are emerging in your business right now? Dare you consider them?
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Monday 27 February 2017
It's been a significantly busy couple of months looking at how Industries and Government Agencies are preparing for change. The Companies versus Climate Change conference in Fort Lauderdale, Florida in November/December, and a meeting with the Political Science Department at the University of Hawaii (Manoa) in January show that positive action is happening, despite some of the headlines
Saturday 31 December 2016
Many of you know that each year I make an observation about what I think the year will bring. The track record suggests I'm usually a couple of years ahead of the curve. With that said I'm calling 2017
Monday 12 December 2016
In Ft. Lauderdale USA I recently attending a delightful provocatively named 'Companies Versus Climate Change' conference. And the message is clear - companies, BIG well known companies are tackling the issues of climate change, sustainability and their carbon footprints and both making and saving VAST sums of dollars. The simple take away message from the presentations over the three days could not have been more explicit - tackling climate change pays off big time!