Don’t Worry, Nothing’ll Happen
What was missing before and during the 2007-08 global financial meltdown, and during the Covid-19 pandemic?
Or during the Spanish Flu? Or in Nazi Germany? Something that perhaps could have prevented the resulting tragedies?
In 2002, somewhere on the outskirts of Mangalore, I was part of the way through third-year engineering. One day, we had classes in an adjoining campus building, one we thought was exclusively for junior college which was also on campus.
After class on the first floor, a few of us close buddies were talking about random topic by a large open window. It was the first time we were in that building which seemed empty on that day. One of my buddies, this giant we call ‘Bear’, was suspiciously quiet through the conversation between the rest of us. Known for the occasional prank, it was almost as though he was concocting something sinister while the rest of us spoke. Then, and without warning, he picked me up, and held me outside the large window. It was a sunny afternoon, and I could feel myself slowly slipping out of the Bear’s hands. As I said, ‘WTF’ and asked him to pull me back in, he very calmly goes, ‘nothing’ll happen, man’. Horrified, my head was doing a ‘time-to-eventuality’ countdown, as I struggled without much success to get a grip on his arm. Finally, after the prank probably got boring, he got me back in. And while I was still breathing a sigh of relief, he seemed really calm, almost like he was confident of his estimates on the safety margin he had for that prank. And yet, I knew that I had little grip, and that I was mere seconds away from slipping to the tipping point from where there was nothing Bear could have done to stop the fall.
(Mis)calculations, and (over)confidence is a cocktail we humans seem addicted to. And sometimes we get the proportions right, and sometimes, terribly wrong. And the worst times are where we are overly confident of the proportions despite glaring evidence to the contrary.
This excerpt from the book ‘The Signal and the Noise’ by Nate Silver mentions one such instance. The global financial meltdown of 2007-08, triggered by the collapse of suspicious mortgage-backed securities (MBS) and collateralized debt obligations (CDO). [Excerpt at the bottom of the post]
As per this excerpt, apart from overlooking the obvious risks of these precariously balanced investment instruments, even as late as 2005, S&P conducted a simulation to assess housing prices. It found a potential 20% drop over the next 2 years. But S&P perhaps was content in knowing that their simulation successfully captured the risk. And that was it.
Cut to more recent times. There are far lower chances of a developed or developing nation getting into a full-scale war, than there is of a virus outbreak.
And yet, most countries across the world, many of whom probably have dozens upon dozens of battle possibilities and multiple theatre scenarios, most were caught with their pants around their ankles when Covid-19 hit. From delaying shutting down international borders, to shutting state-borders and trying to contain the spread.
Covid-19 was of course, a virus more dangerous than most the world has seen in recent times. But yet, the countries that did manage to contain it in the months that followed, were not the most confident or the ones most capable or equipped in containing it. It was almost in all cases, those countries whose leaders accepted (either publicly or in private), that they were dealing with something beyond their abilities and experience; so they followed a more basic, first principles approach to tackle the challenge. And emerged largely successful.
As is common knowledge now, there are known knowns, known unknowns, and unknown unknowns (Donald Rumsfeld). The quicker we accept the situation when something is outside the realm of our understanding, and resist the urge to apply our standard actions and reactions to it, the faster we can begin to deal with it.
The problem is, these instances keep repeating and will continue to repeat. In our personal lives, and also in more far-reaching world events. We are wired in such a manner, that each time a crisis is approaching or presents itself, we tend to react in the same manner. By wasting time in applying what we know, without attempting to first understand.
Answer: Humility
Jacinda Ardern, Prime Minister of New Zealand, and the face of humble leadership the world yearns for.
