4 ms·

You make a good point. Surely there's a way statistics account for this "damage potential". How do statistics treat things like nuclear incidents, etc?

ComputerGuru 9y ago
They're called "black swan events." Apart from writing difference of books and publishing hundreds of papers on the subject (see Nassim Talib), the tl;dr is economists and sociologists still really have no way of truly accounting for them besides being cognizant of their existence.
- microcolonel 9y ago
  My understanding is that you multiply the cost by the probability, or use a power of the cost (since the impact of a huge liability or disabling disaster is usually more than the accounted-for direct damage).
  - devoply 9y ago
    Do we do that for various financial endeavors and shut them down due to the economic risk posed? Cost of 9/11 was rather large, but it was not that large simply due to terrorism, it was that large due to the failure of various measures meant to prevent it... all aligning into a perfect storm.
  - nostrademons 9y ago
    Problem is that it's virtually impossible to estimate the probability of a black-swan event, since, by definition, they are events that have never happened before and nobody has foreseen them possibly happening. A priori, your probability is zero, and yet they happen anyway. We can be fairly certain that something unexpected will happen in the future, but predicting what that something is or with what likelihood it will occur is still the domain of fortune-tellers.
  - jquery 9y ago
    And therein lies the problem. How do you calculate the probability in the first place? For some things (asteroids) this is possible, for others (catastrophic rapid climate change or terrorism) we don't have the predictive tools.
- Banthum 9y ago
  Good to reference Black Swan, but Taleb would call these events gray swans, not black swans. A true black swan is something that's basically inconceivable before it occurs. It is outside the mental model used to evaluate outcome probabilities. Black swan events include things like: ---Your enemy in a war invents the nuclear bomb and drops it on your cities (this happened to Japan in 1945) ---You are a turkey. The farmer comes, as he does every day. Instead of feeding you, he slaughters you (something which you've got no experience or conception of). ---It's 1994 and you own Blockbuster Video, a solid earning company. Then someone invents the Internet... Biological warfare attacks are quite well-known as a concept, making them gray swans. Also in the gray swan category are asteroid strikes, supervolcanoes, etc etc. I try to spread this distinction because if we start calling gray swans black swans, that will hide from us the most important part of Taleb's argument, which is that true black swans are the most important events. The idea of the black swan is hard to keep in your mind (how do you keep in mind the inconceivable?) so it's very easy for a pretender concept to sneak in and steal the label.
  - ComputerGuru 9y ago
    Thank you for the correction. I truly appreciate the importance of this distinction.
  - anovikov 9y ago
    Nukes have also been a very well-known concept, then have been theoretically invented in 1939 and by 1941, it was well-proven that one can be made. If anything in nukes was a black swan event it was the isotope mix of reactor-produced plutonium which made detonation of plutonium bomb without a fizzle incredibly difficult - something which no one had an idea before it happened and it almost doomed the project - in 1941, making the bomb looked a lot easier than it proved to be. It was also well-known that U.S. is the world leading scientific and industrial power, that it absorbed huge number of well-educated Jews fleeing Nazis, and it was least affected by ongoing WWII of all major powers. So if anyone was to make a bomb it was U.S., every rational actor should have expected it to happen. Only 'if' was timing.
    - nostrademons 9y ago
- exelius 9y ago
  I actually took an entire class in business school about this exact topic -- "Catastrophic Risk Analysis". Great class, the teacher was a former astronaut (among many other things). And you're right, you basically can't predict things like this -- but a great many catastrophic risks that can be prevented are ignored because the event seems much less likely than it is due to the scale of the impact being so large as to be unimaginable by many. Climate change is a chief example; but there are plenty others throughout history in business, warfare, and science.
- idiotdummy 9y ago
  >no way of truly accounting No way to predict, sure. But if my memory serves me correctly, the entire theme of Taleb's Black Swan was about accounting for such events. For example, financial hedging; you won't know what event might manifest itself and cause a huge financial disruption (the cause), but you can anticipate "it" happening, in some form, and preparing for it by buying long shot hedges (accounting for the effect).
55555 9y ago
I'm not entirely sure, but models typically don't. Nassim Taleb wrote a book called Black Swans about these types of events.
dredmorbius 9y ago
Poorly. Large-scale, high-consequence, strongly systemic or correlated events are difficult to model and describe. Death-by-asteroid is one of the more interesting cases. That would be a bad day for you (or your descendants), but also, quite likely, many others, when it happens. The days aren't frequent, but they're big. http://blogs.discovermagazine.com/badastronomy/2008/10/13/death-by-meteorite/ http://blogs.discovermagazine.com/badastronomy/2008/10/13/de... More generally, there's a lot summary statistics don't tell you. https://www.autodeskresearch.com/publications/samestats https://www.autodeskresearch.com/publications/samestats

ComputerGuru 9y ago

They're called "black swan events." Apart from writing difference of books and publishing hundreds of papers on the subject (see Nassim Talib), the tl;dr is economists and sociologists still really have no way of truly accounting for them besides being cognizant of their existence.

microcolonel 9y ago
My understanding is that you multiply the cost by the probability, or use a power of the cost (since the impact of a huge liability or disabling disaster is usually more than the accounted-for direct damage).
- devoply 9y ago
  Do we do that for various financial endeavors and shut them down due to the economic risk posed? Cost of 9/11 was rather large, but it was not that large simply due to terrorism, it was that large due to the failure of various measures meant to prevent it... all aligning into a perfect storm.
- nostrademons 9y ago
  Problem is that it's virtually impossible to estimate the probability of a black-swan event, since, by definition, they are events that have never happened before and nobody has foreseen them possibly happening. A priori, your probability is zero, and yet they happen anyway. We can be fairly certain that something unexpected will happen in the future, but predicting what that something is or with what likelihood it will occur is still the domain of fortune-tellers.
- jquery 9y ago
  And therein lies the problem. How do you calculate the probability in the first place? For some things (asteroids) this is possible, for others (catastrophic rapid climate change or terrorism) we don't have the predictive tools.
Banthum 9y ago
Good to reference Black Swan, but Taleb would call these events gray swans, not black swans. A true black swan is something that's basically inconceivable before it occurs. It is outside the mental model used to evaluate outcome probabilities. Black swan events include things like: ---Your enemy in a war invents the nuclear bomb and drops it on your cities (this happened to Japan in 1945) ---You are a turkey. The farmer comes, as he does every day. Instead of feeding you, he slaughters you (something which you've got no experience or conception of). ---It's 1994 and you own Blockbuster Video, a solid earning company. Then someone invents the Internet... Biological warfare attacks are quite well-known as a concept, making them gray swans. Also in the gray swan category are asteroid strikes, supervolcanoes, etc etc. I try to spread this distinction because if we start calling gray swans black swans, that will hide from us the most important part of Taleb's argument, which is that true black swans are the most important events. The idea of the black swan is hard to keep in your mind (how do you keep in mind the inconceivable?) so it's very easy for a pretender concept to sneak in and steal the label.
- ComputerGuru 9y ago
  Thank you for the correction. I truly appreciate the importance of this distinction.
- anovikov 9y ago
  Nukes have also been a very well-known concept, then have been theoretically invented in 1939 and by 1941, it was well-proven that one can be made. If anything in nukes was a black swan event it was the isotope mix of reactor-produced plutonium which made detonation of plutonium bomb without a fizzle incredibly difficult - something which no one had an idea before it happened and it almost doomed the project - in 1941, making the bomb looked a lot easier than it proved to be. It was also well-known that U.S. is the world leading scientific and industrial power, that it absorbed huge number of well-educated Jews fleeing Nazis, and it was least affected by ongoing WWII of all major powers. So if anyone was to make a bomb it was U.S., every rational actor should have expected it to happen. Only 'if' was timing.
  - nostrademons 9y ago
exelius 9y ago
I actually took an entire class in business school about this exact topic -- "Catastrophic Risk Analysis". Great class, the teacher was a former astronaut (among many other things). And you're right, you basically can't predict things like this -- but a great many catastrophic risks that can be prevented are ignored because the event seems much less likely than it is due to the scale of the impact being so large as to be unimaginable by many. Climate change is a chief example; but there are plenty others throughout history in business, warfare, and science.
idiotdummy 9y ago
>no way of truly accounting No way to predict, sure. But if my memory serves me correctly, the entire theme of Taleb's Black Swan was about accounting for such events. For example, financial hedging; you won't know what event might manifest itself and cause a huge financial disruption (the cause), but you can anticipate "it" happening, in some form, and preparing for it by buying long shot hedges (accounting for the effect).

55555 9y ago

I'm not entirely sure, but models typically don't. Nassim Taleb wrote a book called Black Swans about these types of events.

dredmorbius 9y ago

Poorly. Large-scale, high-consequence, strongly systemic or correlated events are difficult to model and describe. Death-by-asteroid is one of the more interesting cases. That would be a bad day for you (or your descendants), but also, quite likely, many others, when it happens. The days aren't frequent, but they're big. http://blogs.discovermagazine.com/badastronomy/2008/10/13/death-by-meteorite/ http://blogs.discovermagazine.com/badastronomy/2008/10/13/de... More generally, there's a lot summary statistics don't tell you. https://www.autodeskresearch.com/publications/samestats https://www.autodeskresearch.com/publications/samestats