7 ms·

How much should we worry about this? http://www.lloyds.com/~/media/lloyds/reports/emerging%20risk%20reports/solar%20storm%20risk%20to%20the%20north%20american%

by btilly 7y ago

How much should we worry about this? http://www.lloyds.com/~/media/lloyds/reports/emerging%20risk%20reports/solar%20storm%20risk%20to%20the%20north%20american%20electric%20grid.pdf http://www.lloyds.com/~/media/lloyds/reports/emerging%20risk... was prepared by Lloyds of London after the 2012 detection of a large solar flare by a satellite in interplanetary space. (That one missed the Earth.) Their estimate was $600 billion - $2 trillion dollars of damage from an event that happens roughly once ever 150 years on average. Therefore the amortized cost of this risk per year is $4 - $13 billion. If a substantial fraction of the risk can be mitigated over the next decade for $300 million, it would be cheap at 10x the price. In fact Berkshire Hathaway probably has enough exposure to this risk that it makes financial sense for them to not debate over who pays and to just create the stockpile to reduce potential future insurance claims.

realtalk_sp 7y ago
Sadly it might cost Berkshire even less to just reinsure against the risk.
- phonon 7y ago
  Berkshire is the 5th largest reinsurer in the world[1], so not likely to happen... [1]https://www.insurancebusinessmag.com/us/news/breaking-news/these-are-the-top-10-reinsurance-companies-in-the-world-189205.aspx https://www.insurancebusinessmag.com/us/news/breaking-news/t...
  - realtalk_sp 7y ago
    Not sure what you're trying to imply. Reinsurers do in fact reinsure against their own risk. It's turtles all the way down.
    - phonon 7y ago
      Yes, retrocession agreements. I know. Berkshire Hathaway is not usually (ever?) on the ceding end of those arrangements.
- pilsetnieks 7y ago
  I'm suddenly tempted to write a not-quite-serious novel about a time period up to and including a post-apocalyptic dystopia that occurred simply because almost all emergency measures in the world were replaced by insurance policies. In the end people subsist on irradiated rats and mutant vegetables but they're doing great because each of them are owed millions of pounds by Lloyd's of London which may or may not exist anymore.
  - mrslave 7y ago
    Something about this reminds me of Snow Crash.
- BurningFrog 7y ago
  Insurance doesn't work when everything breaks at the same time.
gerdesj 7y ago
"How much should we worry about this?" Risk assessment. Hands up who anticipated SARS-CoVid-2 -> covid-19? ... OK who mitigated it with a fortuitous insurance policy? ... OK who simply happened to have enough cash in the bank by accident? Now look at the grid. Any grid.
- avianlyric 7y ago
  Somewhat amazingly the US government anticipated a COVID-19 type pandemic, and even prepared for it. Unfortunately a number of different failures of government resulted in that preparation being completely squandered. Leaving the US completely unprepared when it actually happened. https://www.nytimes.com/2020/04/12/opinion/ventilators-coronavirus.html https://www.nytimes.com/2020/04/12/opinion/ventilators-coron...
- deleted 7y ago
  [deleted]
- maxerickson 7y ago
  Multiple world governments anticipated a novel respiratory virus. Especially post the first SARS. For whatever reason, the US managed to take the idea seriously for decades and then not really be prepared once it actually happened.
  - harikb 7y ago
    Some states like CA were prepared, but the federal government can’t leave these things for states to fend for themselves. At some point somebody somewhere will try to save a few million to make a budget match. Federal government burned 10 times that amount, probably the same day, on military [1] https://www.latimes.com/california/story/2020-03-27/coronavirus-california-mobile-hospitals-ventilators https://www.latimes.com/california/story/2020-03-27/coronavi...
    - redis_mlc 7y ago
      > Some states like CA were prepared CA has a stockpile that was allowed to deteoriate due to budget cuts. So the initial impression was that we weren't prepared, but then we reassessed the situation and gave away at least 500 ventilators to other states as we felt more confident. Luckily, Bay Area and LA residents travel to China a lot, so we already had substantial herd immunity by February 1. You can see that in the Santa Clara dashboard, which never showed an emergency situation: https://www.sccgov.org/sites/covid19/Pages/dashboard.aspx#hospital https://www.sccgov.org/sites/covid19/Pages/dashboard.aspx#ho... Not the "sky is falling" narrative that HN and the press keep trumpeting, is it?
BurningFrog 7y ago
It might be a good investment for anyone to stockpile some of these things, assuming you can sell them for 100x what you paid when The Event happens. Which, if my made up math is correct, means several entities probably already have done so.
- PhantomGremlin 7y ago
  assuming you can sell them for 100x what you paid That would be a dangerous assumption. Price is a good method of discriminating between who wants something and who needs something. But just try and raise prices during a pandemic and there will be 1) laws and 2) calls of "price gouging". If The Event really happened I bet that any transformers would be taken by the state/feds within 24 hours. And such an action would have the support of 99% of the populace. Of course they would pay you. But it would be at 1x your cost, not a nickel higher.
  - IAmEveryone 7y ago
    Never has there been a better time to find evidence on this particular debate... Here's a relevant search of Google News: https://www.google.com/search?client=safari&rls=en&biw=1265&bih=657&tbm=nws&sxsrf=ALeKk01ZyZDHQ0UsyYtnWWXacqJoyGCk5Q%3A1588555718748&ei=xm-vXqOhLcv5kwWf7IOAAQ&q=ppe+prices&oq=ppe+prices&gs_l=psy-ab.3...9984.11904.0.12125.10.10.0.0.0.0.129.822.8j2.10.0....0...1c.1.64.psy-ab..0.1.90...33i10k1.0.oqLKr-QkHJA https://www.google.com/search?client=safari&rls=en&biw=1265&... Choice headlines include: PPE suppliers accused of 'blatant profiteering' as prices inflated by up to 825 per cent. Cost of PPE soars due to price gouging, surge in demand ... Protective equipment costs increase over 1000% amid ... There are indeed some headlines of investigations regarding price gouging in such matters. But it appears that high prices are being paid. And with lots of outrageous stories of millions being paid and the product never showing up, I'd feel relatively safe charging some sane multiplier as long as the product actually exists.
    - floatingatoll 7y ago
      The comparison isn’t exact. The entire US nation needs 30 HV transformers in total and there is essentially no competition for those resources within the US, leading to an extremely illiquid market based upon a good that cannot be easily moved and can be easily seized with force. PPE demand is measured in millions per day, is a resource in high demand by both nation and non-nation entities, and cannot as easily be seized by force as each unit item is the size of a dollar bill (and shipments can be protected, etc).
makomk 7y ago
According to that document, it cost the Canadian government over a billion dollars just to mitigate a substantial fraction of the risk in one province. It talks about them installing protection devices to reduce the risk of damage - just reduce, not completely eliminate - on a thousand of the most at-risk transformers. I don't think having the ability to replace 9 transformers is going to help much here. Sure, the failure of the correct combination of 9 might be able to shut down the grid. That's only likely to happen as the result of a direct, human-planned attack - any disaster would inevitably have to destroy more than the minimum to get a correct combination, probably including a whole bunch of smaller transformers. And crucially, destroying just those key transformers alone wouldn't be enough to stop the grid from being restarted - the generation infrastructure is distributed locally throughout the grid, so even if regions couldn't be reconnected they could operate independently with reduced reliability and capacity if necessary. In order to cause a massive months-long blackout that killed 90% of Americans, any event would have to destroy a whole bunch of local, distributed infrastructure, and stockpiling a handful of transformers would not be enough to replace that.

by btilly 7y ago

realtalk_sp 7y ago

Sadly it might cost Berkshire even less to just reinsure against the risk.

phonon 7y ago
Berkshire is the 5th largest reinsurer in the world[1], so not likely to happen... [1]https://www.insurancebusinessmag.com/us/news/breaking-news/these-are-the-top-10-reinsurance-companies-in-the-world-189205.aspx https://www.insurancebusinessmag.com/us/news/breaking-news/t...
- realtalk_sp 7y ago
  Not sure what you're trying to imply. Reinsurers do in fact reinsure against their own risk. It's turtles all the way down.
  - phonon 7y ago
    Yes, retrocession agreements. I know. Berkshire Hathaway is not usually (ever?) on the ceding end of those arrangements.
pilsetnieks 7y ago
I'm suddenly tempted to write a not-quite-serious novel about a time period up to and including a post-apocalyptic dystopia that occurred simply because almost all emergency measures in the world were replaced by insurance policies. In the end people subsist on irradiated rats and mutant vegetables but they're doing great because each of them are owed millions of pounds by Lloyd's of London which may or may not exist anymore.
- mrslave 7y ago
  Something about this reminds me of Snow Crash.
BurningFrog 7y ago
Insurance doesn't work when everything breaks at the same time.

gerdesj 7y ago

"How much should we worry about this?" Risk assessment. Hands up who anticipated SARS-CoVid-2 -> covid-19? ... OK who mitigated it with a fortuitous insurance policy? ... OK who simply happened to have enough cash in the bank by accident? Now look at the grid. Any grid.

avianlyric 7y ago
Somewhat amazingly the US government anticipated a COVID-19 type pandemic, and even prepared for it. Unfortunately a number of different failures of government resulted in that preparation being completely squandered. Leaving the US completely unprepared when it actually happened. https://www.nytimes.com/2020/04/12/opinion/ventilators-coronavirus.html https://www.nytimes.com/2020/04/12/opinion/ventilators-coron...
deleted 7y ago
[deleted]
maxerickson 7y ago
Multiple world governments anticipated a novel respiratory virus. Especially post the first SARS. For whatever reason, the US managed to take the idea seriously for decades and then not really be prepared once it actually happened.
- harikb 7y ago
  Some states like CA were prepared, but the federal government can’t leave these things for states to fend for themselves. At some point somebody somewhere will try to save a few million to make a budget match. Federal government burned 10 times that amount, probably the same day, on military [1] https://www.latimes.com/california/story/2020-03-27/coronavirus-california-mobile-hospitals-ventilators https://www.latimes.com/california/story/2020-03-27/coronavi...
  - redis_mlc 7y ago
    > Some states like CA were prepared CA has a stockpile that was allowed to deteoriate due to budget cuts. So the initial impression was that we weren't prepared, but then we reassessed the situation and gave away at least 500 ventilators to other states as we felt more confident. Luckily, Bay Area and LA residents travel to China a lot, so we already had substantial herd immunity by February 1. You can see that in the Santa Clara dashboard, which never showed an emergency situation: https://www.sccgov.org/sites/covid19/Pages/dashboard.aspx#hospital https://www.sccgov.org/sites/covid19/Pages/dashboard.aspx#ho... Not the "sky is falling" narrative that HN and the press keep trumpeting, is it?

BurningFrog 7y ago

It might be a good investment for anyone to stockpile some of these things, assuming you can sell them for 100x what you paid when The Event happens. Which, if my made up math is correct, means several entities probably already have done so.

PhantomGremlin 7y ago
assuming you can sell them for 100x what you paid That would be a dangerous assumption. Price is a good method of discriminating between who wants something and who needs something. But just try and raise prices during a pandemic and there will be 1) laws and 2) calls of "price gouging". If The Event really happened I bet that any transformers would be taken by the state/feds within 24 hours. And such an action would have the support of 99% of the populace. Of course they would pay you. But it would be at 1x your cost, not a nickel higher.
- IAmEveryone 7y ago
  Never has there been a better time to find evidence on this particular debate... Here's a relevant search of Google News: https://www.google.com/search?client=safari&rls=en&biw=1265&bih=657&tbm=nws&sxsrf=ALeKk01ZyZDHQ0UsyYtnWWXacqJoyGCk5Q%3A1588555718748&ei=xm-vXqOhLcv5kwWf7IOAAQ&q=ppe+prices&oq=ppe+prices&gs_l=psy-ab.3...9984.11904.0.12125.10.10.0.0.0.0.129.822.8j2.10.0....0...1c.1.64.psy-ab..0.1.90...33i10k1.0.oqLKr-QkHJA https://www.google.com/search?client=safari&rls=en&biw=1265&... Choice headlines include: PPE suppliers accused of 'blatant profiteering' as prices inflated by up to 825 per cent. Cost of PPE soars due to price gouging, surge in demand ... Protective equipment costs increase over 1000% amid ... There are indeed some headlines of investigations regarding price gouging in such matters. But it appears that high prices are being paid. And with lots of outrageous stories of millions being paid and the product never showing up, I'd feel relatively safe charging some sane multiplier as long as the product actually exists.
  - floatingatoll 7y ago
    The comparison isn’t exact. The entire US nation needs 30 HV transformers in total and there is essentially no competition for those resources within the US, leading to an extremely illiquid market based upon a good that cannot be easily moved and can be easily seized with force. PPE demand is measured in millions per day, is a resource in high demand by both nation and non-nation entities, and cannot as easily be seized by force as each unit item is the size of a dollar bill (and shipments can be protected, etc).

makomk 7y ago

According to that document, it cost the Canadian government over a billion dollars just to mitigate a substantial fraction of the risk in one province. It talks about them installing protection devices to reduce the risk of damage - just reduce, not completely eliminate - on a thousand of the most at-risk transformers. I don't think having the ability to replace 9 transformers is going to help much here. Sure, the failure of the correct combination of 9 might be able to shut down the grid. That's only likely to happen as the result of a direct, human-planned attack - any disaster would inevitably have to destroy more than the minimum to get a correct combination, probably including a whole bunch of smaller transformers. And crucially, destroying just those key transformers alone wouldn't be enough to stop the grid from being restarted - the generation infrastructure is distributed locally throughout the grid, so even if regions couldn't be reconnected they could operate independently with reduced reliability and capacity if necessary. In order to cause a massive months-long blackout that killed 90% of Americans, any event would have to destroy a whole bunch of local, distributed infrastructure, and stockpiling a handful of transformers would not be enough to replace that.