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Well said. People often forget that optimizing for efficiency isn't free, it has a cost in flexibility. The modern economy is heavily optimized which, yes, can

by rurp 6y ago

Well said. People often forget that optimizing for efficiency isn't free, it has a cost in flexibility. The modern economy is heavily optimized which, yes, can produce enormous profits, but it also makes the economy extremely brittle. Approaches like just-in-time manufacturing or loading up on debt in a good economy to expand faster work out great... until they don't. And when things go bad, they can go bad quickly. I've heard a number of people referring to COVID-19 as a black swan event, but it's really not. Pandemics are a known risk that have happened many times in the past and will happen many more times in the future. The fact that such an unsurprising disaster has stressed modern economies so tremendously makes me really pessimistic for our society's long term prospects.

chkaloon 6y ago
Yes! That is an astute point. Corporate farms are efficient. Monoculture forests are efficient, etc. But they are fragile. Unions and income transfers cause inefficiencies, but without them, society becomes fragile.
- ethbro 6y ago
  Efficiency has to be integrated over a timespan. Despite all the disruption, I'd be surprised if it were on the whole more efficient for companies to optimize for resiliency... for an event that happens once in 100 years. Rather than fall back on central banks & governments, and expect them to throw everything and the kitchen sink at it. Ideally, though, what the government will and won't do should have been communicated well in advance of a pandemic, so that everyone had an even investment playing field. Piecemeal bailouts are asking for insider trading.
pragmatic 6y ago
Yes. Hospitals in particular. One I'm familiar with moved to a LEAN system where they did not keep large inventory of supplies. There was some protest about not keeping essential supplies on hand for the lab etc. And now we see the problem with this. Profit margin over safety.
mikekchar 6y ago
According to Wikipedia, the original author does not consider COVID-19 a black swan event, so I think you must be right. However, while we know a pandemic will occur, we don't know when. Neither do we necessarily know ahead of time what measures are appropriate to take to mitigate the risk. The aspect of the Black Swan theory where you point to the data after the fact and say, "We should have known" is very similar. For example, countries that experienced SARS and MERS where very much more prepared for COVID-19. Other countries which didn't have many problems did not prepare. This is because they didn't realise that they should prepare. For them COVID-19 was out of the blue -- a complete shock. Of course, we should have looked at the original data and if we had, we could have improved the outcomes. But we didn't have that experience and we didn't know when to expect a large problem. The Tohoku earthquake in Japan in 2011 was similar. Earthquakes of that size hit Japan about once in 1000 years. We know it will happen. We don't know when. We don't know if it will happen in our generation. Should we prepare for it. In hindsight, yes, of course. At the time, it was a shock. Is that a black swan event? I don't know. However, I don't think we need to have much of a distinction. Even if we should know, the fact that we don't know is all that matters. It is still a surprise.

by rurp 6y ago

chkaloon 6y ago

Yes! That is an astute point. Corporate farms are efficient. Monoculture forests are efficient, etc. But they are fragile. Unions and income transfers cause inefficiencies, but without them, society becomes fragile.

ethbro 6y ago
Efficiency has to be integrated over a timespan. Despite all the disruption, I'd be surprised if it were on the whole more efficient for companies to optimize for resiliency... for an event that happens once in 100 years. Rather than fall back on central banks & governments, and expect them to throw everything and the kitchen sink at it. Ideally, though, what the government will and won't do should have been communicated well in advance of a pandemic, so that everyone had an even investment playing field. Piecemeal bailouts are asking for insider trading.

pragmatic 6y ago

Yes. Hospitals in particular. One I'm familiar with moved to a LEAN system where they did not keep large inventory of supplies. There was some protest about not keeping essential supplies on hand for the lab etc. And now we see the problem with this. Profit margin over safety.

mikekchar 6y ago

According to Wikipedia, the original author does not consider COVID-19 a black swan event, so I think you must be right. However, while we know a pandemic will occur, we don't know when. Neither do we necessarily know ahead of time what measures are appropriate to take to mitigate the risk. The aspect of the Black Swan theory where you point to the data after the fact and say, "We should have known" is very similar. For example, countries that experienced SARS and MERS where very much more prepared for COVID-19. Other countries which didn't have many problems did not prepare. This is because they didn't realise that they should prepare. For them COVID-19 was out of the blue -- a complete shock. Of course, we should have looked at the original data and if we had, we could have improved the outcomes. But we didn't have that experience and we didn't know when to expect a large problem. The Tohoku earthquake in Japan in 2011 was similar. Earthquakes of that size hit Japan about once in 1000 years. We know it will happen. We don't know when. We don't know if it will happen in our generation. Should we prepare for it. In hindsight, yes, of course. At the time, it was a shock. Is that a black swan event? I don't know. However, I don't think we need to have much of a distinction. Even if we should know, the fact that we don't know is all that matters. It is still a surprise.