“And so, Arthur, we learned that gambling is bad and yet in a certain sense, isn’t life itself a gamble?  You can never be sure of anything.  Like who would have thought that dolphins could go bad and that fish were magnetic?  Not me, no sir, not me.†– The Tick (Animated)
But you were expecting the Spanish Inquisition?
Nassim Nicholas Taleb is most famous for his 2007 book The Black Swan: The Impact of the Highly Improbable. It’s a great book – I wish as many people read the book as bought it. Then they might have at least understood why home prices plummeted faster than California’s self-respect in 2008-09. Heck, if people would just retain a little bit of this book after they read it, they’d be better off than most MBAs. The title of the book comes from Taleb describing Europeans touching down in Australia, and seeing something that they never thought possible: a black swan. All European swans are white. Therefore? All swans are white.
Until you see a black one.
Taleb defined his “Black Swan†events as having some important characteristics:
- Black Swans are extremely rare. Standard techniques (like normal probability distributions) will never predict them.
- Black Swans have huge consequences.
- Everybody looks at the Black Swan event (after having gone through it) and concluded it was obviously going to happen.
I’ll throw out one other idea to mix with Taleb’s Black Swan concept – this one was from James P. Hogan’s wonderful 1982 book (that Hogan says helped topple the Soviet Union, and he might be right – LINK) Voyage from Yesteryear. In this book, Hogan has a character talk about the difference between a phase change and a chemical reaction. When you freeze water or melt ice, it’s just undergoing a phase change. Warm the ice up, and you get water. Make the water cold enough, and it’ll change back.
Phase changes are simple and reversible. It’s only a matter of energy. But burn a piece of paper, and like the girl you had a crush on your freshman year in high school? It’s never coming back. Burning the paper is a one way trip. It’s a chemical reaction that you can’t reverse. Or a restraining order in the case of the girl. It turns out they don’t like you standing outside of their house holding a boom box over your head in real life.
In real life, John Cusack blocked me on Twitter®. I probably deserved it. I just wanted my two dollars.
Changing the guard from Republican to Democrat and back to Republican is a phase change. Same stuff, different day. But the American Revolution? That was a chemical reaction – after the war we could never go back to being British subjects – the ideas of independence, freedom, and self-governance were too firmly rooted. 9/11 was another phase change. Despite W’s desire that we “go on as normal†we never have been normal again and conventional ideas of privacy, freedom, independence, and self-governance are dead.
Oops.
All Black Swans are chemical reactions – they are irreversible, even though people expect a return to the “way things were†it never happens – you can’t unburn the paper. The change is a one-way event. In one (for me) particularly striking story in The Black Swan, Taleb wrote that his relatives from Lebanon were still waiting for things to return to normal, even though it had been thirty years since the war had ripped Lebanon apart. No, they weren’t crack dealers, and they weren’t alone. Even as late as 2012, 76,000 people were displaced within Lebanon, waiting for things to get back to normal.
Wuhan Flu, COVID-19, is a Black Swan. It’s not quick and immediate like Pearl Harbor or 9/11 or the Great PEZ® famine of 1986.   This Black Swan is unfolding in slow motion across the economy and the world. When this is studied in classes in fifty years, the students will think it happened all at once, rather than unfolding, day-by-day over the course of a year. In a week, we’ve gone from business as usual to shutting down restaurants. It’s the new normal. And yes, I said a year. We’ll be lucky if it doesn’t last a decade.
A woman born at the beginning of the French Revolution would have already had kids by the time Napoleon was booted off stage permanently after Waterloo. But history teaches it like it happened during the two minute warning at a football game.
As I’ve written about before, the economy is facing a crisis that’s at least twice as big as the 2008 Great Recession. The stage was set beforehand for a phase change – from functioning economy to recession and then back again. Trump had really juiced the economy in an unusual way: clearing out regulations. Sure, he pumped money back via tax cuts, but those tax cuts were targeted toward non-millionaire types and businesses. This was, perhaps, the most wholesome way to grow the economy – by people making money rather than by government choosing who got to win. Bernie, I’m talking about you.
In due time, we would have had a recession anyway. Probably a big one, since the economic expansion has been going so long. But just like Wuhan isn’t really the flu, this economic upset really isn’t a recession – it’s far worse. Dow® 8,000 or less isn’t out of the question on the downside. Really.
It’s that bad.
The government is going to take unusual actions. I mean, more unusual than usual. Today, it was floated to just start writing checks to most people. “Millionaires†were excluded. Free health care will come on the table soon enough. We haven’t even scratched the surface of what’s going to happen. And we will never go back to the way things were. This isn’t a phase change. Like a board game that you let a toddler open, things just won’t go back in the box the same way, ever, and all of the pieces are covered in cookie/saliva mix.
Honestly, I don’t miss toddlers, what with them trying to poison you or cut your brake lines or eating all the Cheeze-Its®.
Once upon a time, I got paid to think about disasters as a short time gig at a company I was working for. It was a lot of fun. I researched probabilities of things like civil wars and floods and tornadoes and visits from my ex-wife demonic manifestations. My life for those months included a LOT of surfing of doomer porn sites and thinking about how the world could go to hell. So, I guess that makes me sort-of a retired professional doomer.
And my thinking pattern developed a rhythm . . . If (generic disaster) happened, Then (outcome).
It was thinking about the outcome that was the most fun. If a tornado hit the headquarters, Then what? Well, based upon the statistics that I could find, it was an average wait of 500 years for a tornado to hit any given spot in the geographic region of the HQ. Even for someone as old as Ruth Buzzi Ginsburg, that’s not very often. I tracked down and tried to figure out how much money the company would lose if it got hit by a tornado, volcano, hurricane and earthquake all on the same day – a Torcano Hurriquake™. After researching with every department, it was concluded that we might not be able to collect on a few hundred thousand dollars’ worth of payments that people owed us. As this company was a multi-billion dollar company where the executives had BMWs® that were designed to stop an RPG strike, that was less than the company spent on Featureless Grey Wallpaper® in a year.
Hey, everybody who thinks exactly alike gets a bonus, right?
They didn’t think it was funny when I told them that a Civil War was 10 times as likely as a natural disaster shutting down operations. When I showed them the math, they couldn’t argue, but they weren’t happy. They didn’t like it even more when I pointed out that they could afford to spend about $100 a year in disaster prep – most of their systems already had offsite backups. And no one was even slightly interested in shooting RPGs at the executives.
What the executives were interested in was things that they were used to, floods. Torcanos. Hurriquakes. Civil War? I’m not sure I even brought up a pandemic, but they would probably have looked at me like I had six eyes. “Just not credible.â€
No Black Swan event is credible when you try to describe it to someone who is stuck in thinking normally. Just like Taleb’s relatives looking for stability in Lebanon or me wondering when TSA will stop fondling my man parts, it’s not going to happen. But describe trying to get on a flight in 2020 to an American in 1995? They’d think it was a silly science fiction story. If only we could convince the TSA to fondle Lebonese?
Which brings us back to COVID-19. How do you discuss it with someone who is stuck thinking normally? It’s difficult. Their minds aren’t even playing in the zip code as people who prepare. But even to them, it is undeniable that things have changed. They just don’t realize it’s like herpes: forever.
When I went to school, school lunches were something to be avoided. The Lunch Ladies did their best with the USDA Approved sources of, I guess I’ll call it protein. Now, school food is deemed to be a requirement even when school is out of service. And they say that there isn’t a hell.
Yes, it was just Spring Break, and the school kitchens were closed. And they close during summer, last I checked – every summer. But now? School food is a must. Here in Modern Mayberry, they’re offering the school lunches for free to anyone who comes to pick them up. I think it’s because at least someone in Washington pulled their head away from the bacon-wrapped-shrimp trough long enough to realize that we’re in trouble. One of the brighter ones probably had the following thought:
If (Lunches are Free) Then (How Long Until They Become Free Community Lunches)?
If (Free Community Lunches Exist) Then (How Many People Remember Typhoid Mary Was A Lunch Lady Cook who spent 30 years in prison isolation because she wouldn’t stop killing people by infecting them with typhus cooking?).
Oops.
If you cook them too long, they get all crunchy.
Schools are being closed. This, in my opinion is good. But If (Schools Close) Then (Are Daycares Any Safer?) Your takeaway should be this question:  how long until daycares are closed? If they can close the NBA, Then they can close daycares. But I repeat myself.
What can you do? The best time to prepare was last month. The next best time to prepare is now. I can’t tell you if you have enough cans of corn in your pantry. And, no, that’s not a creepy metaphor referring to some orifice you may or may not have. I mean actual corn. Or tuna. Still not a metaphor. Or mayonnaise. Whatever you normally eat, you have some extra, right?
As of now, the supermarkets are functioning.
If (Supermarkets Close) Then (what)? The average supermarket used to have inventory for three days. The average house, food enough for three days.  Add that up, and American is pretty close to being hungry. What happens Then? Martial law? Food distributions?
If (Your Job Ceases to Exist) Then (what)?
That’s the key to preparing yourself, not only physically like those people building blanket forts with a semi-load of toilet paper in their basement as structural wall material, but also mentally. To understand what’s going on, to be one step ahead, you have to imagine what could happen. You have to let your mind make it real and run it to a logical conclusion.
Then you have to see if it makes sense.
Okay, not everything bad can happen. I mean, cats with thumbs? Silly.
When an idea makes sense, follow it through.  If so, Then what’s the consequence? Don’t limit your thinking. It’s a fun game. Sure, sometimes it ends up in global thermonuclear war, but so did The Terminator™, and look how much fun that was. But when you really think about it, you’ll look to see what happened in the past. While the future won’t look exactly like the past, it will rhyme. The cause and effect of many things doesn’t change.
If we’re quarantining, Then we won’t drive as much. If we don’t drive as much, Then we won’t use as much of that sweet, sweet gasoline. If we don’t use as much of that sweet, sweet, gasoline, Then the price of oil, refineries, and oil producing companies will drop and some will go out of business and lots of people will lose their jobs. That’s exactly what happened last week, and will happen in the next month.
If.
Then.
COVID-19 wasn’t in my projections – I was expecting cake. It wasn’t in the mindset of the people of the world. Then it was. So what happens next? What chains will snap, further unraveling our civilization? What changes will be permanent?
- If you want to keep your doctors alive, Then how will you protect them from COVID-19?
- If you want to save the people with the most future, Then how many over 40 will get one of the 60,000 ventilators? Besides me, I mean.
- If your customers are being impacted, Then will they fail?
- If your customers fail, Then who will pay you?
- If government wants to control people and how they move, Then they’ll start using the tracking information from cell phones.
- If the government tracks cell phones, Then why would they ever stop? About the time they stop touching your no-no areas so you can go to Cleveland?
- If the clerk at Wal-Mart® tells you that “they†have been telling her to have a minimum of two weeks of food, Then will you listen?
- If you hear from another Wal-Mart© employee that they are setting up special hours for employees to shop after the store is closed, Then will you pay attention?
- If the government starts paying people just to breath, Then will they ever stop?
- If I tell you that hope is not a plan, Then will you . . . plan?
We are in a Black Swan event, probably the biggest of your life, and 9/11 was no slouch. Neither I, nor anyone else can tell you exactly what the future will bring. But as I mentioned in my last post, the universe is a harsh grader. The final exam is pass/fail. And passing means you live.
Until the next exam.
If.
Then.
