LETTERS FROM THE GLOBAL PROVINCE |
|
GLOBAL
PROVINCE - Home - About This Site - Agile
Companies - Annual Reports - Best
of Class - Best of the |
|
|
GP15Jun04: Irishmen Who Married Up Black Swans. Sometimes chance things are just gonna happen. In a New York Times Op-Ed (April 8, 2004, p. A27), Nassim Nicholas Taleb evoked Black Swans—his metaphor for events that are contrary to our normal expectations. We cannot re-read his short essay enough times: Black swans can have extreme effects: just a few explain almost everything from the success of some ideas and religions to events in our personal lives. Moreover, their influence seems to have grown in the 20th century, while ordinary events—the ideas we study and discuss and learn about in history or from the news—are becoming increasingly inconsequential. Indeed, we are at one of those turning points in history where the world as we know it has little to do with the world as it really is becoming. Taleb numbers September 11, 2001 and the assassination of Archduke Ferdinand early in the 20th century as Black Swans. The trouble is that our heads are wired to see only White Swans—events that fit our emotional logic—and we refuse to accept Black Swans for what they are: unpredictable, chaotic happenings. Obviously, his book expands on these risks that we never see coming; it’s called Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. Out of Nowhere. Even in sports, Black Swans (we will recolor these swans below) are appearing with increasing frequency. The Minnesota Wild, with no payroll to speak of, came out of nowhere to become a fearsome contender for the Stanley Cup last year. Tampa Bay took the NHL crown this year and shunted aside the Oakland Raiders at the 2003 Super Bowl. The Florida Marlins stood victorious in the World Series in spite of George Steinbrenner’s manure-like spreading of megabucks to pull in talent for the Yankees. Our new world fails to respect the sports powers that were and the powers that be. Professional golf is surely the game that delivers the most delicious surprises. No longer is there a Hogan, Snead, Palmer, or Nicklaus running roughshod over all competition. Every time we turn around some long shot becomes a sure shot at a major PGA event. John Daly, long troubled, triumphed at the Buick Invitational this year. Phil Mickelson, who had never won a major in years of play, finally took the green jacket at the Masters. Increasingly Vinjay Singh and Tiger Woods, kings of the course, have been thrust to the sidelines, biting their fingernails. Shinnecock savaged their play this week: they were badly behind the leaders at the U.S. Open. Golf, all its eccentricities, and its meanings, will get more attention from us at a later date. The Oil Bubble. The oil shortage is not a Black Swan. If you have been watching the steady march upwards of gas prices on this page each week, you know oil and other commodities are over the top. No real surprise here. We could see it coming. On June 17, we listened as Hugh Peyman in Bejing (www.research-works.com) and his colleague in San Francisco conferenced with investors around the world about the current oil crunch which they see lasting to the end of 2006 or the beginning of 2007. Mr. Peyman, an analyst particularly knowledgeable about Chinese industry, sees a huge impact from the ballooning demand for petroleum in China and India. Both countries are slated to consume 4-5% more oil each year right out to 2025 (see The Wall Street Journal, June 18, 2004, p. A9). Oil will cost $35 to $40 a barrel in any event for the next couple of years, but with possible terrorist disruptions—on land or by sea—along the way, Peyman and company visualize $60 or $70 oil in the offing. After that, new supplies will come to market, and they foresee a hefty price collapse, perhaps in the 2008 timeframe. Everybody is drinking a lot of oil, with the single exception of Japan. It has relit its nuclear plants, keeping the lid on oil imports. But this will change as its economy gains even more steam, now that it has been fired up by exports to Red China. Nuclear Nostrum. Our old acquaintance Lew Lehrman, in one newspaper or another, has said that the big fix and the only viable alternative to oil is nuclear energy, so that we had better get busy either splitting or fusing atoms. Richard Rhodes, in The Making of the Atomic Bomb, a wonderful book incidentally, says much the same thing. Nuclear or nothing. Probably Not. This brings into play our Theory of Embedded Wrongs (see Enemy of the People: Innovation). For 35 years we have had potentates of industry tell us that nuclear electricity is the only way to keep our economy cranking. But, as we’re fond of saying, if there’s a longstanding widely held idea about how to solve a massive problem, and the problem ain’t solved yet, then the solution is probably dead wrong. Nuclear probably is not what it is cracked up to be, and we really still don’t know how to get rid of the wastes. There is no magic bullet. More reasoned is David Goodstein’s Out of Gas: The End of the Age of Oil (see our Big Ideas, Item 166). He says that we need to take a series of incremental steps, starting now, to avert an unhappy landing. That includes nuclear, conservation, energy storage, alternate energy, etc. Somewhere in the next 2 decades world oil production will really hit the skids, mirroring the situation in the U.S., where we have fallen from a peak of about 10 million barrels a day to 5. Red Swans. Conventional thinking cuts two ways. It screens out the uniqueness of the bad news coming down the pike such as September 11. But it misses the odd, good news, too—the Red Swans. In unstable times, people are even more blindsided by good fortune than they are by catastrophic risks. The blinders are on. We miss all the meteors coming in from outer space, pretending they are everyday events. Alternate energy is just such a Red Swan. We’re startled at just how much progress has been made in alternate energy areas, such as solar, wind power, hybrid cars, etc. Denmark is producing a reported 15% of its energy from its offshore wind generators, and Great Britain has big plans for tapping in to wind in the North Sea. GE, which had bet the farm on fossil and nuclear generation, now has placed some bets on solar and wind. (See Big Ideas, Item 58 ). Through stubborn persistence, believers in super-clean energy—non - fossil, non-atomic—are making inroads, soon to be a two-lane highway, someday an expressway. As it happens, there are plenty of people who can see white swans. And a small band, including Mr. Taleb, who can spot unforeseen risks, the Black Swans, But there are not enough who are open, intuitive, and future driven enough to get out their binoculars and espy the Red Swans—the just-in-time opportunities which arrive to deal with the brick-wall, hopeless dead ends that bedevil humankind. Now is the time to be alive to swans of any color, black or red. P.S. The Black Swan is the only swan native to Australia. So they have a different set of expectations Down Under. |
|
|
Home - About This Site - Contact Us Copyright 2004 GlobalProvince.com |
|