The book of doom

Markets can be disrupted in numerous ways.  We should prepare as best we can.

Gloom

Here are some things that will happen some day:

  • An epidemic threatens millions or billions of people.
  • A solar storm cuts electricity to wide areas for weeks or months, and destroys satellites — including satnav (which have atomic clocks used to timestamp market trades).
  • A major global crop fails.
  • A nuclear weapon is exploded in anger.

Gloomy comments

When I was first thinking of this post, the first item on the list above was:

  • Earthquake in Tokyo

We’re now getting a sense of the market disruption from that item.  However, what has happened is not especially close to what I had envisioned.  A lesson there, I think, is that disasters can surprise you even when you know they are coming.  Outwitting people is what they are good at — hence the concept of normal accidents.

It was fairly certain that Japan would experience a devastating earthquake in our lifetime.  If we consider longer time horizons, then Seattle is a doomed city.  The area apparently experiences unimaginably extreme earthquakes about every 400 years.  Given the unpredictability of earthquakes, a Seattle megaquake could happen soon — or not for a couple of centuries.

Strictly speaking we are not destined to witness a nuclear explosion.  In order for that not to happen an adult would need to come along and take the toys away from the children.  I don’t see any adults on the horizon.  I’d be pleased to be wrong.

Boom

Markets can be disrupted by good things as well as bad things.  Here’s my list of disruptive technologies that could roil markets:

  • Ultra-cheap solar energy (plants can do it, why not us?)
  • Quantum computing
  • Holographic displays
  • Room temperature super conduction

A difference with the previous list is that there will be time for the market to adjust before the event.

Questions

Do you have additions to either the disaster list or the pleasant-disruption list?

Are there upside events that are sudden and unexpected?

Epilogue

He will tell ya it wasn’t always this way
One bad little thing happened one bad little day

from Just a Bum by Greg Brown (an audio version)

Solar flare image from NASA.

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1 Response to The book of doom

  1. Rob Steele says:

    I’ve had that Greg Brown CD since the late ’80s and never noticed the black swan connection. What a great illustration.

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