Signs From Earth

Natural and Economic Disasters in Parallel

McKinsey and Co. has posted a short essay by Michele Zanini that begins exploring similarity in behavior between man-made and natural systems. She discusses correlative frequency and magnitude of failure in man-made systems and of similarly complex natural ones, and says we should pay greater attention to behavior of natural systems to help us understand vulnerability and instability in the systems we create, like the economy:

'Power Curves' What natural and economic disasters have in common (registration required).

"...the parallels between the dynamics and failures of man-made systems, such as the economy or the electricity grid, and similarly complex natural ones are bringing new ideas to economic forecasting, strategic planning, and risk management. This trend may have profound implications for policy makers, economists, and corporate strategists alike."

There are similiarities in this discussion with the work of Nicholas Taleb vis a vis societal and economic effects of low frequency, high impact disruptive events he calls "Black Swans." 

Signs From Earth: Tips to Avoid "Black Swan" Events

Signs From Earth: Turbulence in Our Midst

Tips to Avoid "Black Swan" Events

A few days ago Nassim Nicholas Taleb, author of the book "The Blacks Swan: The Impact of the Highly Improbable," penned a piece for The Financial Times on avoiding "black swan" events. 

Black swans in this context are very infrequent extreme events that have wide implication. (9/11, financial collapse, power grid failure, the internet, rapid climate change.) 

Taleb has posted the article on his website and it can be downloaded here as a PDF:  Ten Principles for a Black Swan-proof World. 

A few of the ten principles: don't let anything get "too big to fail," stop the socialization of losses and the privatization of gain, and do not give children sticks of dynamite, even if it comes with a warning. (In this context the "dynamite" is complex financial derivatives that no one understands.)

The term "black swan" comes from the mistaken assumption that all swans are white. In this context a "black swan" is a metaphor for something that cannot exist. Black swans were discovered in Australia in the 18th century, thereby proving false the assumption that all swans are white. In Taleb's context "black swans" are rare events beyond the realm of normal exprectation. Photo: Big Gray Mare/flickr

Signs From Earth: Turbulence in Our Midst

Charting a House on a Smart Grid

The Wall Street Journal has a Journal Report: Energy on green energy in times when money is tight.

The article How to Go Green in Hard Times  describes 10 energy-saving changes and discusses how much they will cost, how much you will save, and payback time.

Within is a flash graphic showing a house on a smart grid: The More You Know...

Disappearing Florida House Insurance

Houses in Florida increasingly vulnerable to storms, coastal erosion, and sea level rise are even more vulnerable to loss after the second largest insurer of home properties has decided to pull out of the state. Photo by Old Shoe Woman/flickr.

Sometimes the signs of change come not from the observed world, but from what happens to the money. 

State Farm Insurance has announced it will no longer issue homeowner insurance policies in the state of Florida. The reason given, in a January 28 article in the Wall Street Journal, is that the state government would not allow State Farm to raise rates an average of 47 percent. 

In response, the insurer said it would drop all homeowner policies, totaling more than 700,000, a process that will take about two years. (List of Policy Types Affected)

Company officials said it had to raise rates this much to avoid a further weakening of the company's "financial position." According to an article in the St. Petersburg Times, State Farm paid out more than $4.4 billion to settle claims after the state was hit by multiple hurricanes in 2004 and 2005.

Since then insurance companies have been dropping homeowner coverage in the state. The state of Florida via Citizens Property Insurance Corporation has become the leading insurer of home properties. 

At the time of the announcement State Farm was the second-largest insurer of residential properties in the state.

Wall Street Journal: State Farm Won't Cover Properties in Florida

St. Petersburg Times: State Farm to Florida Homeowners: No Thanks

Insurers: Rising Cost of Natural Disasters

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BBC: 'Huge year for natural disasters'

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"The past year has been one of the most devastating ever in terms of natural disasters, one of the world's biggest re-insurance companies has said.

"Munich Re said the impact of the disasters was greater than in 2007 in both human and economic terms.

"The company suggested climate change was boosting the destructive power of disasters like hurricanes and flooding.

"It has called for stricter curbs on emissions to prevent further uncontrollable weather scenarios.

"Although there were fewer "loss-producing events" in 2008 than in the previous year, the impact of natural disasters was higher, said Munich Re in its annual assessment....

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Munich Re PR:

Catastrophe figures for 2008 confirm that climate agreement is urgently needed

Munich Re: The ten largest natural catastrophes in 2008 

Munich Re: Natural Disasters 2008 World Map

Swiss Re: Preliminary Swiss Re sigma estimates that over 238 000 people were killed by catastrophes in 2008, insured losses soar to USD 50 billion

Thermal Police Save Energy

NYT: Focus on Weatherization is Shift on Energy Costs

..."Call it CSI: Thermal Police — energy experts armed with mostly low-tech tools but strong sleuthing skills, finding flaws that let the air inside a house go through a full exchange with the outdoors twice an hour, instead of once every two or three hours.

"Correct those flaws, and heating and cooling costs are typically cut by 20 percent to 30 percent, a saving of more than $1,000 annually in some households. In addition, carbon dioxide emissions and the strain on the national electric and gas systems are reduced...

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...Weatherizing a million homes annually would also create about 78,000 jobs for a year, according to the federal Energy Department’s weatherization project director, Gil Sperling..."

More Foreign Farmland Buys

The Chicago Tribune is covering the trend of buying up foreign farmland to ensure stability in food supplies. 

This on the heels of other recent articles from New Scientist and the The New Security Beat at the Wilson Center:

Global Farm Land Grabs

The New Colonialism: Buying Foreign Farmland

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Chicago Tribune: Global grain rush under way as rich nations snap up farmland overseas

Wealthy countries try to fend off food shortages

Laurie Goering and Alex Rodriguez (MOSCOW) — Wearing flowing red robes and pitching his own trademark desert tent, Libyan leader Moammar Gadhafi paid a visit to Ukraine last month in search of a remarkable deal to help feed his oil-rich but soil-poor people.

Under a proposed agreement with Kiev, Libya would lease 247,000 acres of Ukraine's rich black land to grow wheat. The harvest would then be shipped back to Libya, giving the desert nation a more secure supply of food in the face of predictions about higher food prices and potential shortages in decades to come. Ukraine, in turn, would get access to Libyan oil fields, helping free it from dependence on Russia for its energy needs.

Around the world, food-poor but cash-rich countries, spooked by last season's high food prices, are racing to snap up rights to farmland in developing countries and breadbasket nations. They're aiming to boost their own food security and cash in on what might prove one of the few sound investments left in a world in financial crisis.

Money Crisis Hurts Food Supplies

The Christian Science Monitor: Financial crisis may worsen food crunch it eclipsed

Although commodity prices for a wide range of crops have fallen by as much as 50 percent from record highs in June, the financial crisis is expected to make food shortages dramatically worse.

"PHNOM PENH, CAMBODIA - Call it crisis eclipse. The global food crisis that dominated headlines earlier this year has been overshadowed by this fall's financial crisis, but it continues to exact a crippling toll on the world's poor. And, although commodity prices for a wide range of crops have fallen by as much as 50 percent from record highs in June, the financial crisis is expected to make it dramatically worse: credit for farmers could dry up, meaning less money to buy fertilizer and seed, leading in turn to greater global shortages of food.

Why the Energy Crisis Will Outlast the Credit Crisis

TIME Magazine Saturday, Nov. 15, 2008

Why the Energy Crisis Will Outlast the Credit Crisis

By Vivienne Walt/Paris

"The looming global energy crisis is unlikely to be on the agenda when the leaders of the world's major economic powers gather in Washington on Saturday for the Group of 20 summit: After all, they're scrambling to fix the world's financial system and soften the landing of the slowing world economy, and energy may seem a lot less urgent than the credit crisis — indeed, one silver lining of the global financial crisis has been a falloff in energy consumption and therefore, lower oil prices.

Turbulence In Our Midst

An October 21st interview on PBS Newshour with Nassim Nicholas Taleb, author of the book The Black Swan, and Benoit Mandelbrot, the mathematician who postulated the "the butterfly effect" in addition to his work with fractals.

Turbulence. We are in its midst. No one knows how severe it will eventually become.