The Black Swan Visits Japan: 9.0 Earthquake, Tsunamis, Nuclear Power Plants

The Black Swan has landed in Japan.

Fair-use of Copyright cover from “The Black Swan” via Wikipedia.

The earthquake(s) and tsunami(s) in Japan, and their terrible consequences, are straight out of “The Black Swan,” by Nassim Nicholas Taleb. The subtitle is: “The Impact of the HIGHLY IMPROBABLE.” (No, we’re not talking about a ballet film.) If you plan to continue living in the unpredictable world of the 21st Century, you probably should read “The Black Swan.” Just my opinion. Mr. Taleb’s home page is here.

A Black Swan is an event that’s “outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility,” Mr. Taleb writes.

The other two fundamental attributes of a Black Swan are: its impact is extreme; and it seems explainable and predictable only after the fact.

“A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. . . . The effect of these Black Swans has been increasing. It started accelerating during the industrial revolution, as the world started getting more complicated, while ordinary events, the ones we study and discuss and try to predict from reading the newspapers, have become increasingly inconsequential.”

Real black swans, never seen in Europe, are native to Australia. GNU free documentation license. Calvin Teo photo via Wikipedia

We humans are arrogant. We think we know everything. We study the normal, and rule out the random and the unimaginable. Because Black Swans are rare and unpredictable, the statistical measures “experts” use to predict “risk” usually don’t even consider the possibility of Black Swans. Mr. Taleb views the reliance of experts on the bell curve, which ignores large statistical deviations, as a “Great Intellectual Fraud.”

“What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it. . . . We can easily trigger Black Swans thanks to aggressive ignorance.”

An earthquake in Japan was predictable. Everyone, even the experts, knew that Japan sat astride a terrible fault line in the Earth. An unpredictable factor was timing:  Will a major earthquake strike this year, or 20 years from now, or 50?

Earthquakes in Japan, Australia, Haiti

I’ve heard that the Japan earthquake was 1,000 times more powerful than the recent quake in Christchurch, Australia, and several hundred times more powerful than the catastrophic earthquake in Haiti last year.

I’ve heard the Japan quake was the fifth most powerful earthquake in recorded history. An earthquake that powerful, AND a tsunami damaging five nuclear plants! That sounds like a Black Swan to me.

Could anyone have predicted the magnitude of this earthquake, or that it  would be followed by several destructive tsunamis? What about hundreds of aftershocks, some of them significant earthquakes in themselves, continuing for days and weeks? Additional tsunamis with each major aftershock?

It is reported that Japan’s nuclear power plants were engineered to withstand major earthquakes. But did the experts calculate for a 9.0 magnitude earthquake? Or was that outside the range of statistical probability? Engineering for an earthquake that has happened before gives a false sense of security. For real security, you’d need to engineer for an earthquake almost worse than you can imagine. Or change to a completely different way to generate power. Let’s see. What’s the fallout if a windmill fails following an earthquake?

Whatever can go wrong . . .

It’s a worst-case version of Murphy’s Law: “Whatever can go wrong, will go wrong.” Did the experts foresee the failure of electric power to run the pumps? Who could predict that the backup system would fail, and then the next backup system? Yep, it’s unlikely and unpredictable, and it happened.

Food and water? Knowing that an earthquake was possible on a fault line, did the responsible government agencies and private disaster agencies stockpile food and water for a 9.0 earthquake followed by destructive tsunamis? Followed by nuclear meltdowns?

I wonder if we are willing to make the effort, and spend the money, to be responsible about risks. The flooding of New Orleans after Hurricane Katrina was predictable. It had long been known that New Orleans was below sea level, and had inadequate protection against flooding. What preventive action was taken?

The next major earthquake in California will not be much of a surprise. Everyone knows it’s only a matter of “When?” But the experience in Japan demonstrates that the complications may be almost beyond imagination. Is California making adequate preparations?

Of course, Black Swans are not only about earthquakes. What about the predictability of financial collapse?

Which reminds me: Japan is one of the largest economies in the world, and one of the most indebted. Who can predict what economic ripples this tragedy might have around the world?

The Black Swan can appear without warning in almost any realm. War is unpredictable, and a war once begun has no predictable course. In fact, Mr. Taleb cites World War I as a classic Black Swan. It’s interesting that the earthquakes and tsunamis in Japan have practically knocked the turmoil in Africa and the Middle East off the news. We’re ignoring, for the moment, the rising prices of gasoline and food.

There’s so much more in Taleb’s “The Black Swan.” I doubt that I’ve shed much light on the author’s ideas, which are mostly over my head. I haven’t even touched on Taleb’s  “Mediocristan” and “Extremistan.” Did you know that The Black Swan can exacerbate the “winner-take-all” nature of our economy, widening even more the divide between rich and poor? In Extremistan, much depends on luck, and “contagion.”

Be on the lookout for Black Swans. With increasing complexity, speed, and global interconnection, conditions are favorable for Black Swans. If you want to know more, you’ll just have to read the book.

— John Hayden

4 thoughts on “The Black Swan Visits Japan: 9.0 Earthquake, Tsunamis, Nuclear Power Plants

  1. Pingback: Taleb on Risk Management | Finance Professor Blog

  2. well im not really sure how tall it was but it went over a 30ft wall so prttey tall it killed over 10,000 peopleit shortened our days by something like .8 milliseconds, because it screwed up the Earths north and South moved Japan 13 feet towards the United States,the waves of the Tsunami were up to like 500 mphif you need any further information, type your question into Google.theyre saying it was either an 8.9 or a 9.0 on the Earthquake scale, aaand it was the 5th largest in the world. Was this answer helpful?


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