“Efficient systems have limited ability to deal with system-wide economic shocks. Those shocks are coming with increased frequency. They’re caused by global pandemics, yes, but also by climate change, by financial crises, by political crises. If we want to be secure against these crises and more, we need to add inefficiency back into our systems.
I don’t simply mean that we need to make our food production, or healthcare system, or supply chains sloppy and wasteful. We need a certain kind of inefficiency, and it depends on the system in question. Sometimes we need redundancy. Sometimes we need diversity. Sometimes we need overcapacity.
The market isn’t going to supply any of these things, least of all in a strategic capacity that will result in resilience. What’s necessary to make any of this work is regulation.—Bruce Schneier, “Bruce Schneier says we need to embrace inefficiency to save our economy.” Quartz. June 30, 2020
“…there are three distinct sides of risk:
* The odds you will get hit.
* The average consequences of getting hit.
* The tail-end consequences of getting hit.
…tail-end consequences – the low-probability, high-impact events – are all that matter.
In investing, the average consequences of risk make up most of the daily news headlines. But the tail-end consequences of risk – like pandemics, and depressions – are what make the pages of history books. They’re all that matter. They’re all you should focus on.”-Morgan Housel, “The Three Sides of Risk.” The Collaborative Fund. May 19, 2020