As an avid admirer of Nassim Nicholas Taleb’s unputdownable book “The Black Swan – The Impact of the Highly Improbable“, I have since become in awe of the power of nature, chance and random events to shape our lives, much more than we think we can direct and plan them ourselves.
As Nassim says in the prologue to his book;
“Before the discovery of Australia, people in the Old World were convinced that all swans were white, an unassailable belief as it seemed completely confirmed by empircal evidence. The sighting of the first black swan might have been an interesting surprise for a few ornithologiests (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single (and, I am told, quite ugly) black bird“.
Meet the Black Swan . . .
So back to Iceland. The point is that no one in the airline industry seems to have taken seriously the possibility of a – once in 200 or less years – volcanic eruption wiping out their business, because they couldn’t fly – in sky polluted with volcanic ash.
Enter the icelandic volcano . . .
This – the bankrupting of large sections of the airline industry – is now starting to look possible and already there is talk about a bailout for airlines along the lines of the banking sector. To which taxpayers are most likely to take a very dim view to say the least . . .
To face this challenge, what we are talking about here is pricing in the concept of inter-generational risk – i.e. over more than 50 years and more – which I fear, only the scientific conquest of death might work to assuage. And only then 50 years hence, not now.