In the March edition of his famous monthly letter, Ambachtsheer discusses his views on effective decision-making to prevent so-called predictable surprises - extreme negative impact events that were predictable, and predicted, before-the-fact, such as the subprime crisis.
I am super way of the idea that a lot of things that happen are knowable in advance. Things look like they were very obviously going to happen when you already know that they did happen. To what extent did people really predict the sub-prime crisis in any useful sense? I mean beyond more complex versions of saying that at some point people with poor credit ratings may default on repayments.
It's a bit like the way that people claim that the anti-Iraq war campaigners have been proved 'right'. Anti-war people made a lot of claims, ranging from the vague to the very specific. They were almost bound to get something right. If you make a vague prediction without any time horizon (ie the invasion will lead to civil conflict) you give yourself a lot of opportunity to get it 'right'.
I had thought the rise of ideas like those of Naseem Nicholas Taleb was leading people to be a bit more realistic about what is actually knowable. But no, it seems apparently it was obvious how the sub-prime crisis was going to play out. Perhaps someone should tell the investment banks, monoline insurers, Northern Rock directors etc etc.
Will post more along these lines tomorrow.