CATASTROPHIC THEORY

The problem with academia is that they so often make the simple obtuse. Like in investing, Markowitz presents statistical analysis in his book on portfolio theory. At what point does the risk reduction from adding a new stock to your investment portfolio become insignificant? Assuming your holdings are diversified, for a risk averse old man the answer is 12 or 13. The featured book in this blog attempts to inject rigorous mathematics into catastrophic analysis. A better approach is to reach the masses, using intuitive heuristic concepts like the black swan or the butterfly effect.

Catastrophes are dismissed as being too rare to worry about or plan for. That might be true for any one type of catastrophe, but not for the risk that something will go wrong. Even excluding the catastrophe of war, there is a high probability that something bad will happen.