Expected Unknowns

Nouriel Roubini has a short article up at Project Syndicate on The Changing Face of Global Risk, replacing the top six dangers of recent years with an equal number of new ones. There’s nothing remarkably implausible about it, but neither is it irresistibly convincing.

This type of forecast, were it reliable, would be of inestimable value. To some considerable degree it is simply inescapable, since there must always be default expectations (of the kind occasionally formalized as Bayesian priors). When specific probability-weighted predictions are not made, future-sensitive agents do not fall back upon poised skepticism — such Pyrrhonism is a philosophico-mystical attainment of extreme rarity. Instead, presumed outcomes are projected out of sheer inertia, whether as perpetuation of the status quo, or the mechanical extrapolation of existing trends. It takes only a moment of reflection to recognize that such tacit forecasts are at least as precarious as their more elaborate alternatives. Their only recommendation is an irrational mental economy, which would find in the least-effort of cognition some analogy with the superficially equivalent (but in this case informative) principle in nature.

Large-scale forecasting cannot be eschewed, but there are obvious reasons why it cannot be greatly trusted. It has no definite methods (relying for its credibility on hazy reputational capital). Its objects are complex, chaotic, and — once again — poorly defined. It has a restricted time frame, appropriate to gradually emerging developments constrained (to some degree) by historical precedent, but necessarily inadequate to radical innovation and to sudden, rapidly evolving events. The combination of these various blindnesses with a high-impact chance event produces the nightmare of the forecasters — (Nassim Nicholas Taleb’s) black swan.

Consider one possible event that does not make it onto Roubini’s new list: The collapse of the Saudi regime. Shifting energy economics, ‘Arab Spring’ -style insurrectionary chaos, US strategic withdrawal, Sunni-Shi’a conflict, and an impending succession crisis are among the clear stress-factors, and several more could easily be added — most prominently the ambient influence of Internet-dynamized corrosive modernism, which not only creates direct legitimation problems, but also energizes an (at least) equally disruptive traditionalist backlash. Unquestionably, some uncontrollable cross-excitation of these developments could escalate to criticality with shocking speed. The probability of such an outcome is impossible to fix.

How catastrophic would the fall of the Saudis be? The least disastrous scenarios sleaze smoothly into a variety of utopian fantasies, from democratic liberation, through Salafist atavism, to Shi’ite millenarian imperialism. Since any process of change which tended momentarily to promise the fulfillment of any such vision would almost certainly evolve quickly in an exceptionally calamitous direction, we are probably safe in assuming that the best case outcome would be remarkably bad.

The collapse of the House of Saud would simultaneously and fundamentally destabilize world energy markets and the Islamic umma. Control of the Holy Places would become a matter of immediate contestation, as would a quarter of the world’s petroleum reserves. The type of interim regime most likely to effectively secure one would be especially likely to compromise security of the other. A relatively competent military government would outrage religious sensibilities (of several different kinds), while an intense theocracy would be greeted internationally as a revolutionary threat to the reliable administration of hydrocarbon production. It is not intellectually challenging to envisage a situation in which religious, military, and economic chaos erupt in concert, on an apocalyptic scale.

In case I am misunderstood, this is not a forecast. It is an anti-forecast, directed randomly at Roubini, but more generally at the very idea of any confident enumeration of significant world risks. In the spirit of Taleb, it is intended to communicate an abstract potential for blind-siding disaster, of arbitrary magnitude.

The most reliable heuristic: plan for the unknown as such. (More on that to come.)



April 3, 2014admin 11 Comments »


11 Responses to this entry

  • MW Says:

    End of the petrodollar! J.k.. The U.S. would just take over, damn the consequences.


    Posted on April 3rd, 2014 at 5:57 pm Reply | Quote
  • Stirner (@heresiologist) Says:

    Roubini is pretty ho-hum in his forecasting these days.

    For the hardcore forecast porn, it is hard to beat GEAB:

    Their forecasting methodology is rather cryptic, but even when they get things wrong they tend to at least get you looking in the right places.


    Posted on April 3rd, 2014 at 6:34 pm Reply | Quote
  • RiverC Says:

    Ah, yes. For to plan for such and such an unknown is to assume not only the activity of a billion wills, but also of more than that number of molecules, patterns and rules only partially understood or even known.

    Paranoia would be defined properly as planning for “such and such” an unknown whose likelihood generally is considered close to nil. However, paranoid is often misapplied in the direction of ‘planning for the unknown as such’ – one could safely regard this as ‘healthy paranoia’.

    Being armed, for instance, over most imaginable unknown difficult situations, ranks high as being of benefit and low as being troublesome. This isn’t merely carrying a gun of course, though usually the better the weapon you can carry (and use correctly – it is not a talisman) the greater benefit you get.

    Of course, there are few actions other than prayer that one can take which have zero potential of having negative externalities.


    Posted on April 3rd, 2014 at 7:22 pm Reply | Quote
  • Dan Says:

    I think recent events in Syria and Egypt have made the fall of the House of Saud much less likely. After Libya and then Egypt went Islamist, it looked like things were on a roll. And the rebels were winning in Syria for a while. But Egypt flipped back and Islamists there have faced brutal consequences. Rebels are taking severe losses now in Syria.

    Prospective rebels have to see now in Saudi Arabia that resistance would bring tremendous loss with no promise of success. Syrian quality of life has been wrecked and for what? Egypt’s situation is the same as before, only with more brutal suppression of dissent. Libya is a mess. The publics of other Islamic autocracies must be thanking their lucky stars that they didn’t do Arab Springs themselves. I don’t think there have been any new ‘Springs’ in a while.

    The Saudi Arabia article ends with “Trita Parsi is founder and president of the National Iranian American Council. ” I don’t know what that means but that doesn’t seem like a neutral source to me.


    Dan Reply:

    The article talks about US oil production, but oil is a global commodity. Production is rising in the US and falling in other countries, so it is probably a wash. There is plenty of global demand no matter what.


    admin Reply:

    Assuming “demand” in your last sentence should be ‘supply’ this micro-analysis strikes me as a little too sanguine. You don’t have a quarter of global reserves taken offline without market disruption on a truly epic scale.


    admin Reply:

    I’m not trying to persuade anybody it’s likely.


    Posted on April 3rd, 2014 at 7:28 pm Reply | Quote
  • Lesser Bull Says:

    I think what you’re saying is, our prediction that the ratchet continues will be falsified if Yellowstone blows.


    admin Reply:

    Another risk factor notably absent from Roubini’s list — obliteration of North America by a super-volcano. (But the effect on global energy markets would be a wash.)


    Posted on April 3rd, 2014 at 8:51 pm Reply | Quote
  • Future References | Neoreaction in The Diamond Age Says:

    […] for the future for a few days, but before I actually began hitting the keys, here’s Outside in on Expected Unknowns. While he doesn’t make predictions, thus does not completely usurp my contemplated […]

    Posted on April 4th, 2014 at 8:24 pm Reply | Quote
  • VXXC Says:

    This is quite a brilliant summation.

    “Control of the Holy Places would become a matter of immediate contestation, as would a quarter of the world’s petroleum reserves. The type of interim regime most likely to effectively secure one would be especially likely to compromise security of the other.”

    This why NRxn ^^ only people thinking


    Posted on April 7th, 2014 at 11:56 am Reply | Quote

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