Fresh Ideas: The Black Swan and the BP blowout

A year ago Bob, my friend Linda's husband, asked me if I had heard of the Black Swan. I said, yes, thinking he was referring to the movie featuring ballet dancers, but no, that was not it. Bob was reading a book titled The Black Swan by Nassim Nicholas Taleb. The Black Swan is a theory of what many now term "black swan events."

Taleb is both a philosopher and a critic of risk-modeling, so the book's initial impact was especially relevant in understanding the financial crisis of 2008. (The book came out in 2007.) A number of events, such as the Sept. 11, 2001, terrorist attacks, the British Petroleum oil drilling debacle in the Gulf of Mexico, and the Fukushima nuclear meltdown, also lend themselves to the definition of Black Swan events.

A Black Swan event has three attributes. It is unexpected, an outlier, because it lies outside our regular expectations. Second, it has a major impact; and third, despite the fact that it was unexpected, we try to rationalize and account for its happening using hindsight. In other words, we try to show how it was predictable, how it can be explained. But this latter attempt to explain "how" does not really address why we were blind to the possibility of the event to begin with.

If we look at the BP oil blowout as a low-probability event (unlikely and unexpected - therefore a Black Swan) driven by BP's recklessness and/or greed, we avoid questions about the safety of deepwater drilling in general and the likelihood of similar accidents occurring in the future.

In fact, it was in the best interest of the oil and gas industry to present the BP blowout as a Black Swan, as something of such low probability that it could never have been anticipated, because this certainty helped to excuse the fact that no one (including Chevron, Exxon or Shell) had a working plan for plugging a blowout as deep as the BP's Macondo. And because no one could have had a working plan in place, we all had to understand and accept the explanation that BP's engineers had to design their countermeasures on the fly.

What the above rationalization ignores, of course, are the implacable realities of geology, whose limits could not safely be breached.

Joel Achenbach, a journalist who has examined in detail the public hearings held by the Marine Board of Investigation in New Orleans to ascertain what really took place on the BP rig, concludes that no one on the Deepwater Horizon understood the operation of the rig as a whole. What is even more disturbing is his conclusion that no one outside the oil industry really understands how a deepwater rig works.

This places us, the non-experts, at an unforgivable disadvantage. The oil industry's authority, shall we say, just like the authority of the nuclear industry, and the authority of the financial institutions, comes from our dependence on the systems the industries themselves have built and mastered. Even when that mastery breaks down, we have little choice but to allow the guilty parties back in the control room.

As we look back at these three Black Swan events, we can ask ourselves, to what degree is it in the interests of the oil and gas companies, the nuclear power industry, or the financial institutions to put our health and welfare first? If the answer is something other than our welfare, we can expect more and more devastating Black Swan events.

• Ursula Carlson, Ph.D., is professor emerita at Western Nevada College.


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