Page 22 - BBC Focus - August 2017

COMMENT
PREDICTING THE UNPREDICTABLE
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Ten years ago this month, an event took place in
Paris which signalled the start of EOTWAWKI.
No, it’s not a Maori festival; it’s something much “WE MAY BE
less fun: The End Of The World As We Know It. WITNESSING A
In August 2007, a French investment bank told REVOLUTION
some of its clients they couldn’t get access to £1bn
of their own money. While undoubtedly bad news IN THE WAY
for those involved, it didn’t seem like a huge story HUMANITY
for the rest of us. But what happened on that
Thursday afternoon is now widely seen as the DEALS WITH
start of the Global Financial Crisis. THE INEVITABLE
Over the following year, trillions of pounds of UNCERTAINTIES
wealth evaporated, global financial institutions
went bust and the world’s economy teetered on OF LIFE IN A
the brink. The cause was the discovery that vast COMPLEX
financial bets had been made by banks about the WORLD”
health of US housing market. Bets that were
complex, interconnected and, frankly, stupid.
And when they started to go wrong, the
consequences went global – and changed
the world forever.
Now there’s talk of EOTWAWKI coming
around again. This time, it’s soaring
consumer debt that’s prompting concern.
From car loans to credit cards, levels of
debt are soaring again.
So, is The End nigh – again?
Unlikely. Sure, there are lots of
pundits predicting it, but then there
always are. What they’ve missed is
the fact that we really did experience
EOTWAWKI in 2007. Not the end of
the world as in Armageddon, but
literally the end of the world as we
used to know it.
Back then, many experts thought it
was possible to make predictions
about, say, the US housing market,
and make bets – and money –
accordingly. Some even thought they
could tell when the economy was in
trouble. Not any more. Now,
financial regulators and central
banks are far more sceptical about
economic forecasts and the
reliability of financial models. Most
have come to accept that another crisis
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is pretty much certain, but that it’s also pretty
much certain that no one can say with any degree
of confidence when it will strike.
So, regulators now insist that banks keep a
greater chunk of their wealth sitting in their
vaults for when the inevitable happens. They also
have to undergo regular ‘stress tests’ which
simulate the impact of severe downturns. A close
eye is also kept on smart-aleck bets of the kind
that caused mayhem a decade ago.
None of this is guaranteed to stop a repeat of
2007, but it does reduce the risk. And when it
comes to dealing with uncertainty, that’s as good
as it gets. It’s an attitude that’s gaining traction
elsewhere – and not before time. After spending
decades and billions trying to predict natural
disasters like droughts, storms and earthquakes,
governments are increasingly focusing on
identifying the high-risk areas, and taking
action ahead of time.
Attitudes to global warming are also
changing. Despite decades of effort, it’s clear
that climate models still struggle with the
complexity of predicting the future in detail.
What is clear is that we can’t carry on the way
we are, and must act now to reduce the risk of
disaster. That’s a truth that is recognised in
the much-maligned Paris climate accord,
which calls not only for reductions in
greenhouse emissions, but also efforts
to adapt to a warmer world.
We may be witnessing a revolution in
the way humanity deals with the
inevitable uncertainties of life in a
complex world. Prediction is giving way
to adaptation. If so, it’s a case of back to
the future. Our knuckle-grazing ancestors
never kidded themselves they knew what
the future held. They just adapted to
whatever their gods hurled their way, from
floods to Ice Ages. It’s taken us 10,000 years
to realise they were right.
Still, better late than never.
ILLUSTRATION: DANIEL BRIGHT
Robert Matthews is visiting professor in science
at Aston University, Birmingham.