ROI is a finance acronym for return on investment. For example: if I invest $1000 in something, how profitable will that investment ultimately be? ROI is often expressed in terms of today’s dollars using a net present value (NPV) calculation.
Kudos Stephanie. I believe writing that touches on mathematics is one of the most difficult of all topics yet yours was the right mix of useful and descriptive. My favorite current example of system thinking is preparation for the non-zero chance of an asteroid impact. We have very limited data, we know it is catastrophic and it might likely end virtually all life on the land masses of the planet. Against that risk, it is very hard to figure out how much to spend on mitigation.
Thanks, Mark! You're right re: an asteroid impact: since it happens so rarely, the likelihood percentage goes way down even for a span of hundreds of years, but the severity is like... essentially infinity? So it *is* a weird calculation. What are your thoughts on applying systems thinking to prepare for something like that?
I think a tool like consequence-weighted NPV is better-suited for climate change, since the likelihood of catastrophe is almost 100% if we do nothing or under-invest, and the severity while terrible can be quantified, so we can focus on the severity/consequences to prioritize investments.
The one that really gets me is a major solar storm, which happens not all that rarely in geologic time, maybe once every 500 years. We should *definitely* put capacitors on all our electrical transformers (https://www.wired.com/story/sun-storm-end-civilization/), yet it hasn't happened yet. Traditional NPV probably says, "We have more pressing problems and better investments to make." Consequence-weighted NPV would (probably) say, "Prioritize this."
I think you ask fun and probing questions Stephanie. Fun to ponder over a nice cup of coffee.
I have a son who is an economist. We have all sorts of fun conversations about stuff. While the scale of the challenge and the accuracy of predictions of outcomes continues to improve with climate, I think it is manageable if we begin to factor in negative externalities to actions that put carbon into the atmosphere. I think all of these activities, today, can be grouped as tragedy of the commons sort of things.
The asteroid or solar storms or pole reversal are probably just stuff that humans get scared and stuck on. We want to control for every eventuality. However, we are hundreds of nation states with a general unwillingness to act as one. I think of most of those sorts of things we can romanticize in a movie where the world comes together to fight a common enemy. I think edge cases and their outsize consequences simply do not resolve in a capitalist system. We ALWAYS privatize gain and socialize the loss and allow innovation to get a free ride. That is why the capacitors can never be installed because the incremental cost of the item will rise and the good actor will go out of business. The economic system we embrace is structurally built with distorted incentives. Lots of easy to flag risks cannot be addressed as a result. I suppose this is why they are fun to talk about because everyone can clearly imagine the risk yet to do anything tangible about it upsets the whole system.
I wrote a post about risk once. I think the interesting thing is the stuff we do focus on. I wrote light-heartedly about the expense and absurd lack of payback we get from putting glow-in-the-dark emergency releases in our trunks. It's probably from watching dramatic Liam Neeson movies when people are put in a trunk. I would imagine we spend at least $5 a car doing this.
I think until recently, NASA has set aside 1/20 of a cent spending per person on earth for protection against an asteroid. I would guess when a body (smallish I hope) arrives beyond early detection it will be that outcome that might convince us to plan. If it is bigger, we will simply lose the gamble I fear. As a lover of sci-fi the inability to act collectively might simply be the explanation why super-intelligence never emerges hardly anywhere if at all. Eventually the odds of an edge case catch up with all planets.
Having spent a significant portion of my career in energy production and distribution, the hardening of substations has been discussed for at least the last 40 years I can attest. Even during the Cold War, only minimal consideration was given to the EMP challenges humans could induce without the sun even being involved!
Kudos Stephanie. I believe writing that touches on mathematics is one of the most difficult of all topics yet yours was the right mix of useful and descriptive. My favorite current example of system thinking is preparation for the non-zero chance of an asteroid impact. We have very limited data, we know it is catastrophic and it might likely end virtually all life on the land masses of the planet. Against that risk, it is very hard to figure out how much to spend on mitigation.
Thanks, Mark! You're right re: an asteroid impact: since it happens so rarely, the likelihood percentage goes way down even for a span of hundreds of years, but the severity is like... essentially infinity? So it *is* a weird calculation. What are your thoughts on applying systems thinking to prepare for something like that?
I think a tool like consequence-weighted NPV is better-suited for climate change, since the likelihood of catastrophe is almost 100% if we do nothing or under-invest, and the severity while terrible can be quantified, so we can focus on the severity/consequences to prioritize investments.
The one that really gets me is a major solar storm, which happens not all that rarely in geologic time, maybe once every 500 years. We should *definitely* put capacitors on all our electrical transformers (https://www.wired.com/story/sun-storm-end-civilization/), yet it hasn't happened yet. Traditional NPV probably says, "We have more pressing problems and better investments to make." Consequence-weighted NPV would (probably) say, "Prioritize this."
I think you ask fun and probing questions Stephanie. Fun to ponder over a nice cup of coffee.
I have a son who is an economist. We have all sorts of fun conversations about stuff. While the scale of the challenge and the accuracy of predictions of outcomes continues to improve with climate, I think it is manageable if we begin to factor in negative externalities to actions that put carbon into the atmosphere. I think all of these activities, today, can be grouped as tragedy of the commons sort of things.
The asteroid or solar storms or pole reversal are probably just stuff that humans get scared and stuck on. We want to control for every eventuality. However, we are hundreds of nation states with a general unwillingness to act as one. I think of most of those sorts of things we can romanticize in a movie where the world comes together to fight a common enemy. I think edge cases and their outsize consequences simply do not resolve in a capitalist system. We ALWAYS privatize gain and socialize the loss and allow innovation to get a free ride. That is why the capacitors can never be installed because the incremental cost of the item will rise and the good actor will go out of business. The economic system we embrace is structurally built with distorted incentives. Lots of easy to flag risks cannot be addressed as a result. I suppose this is why they are fun to talk about because everyone can clearly imagine the risk yet to do anything tangible about it upsets the whole system.
I wrote a post about risk once. I think the interesting thing is the stuff we do focus on. I wrote light-heartedly about the expense and absurd lack of payback we get from putting glow-in-the-dark emergency releases in our trunks. It's probably from watching dramatic Liam Neeson movies when people are put in a trunk. I would imagine we spend at least $5 a car doing this.
I think until recently, NASA has set aside 1/20 of a cent spending per person on earth for protection against an asteroid. I would guess when a body (smallish I hope) arrives beyond early detection it will be that outcome that might convince us to plan. If it is bigger, we will simply lose the gamble I fear. As a lover of sci-fi the inability to act collectively might simply be the explanation why super-intelligence never emerges hardly anywhere if at all. Eventually the odds of an edge case catch up with all planets.
Having spent a significant portion of my career in energy production and distribution, the hardening of substations has been discussed for at least the last 40 years I can attest. Even during the Cold War, only minimal consideration was given to the EMP challenges humans could induce without the sun even being involved!