Page Turning Books

Excerpt 2: Reflections on Fundamental Matters: Not for the Satisfied Mind – Chapter:
Everything Changes (almost)
291. Any systems of Thought and rules oriented towards Action, be it political, ethical, or financial that do
not have at their core a clear and pragmatic way of dealing with unforeseen change are bound to become
obsolete and ineffective. Change will happen whether the system takes it into account or not. Some in
governance attempt to fight and push away Change; often they may temporarily seem to be capable of
fending off Change only to eventually be overwhelmed by it. It seems that a system either factors in Change
effectively on a regular basis or opposes it blindly with eventually more dramatic and destructive
consequences to everybody.
292. The above is not merely a theoretical dissertation. It has important implications, many of which are very
practical in nature. We often take decisions ignoring Change to be disillusioned later on:
a. We trust that some institutions will never go bankrupt, no matter what happens in the future; we
put our life’s savings in them, we believe in these ‘AAA’s (to use a financial jargon), and we feel good
sleeping at night. And here we are not talking about wrongly calculated or rated ‘AAA’ securities such
as a collection of subprime debt but rather the most accurately rated ‘AAA’s, the best one could
think of. Consider the greatest historic institutions, the ‘ever-lasting’ empires in History (the Roman
Empire, the British Empire where the sun never sets with all of its rich colonies), weren’t they
‘AAA’s at their time? Consider then their subsequent history; Britain’s financial status was in
complete disarray in the 1970s. “Real estate will always go up” was the motto of most Anglo-Saxon
countries before 2007. Similarly, most French and Japanese consider that their state will always be
there and capable of providing and intervening when the going gets tough.
b. Japan’s 2011 earthquake and tsunami that resulted in the Fukushima disaster is a recent illustration
of what is called ‘tail risk’ manifesting itself in ways we often fail to imagine. And this happened to
the Japanese, one of the best current cultures in terms of forethought and organisation. It is not that
Japan was not ready; Japan was ready, but the size of the disaster was so large that all of its defences
broke, and a series of very low probability scenarios took place one after the other resulting in the
loss of control of a portion of the nuclear power plant. If the magnitude of the earthquake or the
nature of the tsunami were marginally worse, it is likely that some more dramatic irreversible
consequences could have ensued. If the same thing happens today over the shores of Seattle or
California (which are also on a well-known fault line), they would not stand a chance in comparison
with the Japanese coast. And yet, very large populations live, multiply, and invest very near fault lines
today all over the globe.
c. Who would have thought in Antiquity that horses would become irrelevant one day when it comes
to transportation? Or that papyrus would not be needed anymore because we will eventually all carry
electronic tablets? Or that women would wear what men used to wear in the past and vice versa?
293. A ‘Penny wise, pound foolish’ story. Here is the story of a decent woman. Mrs G. is a middle-class
hard-working disciplined woman. She leads her life in the exemplary fashion of what we consider the best of
the middle class. She works hard and well, never absents herself from work, and takes only what she is
allowed as vacation time. She pays her taxes and bills on time and never abuses the system. She earns a decent
salary, spends a portion of it, and saves the rest. Every month Mrs G. puts aside part of her income in one of
the country’s most reputed pension funds which in turn invests it in some of the most reputed companies in
the country. Mrs G. is frugal, attentive to what she spends, and she meets very specific goals in terms of
monthly saving. She only shops where she can save, and she sometimes skips a night-out or two in order to
meet her goals. The trouble is that Mrs G. does not know that her savings are invested in Citigroup and Bank
of America pre-2007. Over the span of a year, Mrs G. sees most of her life savings almost evaporate from no
fault of her own. Mrs G. has been in the middle of an unexpected change that no one has described to her
before. She has been saving pennies all of her life, to find her pounds being swept away in one year. This is a
tragic story of Change, this is the Absurd…

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