The reaction to the pandemic at all levels – government, social, individual – strikes me first and foremost as a failed exercise in risk management. We all do a lot of risk management, often at an almost subconscious level. A large part of my job is risk management (and the rarely-mentioned yin to risk management’s yang – risk acceptance). In particular, I spend my time on catastrophic risk – highly unlikely, but highly expensive, risk.
One piece of my risk management portfolio is our risk finance program, which consists of a captive insurance company and mind-boggling amounts of re-insurance (essentially, umbrella policies). Insurance provides a certain discipline to risk management – the risks that are being insured are closely defined, if you bother to read the policy, and the price of laying off that risk is in black and white – the premium that you pay for a policy.
An example of one risk financing exercise – the total value of all of our facilities is close to $1BB. Unfortunately, no insurance company will sell us (or anybody) a policy for more than $800MM. About the only way we could anywhere close to $800MM is if our big hospital was completely destroyed, and about the only way that could happen is if an airliner crashes into it. Not impossible, but how much should I really spend to cover that risk? Since the cost of umbrella coverage above $800MM is basically the cost of capital, why should I buy what amounts to a line of credit for $200MM, every year, for a risk that remote? So I don’t. Some risks are so remote you just can’t spend on them, whether through insurance/risk finance or a risk mitigation program.
The ideal, I suppose, is that you spend no more financing and mitigating a risk than the present value of that risk – its severity discounted by its likelihood. Sounds very mathy and objective, doesn’t it? One would think that the insurance business, chock full of data and analysts and actuaries, would be driven almost solely by numbers.
But its not. The presence of all that data, etc. only highlights how subjective it is. The insurance companies (and these are big global companies) aren’t just interested in what’s in our claims history (all that data they can analyze). That’s historical, and they are mostly interested in what could happen during the next year, the one covered by the policy they are trying to sell. Sure, the past is prologue and all that, but they want face-to-face meetings because they want to lay eyes on the people actually creating/mitigating the risk, to get some handle on whether they know what they are doing. They also want some view of our risk mitigation capabilities. Their (subjective) impression of how well run an organization is has a surprisingly large influence on what they will sell you and what they charge.
This is all based on assessment of the likelihood and severity of risk, which is a projection – subjectivity is baked in. At the end of the day, how many claims you might have in the future, and how expensive they might be, is a SWAG.
So let’s take a look at a few risk management pitfalls, as exemplified by our recent experience with terrible risk management – the pandemic.
Tunnel Vision. The public health wallahs are guilty of this. They focused on one virus, one disease, to the exclusion of everything else.
Good risk management does not consist of shifting risk out of your bailiwick and onto someone else’s. The temptation to do this is strong in bureaucratized organizations, and in fact is probably the root cause of a great deal of conflict between corporate divisions or government agencies. Shifting risk is more in the nature of career risk management, not real risk management, as it doesn’t reduce risk to anyone except, perhaps, you.
Risk management, always and everywhere, requires trade-offs. What’s the cost (in time and money) of this countermeasure? What will we not do because we are doing this? What are the likely knock-on effects and downsides? None of this was part of the public health response to the pandemic.
Bad Metrics. A challenge throughout any organization is landing on the metrics you will use to give you some view of organizational performance. Picking metrics is a never-ending struggle. Good risk management is a long game – you are looking at performance over time, so changing metrics in midstream is suboptimal, shall we say (although it is necessary from time to time).
The problems with metrics for dealing with the pandemic are legion. First, they jumped around – cases (really, positive tests), hospitalization, ICU capacity, deaths, vaccinations, etc. Second, many of them were disconnected from the actual risk of the disease. Cases/positive tests, for example, only lead to outcomes anyone should care about (death, severe illness) a very small percentage of the time.
Vaccinations as a metric of public health success are also flawed, largely because they were a short-term remediation strategy. Everyone knew that the virus would mutate out from under the vaccine, so whatever effectiveness the vaccines may have had would wane over time. Sometimes short-term is all you can do, and sometimes its something you should do anyway. Presenting a short-term measure as the final solution is a guarantee of failure in risk mitigation and therefor risk management. Sacrificing the long-term (herd immunity) for the short-term (vaccination) is a cardinal sin.
Credibility. Risk management is a leadership exercise. All leadership requires credibility. Creating and maintaining credibility is beyond the scope of this post (I’m going to need a higher per-word rate for that one), but one thing is clear – our public health enterprise vaporized their credibility with a large segment of the population. I hardly need to reiterate for this crew the series of statements and mishaps that destroyed the credibility of public health officials at the national and local levels.
But you don’t turn on a dime, such as by suddenly embracing public mask wearing after decades of saying it was ineffective, without making a very solid case for it, one that you cannot make without admitting your previous stance was mistaken. You don’t respond to serious dissent with a sneering dismissal. You don’t change the rules, such as by changing what you count from “deaths from” to “deaths with”. You don’t just ignore that your previous predictions were dead wrong. You don’t retreat to appeals to authority to support your diktats.
To keep and build credibility requires humility. I have learned that, counterintuitively, being willing to admit error builds credibility. Once people see you are willing to admit you have made a mistake, when you do plant your feet and say “This is the way I see it”, they tend to believe you have good reasons. Humility is apparently not a virtue with which our public health officials are well acquainted.
Credibility, like other forms of trust, is difficult if not impossible to regain once it is lost. Public health has a role, and our public health masters have done serious long-term damage to their ability to function effectively. As things stand, our public health masters have made themselves incapable of risk mitigation and management.
So, what you’re saying is that if I manage to knock down the whole building, you’re not completely covered?
Hrmm… wait, your state is armed. Nevermind.
If you could knock down our entire main hospital, I don’t think you’d have to worry about some crazy rednecks.
Isn’t that the mistake the port authority, or whoever it was that owned the WTC made? Didn’t they only insure for one tower? Or is that a myth?
Dunno if its a myth or not. If true, was it a mistake? Was it a risk worth insuring against?
Was it even insurable under force majeure exclusion clauses?
STEVE SMITH PROMINENT FOREST LAWYER. HIM REMEMBER THEM HAVE INSURANCES. COLLECT MUCH MUNNIES.
https://www.reuters.com/article/us-wtc-insurance-settlement-idUSN2320101420070523
I sense a disturbance in the Force. As if some comments had their life snuffed out….
our public health masters have done serious long-term damage to their ability to function effectively.
One of the authors of the Great Barrington Declaration, Martin Kulldorf, pointed this out early on. He said, paraphrasing, that despite all the government force behind them, public health officials just have trust. You lose it, it’s gone, and people won’t listen.
Now broaden that to the entire federal and bureaucratic apparatus.
You lose it, it’s gone, and people won’t listen.
Is this true, though? I think mask fatigue was real, but I seriously doubt that most normies stopped trusting Top. Men.
It is falling slower than I expected it to, but it is falling.
I seriously doubt that most normies stopped trusting Top. Men.
I think many normies are now more skeptical. At least of public health/pandemic pronouncements.
And many, because they trusted them, are now invested in that trust and actively resist disconfirmation.
I seriously doubt that most normies stopped trusting Top. Men.
I think this is true to some degree. Case in point:
https://www.amazon.com/Ukraine-Reusable-Washable-Adjustable-Filter/dp/B09SBF4G8V?th=1
Relevant.
Yes, and watch the medias credibility crumble over the last few years.
Good article. You’re hired. When can you start?
Let’s see, hordes of money and the small risk of being lynched or no money and a clear conscience?
https://covidreason.substack.com/p/was-pfizer-vaccine-efficacy-95-or
Do you know where they’re getting 162 and 8 patients that they’re adding into their calculations? I can’t see those numbers quoted anywhere in the rest of the post.
I don’t see where they cite the source, but this (emphasis mine):
in reality one must include the confirmed COVID-19 cases as well, which would yield: VE = ((1816+162)-(1594+8))/(1816+162) = 19.0%
says to me that 162 is confirmed cases in the test group and 8 is confirmed cases in the placebo group, since 1816 and 1594 are cited as suspected but unconfirmed cases in the same groups, respectively.
It should be in the referenced Twitter thread.
https://twitter.com/USMortality/status/1521914418451337217
They weren’t interested in managing risk, but looting whatever they could. And they did a damn fine job of it.
Thanks for the article!
My wife has been in insurance underwriting for her whole adult life and I used to work in a Risk Management department before moving on to managing projects full-time. So I think we are good at assessing risks. Watching people panic over a virus that had a death-rate of less than 0.05% among healthy non-elderly adults and much lower with kids was frustrating. Had some conversations with friends and family who simply couldn’t believe that their kids had a much higher chance of drowning in the pool or being killed in a pool rather than dying of covid – they usually refused to believe us.
We didn’t get vaccinated because of the low risk and suspicion of the vaccine side-effects (which are now being proven true). I lost all respect for our (now former) family doctor when he tried to convince us to get the experimental vaccine.
I have a good friend who is full FCAS (casualty actuary) and he and I have wildly different personal risk tolerance characteristics.
OTH, for an individual third party insured are analysis is mostly lockstep together.
COVID has made some of the most rational people I know irrational.
Heh. One way you can manufacture credibility is to set your rate high enough that people will feel obligated to believe what they paid so much for. Get your clients pot-committed.
These articles are now a regular part of the news cycle. I assume everyone instantly assumes it was the vax – administered to children who had zero chance of dying of covid.
https://fox59.com/indiana-news/15-year-old-student-dies-after-ems-called-to-lawrence-north-track-practice/
The media blackout may be faltering.
https://thelibertybunker.com/2022/05/24/fox-news-john-roberts-breaks-the-silence-about-vaccine-injuries/
Somewhat on topic: How did this article on the Lil Rona Panic get published?
Quick! Print multiple copies and lock them up somewhere secure and climate-controlled before it gets memory-holed and the author gets Clintoned!
already downloaded.
I agree with the author on most of his points and he is a neuroscientist and a MD. He has however, been relegated by the mainstream medical press to the wack job side of the profession.
Be warned if you intend to use this well written article as a way to convince others. Again none of this makes him wrong, but if someone looks this guy up the first thing they will see is the following:
Blaylock has endorsed views inconsistent with the scientific consensus, including that food additives such as aspartame and monosodium glutamate (MSG) are excitotoxic in normal doses.[2][3]
And Blaylock has called the American medical system ‘collectivist’ and has suggested that health-care reform efforts under President Obama were masterminded by extragovernmental groups that wish to impose euthanasia.[19] He blamed the purported collectivism of American medicine for the retirement of his friend Miguel Faria. According to Blaylock, the former Soviet Union tried to spread collectivism by covertly introducing illegal drugs and various sexually transmitted diseases into the United States.[19] Schwarcz characterized these positions as “conspiracy theories.”[19]
There’s the most damning part.
There is also the concept of actuarial credibility. So for your hospital’s workers’ compensation program there is enough claim frequency that your own organization’s risk approach is relevant in the price charged for insurance. OTH, for something like property the design of the building, sprinklers location from the fire department and the like are much more relevant than your organization’s fire risk management plan.
Realistically they want to meet with you so that if the worst does, in fact, happen the insurers and brokers can say they didn’t give you insurance sight unseen. It also helps the working relationships and renewals. Just like any ongoing business relationship. But your loss history is a hell of a better predictor of what my experience will be than any platitudes and risk management PowerPoints an insured or potential insured provides.
Right–every year or so, each of our manufacturing facilities sit down with our insurer’s representatives and talk over the operation of the plant, the design, age, and state of maintenance of the equipment and buildings, and when we build something new, we have in depth meetings with the insurers and answer their many questions. It’s mostly about them doing their due diligence, but sometimes they make useful suggestions for risk mitigation that they have seen other clients do, or that have been discovered as lessons learned in the industry.
Honestly, something like this, taken to a more comprehensive level, would probably do more for personnel and process safety than all the OSHA regulations put together–if the insurers and insured take the process seriously and use it as a tool for improvement.
I see you guys have started working with magnesium…
I share your disdain for OSHA.
Then again I have witnessed things in Chinese factories…
I’ve witnessed things in American factories…
I was in the Milkos dairy plant in Sarajevo…in 1997.
I did not have any of their products after that.
I hear bad things about peanut butter, ketchup, and chocolate.
…and ground coffee.
LOL. Industrial scale hog slaughtering facilities are special.
https://www.youtube.com/watch?v=lKfupO4ZzPs (not footage from one)
Let me introduce you to functional safety some day. After a day of dealing with the specifications I want to erase the memories of it with a hollow point.
But your loss history is a hell of a better predictor of what my experience will be than any platitudes and risk management PowerPoints an insured or potential insured provides.
I don’t disagree. I have just found it interesting how important the “subjectivities” are.
It’s how underwriters and brokers “add” value.
Thanks R C, I enjoy your articles and I definitely learn something from every one of them.
I’m a fellow risk management guy, although my focus is on portfolio financial risk. I think one of the key things you identified is this: the rarely-mentioned yin to risk management’s yang – risk acceptance. In my side of the business, risk can be transferred from one form to another. Although you’re right in saying Good risk management does not consist of shifting risk out of your bailiwick and onto someone else’s, that is sometimes a really, really good strategy. If you’re good at managing credit risk, if you can spot and pick the good credit risks better than other guys, it makes sense to take more credit risk and reduce your market risk. If you have a large balance sheet that can handle volatility, sometimes it makes sense to take on market risk to reduce credit risk. The key question is how good are you at understanding and managing the relevant risk and how robust is your system with respect to the risk in question. One of the big problems with the management of the pandemic was that the powers that be decided to take on a very poorly understood risk that there was little reason to believe our civilization was robust to – that of shutting our society down – in order to mitigate a pandemic risk that we have a long history with and have successfully managed in the past. The results were predictable.
Also, your point about credibility is incredibly important. Managing any system isn’t a one-off, but a repeated game. Scoring a win that degrades the “social capital” in the system more often proves a loss.
It is usually operational risks I look at. The basic formula is: cost of an event X the likelihood of an occurrence. Then we decide whether to accept, avoid, or share / mitigate (i.e. insurance). Sometimes we even stumble into the flip-side of risk – opportunity.
I think the kind of financial risk you work with is absolutely susceptible to risk-shifting and risk selection. Risk shifting is an essential feature of most transactional contracts, and is in the only reason for some transactions (including buying insurance). Risk selection is picking what you will buy (or sell). Financial instruments are generally built around capturing/avoiding risk (and the yin to its yang, reward), and are priced accordingly.
I was talking more about operational risk, which is much less susceptible to transactional shifting to a true outside third party. If you are going to do the operations, you are creating the liability that comes with them. That risk is difficult to shift to a third party (with the notable exception of buying insurance). Of course, the trick with insurance is that, in the long run, the insurance companies always win – the policy holders pay them more than they will pay on the policy holder’s behalf.
I was also thinking more about the game of shifting risk/blame within the organization.
Let’s not forget…
Seinfeld Risk Management
Damnit.
So..this is what George Costanza spent an entire episode trying to avoid reading?
The textbook was real and used within industry at the time.
If a sitcom is using your work as a plot device, you know you’ve made it.
I was going to read the article, but I decided not to risk it.
Can you risk not to?
Seems legit.
The House Committee on Ethics said in a statement on Monday that it has opened multiple investigations into outgoing Rep. Madison Cawthorn (R-NC).
The press release from the Committee comes after Cawthorn was defeated in the Republican primary for the seat representing North Carolina’s 11th District by Chuck Edwards, a three-term state senator and business owner.
The investigations into Cawthorn will look into his involvement with a cryptocurrency and whether he had an inappropriate relationship with a staffer.
“The Committee unanimously voted on May 11, 2022, to establish an Investigative Subcommittee,” the Committee said in a statement. “Pursuant to the Committee’s action, the Investigative Subcommittee shall have jurisdiction to determine whether Representative Madison Cawthorn may have: improperly promoted a cryptocurrency in which he may have had an undisclosed financial interest, and engaged in an improper relationship with an individual employed on his congressional staff.”
So, the takeaway here is don’t talk about the cocaine-fueled orgies?
That is the lesson they are driving home – funny how both parties will unite on the most important issues.
an improper relationship with an individual employed on his congressional staff
Because the Ethics Committee ruthlessly pursues those, without fear or favor, regardless of who is accused.
live boy
dead girl
I suppose that needs to be update for current moral standards
Hey, it scans. https://www.youtube.com/watch?v=PTULqzrhBWA
Sure, just like they threw the book at Fingerbangin’ Biden!
Oh, wait…
OFFS. They got what they wanted; moveon™.
Oh no, they don’t do that.
An example will be made of what happens to flies in the ointment.
Throwing centuries of hard won knowledge aside in favor of the Current Thing just could conceivably be a sign of rot and decay.
Author Jack Carr on How the Afghanistan Withdrawal Should’ve Been Handled
The government would never risk being competent.
Cheap laugh of the day. The CDC confirms that Monkey pox is the ghost of Harambe enacting his inevitable revenge.
https://nypost.com/video/semi-trucks-back-wheels-ripped-off-in-epic-fail/
Ooops. Think he still has a job?
Don’t look back. Just keep driving.
A little voice Inside my head said, “Don’t look back. You can never look back
+1 “Deadhead sticker on a Cadillac”
“Don’t look back, somethin’ might be gainin’ on you”
Satchel Paige
lmao. Wonder how far he got?
It’ll buff out.
He doesn’t let anything get in the way of on-time delivery.
The problems with metrics for dealing with the pandemic are legion. First, they jumped around – cases (really, positive tests), hospitalization, ICU capacity, deaths, vaccinations, etc. Second, many of them were disconnected from the actual risk of the disease. Cases/positive tests, for example, only lead to outcomes anyone should care about (death, severe illness) a very small percentage of the time.
I am still dumbfounded that the preposterous numbers thrown around in the beginning weren’t just laughed out of the room. Even more baffling to me is that even as they proved to be wildly wrong, people continued to take those projections and the people making the seriously.
From the very beginning they said it was bullshit.
“We are going to treat every death with covid as a death of covid.” – Dr.
BitchBirxA couple of observations from COVID:
– Most people are lazy and will not go out of their way to validate information.
– Most people want to trust the authorities.
– Most people cannot tolerate the idea that the authorities don’t have their best interests in mind.
– Once adhered to a position, the vast majority of people cannot or will not change their minds as that involves an admission of a mistake.
A lot of that can be explained by normalcy bias. For myself, once I realized how much they were lying, I have to go back and evaluate everything that came before for the same phenomenon. I assume I took too much for granted already.
– A disturbing number of people relish panic and fear.
Particularly if it can be used to justify the punishment of the other.
Apparently there is some psychological basis for it (TW: TOS): https://reason.com/2022/02/03/some-people-love-a-state-of-crisis/
Excerpt:
“Crisis-prone individuals don’t just like to live in a state of high alert—they seem to relish being called upon to fix all those problems that are causing the crisis,” Susan Krauss Whitbourne, professor emerita of psychological and brain sciences at the University of Massachusetts Amherst, wrote in a 2014 Psychology Today article. These people, she explained, “seek—if not revel in—drama, become worked up over small problems, and tend to see themselves as the center of their all-too-frenetic universes.”
Whitbourne wrote years before vaccine passports were a twinkle in a bureaucrat’s eye, referring to people hooked on disruptive adrenaline rushes at work or home. But a substantial share of our population seems to get much the same kick from a public health crisis.”
Oh… I know a few of those. And she’s right – it is the same people.
I’m fairly anxious, and don’t relate to this phenomenon at all. SIGTGOFMWIN*
*so I’ve got that going on for me, which is nice
Why do gun enthusiasts all have to do the “trigger discipline” pose in pictures?
Love the picture in the top response.
The answers are brutal and well-deserved.
The little girl with the AR is adorable.
Because its not a “pose”? Believe it or not, not everyone is obsessed with performative projection, so their entire life is a pose?
Some of us do things because we think we should, not to demonstrate our piety to Current Thing.
There are reasons we don’t stand up in small boats, when we do we maintain a low profile. There are reasons old guys should not fall down, too.
3 years ago when the covid nonsense started I looked at the actuarial tables and never worried again.
Never get out of the boat!
Absolutely goddamn right!
Because shooting yourself really fucking hurts?
+ 1 Glock 40 cop talking to class.
🙂
He’s the only one professional enough to do that.
It is a behavior that you have to make muscle memory. It was something that was beaten into me by hunter safety class, my father, and my friends.
The best reason:
https://qph.fs.quoracdn.net/main-qimg-0ea005782a0ca84aa3ddb4bfc6f5a832-pjlq
I just shot Marvin in the face!!
That meme of when she stopped asking for Barbies looks amazingly like one of my LGSs.
Great article, RCD; especially since we were warned to see less of you.
“especially since we were warned to see less of you”?
Was someone telling us not to look for him?
Some woman named Nina gave us a warning to avoid him sung to the tune of a Mary Poppins song.
“Just a spoon full of RC make disinformation go down…”
Yes. Well, him, I think.
He’s buying a hospital or something, and the lawyering thing was threatening to divert his attention from his responsibilities here.
Yah, that were it.
bah, less FROM him, sorry…
Speaking of being in need of some risk management/mitigation…
https://amac.us/pennsylvania-primary-fiasco-underscores-urgent-need-for-election-reform/
Unless I’m missing some context…
“it is unclear who, if anyone, would have anything to gain from purposely causing this error” =/= “a race likely to be decided by under 1000”
I think there are two points floating around in there – one is if this was malicious/fraudulent and the other is just that the execution is sloppy. The latter being basically irrelevant in an election that’s not close. The problem really becomes one of the latter providing cover for the former.
Just got around to this, RC, and it’s great! Posted a link for my siblings, so there will be at least two more lurkers hanging around in short order.