- By Ian Bremmer<p> Ian Bremmer is president of Eurasia Group and author of the newly released Every Nation for Itself: Winners and Losers in a G-Zero World. </p>
I moderated a panel on "fat tails" today. The general idea being that however optimistic the baseline (and reasonably consensus) expectation for the global economy, there’s much more volatility in potentially extreme outcomes — the fat tails of the distribution. Which can be dangerous, but can also represent opportunities.
Four CEOs on the panel (Swiss air, Aviva, Third point, AMEC) and the new South African finance minister, so a nicely broad/comprehensive group. Ther were some interesting points.
1) A clear distinction to be made between fat tails (which are intrinsically knowable and, at least in principle, manageable) and black swans (the literal bolt from the blue). Possible that black swans "should" be fat tails when companies have their eye off the ball. Nice in principle, but it doesn’t usually work that way.
2) There was surprisingly little concern raised about Europe. The euroskepticism is really the hallmark of the europundit crowd, not the business community, which means it tends to get over-egged. Consistent worries about the environment, and the move from mitigation to adaptation. Where there’s some good work being done around understanding the impact of the dramatically changing energy mix, less so on business impact of dramatically changing climate patterns.
3) Cybersecurity a big ominous worry across the board, but much more of a black swan. Folks don’t know what they don’t know … and it unnerves them. They feel like they need to resource it, but aren’t sure how.
4) Too many people have been saying that chief executive officers are also becoming chief risk officers. nonsense. they may be becoming more sensitive to and aware of risk. But chief risk officers are generally folks that try to tell you how you can lose money — and so are themselves treated as a risk to be mitigated internally, by executives driven by growth.
5) I very impressed with Pravin Gordhan the South African minister. He was mostly concerned about protectionism and currency controls (externally), social dislocation and broad income disparities (internally). With a few words for the U.S.-China conflict. Fair enough.
6) My buddy Dan Loeb (third point) is now sympatico with obama policy (which was decidedly not the case six months ago — Obama’s not a fat tail.
7) I cold called two friends in the audience with tough questions. Ex-PWC CEO (and WEF trustee) Sam DiPiazza, and starwood CEO Fritz van Paasschen. Both responded gamely. My appreciation.