Washington Post: No, the coronavirus pandemic wasn’t an ‘unforeseen problem’

The Washington Post published an op-ed by Michele Wucker, “No, the coronavirus pandemic wasn’t an ‘unforeseen problem’,” published on March 17, 2020.

“An obsession with the “unforeseeable” black swan metaphor has promoted a mentality that led us straight into the mess we’re in now: a sense of helplessness in the face of daunting threats and a sucker’s mentality that encourages people to keep throwing good money after bad. And the facile willingness to see crises as black swans has provided policymakers cover for failing to act in the face of clear and present dangers from climate change to health care to economic insecurity. This accountability vacuum has pervaded U.S. policy on financial risk and on the pandemic,” she wrote, calling for readers to use the coronavirus crisis as a catalyst for adopting a more pro-active response to the obvious risks we tend to ignore. “Let’s trade the black swan for the gray rhino: a mind-set that holds ourselves and our government accountable for heeding warnings and acting when we still have a chance to change the course of events for the better instead of waiting for a crisis to act,” she wrote. Read the full article HERE.

Ben Zimmer of The Wall Street Journal quoted the Washington Post piece in an article published March 19, 2020 online and in print in the Weekend edition: ‘Black Swan’: A Rare Disaster, Not as Rare as Once Believed [paywall], noting her challenge to the black swan trope –for unknowable, unforeseeable events– which became popular during the last financial crisis.

FT Beyond Brics: China’s Biggest Financial Risk Is the US

Washington’s devil-may-care attitude has become Beijing’s top priority

Michele Wucker published this op-ed on the Financial Times beyondbrics blog November 13, 2018.

In its new annual financial stability report, China’s central bank has again sounded the alarm that “grey rhino” risks — clear and present dangers that are often neglected — continue to threaten the economy.

The report focused on China’s real estate market and high levels of local government, household and corporate debt, consistent with the concerns of Chinese and international observers.

Indeed, a popular narrative among western analysts is that China’s debt is a likely trigger for the next financial crisis. But the finger on that trigger is US complacency about risk.

President Xi Jinping has made containing financial risk a top priority and top officials have been vocal and active in addressing the danger areas they have identified.

By contrast, you could be forgiven for thinking that US officials had forgotten about the financial crisis that exploded a decade ago, not to mention the global dangers posed by 10 years of extremely loose monetary policy.

Washington’s approach appears to be to ignore warning signs and count on being able to frame the inevitable crash as a surprise “black swan” that “nobody saw coming”.

Yet many smart people do see trouble coming and are sounding urgent warnings for the US and the global economy. The International Monetary Fund warned in April that global debt had hit a new record high of $164tn, or 225 per cent of GDP. The US, it noted, is the only advanced economy where debt is outpacing economic growth.

Albert Edwards of SocGen forecast that financial winter is on the way, George F Will wrote of the giant sucking sound of a debt spiral, and Bridgewater’s Ray Dalio predicted a looming new debt crisis. Dozens of other smart analysts are sounding the alarm.

Well aware of the looming challenges, by contrast, China has been trying to gradually let the air out of credit bubbles without bursting them and to guide the economy to “quality growth” that may be slower but is more evenly distributed and less volatile.

Neither feat would be easy, even without having to wrangle external shocks caused by the US administration either not knowing or not caring about the global impact of its policies. China’s officials have been open about the real risks facing its economy, and made no secret of their intentions to cool off overheated sectors.

Using a combination of regulations, increased enforcement and liquidity controls, China has targeted the grey rhino risks that senior officials raised in a key five-year policy-setting meeting in July 2017: high corporate debt, excessive liquidity, shadow banking, capital market vulnerabilities, real estate bubbles, and emerging online financial products and services.

Regulators have cracked down on wealth management products marketed as “less risky” while promising higher yields. With corporate bond defaults up 40 per cent in the first half of 2018 and thousands of peer-to-peer lending platforms allowed to fail, China’s government has sent a message that people cannot count on it to fix every problem.

By contrast, Trump and senior officials have trumpeted US economic strength and downplayed risks and weaknesses.

Until the market volatility of the past few weeks, Trump had repeatedly bragged about how US shares were hitting record after record high, while China’s market indices were down more than 20 per cent for the year.

But a recent Council on Foreign Relations analysis shows how Chinese shares closely track a slowdown in credit growth over the past year or so. This suggests that much of the drop was the direct result of China’s efforts to let the air out of asset bubbles.

The Trump administration’s cavalier approach to financial risk increasingly suggests that its economic policies will not end well.

As the US Congress was preparing to pass a massive tax cut in December 2017, senior Chinese officials called the US tax plan a grey rhino, citing its potential impact on capital flows and financial stability. Responding quickly, Beijing developed a contingency plan involving higher interest rates, tighter capital controls and more active currency intervention.

The new Trump-supported tax cuts are widening the budget deficit while pushing up the cost of interest on the deficit. Even as financial risks increase, Washington has been chipping away at safeguards and emergency powers that could help contain the next crisis.

To be sure, the US Federal Reserve has been gradually increasing interest rates and shrinking its balance sheet, in a delayed attempt at normalising monetary policy. But this has created new global instabilities as money rushes out of emerging markets.

In contrast to China’s more surgical approach to specific vulnerabilities, the US relying mainly on interest rates as a broad-brush economic lever threatens to bring all boats down with it.

China is so concerned about this devil-may-care approach to financial risk that its politburo recently announced that dealing with US-generated economic shocks was an even higher priority than de-risking.

Paradoxically, current US-China policy threatens to slow down reforms that investors would like to see, such as reducing overcapacity at state-owned enterprises and intervening less in currency markets.

Trump’s bellicose rhetoric has ignored that China has been gradually opening its economy: easing foreign investment rules on 15 industries, particularly financial services, and evidence of some progress on intellectual property issues. Both of these are in China’s interest: it sees the benefit of increasing equity financing compared with debt, and it wants to encourage homegrown technological advances.

To counter the economic drag that trade war-related fears were creating, China has loosened its monetary policy in recent months. Its earlier belt-tightening gave it some wriggle room to do so.

But were China to completely abandon its de-risking strategy, it would resume heading towards a feared “Minsky moment” when the country’s ability to support debt collapses.

If the US paid as much attention as China does to the dangers lurking in the global economy and markets, it wouldn’t let itself appear to be so intent on throwing a monkey wrench into China’s sensible efforts to reduce financial risk.

Recall that demand from China for western goods, combined with China’s aggressive fiscal policy, played a big part in getting the world out of the 2008 crisis.

At one point, hopes that China would bail out Europe were dashed when Chinese officials rightly chided western governments for irresponsible economic policies.

Smart US policy would be to pay as much attention as China to heading off the grey rhino risks facing the global economy, and the role each country can play. An agreement ending the trade war would be a start. But unless the US takes financial risk more seriously, the threat to the global economy will remain — and China won’t be the main culprit.

Emerging markets guest forum beyondbrics is a forum on emerging markets for contributors from the worlds of business, finance, politics, academia and the third sector. 

Read this article at FT.com.

Leadership Lessons of the Tango

Strategy + business, August 28, 2018

By Michele Wucker

Everything I learned about management and leadership I learned at…the dance studio?

Well, yes. As a beginner student of the Argentine tango two decades ago, I used to come home reflecting on how much of what I learned from the micro interactions in class applied to everyday life. Those lessons in communication, adaptability, and teamwork stayed with me for many years, and resonate anew now that I’ve taken up the dance again.

Tango dancers, business leaders, and rising stars tend to demonstrate drive, persistence, concentration, and commitment. They also are ambitious, competitive, and impatient. These Type A personality qualities are often the ingredients for success in business and in life. But they also can lead to problems if not managed well. This is especially so for teams in which — just as in the tango — both leaders and followers share these high-performance traits.

READ THE FULL ARTICLE at strategy+business

The Gray Rhino Norwegian Edition

The Gray Rhino is now available in Norwegian via Hegnar Media

Grå neshorn

Michele Wucker

Hvordan gjenkjenne og gjøre noe med de innlysende faresignalene som vi aller helst bare vil ignorere.

Et «grått neshorn» er en høyst sannsynlig trussel med store konse­kvenser som likevel blir oversett – beslektet med både elefanten i rommet og en uforutsigbar sort svane. Grå neshorn er ikke tilfeldige overraskelser, men dukker opp etter en rekke advarsler og tydelige tegn. Boligboblen som sprakk i 2008, de omfattende ødeleggelsene etter orkanen Katrina og andre naturkatastrofer, de nye digitale teknologiene som snudde medieverdenen opp ned, Sovjetunionens sammenbrudd … alt var mulig å forutsi.

Hvorfor klarer ledere og beslutningstagere fremdeles ikke å forholde seg til åpenbare trusler før disse ikke lenger lar seg kontrollere? I Grå neshorn benytter Michele Wucker seg av sin omfattende bakgrunn innen kriseledelse og utforming av politikk og av dyptgående intervjuer med ledere fra hele verden, og viser hvordan man identifiserer og imøtegår strategisk kommende trusler som har store konsekvenser. Grå neshorn er full av overbevisende historier, eksempler fra virkelighetens verden og praktiske råd, og er nødvendig lesning for ledere, investorer, planleggere, strateger og enhver som ønsker å forstå hvordan man kan tjene på å unngå å bli trampet ned.

Medlemspris: 351,-

Spar: 118,- (veil. pris 469,-)

ISBN:9788271463472

Forfatter:Michele Wucker

Forlag:Hegnar Media

Språk:Norsk

Utgivelseår:2018

 

THE GRAY RHINO Taiwan edition

THE GRAY RHINO is now available in Taiwan via Commonwealth Books.

Zhang Bo Song reviewed the book on Inside: “One of the hottest topics of the year is the Grey Rhino. If you don’t understand what the gray rhino is and what’s the difference with a black swan, be sure to take a look at this book. Because you don’t want to wait until the grey rhino is charging at you: you want to act.”

Economic Daily: Don’t Turn a Blind Eye to a Gray Rhinoceros Crisis April 17, 2017

Tai Zhong, DWNews Taiwan  “Gray Rhinoceros Phenomenon and Taiwan government” April 26, 2017 “In April 2017, the financial book “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore” caused the attention of Taiwan’s people, Then “gray rhinoceros” following the “black swan,” became a common word on the media.”

Korea and China editions of THE GRAY RHINO

 

THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore is now available in China via Citic Publishing Group and Korea via Business Books and Co.

Read more at these links (you may need to use your browser’s translate option.)

Review in Korea Economic Daily
Maeil Business Newspaper -Cover Story
Rednet coverage of THE GRAY RHINO

THE GRAY RHINO was published in Hungary in Fall 2016 via Athenaeum, and Taiwan and Norway editions are in production.

HuffPost: A Creative Outpour Inspired by a Massacre

 

Author Julia Alvarez at the first Border of Lights vigil. Photo © 2012 by Tony Savino.
Author Julia Alvarez at the first Border of Lights vigil. Photo © 2012 by Tony Savino.

As Haiti and the Dominican Republic clean up from the aftermath of Hurricane Matthew, this week commemorates another tragedy: the Parsley Massacre, an ethnic cleansing in early October 1937 on the border of the two islands sharing the island of Hispaniola.

In my first book, Why the Cocks Fight: Dominicans, Haitians, and the Struggle for Hispaniola, I wrote about how Dominican soldiers are said to have asked people on the border to pronounce the Spanish word for parsley; if they had trouble trilling the “r,” they were killed.

Rita Dove’s poem, entitled Parsley in reference to that story, powerfully evokes the massacre.

The tragedy has produced other powerful works of literature, film, and creativity.

Farming of Bones is the Haitian-American author Edwidge Danticat’s novel of star-crossed lovers set against the backdrop of the massacre.

More recently, the Dominican-American poet and novelist Julia Alvarez published A Wedding in Haiti, a memoir of her friendship with a young Haitian man named Piti.

I met Julia in 1999 after my publisher sent her an advance copy of Why the Cocks Fight. She sent me a lovely note with a hand-made card with a photograph of a cockfight on the front, beginning a long friendship between two authors who hold a certain island dear in their hearts.

A few years later, Julia and talked over lunch about how sad it was that there had been no “truth commission” or other formal recognition of the victims and survivors of the massacre. We talked about how wonderful it would be to hold a candlelight vigil at the border in their honor. This was before the Internet could bring people together the way it does today, and life (as it has a habit of doing) got in the way of turning the idea into reality.

But in 2011, after the death far too soon of the Dominican-Haitian activist Sonia Pierre, a group of young Dominican- and Haitian-Americans approached us about reviving the idea of a border vigil to both honor Sonia’s memory and memorialize the massacre.

Thus was born Border of Lights, an arts collective driven by rising new voices from the diaspora, that launched in 2012 in the weeks leading up to the 75th anniversary of the massacre. Border of Lights convened performances ofmonologues from the perspectives of victims, survivors, perpetrators, and bystanders, and collected personal narratives that are still hosted on its website.

Border of Lights will hold a Global Vigil this Saturday, October 8, from 8-10pm Eastern Time, with a real time Facebook Q&A about the historical legacy and the way it has played into today’s issues. Border of Lights invites friends around the world to post photos of themselves with candles or other lights to its Facebookand Twitter accounts with the hashtag #BeLights.

From October 7-9, Border of Lights volunteers and partners will hold a vigil on the actual border and clean up after the storm. They also will screen a new film, Death by a Thousand Cuts, a powerful tale of how border tensions play out in a life and death drama over deforestation and the illicit charcoal trade from the Dominican Republic to Haiti. The film premiered at Toronto’s Hot Docs Film Festival in May.

The annual vigil, which celebrates the positive elements of the two countries’ relationship, continues even after tensions rose to new heights after a 2013 Dominican high court decision revoking the citizenship of many Dominicans of Haitian descent, and the exodus that followed after the government began enforcing it in 2015. The Dominican government revoked an award it had given to Dominican-American author Junot Diaz because he, like many other writers, artists, and scholars, had spoken out against its harsh policies.

The massacre and its modern-day legacy also have informed scholarship on the fraught relationship between the Dominican Republic and Haiti.

In The Tears of Hispaniola: Haitian and Dominican Diaspora Memory, the Cuban-American scholar Lucia Suarez shows how the writing of diaspora Dominicans and Haitians has shed new light on both the past and present tensions. She ties their work to the historical record by drawing as well on texts like human rights reports.

Two new books published in 2016 by a new generation of Dominican-American scholars add new insights to the long-running issues of race, nationalism, and violence.

Borders of Dominicanidad: Race, Nation, and Archives of Contradiction, by the Harvard scholar Lorgia Garcia Pena, comes out in November.

Edward Paulino, a historian at John Jay College and a co-founder of Border of Lights, published Dividing Hispaniola: The Dominican Republic’s Border Campaign against Haiti, 1930-1961 in January.

Together, these works serve to recognize the memory of the victims and survivors of the massacre, and to work toward the hope that such an atrocity is never repeated. At a time when racist and nationalist speech is enjoying a resurgence around the world, this creative outpouring is more important than ever -both on the island of Hispaniola and everywhere that hatred raises its ugly head.

Originally published at The Huffington Post.

LinkedIn Editor’s Pick: From Black Swans to Gray Rhinos

LinkedIn Black Swan Gray Rhino

September 2, 2016

The European Union has known since the creation of the euro that the currency was bound for trouble if did not create workable ways to adjust for the wide differences among its national economies. Yet well into its second decade, its failure to do so threatens the currency’s future. The deadly defects in ignition switches and airbags at General Motors and Takata, and the emissions test fixing at Volkswagen were hardly a secret inside the companies, which covered them up instead of correcting them. Despite overwhelming scientific evidence of climate change caused by human activity, temperatures keep rising, with this July marking the hottest month ever recorded.

The reasons are different in each case, but the pattern is the same: humans consistently fail to respond to looming dangers, at astronomical costs in lives, money, reputation, and lost opportunities. Once you start looking at how many crises began with clear but essentially ignored warning signals, it becomes strikingly clear how often we miss opportunities to head off predictable problems.

Too many people take for granted that we cannot react in time to change the course of the disasters even when they are right in front of us. It’s well past time to challenge this assumption.

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