Boards need to be alert to the systemic risks and take precautions at the individual and local scale during the pandemic, write Nassim Nicholas Taleb and Joseph Norman.
Precautionary decisions do not scale. Collective safety may require excessive individual risk avoidance, even if it conﬂicts with an individual’s own interests and beneﬁts. It may require an individual to worry about risks that are comparatively insigniﬁcant.
Assume a risk of a multiplicative viral epidemic, still in its early stages. The risk for an individual to catch the virus is very low, lower than other ailments. It is therefore “irrational” to panic (react immediately as a priority). But if you do not panic and act in an ultra-conservative manner, you will contribute to the spread of the virus and it will become a severe source of systemic harm.
Hence individuals must “panic” (produce an exaggerated response) to avoid systemic problems, even where the immediate individual payoff does not appear to warrant it. This happens when the systemic risk is small to the individual, but common to all, while an individual’s other idiosyncratic risks dominate their own life. The risk of car accident is greater for an individual, but smaller for society.
Under such conditions, it becomes selﬁsh, even psychopathic, to act according to what is called “rational” behavior — to make your immediate rankings of risk conﬂict with those of society, even generate risks for society. This is similar to other tragedies of the common, except there is life and death. In addition, there is a trade-off of short term vs long term for idiosyncratic risk. In the long run, there is convergence between idiosyncratic and systemic — your risk rises if all others are infected and the risks of survival from other diseases drop.
The prudent and ethical course of action for all individuals is to enact systemic precaution at the individual and local scale.
For instance, during a pandemic that mostly spares young, healthy individuals, an independent emergency that would typically be routine may become untreatable because of lack of resources.
In the current COVID-19 outbreak, such effects can be observed by a complete inundation of hospitals and intensive care units as local outbreaks take hold. This and other less-visible thresholds change the dynamic of the pandemic as they are exceeded. Initially small risks become ampliﬁed and produce novel and unanticipated risks as the contagion makes impacts system-wide.
For these reasons, the prudent and ethical course of action for all individuals is to enact systemic precaution at the individual and local scale. The breakdown of scale-separation that a multiplicative contagion induces connects the individual to the collective, making everyone both a potential bearer and source of risk.
This is an edited extract from Ethics of Precaution: Individual and Systemic Risk by Nassim Nicholas Taleb and Joseph Norman, New England Complex Systems Institute, School of Engineering, New York University.
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