Food for Thought - 16 July 2023

The Lucretius Problem, the US electrical grid, Eye in the Sky, Danny Ric and the power of persistence

Welcome to edition #19 of my newsletter. Every week I share five things:

1. One idea I’m thinking about

2. One thing I’m reading

3. One thing I’m listening to

4. One thing I’m watching

5. One quote I’m pondering

One idea I'm thinking about: The Lucretius Problem

We often assume that the worst-case event that can happen in the future will be the same as the worst-case event that has happened in the past.

But we ignore that this worst-case event, when it happened, exceeded the worst-case event at the time.

In his book, Antifragile, Nassim Taleb calls this ‘The Lucretius Problem’, named after the Roman poet Titus Lucretius Carus, who wrote:

“The fool believes that the tallest mountain in the world will be equal to the tallest one he has observed”

We have been doing this for millennia. In Ancient Egypt, scribes tracked the high-water mark of the Nile River and used it as an estimate for a future worst-case scenario.

The 10-metre seawalls around the Fukishima reactor in Japan had been built based on the biggest historical waves. In 2011, an earthquake measuring 9.0 on the Richter scale hit, creating 40-metre waves that destroyed the nuclear plant.

When Chairman of the Federal Reserve Alan Greenspan went before Congrees following the GFC, his main excuse was “it had never happened before”.

What to do about it

There are two key actions we can take to avoid this problem

1. Build redundancy. The human body is a perfect example of redundancy. We have two of many critical organs (kidneys, eyes, ears) and extra capacity in our lungs, neural systems and arteries. This can seem like a waste if nothing unusual happens. But unusual things happen all the time. A similar ‘margin of safety’ can be applied in many other areas:

   • Building a ‘rainy day’ savings fund that will last beyond any period of unemployment you have experienced in the past

   • Designing bridges that can withstand wind speeds higher than anything ever seen before

   • Investing only as much money in the stock market as you are prepared to lose

2. Avoid overspecialisation. Hyperspecialised systems are great for producing things efficiently and cheaply in good times. But they are much more vulnerable to disruption. Take the American food supply chain. It is optimised for speed, enabling supermarkets to 'pile it high and sell it cheap’. However, the COVID pandemic revealed its fragility. A tiny number of corporations dominate each link in the supply chain. For example, one chicken farmer sold millions of liquified eggs for omelettes in school lunches. When schools closed, he lacked the equipment and packaging to sell them through retail channels. He had no choice but to euthanize thousands of hens while, at the same time, eggs were in short supply at the supermarket.

One thing I’m reading: The US electric grid

This article from The New York Times provides an excellent primer on why the US electric grid is not ready for the energy transition.

There are actually three US grids - one in the West, one in the East and one in Texas as the graphic below shows:

This fragmentation poses a challenge for the transition to renewable energy like wind and solar. Many spots with the best wind and sun are located far from city centres and need thousands of kilometres of high-voltage transmission lines to be constructed.

Building these lines is enormously challenging because there is no single entity that plans and manages construction. The system was cobbled together by thousands of independent utilities carrying fossil-fuel generated power to nearby homes.

This lack of transmission capacity means that up to 80% of the emissions reductions from Biden’s climate bill might not happen. Already, thousands of wind and solar projects are facing multiyear delays and rising costs of connecting to the grid.

There doesn’t appear to be a silver bullet, but Congress has given the federal government authority to override objections from state regulators and the Energy Regulatory Commission is exploring how to do more long-term planning and strengthen ties between regions.

“The grid is already a critical element of our energy system, but it’s going to become the central piece of the future energy system.”

One thing I’m listening to: Eye in the Sky

I listened to another great Radiolab episode this week called Eye in the Sky, which tells the story of a guy named Ross McNutt.

In 2004, when casualties in Iraq were rising, McNutt had an idea. He sent up a small plane high into the sky, attached with a 44-megapixel camera that took one picture every second. Whenever a bomb detonated he could zoom into that spot and scroll back in time to see who planted it.

After the war, he brought this tech back to the US. Naturally, police departments were very interested, with trials commencing in Ohio and Baltimore. The tech even made it to Juarez, Mexico where it was used to dismantle a cartel that was responsible for thousands of murders.

Even though this tech clearly saves lives, there are some very obvious ethical concerns. The whole thing feels very Orwellian (McNutt’s company is called Persistent Surveillance Systems).

I personally am not comfortable with this idea. I think it puts way too much power in the hands of the government and companies that own the data. Even if they operate with the best intentions, a data breach or cyberattack could put many lives at risk.

These concerns are shared by the US legal system. The Baltimore experiment led to a big lawsuit and in 2021, the Fourth Circuit Court of Appeals struck down the program as unconstitutional.

But two things give me pause. The first is that I can imagine how different my thinking would be if there was a crime committed against someone close to me. I wouldn't care at all about privacy if it meant I could track down the perpetrator.

The second is that this level of surveillance is likely already in effect, given the amount of CCTV cameras and geolocation capabilities that exist today. This might just be a more efficient way of doing it.

Let me know what you think in the comments below.

One thing I’m watching: Daniel Ricciardo returns

Some big news in Formula 1, as Daniel Ricciardo makes his return to the grid. The Aussie fan-favourite has had a rough few years, bouncing from Red Bull to Renault and Mclaren, where he was consistently outshined by his teammate Lando Norris over the last two years.

Despite being out of a drive, Red Bull had signed Ricciardo as a reserve driver at the start of this year, mainly for marketing duties. But last week, Red Bull’s sister team AlphaTauri announced that they were firing Dutch driver Nyck de Vries and replacing him with Ricciardo.

Coming after only 10 races this season, the general consensus is that this was a pretty unfair move for de Vries. But no one is disappointed about seeing Danny Ric’s return.

There are a few question marks as to his motivations, given that AlphaTauri has one of the worst cars on the grid. But as the video explains, it’s less about this season for Ricciardo and more about a longer-term play for a fairytale return to Red Bull next season.

One quote I’m pondering:

“Dripping water hollows out stone, not through force but through persistence”
- Ovid