The Risk of Insurance

Insurance has a wonderful history in society.  Those who can sustain financial loss take a payment from those who cannot in exchange for some level of coverage.  The value creation here is substantial, especially when the likelihood of a claim is low.  So, life insurance for young people tends to be inexpensive and the person or company writing the agreement will tend to make a lot of money.  All this is of course a matter of how the dice rolls!

No wise person would want to sell insurance knowing full well that the claims will bankrupt them.  That would be considered stupid, wouldn’t you think?  In fact, can you imagine working for a company that did this repeatedly?  You would certainly know that the day was coming when the roof would cave in.

Well, the recent situation in the Gulf is a case in point.  We all heard that Houston floods routinely.  That was no surprise.  Yes, the amount of rain was more than we have seen in the past, but flood losses are almost routine there.  So, what happens when flood insurance is subsidized based on making home ownership more affordable?

Well, the article shown here indicates it may have gone too far: “Harvey Proves Flood Subsidies Must End.”

It seems we all have a lot to learn about public policy and how risks are priced into the markets … or not.

We are in a huge transition within the electricity pricing discussion.  We are beginning to see risks in natural gas time based pricing as well.  It seems we should be having a dialogue now before the storms hit.

 

Machiavellian Whales

I am sure most of you were taught about Machiavelli … the most famous quip I remember was “might makes right.”  That always made me cringe.  The idea that might could be used to perpetuate a wrong was too fresh in my mind with the antics of Hitler and other dictators.

Well, you may have missed this in the recent news.  After all, it is not about Trump, Russia, North Korea.  Nor is it about Houston.  But, it is a terrible commentary about what is happening in the world.  Read about it for yourself: Anti-Whaling Activists Prove No Match for the Japanese Military Leviathan

We in this country relish the freedom of speech, the right to object, etc.  We also tend to root for the underdog and relish the opportunity to right some wrongs we see, even if they are ultimately futile.  I love the story of the little girl on the beach where thousands of starfish had washed up.  She was carefully picking them up and throwing them back out to sea.  When confronted by a realist asking, “Why are you doing that?  You can’t make a difference.  It doesn’t matter,” referring to the futility of the situation, we celebrate the child’s reply as she hurled the starfish back into the water: “Well, it mattered to this one!”.

But, now we face stark realities.  Where are we on the protection of species if this can happen?  I am not going to criticize the Japanese for their actions, but I would like an answer to the bigger question.  If we are going to protect anything, we can’t have a large group of people ignoring it because they can make so much money subverting the right thing to do.

We have an opioid epidemic in this country because there is too much money to be made contributing to it.  We have a food industry using harmful ingredients because of the same, even though the agency we all support to protect us turns a blind eye … see above for the reasons.  We have Medicare and Medicaid fraud that raises health care costs for all of us.  Why aren’t we working on these issues?  Why don’t they appear in the news?

Oh, I guess I just proved my point.

 

The Worst Storm in the Atlantic

Infrared satellite image of Hurricane Irma NOAA/The Washington Post

Well, by the time you read this we will all know just how bad hurricane Irma was.  As I write it now, it is still about four days from hitting the US.  But, the status of Irma has already been established by the media as the title of this blog implies.  It is being touted as the worst storm in the Atlantic, but the phrase is incomplete.  It should be, the worst storm we have observed in the Atlantic and our point of view is only as old as today’s satellite imagery.

Oh … perhaps there have been stronger storms in the past?  Gee … given this storm will not be a category 5 when it hits our shores, how would we have known that in the past?  Gee, perhaps even the number of storms is then only as good as our recent data.

This prompted me to look a bit further into just how recent our capabilities are. According to Wikipedia, the first satellite (orbital) photographs of Earth were made on August 14, 1959 by the U.S. Explorer 6.   The Blue Marble photograph was taken from space in 1972, and has become popular in the media and among the public. Also in 1972, the United States started the Landsat program, the largest program for acquisition of imagery of Earth from space. Landsat Data Continuity Mission, the most recent Landsat satellite, was launched in February 2013. In 1977, the first real-time satellite imagery was acquired by the United State’s KH-11 satellite system.

So, we should say the worst storm recorded in the last 40 years.  Still impressive, but not as frightening as the media uses to get your attention.  More importantly, it is not going to be the worst storm to HIT the US … period.

Don’t get me wrong.  I do appreciate the media emphasizing the preparedness messages.  Getting your attention is one thing.

The problem with the media is that their sense of accountability seems to end with that.

 

 

Self-Reliance vs. Interdependence

I remember my survival skills training as a Boy Scout.  There was something seemingly terribly important about learning how to start a fire, find food in the wilderness, and to stay safe.  We read about these things, talked about them in groups, and then went into the woods to practice our craft.  Merit badges were only part of the reward; there was something deeply satisfying about becoming self-reliant.

Perhaps you also remember the TV series with Bear Grylls where he would go into situations that even I would have no idea how to survive, often with a frail female companion to further complicate his efforts.

Our lives today have become so complex that we can no longer be self-reliant like that.  We depend upon a host of medical practitioners rather one family doctor … after all, today everyone is a specialist.  We probably can’t do our tax returns, maintain our cars or properties, or even manage our families without help.  Then, when things go wrong, we are often dependent upon a host of people we barely know.  Thankfully most of them are honest and helpful.

So, with this increased level of interdependence, why doesn’t that show in our behaviors?  When I was a child, I was told that you never talk about three things: sex, politics, and religion.  Maybe we should take those out of our narratives once again since the current polarizing forces on these is so debilitating.

We take sides on almost any and every issue these days, as if we knew for sure

we were right, and by standing our ground, the others would give in to us.  We seem way too content to just keep insisting on our ways rather than to find common or even higher ground to do something that will help.

We can call this by a nice word like polarization as if that somehow makes it acceptable.  Labels never really change situations for the better.  We need to work on things, adjust our paths, and push for progress.

Let’s work together to create jobs for everyone who wants to work, and inspire the ones who do not, to see that working leads to a better world for themselves and their families.

 

The News Media Misdirections

Have you been noticing the tendency lately for the media to take what seem to be reasonable facts and then spin it in a way that just isn’t really quite truthful?

“GM Might Eliminate Some of its Popular Cars” is what it read.  That sounds like GM is no longer making cars we really like, doesn’t it?  Take a look for yourself.

The correct news headline should have been something like “GM cars decline forcing GM to eliminate unpopular ones” or something like that.  Clearly GM does not want to disappoint customers who clamor for certain cars.

I just wonder whether we are seeing something a bit deeper and darker in the news media.  Could they be looking for ways to indicate the economy is not doing well?  They don’t seem to want to cover the stock market, which is on a tear.  Or that our President and First Lady represented us proudly on the world stage.  They don’t seem to want to cover anything that is good or getting better in the world.

As I posted months ago, the song Dirty Laundry comes to mind.  I guess it just sells papers … and they need that for sure … they are dying you know … maybe that is at the root of all of this … they haven’t resigned themselves to that.  In the meantime, enjoy the song one more time.