Finance & Insurance

“Crises are predictable”: Didier Sornette at TEDGlobal 2013


The key is recognising the warning signs…

TED Blog

Risk economist Didier Sornette makes bold claims on Wednesday morning at TEDGlobal 2013, during the session “Money Talks.” According to Sornette, we have been operating under a few detrimental illusions that have landed us in our current economic state: One, we have been living in an age of never-ending growth and prosperity. Well, $30 trillion losses in the global market from the Great Recession have already shattered this illusion. And two, that we couldn’t see this crash coming.

The 2007-2008 crash seemed to come out of nowhere, with no source or group to take responsibility, an unpredictable one-time anomaly — as Sornette calls it: “the wrath of God.” But as he says firmly: Despite what standard risk management tools show, these outliers operate under special mechanisms that make them predictable, perhaps even controllable. Sornette and his team at the Financial Crisis Observatory (FCO) call these special cases “dragon-kings.” Dragon-kings…

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