# The BP Spill as a Black Swan Event

For context in understanding the oil spill, and to help answer the question “How could it possibly be this bad?”, I recommend a book by Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable.

The BP spill is a textbook example of what Taleb calls a Black Swan Event.

1. The event is a surprise (to the observer).
2. The event has a major impact.
3. After the fact, the event is rationalized by hindsight, as if it had been expected.

In the book, Taleb makes the point that in the modern age, we have adopted the “normal distribution” as statistical tool to describe our world, mostly out of mathematical convenience and as an aid in our continued illusion of sanity. (For those of you who bailed on the second week of Stats 201, I’ll keep it simple.)

In this simplified world, a range of events are characterized by their “mean”, or average value, and by the “standard deviation” from that mean. (In the diagram, the Greek letter mu is the mean, and sigma stands for one standard deviation.)

In this model, 68% of events to be experienced fall within 1 standard deviation of the mean (dark blue), 95% within 2 (medium plus dark), and 99.5% within 3.

According to Taleb, the real world does not follow this statistical conceit, even if it makes the math easy. The real world is governed more by Murphy’s Law (“If anything can go wrong, it will.”), and by Hale’s Corollary to Murphy’s Law (“There is no limit to how bad things can get.”). Those outlying points — 5, 6 or 7 standard deviations from the mean — occur a lot more frequently than this model implies, and those events tend to have tremendous impact.

Rolling boxcars — double sixes — with a fair pair of dice is roughly a “two sigma” event; it happens one throw in 36, or about 2.8% of the time.

Rolling six boxcars in a row, then, is a highly improbable event (about once every 2 billion tries) — unless you’re playing with loaded dice, or unless the outcome of each roll is not totally independent of the other rolls.

Back to BP: they appear to have made a series of operational choices on the Macondo well that involved some acknowledged element of risk. They ran a “long string” instead of a liner; they didn’t get all the gas out of their mud returns; they didn’t centralize the pipe per Halliburton’s recommendation, etc., etc.

The details of the engineering aren’t important. They were probably correct in thinking that they could “probably get away with” each step, and that the likelihood of catastrophic failure of all the systems was very, very remote.

But they fooled themselves, because they weren’t playing a game of dice, they were playing dominoes. Gas in the mud led to a failure in the cement which cascaded into a failure of the pipe which cascaded into an inoperable blowout preventer and a lower marine riser package that didn’t work as designed.

That chain of events put a combustible gas bubble at the surface, which caused the explosion and fire.

And the cost of guessing wrong in this particular game was eleven lives, a \$650 million state-of-the-art drilling rig, and an economic and environmental calamity for Louisiana and the other Gulf states.

None of this absolves BP of culpability in the disaster. According to BP’s partner in  the well, Anadarko Petroleum,

“The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP’s reckless decisions and actions. Frankly, we are shocked by the publicly available information that has been disclosed in recent investigations and during this week’s testimony that, among other things, indicates BP operated unsafely and failed to monitor and react to several critical warning signs during the drilling of the Macondo well. BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement,” continued [CEO James] Hackett.

Under the terms of the joint operating agreement (JOA) related to the Mississippi Canyon block 252 lease, BP, as operator, owed duties to its co-owners including Anadarko to perform the drilling of the well in a good and workmanlike manner and to comply with all applicable laws and regulations. The JOA also provides that BP is responsible to its co-owners for damages caused by its gross negligence or willful misconduct. …

Legally, gross negligence and willful misconduct is normally a tough standard to prove, but with 25% of the cost of the spill at stake, Anadarko may feel that its best shot is to get the matter in front of a jury with an ax to grind for BP. So far, the 10% partner, Mitsui, is noncommittal on the issue.

• cbs

Great post.

While a lot of people have discussed what has happened after the explosion, here’s an interesting congressional report that looks at what DOI and MMS were focusing on before the oil spill:

This timeline seems to raise some troubling questions about whether Interior Secretary Ken Salazar and MMS officials were distracted by the Administration?s political agenda instead of focusing on the ongoing dysfunction within MMS.

Just as BP wanted to become “Beyond Petroleum”, so did the MMS, the Dept of the Interior and the President.

They were focused on their Green Jobs agenda and offshore wind as part of their renewable energy portfolio.

They appointed Liz Birnbaum and a couple of other like-minded Ivy League environmental lawyers to run MMS. These people were not there to oversee oil and gas production. As I have commented elsewhere, they would not know an oil well if they fell bass-ackwards into one.

Hmmm. That might make a pretty good blog entry…

• cbs

Maybe I’m reading it differently than you, but it seems the points you just raised are precisely what that timeline demonstrates. Look at all the focus on wind and renewable focus shown in the right hand column . There is no doubt the mentality shifted at MMS after Obama was elected away from oil and gas towards renewables. Not only that, Ken Salazar, the head of DOI which oversees MMS, was seemingly more concerned about health care, stimulus, and even running for Governor than he was about proper oversight and guidance of the oil and gas programs at MMS. I think there is a story there and would love to see you post more on the topic.

• remnant60

Fascinating article, Vladimir. Oddly, I was in a Borders store last month, happened to see the Taleb book on a paperback table, read the summary, and immediately thought, “BP.” Thanks to your post, the book is now on my reading list, though I’ve been so swamped that I’m only able to read in bite-sized chunks right now. It strikes me as one of those works that would allow one to see a good deal of history through a fresh and, frankly, valuable lens.

My understanding is, from those I’ve talked to and the reading I’ve done that cbs is on to something in asking what MMS was thinking. In fact, there are a multitude of questions to ask about where our government contributed to the domino chain. For example, MMS and the EPA apparently have conflicting standards: Being in compliance with one leads to non-compliance with the other in certain regards. Aside for being an interesting question about where things went wrong here, that point would seem to serve double duty as an argument for slashing bureaucracy and restoring more limited government.

• qixlqatl

for putting this stuff in terms I can understand.

I’m not surprised the spill is the result of “gun-decking” *. I deal with it all the time. All those little variables tend to add up to a deck stacked against you.

*(from dictionary.com) gun-deck(ing) is a term used to convey that one has endangered the safety of the vessel equivalent to pointing the guns at the deck such that when they are fired the obvious catastrophic result will occur.

• romeg

of which you are probably aware but did not mention in your time line. According to the Tech Support Manager (whose name escapes me at the moment), days prior to the blowout, they conducted a test of the BOP. While the BOP was closed someone, unnamed, caused about 15 feet of drill rod to be hoisted through the BOP. In the following days, again according to this manager, pieces of material of which the BOP was made began circulating to the surface in the drilling mud that is continually circulated in the well casing. When these chunks of material were presented to management with the warning that it was pieces of the BOP the manager (another individual whom I believe was a BP employee) refused to take action to address the damaged BOP.

It was already known that the backup controller for the BOP was inoperable. With these pieces of the BOP washing to the surface, BP knew or should have known that the BOP was, for all intents and purposes, non-existent.

This is thoroughly documented and was reported by 60 Minutes a week or so after the explosion and fire in an interview with the Tech Manager.

In other words, rather than rolling dice, BP was playing Russian Roulette with a Colt 1911A1 with 6 rounds in the magazine and 1 chambered only they were aiming it at the heads of those 11 men who were incinerated instead of their own.

Seeing pieces of rubber from the “Hydril” — the bag-type annular preventer — is not necessarily a cause for alarm. It depends on how much, how long since the last test, etc.

Just like you don’t change your tires when they’ve lost 20% of the original tread.

The annular preventer is made to take some wear and tear. The large rubber bladder is considered an expendable item. That being said, my company has reconsidered its policy and may require new Hydril rubbers on future jobs, as the only way of knowing the history of a particular set.

• romeg

was far more so. The suggestion that the pieces found in the drilling mud were part of the BOP was made by the person being interviewed by Steve Kroft. I would defer to his considerable experience and expertise as to what the pieces were. The interesting coincidence is that the drill rod was pulled through the closed BOP a day or two prior to the blowout and those pieces surfaced in the intervening time.

As for the tire analogy, if one of my brand-new Michelin’s encounters an object that damages either the tread or the sidewall I’m going to take the time and, if necessary, spend the money to know that I can safely drive at 80 miles per hour. If the Tech Manager is to be believed, the BP official, in effect, simply blew him off.

It may well have been that at the moment the drill rod was pulled through the BOP that the damage was done and there was nothing that anyone could have done to prevent the explosion and fire. But if the interviewee, a man who had made his living on drilling platforms for quite some time (I apologize for being so imprecise) is to be believed then perhaps there was a window between that moment and the explosion that it could have been prevented.

The point of the original post, the statements and subsequent Senate testimony of the Tech Manager and the best information available on the event up to now is that BP and BP’s managers and employees were focused on getting the platform operator off the site and leaving the hole in a condition such that tapping back into it would be done as quickly and easily as possible with the risks involved in their approach being a secondary consideration at best.

This wasn’t a Black Swan event as I understand the concept. The was the consequence of a cascade of events and bad decisions at several steps along the way hence the Russian Roulette analogy.

… had anything to do with the blowout.

The blowout resulted from a failure of the blind/shear rams. That failure may have happened due to the inexplicably long time it took the crew to close them.

The 60 Minutes interviewee was an electronics tech, IIRC. The BOP was probably outside his area of expertise.

The annular preventer has a rubber bladder precisely to allow stripping the drill string through it. It has a large area of contact so could lose a chunk of rubber without losing a seal.

• romeg

But that doesn’t mean that he was ignorant of the anatomy of the BOP or the mechanisms that controlled it. He seems to place great weight on the possible condition of the BOP at the moment of the leak and subsequent explosion.

The fishermen that were in a boat under the platform heard the rush of escaping gas and realized what it was. They had time to escape to a safe distance which would have taken a few minutes at minimum. Is it known when an attempt was made to actuate the rams?

The ET’s statements and testimony are the best available published information thus far as to what preceded the blowout. and describe a chain of events and actions that conform to the dominoes analogy used earlier.

I’ve never even seen a drilling platform so I have to rely on those who have that knowledge. From your original piece and the commentary and responses here you appear to have some specialized knowledge of the technology.

BTW, I was remiss in not complimenting you on your OP. You seem to have the ability to take a subject that is utterly opaque to most, myself included, and put it into a form and context that is understandable. Thank you for that.

• acat

Depends on whether you’re looking at each individual failure in the cascade, the cascade overall, or whether the cascade was unprecedented.

The question I, a lowly landlubber, have to ask is whether I could have predicted the disaster based on the data I had available the day or the hour before – just as the hypothetical turkey could know, from the available data, what’s coming on the day (or week) before Thanksgiving…

Mew

• throwback59

You have “impaled” BP with their own bad choices.

• qixlqatl
• acat

And “Black Swan” is in my laptop bag – I’m slowly working my way through it. Highly recommended reading.

I think we’re in for quite a few swans in the coming years.

Mew

• qixlqatl

I know, cuz I had the same question on one of his previous diaries, and Neil set me straight.

• acat
• qixlqatl

before I got it. I can be a bit less than incandescent, but once the light comes on, I am happy to share the luminescence

“We look forward to continuing to work with the Administration…”

That disclaimer on “forward-looking statements” sure won’t shield them either.

• dennism

…but won’t hold water, it seems to me.

I think all the companies with an ownership interest in the well are jointly and severally liable. If Anadarko has to pay out damages, then they can recover from BP if BP was negligent.

Problem #1 is if BP takes bankruptcy. Anadarko is on the hook for much more than they bargained for and will hold the distinction of being BP’s largest creditor. I don’t think Anadarko can lay behind the log and use BP’s negligence as a shield against any liability from anybody. That would put Anadarko’s interest in priority to all the other claimants and it’s not supposed to work that way.

I expect that some RedStater is going to chastize me and yell at me for thinking that things will work the way they are supposed to work under Mr. Obama’s Administration, but all you got to do is look at a chart of Anadarko’s stock. I could be wrong but the market agrees with me.

• kowalski

…It’s exactly what happens when the lies pile up. It’s kind of the “inverse butterfly effect” that everyone recalls from their early readings in chaos theory: the flapping of a butterfly’s wings in some far flung location could cause a hurricane somewhere else.

It doesn’t usually work that way. But systems that have been engineered so that all the parts depend on the other parts are vulnerable to an inverse version of that effect if there are significant flaws in a large enough number of places.

At some point in a long chain of faleshoods, one of them “flutters” and sets the rest of them off; up until that point all the little fluttering butterflies didn’t have any effect but suddenly, one of them become much more critical than the rest and pretty soon it’s nothing but butterflies all over the place in a cascade.

If you string together a long enough series of improbable events, eventually you’ll have one of these cascades because they are bound together. Then the whole thing goes off like a string of firecrackers.

I’m being very loose with my terminology here but the longer I look at this disaster the more it looks like a gradual accumulation of failures – independent of each other – at a large number of points. Then something touched the fuse and they all fell over, more or less together.

The amazing thing is that I don’t know whether you can stop that from happening in the real world, at least not completely. You can do a better job at preventing it at each step, but I don’t think it’s ever possible to completely prevent it, unless you just decide to crawl into a spider hole and never do anything ever again.

In another sense, the digital world has had an impact on our consciousness that’s not entirely good: we expect absolute certainty far, far too much, and we demand it of our machines and our institutions to an increasing degree. Either the website is there or it isn’t, either the picture is there or it’s not. The phone doesn’t have static, it just stops working. The picture on the screen is either there and playing or it stops entirely. It’s 0% or 100% and nothing in between. Either we can stop the oil or we can’t. Either dumping rocks into the passages will stop the flow and save the marshes or it will eventually destroy them.

Somehow, we’ve lost the fundamental idea that everything we do is to try, and mostly to fail. If Thomas Edison had to live in our world today, he couldn’t have made it. Most of what he did was to try things that didn’t work until he found something that did. A mile beneath the water in the Gulf of Mexico, basically the same thing is happening right now. I don’t envy them.

• kowalski

Nuclear power was pretty much proven as a concept in this country in the squash courts at the University of Chicago. The concept of a “SCRAM” meaning to moderate the reactor by introducing a big quantity of neutron absorbing material is an acronym:

“Safety Control Rod Axe Man”

Meaning the guy who was standing in the room with a sharpened axe, in case he had to cut the rope to shut down the reactor:

When I showed up on the balcony on that December 2, 1942 afternoon, I was ushered to the balcony rail, handed a well sharpened fireman’s ax and told that was it, “if the safety rods fail to operate, cut that manila rope.” The safety rods, needless to say, worked, the rope was not cut… I don’t believe I have ever felt quite as foolish as I did then. …I did not get the SCRAM [Safety Control Rod Axe Man] story until many years after the fact. Then one day one of my fellows who had been on Zinn’s construction crew called me Mr. Scram. I asked him, “How come?” And then the story.

The US Nuclear Regulatory Commission verifies that this etymology of SCRAM is the correct one in their glossary, stating:

“Also known as a ?reactor trip,? ?scram? is actually an acronym for ?safety control rod axe man,? the worker assigned to insert the emergency rod on the first reactor (the Chicago Pile) in the United States.”[4]

These were the things that men DID in order to make advances. In case something “went wrong” there was the super-advanced technology of a sharpened axe to shut down a nuclear pile at the University of Chicago.

We can try our best to do better than this, but we’re always going to be taking risks of one kind or another. We should try to minimize them, but we shouldn’t fool ourselves that we can completely eliminate them. I’ve had a lot of reversals of sentiment about this disaster in the past few weeks, and every day I have another one. But that’s probably because I’m READING about it and not DOING much about it, like 99% of the rest of the pundits and commentators and smart-asses in the world.

• acat

If the above quote from Riff, who’s better known for saying “Let me check my notes”, were true – if there had been a “SCRAM man” instead of a broken BOP under Deepwater Horizon, we wouldn’t be having this conversation, eh?

I will say that, as a nerd responsible for systems that have to get “five nines”, i.e. 99.999% uptime, I’m actively – every day – preventing my organisation (and it’s a name you’d know) from being on the front page… I’m aware of the conditions inside a few events that made the front page, all boiled down to the decision-makers not understanding the risks, and the front-line guys having the choice of losing their jobs, guaranteed, or of doing things they knew were risky.

In short, when the people making the decisions don’t understand the risks, sooner or later they end up making news…

Mew

• mikerazar

Just as the hammer specialist sees nails everywhere, so do the authors of long books where ten pages would do, smell profits from vast oversimplification.

Taleb’s idea of logical argument is to disparage people who know more than he does. But I exaggerate. He also thinks non sequitor anecdotes about his wonderful life are a substitute for the scientific method. The man has found more black swans than Bernie Madoff found suckers.

Rigor, shmigor. Unfounded inductive reasoning? Paranoid narratives? Funny how the logical errors he sees in the work of his inferiors abound in his own work.

The theme of the book is that it is dangerous to misunderestimate the probabilities of bad events. What an insight! No serious statistician thinks you can just assume normal distributions whenever you feel like. it. There is no Medicrostan; no Extremistan. There is only a world with all kinds of events and levels of information. Like any tool, probability theory can be mis-applied to the real world. Taleb never tells you how to tell which “stan” you are in at any given time.

Predicting the future, as he freely admits, is hard to do. Just ask Yogi Berra. Or anyone.

The whole subject boils down to the the observation that if you use the conclusion of a mathematical theorem without verifying its hypotheses, you may not be correct. Who’d have thunk it?

• taxpayer1234

Taleb is a cocky guy, and it shows. He’s not the greatest writer, either, as his prose is rather choppy and disconnected. (Probably drove his editor/s to exasperation.) But that doesn’t mitigate the fact that few people try to account for the unexpected, the outliers. He’s a financial expert and like many in his field, he’s not about to give out his recipes.

In the book he pointed out the likely consequences of wearing blinders regarding the banking industry/Fannie Mae/Freddie Mac situation. This was a full two years before the markets tanked. He may not have given out his “secret for success,” but he sure as hell earned my respect with that single argument.

• mikerazar

Oil spills aren’t outliers. Bear markets in real estate aren’t outliers. Democrats who hate everything America stands for aren’t outliers.

Barak and Nancy are out liars but not outliers.

Anyone who believes that Taleb has a secret….

• taxpayer1234

I found it amusing that the casino discussed in the book had every kind of gaming risk covered–cheaters, high-rollers, thieves, computer glitches. But the casino’s largest monetary losses didn’t come from gaming. They were too focused on what they could control absolutely that they didn’t consider what they could control even partially. Not the most brilliant risk-management strategy.

So what say you about his prediction of the financial collapse? “Likewise, the government-sponsored institution Fanny Mae, when I look at their risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: Their large staff of scientists deemed these events ‘unlikely’.”

• acat
• wrenhal

I thought this was an oil “leak”, not a spill.???? Just having fun with you…

• northernrockiesguy

My impression of a black swan event is something that has never happened before……”nobody’s ever seen a black swan, therefore there are no black swans”. The blowout in the Gulf was not a black swan event. There have been zillions of blowouts…Red Adair made a good business out of blowouts. BP gambled and lost.

Fooled by Randomness and the Black Swan are both worth reading, though they could have been much shorter books and just as effective. But, who is gonna pay \$25 for a 25 page book?

See item #3 in the OP.

Blowouts are rare events. In 2006 and 2007 there were zero blowouts on the OCS.

I actually began writing the OP with the spill quantity in mind. BP has been criticized because their estimate of the “worst case discharge” from a blowout was 300,000 barrels, about an order of magnitude too low, apparently. The reaction of some people is that BP must have been deliberately understating the potential blowout volume.

But that’s 20/20 hindsight. In context, for the period 1970 until March 2010, the total volume spilled from all OCS blowouts was just 1,500 barrels. BP’s estimate for Macondo was 200 times the total volume spilled by all blowout wells in the previous forty years. And they were something like 10x too low.

That, my friend, is a black swan event.

• mikerazar

but why is the world capacity for skimming oil spills millions of barrels an hour? Presumably somebody thought they needed to plan for events in which more than 50 barrels a year might spill.

What is the source for your 40 year blowout total?

I don’t understand the relevance of the examples commented on like the scram system. Would it have been a black swan event if the scram guy had a seizure just moments before a runaway chain reaction? Back up scrammer? What if they both ate spoiled tuna sandwiches for lunch on the bad day?

Do you have any idea how to assign probabilities to unlikely events? Nobody else does. It isn’t exactly a new idea. Taleb is right that reliance on unjustified mathematical calculations can lead one astray. But what else does he have to say? He has provided an unjustified excuse for lazy risk managers and the higher-ups who ignore known risks.

Nobody can skim millions of barrels an hour.

Large spill capacity is needed because we bring lots of oil to this country in boats, because we don’t drill enough domestic wells. Partly because some people have wildly unfounded ideas about the risks of drilling.

The source of the 1,500 bbls was a radio interview by Ken Arnold, one of the Nat’l Academy of Engineering guys, from the U. of Texas.

SCRAM is relevant because it’s a human factor. The SCRAM-equivalent on the Deepwater Horizon failed because the crew apparently waited too long to use the BOP.

Finally, you miss Taleb’s main point, which has nothing to do with predicting rare events, and everything to do with recognizing and reacting to rare events. Our psychology causes us to react to all events, random or not, as if they were “normal” or “expected”, give or take a couple of sigma. That’s what you’re doing here. That’s also how many of us reacted to 9/11.

• mikerazar

I said WORLD capacity…all the skimmers combined.

Don’t you even question numbers like 1500 barrels in 40 years?

The concept of a black swan is useless if all it means is anything that goes wrong. So human error was involved? How wildly unpredictable! People make mistakes. By all means, let’s build more robust systems because we can anticipate things going wrong—the antithesis of black swans.

That psycho babble about thinking rare events are normal is just one among many assertions he makes with little evidence. If I win the lottery, I will not be fooled into expecting to win it again. I promise.

Physicists have spent a fortune trying to measure how many neutrinos are absorbed by the Earth as they pass through nearly undetected. Black swans? Hardly. There are incredibly precise predictions about these rare events which are confirmed by clever experiments.

What is more likely? A neutrino being absorbed by your body, or an earthquake destroying NY tomorrow? How much should we spend to earthquake-proof NY? Up to 7 on the Richter scale or 8 or 9 or 10?

There is a lot to criticize about how we measure the likelihood of future events. It is an incredibly hard subject. Trivializing it with random (sic) snide comments and irrelevant anecdotes does not add to the intellectual foundation of the problem.

• acat

The concept of a black swan is about when the very-hard-to-predict happens. Not one event in the chain, but the whole chain. And it has to have a massive effect. I am starting to suspect you’ve never read the book but have heard someone else slam it.

Taleb spends quite a while on the probability of events happening and how that probability is determined. I’m sure you’ve heard the phrase “Past performance is not an indicator of future results”, right? One of Taleb’s simplest examples is the Thanksgiving turkey, who spends many consecutive days being fed and living a good life. What indicator does he have that something’s about to change? That’s Taleb’s point – not that there are no indicators, but that we often either fail to recognize them or chose to ignore them.

Fortunes have been made and lost during events Taleb describes as black swans – I’m quite sure all the bankers who lost out when the economies of South America tanked in the ’80s or when the S&Ls imploded spent quite a bit on what they thought was risk management – they just weren’t looking at the world the right way, so it didn’t protect them. I’m equally sure BP spent fortunes on risk management – and promptly ignored their own rules when push came to shove.

As for skimmers, there’s been one big hold-up in building them – testing. I can’t take my skimmer out into a public waterway, pour a gallon or two of oil on the water, skim 99% back up, and call it a success – I’d be heavily fined for the 1% I left behind.

That’s part of the reason why the A-Whale – a massive addition to skimming capacity – has been so slow in getting to work. The other part is the Obama administration being unwilling to say “Pock the rules, just get it cleaned up”. Ditto that for Kevin “Waterworld” Kostner’s machine.

Mew

• mikerazar

What does “very hard to predict” mean?

• acat

Example: The drill crew fought this problem well fro an hour or two past the point when they should have activated the blind/shear rams. They thought they could handle it.

Example: The mayday was called by a 23 y.o. woman on the rig, after the explosion, when everyone responsible in the normal chain of command could not accept the magnitude of the event & give the order to abandon ship.

Example: The USCG’s refusal of numerous offers of skimming equipment from around the world because they did not have the separation capacity to return 99.9985% pure water back to the Gulf. That’s an appropriate standard to use in handling a 50 bbl spill, not a 3 million bbl spill.

• mikerazar

I don’t know what blind/shear rams are, but if deploying them on time would have prevented the blowout, then one must ask whether there was enough reason in advance to justify deploying them. If the answer is yes, as you imply, then one should ask if the training of the operators was inadequate. Since all the needed safety measures appear to have been in place, this blowout was not a highly abnormal event; it was a low probability event for sure on any given day on any given platform, but not unanticipated.

Your three examples are interesting; even compelling, but I see no connection to Taleb’s Black Swan thesis, whatever that is.

• acat

“A black swan is an event, positive or negative, that is deemed improbable yet causes massive consequences.”

After you admit you didn’t read it, Mike, just go spend the \$17 to buy the paperback second edition. You can probably find it on sale.

Mew

• mikerazar

Though there are some obvious truths sprinkled throughout, none of the is an original observation. It is full of generalizations from his personal experience, which ironically, are derived by the various.

He gives fancy or fanciful (I’m not sure which) names to well known logical errors. He refers obliquely to what we call the scientific method by claiming that its use is a sign of mental health and that errors are a sign of arrogance.

I believe that the logical error of “post hoc ergo procter hoc” describes goes back at least to Aristotle. He has a sharp eye for that fallacy in others, yet uses it freely to advance his own point of view. He claims it as his own as part of the “narrattive fallacy”. A good description of the whole book, actually.

For all that, there are many interesting observations in the book. For my money, they are too deeply embedded in nonsense and fluff to be useful, but to each his own. Yes, normal distributions are often assumed with no good reason to do so. Yes, people aren’t very good at guessing subjective probabilities of future events. Heck….there are even some pretty dumb MBAs; maybe even dumb PhDs. But there are no smart turkeys (in my experience). He seems very angry. The world has treated him well, but not well enough.

• mikerazar

nt

• acat

Degrees indicate more about the recipients’ ability to thrive in an academic environment.

I’ve never met a smart MBA. That is, I’ve never had someone who tells me, soon after we meet, that they’ve got an MBA who are actually any good at what they do.

It seems like the only people who broadcast that they’ve got an MBA are the same pool of people who broadcast that they’ve got a technical certification, or a doctorate.

Having the piece of paper doesn’t matter, having the skills does, and using paper as a proxy for skills is an all too common shortcut in Human Resources departments, with predictably bad results.

As for hard-to-predict events, I don’t think Taleb is trying to cover new ground – I had more the impression that he’s trying to explain old ground in a more approachable way for those who haven’t taken their semester in chaos theory .. and likely never will.

Mew

• mikerazar

The degree thing was just one example of Taleb’s biases. It has nothing to do with black swans.

• acat

Taleb’s bias against academia as a yardstick is, in my opinion, fully justified. I said so. I can provide examples if you’d like.

However.

You are the one who brought up degrees, Mike.

Mew

• mikerazar

If “highly improbable events” – defined as being five or more standard deviations from the norm – are truly more frequent in reality, then they aren’t really so far from the norm, are they?

Humans do tend to recall the outliers, the unusual and extraordinary events, while the memory discards the overwhelming majority of events which fall within expected norms. Our minds then can be easily convinced that these event occur more often than they actually do.

If BP took too much risk here – leaving aside the easy assessment that they must have since they lost their bet – it was probably due to the institutionalized decision-making process, which divided responsibilities perhaps too narrowly, thereby minimizing them in the perception of the planners. If no one were ultimately responsible for the level of risk assumed, each section would tend to take on the maximum level of reasonable risk. But if every section is taking on its highest risk tolerance, the effect for the whole project is multiplied, with no one apparently designated to say, “Hey, wait a cotton-pickin’ minute here!” This seems close to what actually happened.

• acat

Taleb devotes quite a bit of time to knocking down the idea that the bell curve is a good tool to predict what can happen.

The key points for me so far is that past history can be very misleading, and that humans seem to like being misled if it gives them a sense of security along the way.

Taleb doesn’t seem to be saying the events happen more or less often, rather that the plans to deal with them don’t anticipate the complete scope of the impact.

Mew

• mikerazar
• http://thesandsinstitute.org Vassar Bushmills

In making the case for gross negligence, (a civil cause of action) who are the plaintiffs besides the feds, with whom BP has already “settled” out of court, so to speak? From other reports I’ve been led to believe that drillers can’t break wind without M&M signing off on it, so I assume then that these strings of improbable events were were done with the knowledge (and signature?) of M&M. If done behind M&M back, or contrary to their orders (a record of that would have surfaced by now) a real, and serious crime has been committed.

BP has already presented them with bills for their proportionate share of the costs to date. Anadarko will refuse to pay, citing gross negligence, which gives them an out under the Joint Operating Agreement which structures their relationship. Mitsui is non-committal.

The MMS approved the well design. The execution is up to BP. Courts & juries will get a chance to decide on whether a prudent operator would have fully circulated the mud, run Halliburton’s centralizer design, displaced mud with sea water, etc. (N.B. I wouldn’t want to be defending BP.)

• http://thesandsinstitute.org Vassar Bushmills

VB

• Achance

though I’m aware of the notion. I have however actually dealt with a couple of Oh S#\$t situations. I was heavily involved in the HR/LR side of the Exxon Valdez, I did the administrative investigation of the grounding of the Alaska ferry M/V LeConte, I’ve dealt with several plane crashes including one that for several hours I thought my wife was on. So, I know a little bit about both how things go to Hell and how people manage, and usually don’t manage, when things are going to Hell.

Two things seem to be constant when things go to Hell: It happens a little bit at the time and it isn’t apparent that things have gone to Hell until things have gone to Hell, and; if somebody notices in time to do something about things going to Hell, they either aren’t empowered to say “STOP,” or because of the organizational culture aren’t empowered to say “STOP.” There’s a deriviative of the second in the malicious refusal to say stop because you’re slavishly following the rules and chain of command, but I don’t think that’s the case here, it could be though. It does sound like there wasn’t exactly peace, love, and harmony on that rig.

This was an incremental crisis; everything that happened was something that it could be predicted MIGHT happen and certainly everybody in a responsible position had at least thought about it happing and had some notion of a plan if not a formal plan for it. What there wasn’t and never is, is a plan for is when the incremental crises stack up to the point where the sum of them is no longer manageable. I think that is a very, very hard thing to see. If you’re good, you can see it, you can handle it, and you’re handling it – and you let yourself get more and more balls in the air, and then a ball drops and in trying to retreive that ball, you drop another, and then the balls come cascading down, and things have gone to Hell.

I think everybody has a plan for what to do when one big thing makes things go to Hell, even if the only plan is say a prayer and kiss your butt goodbye. But when things go to Hell from one manageable thing after another happing until nobody can manage them all, there isn’t a plan and in the few instances where people have handled things like that and prevented things from going to Hell, the person who handled it has his or her name in books and on buildings.

• mikerazar

but you are describing the opposite of a black swan. You are talking about bad planning for a likely and predictable accident. I admit, that Taleb himself seems to want it both ways, but I take his definition as being a really low probability event with dire consequences. The BP spill certainly has had dire consequences, but it was wholly expected that this sort of thing could happen. You are rightly critical of those whose responsibility was to prevent or mitigate such accidents.

An earthquake in San Francisco is not a black swan. Maybe one in NY is.