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  • We Know Very Little

    Posted by Carl from Chicago on January 19th, 2011 (All posts by )

    Recently there was a revolution in Tunisia, which resulted in the ousting of the existing regime after a series of violent demonstrations led primarily by young people. The president who ruled the country for more than 20+ years abdicated, the first toppling of a ruler in an Arab country in decades.

    While the news outlets (and bloggers) covered this event intensely as it occurred, and are now looking at neighboring states with long-lived autocrats as potential dominoes also ready to fall, the REAL issue is “who predicted this before it occurred?”

    The answer is – nobody. No one was out there predicting a year ago that this government was going to fall. The factors that we are viewing as important today, such as the fact that the government had been in power for decades and was giving few opportunities to a vast population of younger people, were there for all to see previously, and hadn’t changed. Virtually nothing changed, except that a fruit-stand operator immolated himself when detained by the government.

    In looking back at history many things seem “obvious” in retrospect, such as the German victories under Blitzkrieg early in WW2 or the BP offshore oil spill – but in fact they were NOT obvious at the time. This revolution is similar to those types of events which seem surprising but then immediately become part of the “common wisdom”.

    When we have a world that is priced for stability with low inherent risks in valuations this type of event should put a shiver down an investor’s spine, because these sorts of events only bring with them a knock down in pricing and lead the way for more such events to follow. Not to say that this isn’t a good thing, since dictatorships aren’t good for the world in the medium or the long term, but in the short term they can “put a lid” on instability.

    The prognosticators, whether paid (main stream media) or unpaid (like us) totally didn’t see this one coming, at least not now. Remember this and prepare for future surprises.

     

    6 Responses to “We Know Very Little”

    1. Jason Says:

      I have to wonder if the revolution was another side effect of our invasion of Iraq. Similar to TPM Barnetts theory of a big bang across the mid east.

    2. Marty Says:

      There’s a great video of a session at an Aspen Institute forum last summer (the link was ina post at zerohedge 2 or 3 days ago), of a panel of David Gergen, Niall Ferguson and Mort Zuckerman discussing what the financial crisis means to US dominance. Ferguson makes the point that the economy (world and national) is not a stable system in or seeking equilibrium, as we are taught. Rather, it is inherently a complex, chaotic and unstable system taht can change very rapidy and unpredictably.

      In hindsight we find “causes” and “reasons” because that’s what our brains are wired to do—to discern patterns. Even where there isn’t one, like in conspiracy theories.

      Now, when Bernanke started QE2 last summer, many people noted that it would be highly inflationary and predicted food riots and other disruptions such as have since occured. But to say that Tunisia, in particular, would see its government fall in January, 2011? That’s an inherently unpredictable event in a chaotic system.

    3. Irwin Makem [Fred Lapides] Says:

      The real issue : did our Itel know this might take place? If not, why not.

    4. Michael Kennedy Says:

      David Pryce-Jones has some useful comments on Tunisia.

    5. renminbi Says:

      Some 20 years ago David Pryce-Jones wrote The Closed Circle about the Arab world. I read the book then and saw that world as a behavioral sink. He makes his case by citing instance after instance. Nothing that has happened in that world provides reason for optimism.
      See the reader reviews on amazon.com, which are more eloquent than I can be. God only knows what would snap them out of their losing ways.

    6. josephscott Says:

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