PT  - JOURNAL ARTICLE
AU  - Martin J. Goldberg
TI  - Why We Tend to Be Unprepared for the Inevitable Next Disaster
AID  - 10.3905/jsf.2020.1.108
DP  - 2020 Sep 04
TA  - The Journal of Structured Finance
PG  - jsf.2020.1.108
4099  - https://pm-research.com/content/early/2020/09/03/jsf.2020.1.108.short
4100  - https://pm-research.com/content/early/2020/09/03/jsf.2020.1.108.full
AB  - It is human nature to be unprepared for rare catastrophic events. Human nature includes inclinations towards optimism, optimizing for best performance if nothing changes, linear thinking, innumeracy, inertia, greed, a desire to fit in with the crowd, and myopia. Thus, being prepared for an unknown future disaster of an unknown type requires going against human nature.TOPICS: Risk management, legal/regulatory/public policy, behavioral financial theoryKey Findings• Human nature has not changed since modern humans evolved.• Myopic linear thinking, inertia, greed, and social pressure lead to optimizing for what would be the best results if conditions never changed.• Resiliency when conditions change requires actively preparing for events that may never happen, which is rarely part of human nature.