1/4 Rebuilding the economy after covid-19 will be subject to the law of regression to the tail, if less dramatically than the pandemic. Loss of life will hopefully fade as a main risk. But financial fragility, wealth destruction, and debt will continue to be key risks for a while Image
2/4 The massive stimulus spending governments use to restart economies in recession comprise giant construction and investment projects with fat-tailed financial risks, like multi-billion-dollar megaprojects in IT, transport, energy, water, education, housing, health, and defense
3/4 Some projects are more fat-tailed than others, i.e., they are more susceptible to the law of regression to the tail. Data analytics should be used to separate fat-tailed projects from thin-tailed ones, and stick with the latter whenever possible. We know how to do this.

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More from @BentFlyvbjerg

16 Oct
Item #3 for building back better

We are unlikely to return to the same state of the world as when we entered the #pandemic, nor is this desirable. #Remoteworking has the potential to become more prevalent after the crisis. Image
Investments might shift from face-to-face working (and lower the cost of #officerealestate and time for #commuting).
#Stimulus spending should focus investments on the enablers of this new approach to work, e.g., #5G rollouts, #broadband infrastructure, #satellites for global reach, server farms for adequate capacity, etc, all with effective #privacy protection.
Read 4 tweets
16 Oct
Item #2 for building back better

The covid crisis must be used to accelerate the transition to an electric, zero-carbon economy, to reduce climate tail risk. Image
This includes:

(a) investments in renewable energy (and maybe nuclear, if it can be made fast and safe) for powering the industry;

(b) electrification of trains, trucks, public transport, and cars; and
(c) investments to improve true sustainability of farming, food manufacture, housing, and commercial real estate.

Free pdf with new paper here: bit.ly/2C69vKS

Please help share.
Read 4 tweets
15 Oct
1/4 #Nuclear power plants are bespoke, slow to build, and fat tailed for financial and safety risks. #Wind farms and #energystorage are modular, fast, and thin tailed. Image
2/4 By choosing wind over nuclear, the risk of regression to the tail will be significantly reduced, and #climate goals will be achieved sooner. This is just one example. Many others exist.
3/4 Every investment alternative must be assessed in this manner to ensure that #stimulus spending becomes a boost instead of a drag on the economy. The latter is happening more often than we like to think.

Free pdf with new paper: bit.ly/2C69vKS

Please help share. Image
Read 4 tweets
14 Oct
#Floods and #wildfires are both subject to regression to the tail. The same holds for #droughts, #hurricanes, #landslides, #icemelt, #sealevelchange, and other phenomena closely related to the climate crisis. Image
This tells us that understanding regression to the tail and how to mitigate its specific manifestations for climate will be key to mitigating the climate crisis.
Here it is worth remembering that regression to the tail for the climate crisis will be just as indifferent to human ignorance and folly as regression to the tail is for covid-19.
Read 5 tweets

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