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Sunday, January 19, 2014

Climate Change Business

Businessmen Making Decisions About The North Wind

Climate Change is a proposition that we may assign a certain probability to.

With Climate Change, there are risks and uncertainties. How do we make decisions with risk and uncertainty?
We do it all the time in business.

Climate Change should be handled as a business situation - an approach I think many insurers have already taken.
By turning it into a political situation, we have turned it into the usual political buffoonery, and obliterated all discussion of risk, uncertainty, and planning.

One of the first steps is to realize that very few propositions attain 100% certainty. Only death and taxes, so we make a decision to do our taxes and we make our wills based on 100% certainty.
In all other fields, we deal with varying amounts of uncertainty.
We should be able to quantify it and deal with Climate Change in the same way: intelligently.

Apply the probabilities to the risks and see what the future holds; a risk of a loss of $1,000 trillion dollars with a certainty of 50% means we should reasonably expect a 0.50 x $1,000 trillion = $ 500 trillion dollar loss sometime in the future.
The present value of that loss is pretty big, given the low interest rates and depending on how far into the future we are projecting.

Let's make a business decision for our future!


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