Risk Intersectionality 1: A History Lesson

I recently presented at the second Credit Risk and Credit Rating conference hosted in Ningbo, China. This is the first of several articles based on that presentation. The general outline for the series is:

1)???The Histories – by Numbers

2)???Population Growth and Migrations

3)???Horsemen of the Apocalypse plus some

4)???An Intersection of Risks

5)???Credit Modelling

6)???Model Risks

This first article might not seem relevant to the general LinkedIn audience, but it lays the groundwork for what follows.

Mass Extinctions

This history section might seem excessive, and could be called “History by Numbers”.?You will, however, see why it is relevant.?This first part focuses on mass extinctions, of which one is currently in its early stages.?For interest, that skull pre-dates the dinosaurs. It is from the Karoo Basin, a region that my wife and I pass through frequently on our way to Cape Town.

1st, Ordovician → Silurian

Sometime about 580 million years ago the evolution of life on earth accelerated. The first mass extinction was the Ordovician, almost 445 million years ago when 85 percent of species perished. It was the second-worst ever. At that stage, most life was in the oceans with little on land.?The extinction’s cause was global warming followed by global cooling, a one-two Ice-House Hot-House punch during which the Appalachian Mountains rose, carbon dioxide levels fell, and the seas became toxic. ?

2nd, Late Devonian → Carboniferous

Next up was the late Devonian, when between 70 and 95 percent of species died. There was no single cause but contributors were volcanic activity in Siberia, growth of plant life on land, and a possible asteroid strike in Sweden.

3rd, Permian→Triassic

The third was the worst, the Great Dying. This was the Permian, which gave rise to the earlier skull, which was again brought on by Siberian volcanoes that spewed trillions of tons of carbon into the atmosphere. Global warming brought the temperature of equatorial seas to hot-tub temperatures of 40 degrees Celsius. Oceans became acidic and wildfires wiped out forests.?

4th, Triassic→Jurassic

Number four was the Triassic about 201 million years ago, when 75 percent of species perished.?Many believe it was caused by volcanic eruptions in the central Atlantic that split the Americas from Europe and Africa.?Siberia is not the culprit this time.?

5th, Cretaceous → Tertiary

And the last, was the Cretaceous, which we all know wiped out the dinosaurs and, in the process, inspired countless horror movies.?It is blamed mostly on an asteroid strike just off of Mexico’s Yucatan peninsula, but a further contributor was subsequent volcanic activity around India.?

Major Drivers

Now, if one considers the Big Five, at least three resulted from volcanic activity, which obviously affects the atmosphere with varying results, whether global warming or cooling. Other causes were the hot-cold double punch and asteroid strikes.

But, why is this relevant??

6th, Anthropocene

Because we are now going through the early stages of the Anthropocene era, where extinction rates are 100 times normal.?The big difference is that the changes are not being caused by volcanos or asteroids, but by a single species that dominates the planet. That is, of course, us! Rather than the evolutionary “adapting to the environment” we instead “adapt the environment to us” with unforeseen consequences—other than that things will never be the same again.

Quarternary extinction

The first extinctions related to our presence on the planet occurred as humans bred and spread. In the process, other species became extinct, especially megafauna—the very big animals. Some may have been natural extinctions as the climate warmed, but it is commonly believed that humans played a role in the demise of the woolly mammoth, woolly rhino, sabre tooth tiger and the giant marsupials of Australia. And over time, the extinctions quickened.

REVOLUTIONS—COGNITIVE, AGRICULTURAL, INDUSTRIAL

We’ve come a long way since agrarian scenes like this which look idyllic, but were ages of much shorter lifespans and high infant mortality. Our circumstances have improved, but not those of other species with whom we share the planet.?It has been changed by our use of fossil fuels, plastics, and the massive amounts of methane generated by cow farts.

Cognitive Revolution

It is thought that humans have existed in their modern form for 200 thousand or so years, but about 75 thousand years ago something happened to wipe out all but a few thousand in East Africa and we all have a common ancestor in these few. The exact cause of this evolutionary bottleneck is unknown, but it was possibly more volcanoes and centuries of global cooling.?

Neolithic Agricultural Revolution

And then came the first agricultural revolution about ten thousand years ago, first in the Middle East but quickly followed in Asia and the Americas.?A contributing factor was the availability of plant and animal species that could be domesticated, but while it made life easier the quality of life did not necessarily improve.

Mediaeval Agricultural Revolution

One-thousand years ago, wheeled ploughs, horse collars and wind and water power were introduced in Europe. They coincided with a warmer climate and greater political stability, especially with the end of Viking raids. Food production increased three-fold and the population followed suit…while people’s lifespans increased by up to twenty years. The benefits were greatest in northern Europe, but similar advances were being made in Asia, as evidenced by China’s Grand Canal. All looked rosy until the 1300s when bad weather and the Black Death hit.

Later Agricultural Revolution

Several centuries later, further innovations included crop rotation, selective breeding of animals, and the use of seed drills and threshers.?In the 1700s, Edward Gibbons had noted that during Roman times, the Rhine River would freeze over sufficiently to carry heavy wagons and reindeer inhabited the forest of northern Germany. He ascribed the changes to the clearing of forests for agriculture.

Industrial Revolutions

At this stage, we get into the industrial revolutions. Each has been associated with changes in energy sources and communications. When I was in grade school they were taught as one, but over time they have been split into sub-periods whose definitions are not cast in stone. The most commonly used today is that presented by Klaus Schwab who founded the World Economic Forum.?

1st - 1760 to 1840, MECHANICAL

The earliest industrial revolution resulted from the use of coal and steam, first to pump water out of coal mines… but then for textile factories, ships, railways and tractors. Communications were by mail, which was a key tool for merchant bankers to gather credit intelligence from their networks. Unfortunately, this revolution was also a major driver behind European colonial adventurism, especially by the English.

2nd - 1870 to 1914, TECHNOLOGICAL

The second was the use of gas and oil for internal combustion engines, electricity for lighting, and telegraphs for communication—amongst others. This lasted until the First World War. Other developments were the first era of globalisation, and the emergence of agencies for sharing credit information. The war was the beginning of the end of European colonialism.

2A - 1940 to 1970, SCIENCE & TECHNOLOGY

One not usually not recognised (or at least not by Klaus Schwab) as a separate revolution relates to Science and Technology, which ran from the end of World War II until the moon landing and included computer and aerospace developments. ?During this period, companies automated back-office processes, there was a second era of globalisation, and the Cold War emerged and peaked.

3rd - 1969 to 2010, DIGITAL

The third was the Digital Revolution, massive computerisation in the nuclear era.?Telephones dominated communications, but this soon changed to texts and emails.?During this period, China arose as a major economic and political power and the Cold War’s end heralded the start of a third era of globalisation.

4th - 2010… CONVERGENCE

And finally, is the fourth revolution when various technologies are converging to give us self-driving cars and the Internet of Things. We are shifting (way to slowly) to renewable energy… and almost all messaging passes via computers and smartphones. The pandemic and geopolitics are causing globalisation to go into reverse, while many countries are trying to engineer a “just transition” to renewables because many people’s livelihoods hinge on fossil fuels’ extraction, transmission, or use.

END of PART 1:?HISTORIES

As indicated that is the end of Part 1.?The next instalment (see link below) will cover human population growth and migrations.