Planning for the Worst Case Scenario

Eliezer Yudkowsky on planning for the abyssal.

Never mind hindsight on the real-estate bubble – there are lots of things that could potentially trigger financial catastrophes.  I’m willing to bet the American government knows what it will do in terms of immediate rescue operations if an atomic bomb goes off in San Francisco.  But if the US government had any advance idea of under which circumstances it would nationalize Fannie Mae or guarantee Bear Stearns’s counterparties, this plan was not very much in evidence as various government officials gave every appearance of trying to figure everything out on the fly. […]

It’s questionable whether the government should be in the position of trying to forecast the abyss – to put a probability on financial meltdown in any given year due to any given cause.  But advance abyssal planning isn’t about the probability, as it would be in investing.  It’s about the possibility.  If you can realistically imagine global financial meltdowns of various types being possible, there’s no excuse for not war-gaming them.  If your brain doesn’t literally cease to exist upon facing systemic meltdowns at the time, you ought to be able to imagine plausible systemic meltdowns in advance.

This got me thinking about planning for our own abyss (be it employment or health). Why don’t we have plans for the worst case scenario? After all, as the Financial Times’ Tim Harford states, “[A] recently published research paper [shows] that most unemployed people are too cocky about their prospects of finding a new job. On average, they expect seven weeks of unemployment, but eventually endure 23 weeks. And this is using data from the mid-1990s, not recession years”.

A case of the planning fallacy?