In retrospect, the pattern seems clear. Years before the Deepwater Horizon rig blew, BP was developing a reputation as an oil company that took safety risks to save money. An explosion at a Texas refinery killed 15 workers in 2005, and federal regulators and a panel led by James A. Baker III, the former secretary of state, said that cost cutting was partly to blame. The next year, a corroded pipeline in Alaska poured oil into Prudhoe Bay. None other than Joe Barton, a Republican congressman from Texas and a global-warming skeptic, upbraided BP managers for their “seeming indifference to safety and environmental issues.”
Much of this indifference stemmed from an obsession with profits, come what may. But there also appears to have been another factor, one more universally human, at work. The people running BP did a dreadful job of estimating the true chances of events that seemed unlikely ”” and may even have been unlikely ”” but that would bring enormous costs….
I can think of better analogies than the housing bubble to use for examples of business and industry ignoring risk in the face of reality and even warning data, such as the two fatal Space Shuttle missions or even the sinking of the Titanic. There are several lesser-known failures that are more poignant as well. However, I’m glad to see an article that looks at the Deepwater Horizon mess as a failure of risk/benefit analysis.
And speaking of analogies, are not atheists and many self-proclaimed Christians guilty of such “black swan” thinking? “Do not be afraid of those who kill the body but cannot kill the soul. Rather, be afraid of the One who can destroy both soul and body in hell.” God cares about what we consider important and he’ll be sure to let us eternally know how we’ve done with our choices.
The author made a very cogent point that the $75 million cap
on liability (waived by BP, tho’) acted to distort the thinking of
oil company executives. IIRC, other articles I’ve read indicated that
BP execs had overridden safety concerns which had been raised by
BP’s own personnel. This does seem to follow the same template
of hubris as the disastrous destruction of the space shuttle
Challenger in which the management of Morton Thiokol overrode the
recommendations of their own engineers, who thought the shuttle
should not be launched.