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What follows natural disaster? Opportunity

December 6, 2012 12:10 am

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This aerial photo shows damage in the wake of superstorm Sandy in the central Jersey Shore area of New Jersey.

VIENNA, Austria

--As the media warnings for Hurricane Sandy reached fever pitch in late October, I found myself killing time on a business trip in Lisbon strolling through the center of town. Conditioned to disaster by news channels at my hotel, on my walk I was thinking that here is a city that knows something about what it's like to be destroyed by the indifferent hand of a not-so-motherly Nature. On the morning of Nov. 1, 1755, Lisbon was leveled by a magnitude -8.7 earthquake, 20 times more powerful than the quake that destroyed San Francisco in 1906.

The Lisbon quake and the subsequent 60-foot-high tsunami killed about a quarter of the city's residents and destroyed more than 85 percent of the buildings. Comparing these figures with even the highest estimated loss of life and property from the hurricane makes Sandy look like a summer squall by way of comparison. Admiring the magnificent buildings and waterfront in Lisbon today, I found it difficult to envision what the city could possibly have looked like following that huge quake. The "X-event" of the earthquake opened up the opportunity for Lisbon to rebuild its city in a more modern style with much better materials and an entirely new style than would have ever been done had the quake not occurred.

The point of this little story is that since it's always easier to destroy something than it is to create it, short-term X-events are almost always damaging to life, property, and general psychic health. But taking a longer-term perspective, they can be and usually are rather positive. The destructive phase clears away a lot of the "underbrush" of social structures--political, economic, financial, organizational--opening up niches to be filled by innovators, entrepreneurs, and adaptive organizations. In this manner, society is reconfigured in new and generally better ways. Critical infrastructures for power, food, communications, and the like are replaced with more modern and reliable materials and equipment. Society then progresses and becomes far more resilient to future damaging X-events.

CREATIVE DESTRUCTION

This is the phase called "creative destruction" by the Austrian-American economist Joseph Schumpeter, who argued that the destruction of dysfunctional and/or outmoded social structures is a crucial component of the economic cycle of any society that wants to grow. And this notion of creative destruction is not confined to economic processes. Biologists have proposed the theory of punctuated equilibrium, arguing that occasional shocks to the evolutionary process accelerate the rate of biological evolution by disrupting the status quo and opening up new niches. Consequently, X-events are not only good for your health, they're necessary for it. There's good reason to argue that this dictum applies to the lives of individuals, as well.

The notion of creative destruction suggests that it might serve humans well to experiment with deliberately creating controlled X-events so as to precipitate manageable destruction that opens up new social niches without destroying the experimenter. We already do this on a small scale with controlled burns in forests and culling herds of animals so as to generate space that buffers against a full-fledged forest fire or an animal pandemic. Of course, such actions at the level of human systems would be political suicide. Instead, politicians wait for (human) nature to do the destruction for them, stepping in afterward to take credit for the cleanup and garner votes from the victims. Witness efforts in this regard by both parties in the recent presidential election.

Returning to the Lisbon quake, in less than a year the city was cleared of debris. Eager to have a new and easier-to-navigate city, the king commissioned the construction of big squares, large avenues laid out in a rectangular grid, and wide streets--the very streets I was walking on as I pondered Hurricane Sandy. What benefits of this kind might we expect to see from Sandy?

SANDY WASN'T SO BAD

It may come as a surprise to many readers to know that Sandy was a rather moderate X-event. The "X-ness" of an event is a combination of three factors: rarity, surprise, and social damage. Sandy was not particularly rare, at least in the sense that hurricanes even of the magnitude of Sandy take place quite often. Sandy was not surprising either, since with almost all hurricanes warnings began appearing many days before the storm made landfall. With an earthquake there's usually no warning at all. And while the damages from Sandy will certainly be substantial, many other events have created far greater damage than even the most extreme estimates I've seen of $50 billion or more.

As points of comparison, Hurricane Katrina came in at more than $100 billion, while the Lisbon disaster was a huge setback to a powerful trading nation--Lisbon may have been the richest city in Europe at the time--and caused a shift in the balance of power of the era. So Sandy is notable but not extraordinary. I hasten to add that in no way does this lessen the tragedy for individuals who lost their lives or homes or jobs in the storm. But as an event, the storm's level of X-ness is midrange at most.

The upside of Sandy comes when we turn from the destruction wrought and look at the "creative" half of its creative destruction. In Sandy's cleanup phase, the money pumped into the economy will pay for everything from building materials to new construction jobs and run to $100 billion or more. Even the lowest estimates of this new growth far exceed the worst estimates of the damage, at least in regard to reconstruction of damaged property. While this is cold comfort to families who lost loved ones to the storm, at the societal level I think one can argue that Sandy will end up being at least as much of a blessing as it will be a curse. As the old Viennese saying goes, the situation is desperate, but not serious.

John Casti is director of The X-Center, a research institute focusing on the study of human-caused extreme events. He is the author of the book "X-Events," published by HarperCollins/Morrow.





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