Forget black swans. We’re getting run over by two gray rhinos: coronavirus and climate change.
The intrigue: A gray rhino is a metaphor coined by risk expert Michele Wucker to describe “highly obvious, highly probable, but still neglected” dangers, as opposed to unforeseeable or highly improbable risks — the kind in the black swan metaphor.
The big picture: The novel coronavirus spreading infections and fear around the world is prompting black swan references from the media and investors alike, as is climate change’s impact on financial markets.
- But epidemics like the coronavirus and the slower burn problem of global warming are actually gray rhino risks, because there have been plenty of warnings for those who were paying attention.
Why it matters:
“It matters immensely that decision makers view risks as gray rhinos instead of obsess in vain about black swans, because we can see gray rhinos in front of us, but black swans by definition only appear in the rearview window. That means we have a chance to do something about gray rhinos. And, in fact, most so-called black swans happen because people ignored the gray rhinos.” — Michele Wucker, author of the 2016 book "The Gray Rhino," to Axios
Yes, but: While coronavirus and climate change are both gray rhino risks, their differences explain why the world — and stocks and oil prices — is in a tailspin.
- Coronavirus is a more immediate threat, and the amount of uncertainty surrounding it feels limitless. We don’t know how many people in any given area are infected, and because we don’t know that, questions persist about the accurate mortality rate.
- Climate change is one massive systematic risk that unfolds over decades and centuries. It increases the risk for an infinite number of weather events and patterns.
- While a lot of uncertainty persists here, scientists are getting better at pinpointing risk. To wit: Australia’s bushfires were made at least 30% more likely due to human-driven climate change.
Risks rarely come in isolation or operate in a vacuum. There's the risk of unintended consequences responding to an initial risk.
- Our globally connected world already risks grinding to a halt and having a series of repercussions as coronavirus infections grow.
- In the same vein, if the world drastically slashes use of fossil fuels, energy costs could spike and cause economic crashes and more inequality.
- There’s also competition for attention. Fears over the coronavirus are already slowing key diplomatic meetings on climate change ahead of a highly anticipated year-end summit.
- Climate change is a slower moving risk, so it inevitably gets put on the back burner when millions of people are at risk of dying from a virus outbreak in the coming months.
The bottom line: So what happens when you have multiple gray rhinos coming at you? A group of rhinos is — fittingly and alarmingly — called a crash.