Black Swans and Shipping Containers

One of my favor authors/thinkers is Nassim Taleb.✍️

​​His books Anti-Fragile, Skin In The Game, and Black Swan each deeply impacted my thinking and philosophy about life.

​​And his are some of the only books that I re-read very regularly.📚

The reason I share all of this is because over the last few days…

​​I’ve been thinking a lot about the concept of a Black Swan.💡

According to Taleb, a “Black Swan” event is:

“an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact….Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

So why have I been thinking about Black Swans lately?

​​Well because of what’s going on in the Suez Canal.

Black Swans and Shipping ContainersIn case you haven’t been following the news, a 1,300 foot long cargo ship called Ever Given has been suck horizontally across the Suez Canal for several days now.

Something like this has never happened before…

And yet its implications are MASSIVE.

As of this morning, there were nearly 300 additional cargo ships waiting to go through the canal…

And while it might be hard to fathom…

13% of all global maritime trade and 10% of all seaborne oil shipments go through the Suez Canal each year…

And the mooring of this one ship is going to have a massive impact on world trade, and supply, for several weeks (if not months) to come.

In fact, right now it’s estimated that the blockage is costing the global economy a staggering $400 million an hour…

And you can expect this unprecedented blockage to affect “basically anything you see in stores” one container-shipping expert recently told NBC News.

You’re going to probably see toiler paper shortages again…

Black Swans and Shipping ContainersIt’s likely that there will be massive coffee shortages in Europe, which could put many cafes out of business…

And furniture deliveries are going to be pushed back dramatically too.

​​In fact, the CEO of Lay-Z Boy recently said that customers can expect it to take 5 to 9 months for a chair they order to arrive…and this blockage will only make it worse.

Oh, and then there are gas prices…

You may have noticed that they’ve already been going up…and this blockage will push prices much, much higher.

So, what does all of this mean?

Well it’s too early to tell. It could just lead to a minor inconvenience for a period of time…

But it’s also possible that this single ship being stuck is the first spark in a global recession.

It sounds dramatic…

But oil prices going higher and straining consumer wallets…

Companies being unable to get raw or finished goods in a reasonable time…

The impact could be huge.

And that’s what makes the mooring of this cargo ship a Black Swan event.

Nothing like this has every happened before…

The impact could be massive…

And already you’re seeing articles come out pointing out the “obvious” ways such a fiasco could have been avoided.

It’s kind of amazing to see…

It’s not every day you get to watch a Black Swan unfold its wings before your eyes…

So I’d suggest you pay careful attention to what’s going on here.

– SPG

P.S. One more thought – consider the owner of the shipping container that's stuck. It’s a Taiwanese company with a Japanese owner…

And they have $3BN in insurance to cover any damage or issues that their boat may cause.

You’d think a $3BN policy would be pretty solid…

But at $400MM an hour in economic damage…

Their company is pretty much f***ed…

And the insurer who wrote their policy is likely f***ed too.

Which is amazing, because insurance companies are supposed to be experts in risk “management”…

Yet I doubt they had provisions about what would happen if a ship they insured causes a global supply chain logjam for weeks on end.

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Stefan Georgi

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