Why We Tend to Be Unprepared for the Inevitable Next Disaster

It is human nature to be unprepared for rare catastrophic events. Human nature includes inclinations toward optimism, optimizing for best performance if nothing changes, linear thinking, innumeracy, inertia, greed, a desire to fit in with the crowd, and myopia. Thus, being prepared for an unknown future disaster of an unknown type requires going against human nature. TOPICS: Risk management, legal/regulatory/public policy, behavioral financial theory Key Findings • Human nature has not changed since modern humans evolved. • Myopic linear thinking, inertia, greed, and social pressure lead to optimizing for what would be the best results if conditions never changed. • Resiliency when conditions change requires actively preparing for events that may never happen, which is rarely part of human nature.