McKinsey Quarterly article – ‘Power curves’: What natural and economic disasters have in common

McKinsey Quarterly has a nice article discussing the oft-quoted power law distribution of events in the natural and financial worlds, together with readers’ comments:

Executives, strategists, and economic forecasters, somewhat sheepish after missing the “big one”—last year’s global credit crisis—turned to the lexicon of natural disasters, describing the shock as a tsunami hitting markets and as an earthquake shaking the world economy’s foundations. Shopworn as these metaphors may be, they aptly capture the extreme and unexpected nature of the circumstances. In fact, the parallels between the dynamics and failures of man-made systems, such as the economy or the electricity grid, and similarly complex natural ones are bringing new ideas to economic forecasting, strategic planning, and risk management. This trend may have profound implications for policy makers, economists, and corporate strategists alike.

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