Optimists are never pleasantly surprised

I've made a number of dire predictions on this blog, some of which haven't happened (yet) and some of which have been disturbingly vindicated over the last year--notably the prediction that the money center banks would in one way or another be nationalized.

In general, I would argue that most risk and security managers are overly Gaussian in their sense of what to plan for, refusing toplan for long tail risk -- a point emphasized by the Economist's recent survey of how god-awfully the banking industry did in anticipating how bad the crisis could get:

Even Goldman Sachs, widely regarded as the best manager of risk in the industry, did not foresee quite how bad things could get. The bank's most demanding pre-crisis stress test—known as the "wow," or worst of the worst, test—took the most negative events to have happened in each market since 1998 and assumed that they got 30% worse and all happened at the same time. That still wasn't pessimistic enough.

That still wasn't pessimistic enough....