Burning a Hole in Fire
a great analogy from the chairman of Oaktree Capital got me thinking about forest fires:
“the Los Angeles Times kicked off a major series on forest fires. Here’s part of what it said:
The government’s long campaign to tame wildfires has, perversely, made the problem worse. . . . By stamping out most wildland blazes as quickly as possible, the Forest Service has stymied nature’s housekeeping – the frequent, well-behaved fires that once cleaned up the pine forests of the Sierra Nevada and the Southwest. Now, woodlands are tangled with thick growth and dead branches. When fires break out, they often explode.
Sound familiar? Clearly, the analogy between financial crises and forest fires is solid. And I told Tom that just as the Fed’s growing tendency to solve every problem led people to take greater risks, the policy of fighting fires early also created moral hazard by encouraging people to build homes further into the forest. It fell to the community to keep those unwisely built structures safe, just as the government now feels it has to rescue subprime borrowers and financial institutions.
Capitalism can produce great results, but participants have to be allowed to both win and lose.”
which reminded me not only of risk homeostasis, but a fascinating portion of the book Young Men and Fire, about the 1949 Mann Gulch fire which claimed the lives of 13 smoke jumpers, where he describes what the other fire fighters saw their leader doing as they tried to escape being engulfed by flames:
“I saw him bend over and light a fire with a match. With the fire almost on our back, what the hell is the boss doing lightning another fire in front of us? We thought he must have gone nuts… what is this dumb bastard doing?… saw the foreman enter his own fire and lie down in its hot ashes to let the main fire pass over him… Dodge instantly invented what was to become known as the ‘escape fire‘ by lighting a batch of bunch grass with a gofer match… in so doing, he started an argument that would remain hot long after the fire.
Traditionally set by plains Indians to escape from grass fires and that pioneers on the plains picked up invention from Indians - start one in the immediate vicinity of person or company in peril… at first small and harmless, the fire will soon burn over an area large enough to form a safe asylum, and when the sweeping cohorts of flame came bearing down upon the apparently doomed company, the mighty line would part as if by pre-ararngement and pass harmlessly by on either side.
His invention, taking as much guts as logic, suffered the immediate fate of most other inventions - it was thought to be crazy by those who first saw it… who kept going, most to their deaths.”










