Didier Sornette

Didier Sornette boldly applies his varied experience in many areas to propose a simple, powerful, and general theory of how, why, and when stock markets crash.

Critical Events in Complex Financial Systems

Why Stock Markets Crash

Concepts and Tools (Springer Series in Synergetics)

Critical Phenomena in Natural Sciences: Chaos, Fractals, Selforganization and Disorder

Dmitry Chernov

Case Studies of Major Disasters and Human Fallibility

Man-made Catastrophes and Risk Information Concealment

Giovanni Sansavini

Ali Ayoub

The book reviews existing research on the challenges of voice and silence in organizations. After a major disaster, when investigators are piecing together the story of what happened, a striking fact often emerges: before disaster struck, some people in the organization involved were aware of dangerous conditions that had the potential to escalate to a critical level. But for a variety of reasons, this crucial information did not reach decision-makers. So, the organization moved ever closer to catastrophe, effectively unaware of the possible threat—despite the fact that some of its employees could see it coming. What is the problem with communication about risk in an organization, and why does this problem exist? What stops people in organizations or project teams from freely reporting and discussing critical risks? This book seeks to answer these questions, starting from a deep analysis of 20 disasters where the concealment of risks played a major part. These case studies are drawn from around the world and span a range of industries: civil nuclear power, coal, oil and gas production, hydropower energy, metals and mining, space exploration, transport, finance, retail manufacturing and even the response of governments to wars, famines and epidemics. Together, case studies give an insight into why people hesitate to report risks—and even when they do, why their superiors often prefer to ignore the news. The book reviews existing research on the challenges of voice and silence in organizations. This helps to explain more generally why people dread passing on bad news to others—and why in the workplace they prefer to keep quiet about unpleasant facts or potential risks when they are talking to superiors and colleagues. The discussion section of the book includes important examples of concealment within the Chinese state hierarchy as well as by leading epidemiologists and governments in the West during the novel coronavirus outbreak in Wuhan in 2019-2020. The full picture of the very early stage of the COVID-19 pandemic remains unclear, and further research is obviously needed to better understand what motivated some municipal, provincial and national officials in China as well as Western counterparts to obfuscate facts in their internal communications about many issues associated with the outbreak.

How Poor Communication on Risks within Organizations Causes Major Catastrophes

Don't Tell the Boss!

Euan Mearns

From 1966 to 1976, four large earthquakes shook the Bohai Bay rift basin of Northeast China. This prompted the Chinese to launch one of the world’s largest social and science experiments into earthquake prediction that would engage tens of thousands of common people. The climax of this came in February 1975 where a prediction was made hours before the Haicheng earthquake struck. Evacuation of the city of Yingkou and some rural districts saved thousands of lives. The Chinese were jubilant, believing they had cracked the earthquake prediction conundrum. Eighteen months later, however, on the 28th July, 1976, jubilation turned to despair when a great earthquake flattened the large industrial city of Tangshan resulting in 250,000 to 650,000 casualties. This book describes the geological, technical, political and sociological backgrounds to the Haicheng prediction success and the Tangshan prediction failure. Ahead of the Tangshan earthquake, Chinese seismologists had accumulated significant information that suggested an earthquake was imminent and came close to making a prediction. With improved knowledge and vastly improved ability to accumulate, consolidate and analyse data, this book suggests that Tangshan could have been predicted today using techniques developed in China in that epic decade of discovery. Building on these insights, it also offers a viable future pathway towards earthquake predictions that combines the insights and organisation of the 1966-1976 Chinese prediction program with modern technologies, in order to facilitate data gathering, interpretation and sharing.

Learning from the 1966-1976 Chinese Prediction Program

The Great 1976 Tangshan Earthquake

The scientific study of complex systems has transformed a wide range of disciplines in recent years, enabling researchers in both the natural and social sciences to model and predict phenomena as diverse as earthquakes, global warming, demographic patterns, financial crises, and the failure of materials. In this book, Didier Sornette boldly applies his varied experience in these areas to propose a simple, powerful, and general theory of how, why, and when stock markets crash. Most attempts to explain market failures seek to pinpoint triggering mechanisms that occur hours, days, or weeks before the collapse. Sornette proposes a radically different view: the underlying cause can be sought months and even years before the abrupt, catastrophic event in the build-up of cooperative speculation, which often translates into an accelerating rise of the market price, otherwise known as a "bubble." Anchoring his sophisticated, step-by-step analysis in leading-edge physical and statistical modeling techniques, he unearths remarkable insights and some predictions--among them, that the "end of the growth era" will occur around 2050. Sornette probes major historical precedents, from the decades-long "tulip mania" in the Netherlands that wilted suddenly in 1637 to the South Sea Bubble that ended with the first huge market crash in England in 1720, to the Great Crash of October 1929 and Black Monday in 1987, to cite just a few. He concludes that most explanations other than cooperative self-organization fail to account for the subtle bubbles by which the markets lay the groundwork for catastrophe. Any investor or investment professional who seeks a genuine understanding of looming financial disasters should read this book. Physicists, geologists, biologists, economists, and others will welcome Why Stock Markets Crash as a highly original "scientific tale," as Sornette aptly puts it, of the exciting and sometimes fearsome--but no longer quite so unfathomable--world of stock markets.

This book discusses the risks of information concealment in the context of major natural or industrial disasters – offering detailed descriptions and analyses of some 25 historical cases (Three Mile Island nuclear accident, Bhopal disaster, Challenger Space Shuttle explosion, Chernobyl nuclear disaster, Deepwater Horizon oil spill, Fukushima-Daiichi nuclear disaster, Enron’s bankruptcy, Subprime mortgage crisis, Worldwide Spanish flu and SARS outbreaks, etc.) and applying these insights to selected on-going cases where such information concealment is suspected. Some successful examples of preventive anti-concealment practice are also presented. In the book, the term ‘concealment’ is used to represent the two distinct behaviors uncovered in the investigations: (i) facts and information about an organization and its functioning being hidden from those that need them – here the concealment can be due to various factors, such as complexity and miscommunication, to name but two – and (ii) the conscious and deliberate action of keeping important information secret or misrepresenting it. This second meaning makes up a surprisingly important part of the evidence presented. Accordingly, emphasis has been put on this second aspect and the approach is more pragmatic than academic, remaining focused on evidence-based practical and useful factors. It raises awareness and provides valuable lessons for decision- makers, risk specialists and responsible citizens alike. This work is also intended as a fact-based reference work for future academic and scholarly investigations on the roots of the problem, in particular regarding any psychological or sociological modeling of human fallibility.

This book explores the major differences between the kinds of risk encountered in different sectors of industry - production (including agriculture) and services - and identifies the main features of accidents within different industries. Because of these differences, unique risk-mitigation measures will need to be implemented in one industry that cannot be implemented in another, leading to large managerial differences between these broad economic sectors. Based on the analysis of more than 500 disasters, accidents and incidents - around 230 cases from the production sector and around 280 cases from the service sector - the authors compare the risk response actions appropriate within different sectors, and establish when and how it is possible to generalize the experience of dealing with risks in any given industry to a wider field of economic activity. This book is mainly intended for executives, strategists, senior risk managers of enterprise-wide organizations and risk management experts engaged in academic or consulting work. By setting out clearly the sector differences in risk management, the authors aim to improve the practice of general risk assessment with regard to identifying and prioritizing risks, and of risk control with regard to planning appropriate mitigation measures.

Based on the Analysis of More Than 500 Incidents, Accidents and Disasters

Critical Risks of Different Economic Sectors

Yannick Malevergne

"Clearly elucidates extreme financial risks associated with rare events such as financial crashes. The highlight of the book is the delineation of various copulas in conjunction with financial dependences among different assets of a portfolio. In particular, the insightful discussion on quadrant and orthant dependences casts new light on the connection between marginal models and financial dependence...brings a vivid portrayal of the subject." -- MATHEMATICAL REVIEWS

Didier Sornette

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