The earthquake that rocked Haiti last week has caused unimaginable death and destruction, a reminder to everyone that catastrophes are usually unforeseeable and therefore almost impossible to prepare for. Yet ironically, scientists almost two years ago warned Haiti about an impending major earthquake. The Haitian government lacked the resources to follow up on the report, which raises the question of whether any country or region of the world, rich or poor, can take meaningful steps to avoid the destruction caused by catastrophes of any kind, from earthquakes and hurricanes to terrorist attacks and pandemics. Knowledge at Wharton asked professors Howard Kunreuther and Michael Useem, authors of a new book titled, Learning from Catastrophes: Strategies for Reaction and Response, and professor Morris A. Cohen, to talk about the challenges of dealing with such crises.
An edited transcript of the conversation follows:
Knowledge at Wharton: Thank you all for joining us.
Howard, let’s start with you. As I noted, although scientists predicted an earthquake in this area almost two years ago, the Haitian government was unable to act on the warning. If they had been able to respond, what could they have done?
Howard Kunreuther: That is an excellent question. I think that we are dealing with a situation in Haiti where, as you indicated, poverty has really dominated the scene. So one of the key questions that comes up with this Haitian earthquake is: What could have been done in the way of preparation? You had houses that were really poorly designed. To design better houses requires a great deal of money and resources. It would have been extraordinarily hard for Haiti to have prepared for this without a great deal of assistance from the rest of the world.
Knowledge at Wharton: Mike?
Mike Useem: I would just add the idea that big problematic developments – disasters of one kind or another; hurricanes, earthquakes, tsunamis, rare events that are sometimes referred to as “once in a century” – don’t sit at the front of people’s consciousness. They are not in front of a legislative body thinking about the budget for this year. We know that these events are out there, the forecasts are there, but one of the great challenges is becoming better at being able to translate an assessment of high-consequence but low-likelihood events into what we do now. [In the case of] Haiti, which is very short on resources, even had they been more aware of [the earthquake warning], and even if they had additional resources, points of intervention weren’t feasible. But prior to even thinking about allocating resources to improve housing stock, to bolster construction of schools and the like, it is critical that we find devices to help people in legislatures and executive offices better prepare and plan so that they know how to think about these low-likelihood but hugely-consequential events.
Knowledge at Wharton: Morris, what are the supply chain challenges that relief efforts face in such situations? And are there any lessons that we learned from the tsunami that would have been helpful in Haiti?
Morris Cohen: We are seeing, unfortunately, as this tragedy unfolds that the big bottleneck is essentially a logistics problem, that it is not even a question of shortages of resources. There is lots of drinking water. There is lots of food. But it’s impossible to get it to where it is needed. This is an incredibly complicated supply chain problem and we saw the same thing with the tsunami. We’ve seen it in other natural disasters. The world has recognized this and there have been attempts to develop better response techniques, better deployment – prior deployment – of resources. It is ironic. These events are once in a century, once in two centuries, so we can’t predict them. But with certainty they will occur. We have to be prepared.
We don’t know where or when they will occur, but we have to deploy resources in advance of them. I think that’s a very important issue. Having the right resources, having the right processes in place – even in a more advanced or developed environment – would have been an enormous challenge. In Haiti, it is compounded by the fact that it was already an environment that was hurting in this regard. So the challenges of getting the resources to where they are needed – on time and with the clock ticking – may, unfortunately, become even more difficult before they get easier.
Knowledge at Wharton: What has been the role of the media in showing the extent of this tragedy and also encouraging people to use Twitter and other social media to donate money to the relief effort?
Kunreuther: I think the media always plays a critical role here. In the case of Haiti, what has happened – certainly in the United States; I can’t speak about other countries – is that people have been extraordinarily sympathetic. The Obama administration has played a very, very creative and very important leadership role here in getting people to think about things. In the spirit of the comments that Mike and Morris have made, there is this myopia here that we have to at least reflect on. People are willing to give money now. There is an opportunity for large contributions to come from the private sector and hopefully from the government. We are seeing some of that now.
But if it doesn’t happen [to a greater extent] in the next few weeks, there will be another crisis that will then dominate the scene, and we are going to be forgetting Haiti in the way that we have forgotten the tsunami and other problems. The problem is in terms of how you are going to deal with the short run, but at the same time try to get large contributions for long-range planning so that Haiti can be in a position where it can really change. I think there is a challenge here, but there is also a tremendous opportunity.
There was a very, very interesting column that David Brooks wrote in terms of poverty and how to deal with it. We need to do things that can really reflect the long run. The media can play an important role here. But keeping it on the media’s agenda is going to be extremely difficult after a period of three or four weeks – at least from past experience.
Knowledge at Wharton: That was my next question. I wonder what Morris and Mike think about the idea that the public has a very short attention span. It is clear what is needed in a country like Haiti is long-range thinking. Is there a chance that life could actually get better in this country now that global attention is focused on the challenges? Or is that just wishful thinking?
Cohen: There was an interesting article in The Wall Street Journal over the weekend that talked about major disasters that have occurred in cities in the last 300 years – Lisbon, San Francisco and other places – which have led to the rebirth of these cities and [the influx] of major investment. But the betting seems to be that this is not going to happen in Haiti. Haiti has been a problem case for the world for a long time. Will attitudes change sufficiently because of this disaster? Even with Twitter, not that much money has been donated compared to other disasters. We are talking about peanuts, compared to what is needed. The media is bringing it to our attention, but the response that is needed is much, much greater than what has happened. There is an enormous gap still there.
Useem: This disaster is one of enormous scale. We have to remind ourselves that several million people are directly affected. Death tolls could rise to over 100,000 at least. But having said that, in our recent past we have been through some events of comparable magnitude. The earthquake in China, for example, back in 2008 is estimated to have killed about 70,000 people. With the tsunami back in December 2004, the estimate of loss of life there was somewhere around 280,000 or more. Katrina itself killed 1,300, but well over 1.5 million people were evacuated, and we know the enormous consequences that persist to this day of that disaster and its scale. I think we all appreciate that the media right now has taken extraordinary risks – personal risks – on the part of reporters and crews that have gone with them to report to us as graphically as they can what it means to be in Port-au-Prince now, under a pile of rubble, still with some life left in you. The flow of cash, the extraordinary outpouring of support generated by the media, has been notable.
But as my two colleagues have implied, we often soon forget. It is not a media problem. It is a more general problem for leaders of organizations – those in elected office, those responsible at the U.S. Agency for International Development, the World Bank, the U.N. agencies, etc. It would be helpful — after this immediate crisis has ended, at least in terms of emergency services – to take a step back and ask what we can do as reporters, as teachers, as organizational leaders to better prepare internationally for the kind of disasters that are out there. Morris said it well just a few minutes ago: An earthquake like this, we don’t know when it’s coming, but we know it will come sooner or later. There is a long list of such low-probability, but high-consequence events that I think we all need to become better at thinking about and being prepared for.
Knowledge at Wharton: If we could probe a little bit deeper into the media, including social media like Twitter and Facebook, for example. One thing that is very striking this time is that in previous catastrophes, the highest amount of money the Red Cross raised through social media was about $3 million. This time, within days of the earthquake, I think it raised $20 million – much of it through text messages. Now we have all heard about the “wisdom of crowds” concept. There is something to be said about the “altruism of crowds,” and what that shows about the way the media is changing.
Kunreuther: Let me raise the issue that Morris partly brought up when he indicated that [the donations] make up a larger amount of money certainly than we have had in the past, but they aren’t the kind of money that is really needed. And so maybe you can use Twitter and Facebook as a signal of the [desire] people have to really use these [methods] to generate much larger funding. One current example of this is that the World Economic Forum is going to use Haiti as a key issue in the conference next week at Davos. The fact that they want to use that as an issue for people to think about is an opportunity to really raise not just millions, but billions, of dollars from the private sector and from groups that could afford this [level of giving]. There is an opportunity here for altruism at a broader level. So I think if we can use Twitter and Facebook as a way of saying, ‘Look, there are things that are needed at a bigger level in order to do the kinds of reconstruction that are necessary,’ then I think you have a chance. It’s an uphill battle given everything we all know about Haiti to do the kinds of things that are necessary.
Let me use one example that I think is an instructive one from the 1923 earthquake in Tokyo that destroyed the entire city. Frank Lloyd Wright’s Imperial Hotel was the one building that managed to at least stand, and it didn’t even stand completely. The government was really very concerned. They had tried to develop a plan but never really implemented it. But there is one thing that they did do, and we know about Japan today versus where it was in the 1920s. They developed reconstruction standards and they made sure that buildings that were designed, that were rebuilt, met those standards.
The challenge is going to be whether, in a country with abject poverty, one can have enough money so that international organizations will be able to [take the steps] that Japan did. Japan was a richer country and was able to do things in a variety of ways that [may not be possible in] Haiti [in terms of redesigning] the city. But that’s what people are looking for. That’s the short-term challenge, as we have all said. Can you have a strategy and plan that can be implemented [if you] have enough money to do it? Twitter and Facebook are not going to be the [sources] for that kind of money.
Cohen: One thing the media has done more and more – and this disaster illustrates it – is [show that a catastrophe] is no longer something that occurs in a distant place that we can’t imagine. We see it in real time. We can experience it. And so the altruistic response is there. But I absolutely agree with Howard that the long-term solution is not tens of millions. It is tens of billions. And where is that going to come from to invest in Haiti?
My bigger concerns right now are long-term issues. We can redesign the building codes. We can invest in infrastructure. But I think we are facing a crisis between now and, let’s say, the next two weeks, where you could have riots in the streets. You could have widespread disease. You could have all kinds of issues occurring. And it’s not clear to me how that is going to be alleviated. The U.S. Army is on the scene, but in order for them and everyone else – the U.N. – to address this problem is on an order of magnitude like the invasion of Normandy. You are going to need an army to invade the country and occupy it in order to solve this problem. If not, then people are going to start dying in greater numbers through disease and starvation. I don’t see the answer to that immediate problem at this point.
Knowledge at Wharton: How developed is the insurance market in Haiti? How much do you think insurers might be liable for, or is there no insurance market there?
Kunreuther: We have not heard very much, and we study insurance. I’ve heard very, very little about any insurance in Haiti. My guess is – although we can check that out and others who are hearing this Podcast can comment on this – is that there is very, very little. This is one of the challenges in the emerging economies. You don’t have the institutions that really exist as we do in the developed world for dealing with insurance. And so my guess is that there would be very little insurance. Most of these homes were very, very poorly constructed. There isn’t an insurance company I could imagine that would have been willing to provide the kind of coverage that would be necessary to help on the rebuilding. So I think we are really talking about new money coming in. I do want to add to what Morris has said and I know Mike and I have chatted about this in the context of our own book on Learning from Catastrophes, that the very short run has to be dealt with. Everything we are talking about, with regards to the long run, pales if we don’t get this country to the point where it is able to survive and cover these problems. If we don’t do that, everything is going to go by the wayside because everyone is going to have to put out fires over the next few weeks or months or possibly years. All the good intentions, and even maybe the money that is raised, could [be wasted]. But on the insurance side, it would be very interesting to hear a little bit more on what actually exists. My guess is there is very little.
Useem: To add to that, the immediate consequences are in front of us everyday right now, including the catastrophic impact on life and limb. In the weeks ahead, the problems are going to be different, but they are going to be, in some respects, no less severe. Of course, when disasters do strike of this scale, it is the most vulnerable populations – the very poor, children, those who are in need of medical care already — who are most affected. So I think the second order consequences of this particular earthquake playing out over the next several weeks are going to be not in terms of direct threat to life, but in terms of economics and social existence. And, of course, the economy has been just about stopped in its tracks here. Once we get through this immediate search and recovery phase and then start worrying about simply reconstructing housing and beyond, there is the whole issue here of how to get this economy, which was not in great shape to begin with, back on its feet. It is a way of saying that the world has a long-term obligation to hang in here. We do worry that after media attention backs off, these more far reaching problems – social, economic, and beyond – will not be addressed. I think there is an opportunity for social entrepreneurs with the benefit of the web these days – everything that goes with that, including Twitter and well beyond – to develop ways to involve thousands, maybe millions, of people around the globe in not just immediate relief for Haiti but in longer-term investment in Haiti.
Knowledge at Wharton: Mike, following up on what Morris said earlier about the necessity for perhaps an invading army to enter and solve the problem: Very often after a catastrophe of this type, especially if there is the leadership of a very poor country involved, you have giant relief agencies that come in and try to make things happen. To what extent is this really desirable and what does it say about leadership and, indeed, the idea of sovereignty in this global economy?
Useem: You know, there is such a lesson here from the Haitian experience. And that is that in the immediate aftermath of the earthquake itself, many of the U.N. representatives on the ground who are partly responsible for distributing relief were themselves killed and their whole operation put out of commission. It is akin to the fact that some of the nerve centers for New York’s response that should have been able to pick up quickly as 9/11 began to unfold back in 2001, some of them were actually in the buildings directly impacted by the two attacks early on 9/11. It is really a statement that when it comes to large-scale disasters, we are generally underprepared organizationally to respond in a systematic, comprehensive way. No surprise, and no blame here to be allocated. It is just a reality of life. As we have watched, in fact, the United States come to control air traffic at the Haitian airport in the vacuum that is left there, [it seems to me that this is] symptomatic of the fact that many organizations, many agencies are simply filling the vacuum with very good motives to help the country at least get through this crisis. Longer term, you raise a great question. At some point the U.S. is going to have back out of their seats [and give] sovereignty back to the hopefully soon functioning government of Haiti.
More generally though, here is a statement to make. This is, as we have already said, not the first disaster of this scale – for sure not the last. It is beyond any community’s capacity or any country’s capacity to adequately respond. Isn’t one of the lessons here that – as a universe, as a globe – we have to develop better mechanisms, better organizational schemes, stronger forms of commitment on the part of people privately through the United Nations and other vehicles to be ready to assist and to have a scheme for intervention without it having to be quite so ad hoc as it has been.
Cohen: What Mike says underscores the fact that one of the key challenges here is coordination. There are many agencies and entities that are prepared and even on the scene that have been less effective than they possibly could be. The finger pointing has already begun. The French have accused the Americans of invading Haiti. And the sovereignty issue has been raised. But the ability to coordinate these things on a global level is an enormous challenge. The United Nations has developed new processes and procedures for disaster relief. There has been a lot of progress made in the Red Cross in figuring out how they can deal with these contingencies. But if you look at the scale of what happened in Haiti, it is not anything close to what they were prepared to do. No one agency – not even one country — has sufficient resources to solve this problem. So the problem of coordination is there and real. And, yes, we need to figure out how to solve it in a better way. But I don’t see the answer to that, at least in the short run.
Kunreuther: The one point that I would add to what my colleagues have mentioned is that this really is going to have to fall at the end of the day on the Haitian government. In some sense, they could see this as an opportunity, with the leaders saying that they could change things in a way that will benefit them – whatever their values are, and hopefully they are positive. They could take the role of helping to coordinate with international organizations and serve as a case study of how a country has managed to find opportunity [arising out of the devastation]. There is a chance for something like this to happen. But if the leaders feel that it is business as usual and that they have to fall back on where they are, it is really going to be extraordinarily difficult – no matter what the U.N. does or what the World Bank does or any of these international organizations. It really has to be a partnership. One of the open questions – and I think there is probably a lot of discussion going on right now with the government – is to see the challenges, but also the opportunity to take that leadership role and coordinate in such a way so that things can happen which otherwise would not.
Knowledge at Wharton: Mike and Howard, in your book, do you discuss some of the behavioral biases that cause bad decisions to be made about the likelihood of disasters?
Kunreuther: Biases? Interesting word. Let me start. Mike and I have talked a lot about this and it is an area that both of our centers have been concerned about. I think there are two biases that we have actually been talking about. One of them is this notion of a short-run bias and the idea of myopia, feeling that I can’t really think more than the next year or two years ahead. There may be very good reasons for that, and there may be a whole reward system and incentive system that encourages that.
So there is a myopia bias – an “it cannot happen to me” bias. Then there is a bias where, in many, many situations, people say, ‘Look, here are the pleasant reasons for living here. I don’t want to think about a disaster.’
And then the last bias, which is the one that, of course, has happened right after the earthquake – what we call an availability bias. The minute that disaster occurs, it is on everyone’s agenda for a short period of time [during which] Twitter and Facebook and a variety of things are going to mobilize a set of activities.
And, so, we have these three kinds of combinations. It is a combination of these that make it really, really difficult to deal with.
Useem: Another short coming to add to that is just who we are. We tend to hate bad news coming up from below. We don’t want to hear it if it reflects poorly on us, for example. It is pretty well documented now in the current financial crisis that many of the problems that took down companies like AIG and Fannie Mae were problems that people could see. That is, those on the front line recognized that the subprime mortgages were shaky, that everything was going to be okay so long as everything was going up. But if there was a tipping point reached and a systemic decompression so to speak, that there would be big problems forthcoming.
People in the trenches often saw exactly those problems. As they sought to communicate upwardly the warning signs, the resistance was pretty everywhere at the top. Not because people are perverse and don’t want to face problems, but it is the nature of who we are. We don’t like bad news. If you want the extreme example that, I think, sums it up as well as any I have ever seen, consider the Challenger launch in January 1986 and its problems with the infamous O-rings that cracked under cold conditions, which described the launch conditions that particular early morning at the Cape in Florida. The problems with the O-rings actually were known by the maker of the O-ring, at least with the engineers who were most directly in contact with those particular parts of the booster rocket in which they were located.
Despite efforts to bring those concerns upward, top management did not absorb that information. Now in defense of top management, there is lots of bad news that comes up everyday. And we have to become mindful of the fact that some criticism, some bad news, we cannot and should not take into account. Other information, though, we should. So when it comes to behavioral biases, I would simply add the need for a device that would help us be better at, I call it, peripheral vision, as one of our colleagues has written about, in which you can see the warning signs. The fact is that indeed there were warning signs in Haiti about the prospect of an earthquake, but they were ignored by everybody including myself. I didn’t pay any attention to those, of course, didn’t put money into something that might have averted that. I think that particular behavioral problem is one of the major sources why we seem to stumble into these low-probability, high-consequence events too little prepared.
Knowledge at Wharton: How can someone, or the world, prepare for such events? In fact, can you prepare? Does your book say anything about that?
Useem: The great hurricane that hit Myanmar, the great flooding in Mozambique, the Katrina experience, 9/11 experience, the Challenger disaster: It is not that we want to dwell on these terrible, terrible circumstances and ordeals that people have gone through, but in our view we must remember most the need to stay vigilante and be focused on working with bad news and risky circumstances. If we want to do something for the people of Haiti along with all the things that millions of people are doing now in terms of immediate relief, it would be to describe the lessons of Haiti as graphically and in as much detail as we can, and communicate those lessons so that they will help all of us be ready for the next Haiti-like event.
Kunreuther: One of the challenges that we have had in all of these low probability events is that we are able to put this below our threshold level of concern by saying this is a one in two century event. People say, ‘Well, the probability [of something bad happening] is sufficiently low that we can ignore it.’ That is a major problem in terms of not putting it on the agenda. So one of the reasons that we have all been talking about longer term is that we may get people to think about things in a different way. I’ll just use one little example that we have used in even a class experience.
You tell an individual there is a 1 in 100 chance of a flood, earthquake or hurricane occurring next year and you need to take some steps to protect yourself. You ask people what they would do or how much they would pay. The 1 in 100 sort of looms as a relatively low event.
If you change the time horizon and think long-term and tell the individual that if you live in this house for a 25-year period, the chances are greater than 1 in 5 that you will have at least one flood, earthquake or hurricane, the reaction is extraordinarily different. People pay more attention to it. They think about things in a different way. And so a challenge I think that we are facing is that when you have these events, let’s think about these things on a longer-term basis. Present information in that way and think of strategies. We may be able to do a better job of preparing if people feel that this event is more likely to happen than that “it won’t happen to me” event.
Knowledge at Wharton: There has been a lot written about new approaches to mitigation and preparedness and emergency response and all that. What does this book – your new book – offer that goes beyond that, or that you feel would be especially helpful to know about given what has happened in Haiti?
Kunreuther: What we found very exciting is that we have tried to put together in this book a group of people who were part of a global agenda council associated with the World Economic Forum who had experience around the world. And so this is not a book by us. We are authors or editors of 20 people who have written from their perspective – not only about natural disasters but about the financial crisis, about pandemics, about other kinds of disasters where there are principles here that we felt really are important.
The principles are in the context of what are you going to do before hand? How can you think about what will happen afterwards? How do you put these together? The experience is that we have gotten a much broader perspective from people with different backgrounds, including meteorology, the financial sector and so forth. We view this book really as something that is not just a do-it-yourself kind of thing for natural disasters, but really how do you think more broadly about a variety of these low probability events?
Useem: The thrust of the book is really a product of a moveable seminar. Twenty people. We met several times at some length people who were experts on financial crises, on pandemics, on physical crises like we see in Haiti.And with that in depth understanding in different areas of what went wrong, we looked for the common themes that seemed to explain why in all these cases things went wrong. We can diagnose what went wrong. That is certainly the right step to take in looking now at how to make it right before this kind of disaster happens again.
So, for instance, we observed in all these different settings a lack of readiness on the part of people to swiftly intervene, to know the drill, for many different units to be ready to orchestrate public and private relief together – things that Morris alluded to earlier. Just to sum all this up, in the end we identified half a dozen – we call them guiding principles — that anybody concerned with disaster, avoidance, or disaster recovery ought to be mindful of.
This is almost a chestnut from the field of leadership and leadership development: There is no better time to have leadership — and all the principles that go with that — in place before you need it.
Number two, leadership is not natural. It is not a natural skill that most people bring to the table. Therefore, looking ahead, once we can get beyond Haiti, our book does suggest that it would be a great time to take the tsunami, the events in Haiti, the disaster in Myanmar, Challenger, the implosion of AIG, and with that collective experience work with these principles and build others. And then going all the way back to new social media, I think we have an opportunity for these ideas to be communicated far more extensively than they have been in the past. So in the same sense that President Obama built some of this success with the grass roots through social media, I think with these ideas, these principles now are pretty clear, at least to our group of 20 , as to what is really vital going forward. I think we have better devices, if you will, for these ideas to be communicated out.
Knowledge at Wharton: Since the book is titled Learning from Catastrophes, could you suggest a couple of things that you hope people will learn from catastrophes from your book?
Kunreuther: One of the key lessons of Learning from Catastrophes is that this is not an isolated event in the sense that only one country is involved. We are in an interconnected world. We have interdependencies. We have a whole variety of things that really impinge on all of us. And to the extent that we see these as global risks, rather than risks for the country, and I think the media, and the variety of what we have today, communicates it in that fashion, we have a better opportunity of f bringing all of us together to think about that. And so I would say the interconnectedness — and the notion that we have been stressing from the very beginning of trying to think more broadly, and trying to think long-term, and coordinating these activities, both in the short-term and long-term – are the lessons we would like to see coming out of this book.
Useem: I think I would add to that, Howard, the idea that catastrophes have been here since people have been here on earth. The scale of the catastrophes we have seen, though, in recent years in some respects has become more significant, in part, because of population growth, the concentration of people in areas that ordinarily would not be inhabited because of urban pressures and all that.
And, thus, as we look ahead the next 10 or 15 years, again going back maybe to what Haiti can help us do now, we see the vital importance of becoming more mindful of the fact that low probability, big deal events are going to happen. I think Morris said it so well. They are going to happen. We don’t know where or when. And, therefore, within our country and certainly even more importantly within the world community, our conclusion is that we have to develop devices, if you will – mechanisms to build leadership and commitment to prevent the disasters that are avoidable. Some disasters are – to use a tennis phrase here – unforced errors. Other disasters are not. Whichever way they come, we certainly want to be prepared to have in place relief and recovery. Again, there are many specifics to go with that. But I think the summary line is organization and preparedness for what lies ahead.
Cohen: On an optimistic note, I think we have seen the development of better tools for the allocation of resources and for planning for these types of low probability events based on contingencies. In many ways, what we are dealing with here is analogous to a real option. Society has to make investments in advance of these disasters. What I have seen – even in the more mundane levels like in supporting mission critical products in after sales and so on – is that the effectiveness of mitigating is primarily determined by the decisions you have made prior to its occurrence. And we all know that. We are seeing better tools. It’s not that we can forecast it. And it is not that we can prevent it. We have to figure out, given that it is going to occur, how will we respond? And the decisions that we make about how we respond – 99% of them are made prior to the event. That requires better decision-making tools. As I said, optimistically, we have developed better tools. We are making better use of information. I think the technology and the will to use these tools are improving.
Knowledge at Wharton: Well, thank you, Morris, for that note of optimism. And, Mike and Howard, thank you both for joining us as well.