Why It’s Usually Crazier Than You Expect
I want to try to explain why Gamestop went up 100-fold in the last year and why Sears never recovered. They have to do with the same force in opposite directions. It’s a force that can explain a lot of baffling trends lately, and it’s so easy to underestimate and overlook.
First, a story about why some animals go extinct faster than people expect.
Forecasting when a species might go extinct is hard because whatever is causing a species to die off rarely progresses at the same rate. It can speed up in the blink of an eye in ways that surprise people.
Two researchers wrote a paper a few years ago explaining why.
Say an elephant is being hunted for its tusk. The rate of hunting often massively speeds up over time, cascading into a frenzy that pushes a mildly at-risk species into quick extinction.
It’s simple: As the number of elephants declines, tusks become rare. Rarity pushes prices up. High prices make hunters excited about how much money they can make if they find an elephant. So they work overtime. Then fewer elephants remain, tusk prices rise even more, more hunters catch on, they work triple-time, on and on until the number of hunters explodes as everyone chases the last herd of elephants whose super-rare tusks are suddenly worth a fortune.
Forecasting models that don’t appreciate how frantic the last-minute hunt can become “give a false sense of security when managing large harvested populations,” the researchers wrote. A (Read more...)