There was a rather remarkable letter to the editor published in the WSJ last Friday by Terry Barr, President of Sampson Oil and Gas. It was not the usual 150 words but an extensive piece which took up much of the page on the main opinion and described a detailed timeline surrounding the events leading up to the catastrophic explosion, fire, and subsequent oil leak. The events are unambiguous. The catastrophic events were a clear consequence of not one but a series of bad decisions and activities executed on that fateful drilling platform.
Why would anyone or any group be so reckless? Perhaps the answer is we tend to become reckless when we are not aware that our behavior is risky. We tend not to become aware when "risky" behaviors virtually never result in bad outcomes. Bad outcomes serve a useful purpose when we are able to link specific behaviors to particular risky activities.
When we are successful in avoiding catastrophic outcomes, we tend to forget how are actions may cause such events. We start to believe that the world has become domesticated and somehow the world has changed in such a way that we were no longer vulnerable to such things as oil spills or financial meltdowns. Furthermore, we also lose the tools to address such unpleasant events. Who should BP turn to with experience in capping such a deep well and cleaning up the horrible mess? Who is around who has experience in dealing with such a calamity? The last major oil spill was almost 20 years ago during the first gulf war.
Over time, we lose both the expertise needed to deal with such calamities as well as our appreciation for the importance of safety measures to avoid them in the first place. In the realm of the financial world, it is pretty clear that excessive debt and leverage sets the stage for investment bubbles and financial collapse and it has done so repeatedly. Yet in the periods of time between calamities, memory of this fades, particularly when nothing happens to those who extend themselves. Leverage and debt be be used to make people very wealthy and periods of economic expansion coupled with measures to insulate people and institutions from modestly bad economic decisions ultimately entices many people to become reckless.
After catastrophes, we tend to deploy many control measures, some of which are more critical than others. Over time, we tend to forget what rules are critical and what rules are followed out of simply habit. The longer we avoid spectacularly bad outcomes the less vigilant we become and the less we tend to appreciate what control measures are really important. With enough time, no one really remembers what behavior is really reckless. I would venture to guess that virtually no one within BP has experienced such an event. We can only hope that re-exposure results in some sort of lasting immunity. How can we artificially deliver such a booster without having to live through these events?