Ep 47: Risks & Uncertainties in Pandemics & Retirement Planning

Interesting parallels can be seen in modeling retirement projections and the Coronavirus pandemic. Small changes to inputs -- such as the rate of return or infection spread rates -- can have magnified effects on outputs -- such as ending wealth or total infections (and ultimately deaths), given similar exponential growth traits.

What is important to understand in both are the concepts of risk and uncertainty. Risk can be modeled. Uncertainty cannot yet must be planned for. Misunderstand either and things can quickly go wrong.

Hear Kevin discuss these two critical concepts. He also gives his opinion on why Ohio Governor Mike Dewine was prudent in the aggressive economic shut down in face of Coronavirus uncertainty. However, Ohio, and the U.S. at large, now need to transition back to economic functioning in light of Coronavirus risks being better understood, significantly less than what was initially believed, and to avoid second-order effects becoming more severe than those from the virus itself.

 

Timestamps:

3:45 - How Risk And Uncertainty Affect Investing

14:37 - What Is Non-Linear Modeling?

17:32 - An Example Of Non-Linear Modeling

21:33 - The Math And Science Of The Coronavirus

35:09 - Known Unknowns