Volcanic Ash Redux

My very first blog post – Volcanic Ash is Financially Risky – pointed out that the European authorities did a foolish thing by shutting down European air space without even bothering to test if the ash had made it dangerous to fly.  They assumed that it was dangerous because of only one other known incident of a jet flying through a different ash cloud years ago. The point of my blog entry was not that they should have kept the skies open, as some have interpreted it.  Rather, the point is that they should have closed the skies and immediately ordered tests to verify their assumption that it’s dangerous to fly.  Instead, they waited two or three days until the Dutch had had enough of this ridiculous approach and flew tests themselves.  Lo and behold – it was safe!

Interview at Institutional Investor

I was interviewed last week at Institutional Investor as part of their “Executive Thought Leadership Video Series.”

NTSB for Financial Services

This is not a new idea – lots of people have called for financial regulators to set up a body for markets that resembles the NTSB.  It isn’t even all that brilliant – it’s more like the proverbial no-brainer.  Why don’t we have an NTSB for Financial Services?  Why don’t we treat market crashes the same way we treat airplane crashes?  The National Transportation Safety Board has made airline travel (and railway, ferry and other public transit)  extremely safe in a relatively short amount of time.  How did they accomplish this feat?  Simple – every time there is an accident, or a near accident, a team of investigators figures out what caused the accident/incident and then regulations are put in place to prevent that particular thing from ever happening again.  Airlines are required to adhere to the new rule.  Required – as in “you don’t fly if you don’t do this.”  The NTSB’s origins can be traced to the Air Commerce Act of 1926 in which Congress required the Department of Commerce to investigate the causes of airplane crashes.  At first the benefits were slow in coming.  But over time air travel has become much safer.  Sure, it takes time to investigate and it takes time to enact the appropriate new regulation, and the process is far from perfect.  But it works.  Today, I am completely comfortable getting on a commercial airliner (in the developed world) because of this.  It has reduced the accident rate to a negligible level.  And as long as this process continues, air travel will remain safe.