Ian Goldin is Professor of Globalization at the University of Oxford and author of “The Butterfly Defect”, a book that looks at how local events cascade over national borders. WRIN.tv spoke with Professor Goldin about globalization, systemic risk, and why mitigating uncertainty in an interconnected world is essential.
According to Professor Goldin, the titled of his book “The Butterfly Defect” refers to Lorenzo’s “Butterfly Effect”, which describes how something that happens on one side of the world can impact events elsewhere. In Loernzo described how a butterfly flapping its wings in the US could create a hurricane on the other side of the world.” Professor Goldin says Butterfly Defect is the nature of risk.
Globalization and technological change has created an incredibly hyper-connected global system with surprises that impact us come from outside our own domain. He says “the great challenge of risk management in the 21st century is how to mitigate… build resilience against it…(and) manage what’s more complex than ever before.”
Professor Goldin believes globalization is a positive force, but he is concerned about globalization in reverse. He notes that globalization has lifted people from poverty and created the most rapid growth the world has ever known economically. Unless society can manage the emergent forces coming out of globalization “we can find that it is set back dramatically.” Forces that come from globalization include protectionism, nationalism and xenophobia. He also warns that new systems with integrated technology are too vulnerable as the world becomes more interconnected.
Globalization causes instability because of the pace of change and ‘interconnectedness.’ Five years ago there were one billion people connected. Now there are five billion connected. As more people become connected, it becomes more difficult to manage and control. New risks are created by technologies that are evolving faster than our managerial capabilities.
Professor Goldin wrote the Butterfly Defect as a wakeup call. “The insurance and risk management industry are stuck in silos…created in 20th century thinking.” It has to be the CEO or President who thinks of risk management as their primary duty, said Professor Goldin. “