1 00:00:00,818 --> 00:00:02,328 Once upon a time 2 00:00:02,328 --> 00:00:08,979 we lived in an economy of financial growth and prosperity. 3 00:00:08,979 --> 00:00:12,674 This was called the Great Moderation, 4 00:00:12,674 --> 00:00:16,080 the misguided belief by most economists, 5 00:00:16,080 --> 00:00:19,383 policymakers and central banks 6 00:00:19,383 --> 00:00:22,714 that we have transformed into a new world 7 00:00:22,714 --> 00:00:26,571 of never-ending growth and prosperity. 8 00:00:26,571 --> 00:00:31,314 This was seen by robust and steady GDP growth, 9 00:00:31,314 --> 00:00:34,314 by low and controlled inflation, 10 00:00:34,314 --> 00:00:36,553 by low unemployment, 11 00:00:36,553 --> 00:00:40,459 and controlled and low financial volatility. 12 00:00:40,459 --> 00:00:47,091 But the Great Recession in 2007 and 2008, 13 00:00:47,091 --> 00:00:50,570 the great crash, broke this illusion. 14 00:00:50,570 --> 00:00:55,594 A few hundred billion dollars of losses in the financial sector 15 00:00:55,594 --> 00:00:59,674 cascaded into five trillion dollars 16 00:00:59,674 --> 00:01:01,558 of losses in world GDP 17 00:01:01,558 --> 00:01:05,361 and almost $30 trillion losses 18 00:01:05,361 --> 00:01:09,306 in the global stock market. 19 00:01:09,306 --> 00:01:14,501 So the understanding of this Great Recession 20 00:01:14,501 --> 00:01:19,862 was that this was completely surprising, 21 00:01:19,862 --> 00:01:21,208 this came out of the blue, 22 00:01:21,208 --> 00:01:24,125 this was like the wrath of the gods. 23 00:01:24,125 --> 00:01:25,916 There was no responsibility. 24 00:01:25,916 --> 00:01:27,839 So, as a reflection of this, 25 00:01:27,839 --> 00:01:31,448 we started the Financial Crisis Observatory. 26 00:01:31,448 --> 00:01:35,386 We had the goal to diagnose in real time 27 00:01:35,386 --> 00:01:37,757 financial bubbles 28 00:01:37,757 --> 00:01:43,614 and identify in advance their critical time. 29 00:01:43,614 --> 00:01:46,972 What is the underpinning, scientifically, of this financial observatory? 30 00:01:46,972 --> 00:01:51,598 We developed a theory called "dragon-kings." 31 00:01:51,598 --> 00:01:54,804 Dragon-kings represent extreme events 32 00:01:54,804 --> 00:01:58,076 which are of a class of their own. 33 00:01:58,076 --> 00:02:00,919 They are special. They are outliers. 34 00:02:00,919 --> 00:02:04,359 They are generated by specific mechanisms 35 00:02:04,359 --> 00:02:07,245 that may make them predictable, 36 00:02:07,245 --> 00:02:10,143 perhaps controllable. 37 00:02:10,143 --> 00:02:13,970 Consider the financial price time series, 38 00:02:13,970 --> 00:02:16,143 a given stock, your perfect stock, 39 00:02:16,143 --> 00:02:18,495 or a global index. 40 00:02:18,495 --> 00:02:20,549 You have these up-and-downs. 41 00:02:20,549 --> 00:02:24,111 A very good measure of the risk of this financial market 42 00:02:24,111 --> 00:02:26,533 is the peaks-to-valleys that represent 43 00:02:26,533 --> 00:02:28,829 a worst case scenario 44 00:02:28,829 --> 00:02:32,502 when you bought at the top and sold at the bottom. 45 00:02:32,502 --> 00:02:36,251 You can look at the statistics, the frequency of the occurrence 46 00:02:36,251 --> 00:02:38,606 of peak-to-valleys of different sizes, 47 00:02:38,606 --> 00:02:41,157 which is represented in this graph. 48 00:02:41,157 --> 00:02:44,189 Now, interestingly, 99 percent 49 00:02:44,189 --> 00:02:47,982 of the peak-to-valleys of different amplitudes 50 00:02:47,982 --> 00:02:51,442 can be represented by a universal power law 51 00:02:51,442 --> 00:02:54,893 represented by this red line here. 52 00:02:54,893 --> 00:02:59,039 More interestingly, there are outliers, there are exceptions 53 00:02:59,039 --> 00:03:00,942 which are above this red line, 54 00:03:00,942 --> 00:03:04,701 occur 100 times more frequently, at least, 55 00:03:04,701 --> 00:03:08,854 than the extrapolation would predict them to occur 56 00:03:08,854 --> 00:03:12,791 based on the calibration of the 99 percent remaining 57 00:03:12,791 --> 00:03:15,040 peak-to-valleys. 58 00:03:15,040 --> 00:03:19,640 They are due to trenchant dependancies 59 00:03:19,640 --> 00:03:23,152 such that a loss is followed by a loss 60 00:03:23,152 --> 00:03:26,115 which is followed by a loss which is followed by a loss. 61 00:03:26,115 --> 00:03:29,226 These kinds of dependencies 62 00:03:29,226 --> 00:03:34,838 are largely missed by standard risk management tools, 63 00:03:34,838 --> 00:03:37,767 which ignore them and see lizards 64 00:03:37,767 --> 00:03:41,586 when they should see dragon-kings. 65 00:03:41,586 --> 00:03:45,503 The root mechanism of a dragon-king 66 00:03:45,503 --> 00:03:48,639 is a slow maturation towards instability, 67 00:03:48,639 --> 00:03:50,261 which is the bubble, 68 00:03:50,261 --> 00:03:52,891 and the climax of the bubble is often the crash. 69 00:03:52,891 --> 00:03:56,516 This is similar to the slow heating of water 70 00:03:56,516 --> 00:03:59,419 in this test tube reaching the boiling point, 71 00:03:59,419 --> 00:04:01,909 where the instability of the water occurs 72 00:04:01,909 --> 00:04:05,246 and you have the phase transition to vapor. 73 00:04:05,246 --> 00:04:08,923 And this process, which is absolutely non-linear -- 74 00:04:08,923 --> 00:04:11,203 cannot be predicted by standard techniques -- 75 00:04:11,203 --> 00:04:15,379 is the reflection of a collective emergent behavior 76 00:04:15,379 --> 00:04:17,758 which is fundamentally endogenous. 77 00:04:17,758 --> 00:04:20,971 So the cause of the crash, the cause of the crisis 78 00:04:20,971 --> 00:04:24,155 has to be found in an inner instability of the system, 79 00:04:24,155 --> 00:04:30,191 and any tiny perturbation will make this instability occur. 80 00:04:30,191 --> 00:04:33,891 Now, some of you may have come to the mind 81 00:04:33,891 --> 00:04:36,516 that is this not related to the black swan concept 82 00:04:36,516 --> 00:04:39,451 you have heard about frequently? 83 00:04:39,451 --> 00:04:41,868 Remember, black swan is this rare bird 84 00:04:41,868 --> 00:04:45,277 that you see once and suddenly shattered your belief 85 00:04:45,277 --> 00:04:47,751 that all swans should be white, 86 00:04:47,751 --> 00:04:51,295 so it has captured the idea of unpredictability, 87 00:04:51,295 --> 00:04:52,804 unknowability, that the extreme events 88 00:04:52,804 --> 00:04:55,635 are fundamentally unknowable. 89 00:04:55,635 --> 00:04:57,360 Nothing can be further 90 00:04:57,360 --> 00:04:59,998 from the dragon-king concept I propose, 91 00:04:59,998 --> 00:05:03,716 which is exactly the opposite, that most extreme events 92 00:05:03,716 --> 00:05:06,939 are actually knowable and predictable. 93 00:05:06,939 --> 00:05:10,444 So we can be empowered and take responsibility 94 00:05:10,444 --> 00:05:12,663 and make predictions about them. 95 00:05:12,663 --> 00:05:15,863 So let's have my dragon-king burn this black swan concept. 96 00:05:15,863 --> 00:05:17,489 (Laughter) 97 00:05:17,489 --> 00:05:20,429 There are many early warning signals 98 00:05:20,429 --> 00:05:22,308 that are predicted by this theory. 99 00:05:22,308 --> 00:05:24,675 Let me just focus on one of them: 100 00:05:24,675 --> 00:05:27,827 the super-exponential growth with positive feedback. 101 00:05:27,827 --> 00:05:28,987 What does it mean? 102 00:05:28,987 --> 00:05:31,160 Imagine you have an investment 103 00:05:31,160 --> 00:05:34,314 that returns the first year five percent, 104 00:05:34,314 --> 00:05:37,469 the second year 10 percent, the third year 20 percent, 105 00:05:37,469 --> 00:05:40,011 the next year 40 percent. Is that not marvelous? 106 00:05:40,011 --> 00:05:43,409 This is a super-exponential growth. 107 00:05:43,409 --> 00:05:45,346 A standard exponential growth corresponds 108 00:05:45,346 --> 00:05:49,090 to a constant growth rate, let's say, of 10 percent 109 00:05:49,090 --> 00:05:52,571 The point is that, many times during bubbles, 110 00:05:52,571 --> 00:05:56,168 there are positive feedbacks which can be of many times, 111 00:05:56,168 --> 00:05:59,867 such that previous growths enhance, 112 00:05:59,867 --> 00:06:03,355 push forward, increase the next growth 113 00:06:03,355 --> 00:06:05,857 through this kind of super-exponential growth, 114 00:06:05,857 --> 00:06:08,971 which is very trenchant, not sustainable. 115 00:06:08,971 --> 00:06:12,028 And the key idea is that the mathematical solution 116 00:06:12,028 --> 00:06:15,666 of this class of models exhibit finite-time singularities, 117 00:06:15,666 --> 00:06:19,019 which means that there is a critical time 118 00:06:19,019 --> 00:06:22,223 where the system will break, will change regime. 119 00:06:22,223 --> 00:06:25,499 It may be a crash. It may be just a plateau, something else. 120 00:06:25,499 --> 00:06:27,766 And the key idea is that the critical time, 121 00:06:27,766 --> 00:06:30,295 the information about the critical time is contained 122 00:06:30,295 --> 00:06:35,779 in the early development of this super-exponential growth. 123 00:06:35,779 --> 00:06:40,139 We have applied this theory early on, that was our first success, 124 00:06:40,139 --> 00:06:43,698 to the diagnostic of the rupture of key elements 125 00:06:43,698 --> 00:06:46,227 on the iron rocket. 126 00:06:46,227 --> 00:06:49,049 Using acoustic emission, you know, this little noise 127 00:06:49,049 --> 00:06:51,346 that you hear a structure emit, sing to you 128 00:06:51,346 --> 00:06:55,037 when they are stressed, and reveal the damage going on, 129 00:06:55,037 --> 00:06:57,477 there's a collective phenomenon of positive feedback, 130 00:06:57,477 --> 00:06:59,174 the more damage gives the more damage, 131 00:06:59,174 --> 00:07:01,649 so you can actually predict, 132 00:07:01,649 --> 00:07:03,789 within, of course, a probability band, 133 00:07:03,789 --> 00:07:05,702 when the rupture will occur. 134 00:07:05,702 --> 00:07:08,137 So this is now so successful that it is used 135 00:07:08,137 --> 00:07:12,502 in the initial phase of [unclear] the flight. 136 00:07:12,502 --> 00:07:15,309 Perhaps more surprisingly, the same type of theory 137 00:07:15,309 --> 00:07:18,037 applies to biology and medicine, 138 00:07:18,037 --> 00:07:21,733 parturition, the act of giving birth, epileptic seizures. 139 00:07:21,733 --> 00:07:25,357 From seven months of pregnancy, a mother 140 00:07:25,357 --> 00:07:31,021 starts to feel episodic precursory contractions of the uterus 141 00:07:31,021 --> 00:07:35,125 that are the sign of these maturations 142 00:07:35,125 --> 00:07:38,549 toward the instability, giving birth to the baby, 143 00:07:38,549 --> 00:07:40,920 the dragon-king. 144 00:07:40,920 --> 00:07:43,526 So if you measure the precursor signal, 145 00:07:43,526 --> 00:07:49,751 you can actually identify pre- and post-maturity problems 146 00:07:49,751 --> 00:07:51,222 in advance. 147 00:07:51,222 --> 00:07:54,982 Epileptic seizures also come in a large variety of size, 148 00:07:54,982 --> 00:07:58,262 and when the brain goes to a super-critical state, 149 00:07:58,262 --> 00:08:01,835 you have dragon-kings which have a degree of predictability 150 00:08:01,835 --> 00:08:07,342 and this can help the patient to deal with this illness. 151 00:08:07,342 --> 00:08:09,527 We have applied this theory to many systems, 152 00:08:09,527 --> 00:08:12,382 landslides, glacier collapse, 153 00:08:12,382 --> 00:08:15,949 even to the dynamics of prediction of success: 154 00:08:15,949 --> 00:08:20,335 blockbusters, YouTube videos, movies, and so on. 155 00:08:20,335 --> 00:08:23,471 But perhaps the most important application 156 00:08:23,471 --> 00:08:25,837 is for finance, and this theory 157 00:08:25,837 --> 00:08:29,276 illuminates, I believe, the deep reason 158 00:08:29,276 --> 00:08:31,972 for the financial crisis that we have gone through. 159 00:08:31,972 --> 00:08:36,020 This is rooted in 30 years of history of bubbles, 160 00:08:36,020 --> 00:08:39,732 starting in 1980, with the global bubble 161 00:08:39,732 --> 00:08:41,819 crashing in 1987, 162 00:08:41,819 --> 00:08:44,188 followed by many other bubbles. 163 00:08:44,188 --> 00:08:46,900 The biggest one was the "new economy" Internet bubble 164 00:08:46,900 --> 00:08:48,825 in 2000, crashing in 2000, 165 00:08:48,825 --> 00:08:50,873 the real estate bubbles in many countries, 166 00:08:50,873 --> 00:08:53,653 financial derivative bubbles everywhere, 167 00:08:53,653 --> 00:08:55,942 stock market bubbles also everywhere, 168 00:08:55,942 --> 00:08:59,893 commodity and all bubbles, debt and credit bubbles -- 169 00:08:59,893 --> 00:09:02,606 bubbles, bubbles, bubbles. 170 00:09:02,606 --> 00:09:05,245 We had a global bubble. 171 00:09:05,245 --> 00:09:09,486 This is a measure of global overvaluation 172 00:09:09,486 --> 00:09:13,492 of all markets, expressing what I call 173 00:09:13,508 --> 00:09:16,677 an illusion of a perpetual money machine 174 00:09:16,677 --> 00:09:20,629 that suddenly broke in 2007. 175 00:09:20,629 --> 00:09:24,863 The problem is that we see the same process, 176 00:09:24,863 --> 00:09:27,594 in particular through quantitative easing, 177 00:09:27,594 --> 00:09:30,778 of a thinking of a perpetual money machine nowadays 178 00:09:30,778 --> 00:09:35,181 to tackle the crisis since 2008 in the U.S., in Europe, 179 00:09:35,181 --> 00:09:37,469 in Japan. 180 00:09:37,469 --> 00:09:39,859 This has very important implications 181 00:09:39,859 --> 00:09:43,937 to understand the failure of quantitative easing 182 00:09:43,937 --> 00:09:45,813 as well as austerity measures 183 00:09:45,813 --> 00:09:48,622 as long as we don't attack the core, 184 00:09:48,622 --> 00:09:53,813 the structural cause of this perpetual money machine thinking. 185 00:09:53,813 --> 00:09:56,429 Now, these are big claims. 186 00:09:56,429 --> 00:09:59,311 Why would you believe me? 187 00:09:59,311 --> 00:10:02,191 Well, perhaps because, in the last 15 years 188 00:10:02,191 --> 00:10:05,383 we have come out of our ivory tower, 189 00:10:05,383 --> 00:10:08,119 and started to publish ex ante -- 190 00:10:08,119 --> 00:10:11,447 and I stress the term ex ante, it means "in advance" — 191 00:10:11,447 --> 00:10:13,585 before the crash confirmed 192 00:10:13,585 --> 00:10:16,271 the existence of the bubble or the financial excesses. 193 00:10:16,271 --> 00:10:19,993 These are a few of the major bubbles 194 00:10:19,993 --> 00:10:24,471 that we have lived through in recent history. 195 00:10:24,471 --> 00:10:27,311 Again, many interesting stories for each of them. 196 00:10:27,311 --> 00:10:30,025 Let me tell you just one or two stories 197 00:10:30,025 --> 00:10:32,071 that deal with massive bubbles. 198 00:10:32,071 --> 00:10:34,407 We all know the Chinese miracle. 199 00:10:34,407 --> 00:10:37,477 This is the expression of the stock market 200 00:10:37,477 --> 00:10:40,357 of a massive bubble, a factor of three, 201 00:10:40,357 --> 00:10:42,527 300 percent in just a few years. 202 00:10:42,527 --> 00:10:45,729 In September 2007, 203 00:10:45,729 --> 00:10:49,376 I was invited as a keynote speaker of a macro hedge fund 204 00:10:49,376 --> 00:10:51,825 management conference, 205 00:10:51,825 --> 00:10:55,880 and I showed to the conference a prediction 206 00:10:55,880 --> 00:11:00,073 that by the end of 2007, this bubble 207 00:11:00,073 --> 00:11:02,042 would change regime. 208 00:11:02,042 --> 00:11:05,127 There might be a crash. Certainly not sustainable. 209 00:11:05,127 --> 00:11:10,369 Now, how do you believe the very smart, 210 00:11:10,369 --> 00:11:15,799 very motivated, very informed macro hedge fund managers 211 00:11:15,799 --> 00:11:17,755 reacted to this prediction? 212 00:11:17,755 --> 00:11:19,711 You know, they had made billions 213 00:11:19,711 --> 00:11:22,546 just surfing this bubble until now. 214 00:11:22,546 --> 00:11:24,130 They told me, "Didier, 215 00:11:24,130 --> 00:11:27,167 yeah, the market might be overvalued, 216 00:11:27,167 --> 00:11:29,063 but you forget something. 217 00:11:29,063 --> 00:11:31,415 There is the Beijing Olympic Games coming 218 00:11:31,415 --> 00:11:33,679 in August 2008, and it's very clear that 219 00:11:33,679 --> 00:11:36,871 the Chinese government is controlling the economy 220 00:11:36,871 --> 00:11:38,224 and doing what it takes 221 00:11:38,224 --> 00:11:42,671 to also avoid any wave and control the stock market." 222 00:11:42,671 --> 00:11:45,142 Three weeks after my presentation, 223 00:11:45,142 --> 00:11:47,268 the markets lost 20 percent 224 00:11:47,268 --> 00:11:49,529 and went through a phase of volatility, 225 00:11:49,529 --> 00:11:52,255 upheaval, and a total market loss of 226 00:11:52,255 --> 00:11:54,523 70 percent until the end of the year. 227 00:11:54,523 --> 00:11:57,399 So how can we be so collectively wrong 228 00:11:57,399 --> 00:12:01,541 by misreading or ignoring the science 229 00:12:01,541 --> 00:12:04,372 of the fact that when an instability has developed, 230 00:12:04,372 --> 00:12:06,823 and the system is ripe, any perturbation 231 00:12:06,823 --> 00:12:10,504 makes it essentially impossible to control? 232 00:12:10,504 --> 00:12:15,209 The Chinese market collapsed, but it rebounded. 233 00:12:15,209 --> 00:12:19,965 In 2009, we also identified that this new bubble, 234 00:12:19,965 --> 00:12:22,551 a smaller one, was unsustainable, 235 00:12:22,551 --> 00:12:26,183 so we published again a prediction, in advance, 236 00:12:26,183 --> 00:12:30,510 stating that by August 2009, the market will correct, 237 00:12:30,510 --> 00:12:33,191 will not continue on this track. 238 00:12:33,191 --> 00:12:36,343 Our critics, reading the prediction, 239 00:12:36,343 --> 00:12:40,256 said, "No, it's not possible. 240 00:12:40,256 --> 00:12:41,750 The Chinese government is there. 241 00:12:41,750 --> 00:12:44,432 They have learned their lesson. They will control. 242 00:12:44,432 --> 00:12:46,239 They want to benefit from the growth." 243 00:12:46,239 --> 00:12:49,895 Perhaps these critics have not learned their lesson previously. 244 00:12:49,895 --> 00:12:53,727 So the crisis did occur. The market corrected. 245 00:12:53,727 --> 00:12:56,063 The same critics then said, "Ah, yes, 246 00:12:56,063 --> 00:12:57,912 but you published your prediction. 247 00:12:57,912 --> 00:12:59,568 You influenced the market. 248 00:12:59,568 --> 00:13:02,701 It was not a prediction." 249 00:13:02,701 --> 00:13:06,058 Maybe I am very powerful then. 250 00:13:06,058 --> 00:13:08,102 Now, this is interesting. 251 00:13:08,102 --> 00:13:11,039 It shows that it's essentially impossible until now 252 00:13:11,039 --> 00:13:13,167 to develop a science of economics 253 00:13:13,167 --> 00:13:16,310 because we are sentient beings who anticipate 254 00:13:16,310 --> 00:13:20,373 and there is a problem of self-fulfilling prophesies. 255 00:13:20,373 --> 00:13:24,106 So we invented a new way of doing science. 256 00:13:24,106 --> 00:13:26,818 We created the Financial Bubble Experiment. 257 00:13:26,818 --> 00:13:29,490 The idea is the following. We monitor the markets. 258 00:13:29,490 --> 00:13:33,658 We identify excesses, bubbles. 259 00:13:33,658 --> 00:13:36,962 We do our work. We write a report 260 00:13:36,962 --> 00:13:41,234 in which we put our prediction of the critical time. 261 00:13:41,234 --> 00:13:43,809 We don't release the report. It's kept secret. 262 00:13:43,809 --> 00:13:46,674 But with modern encrypting techniques, 263 00:13:46,674 --> 00:13:50,696 we have a hash, we publish a public key, 264 00:13:50,696 --> 00:13:54,651 and six months later, we release the report, 265 00:13:54,651 --> 00:13:57,050 and there is authentication. 266 00:13:57,050 --> 00:14:01,818 And all this is done on an international archive 267 00:14:01,818 --> 00:14:06,018 so that we cannot be accused of just releasing the successes. 268 00:14:06,018 --> 00:14:09,410 Let me tease you with a very recent analysis. 269 00:14:09,410 --> 00:14:12,668 17th of May, 2013, just two weeks ago, 270 00:14:12,668 --> 00:14:14,346 we identified that the U.S. stock market 271 00:14:14,346 --> 00:14:16,738 was on an unsustainable path 272 00:14:16,738 --> 00:14:20,540 and we released this on our website on the 21st of May 273 00:14:20,540 --> 00:14:22,585 that there will be a change of regime. 274 00:14:22,585 --> 00:14:27,369 The next day, the market started to change regime, course. 275 00:14:27,369 --> 00:14:28,860 This is not a crash. 276 00:14:28,860 --> 00:14:31,459 This is just the third or fourth act 277 00:14:31,459 --> 00:14:34,322 of a massive bubble in the making. 278 00:14:34,322 --> 00:14:37,418 Scaling up the discussion at the size of the planet, 279 00:14:37,418 --> 00:14:38,443 we see the same thing. 280 00:14:38,443 --> 00:14:41,364 Wherever we look, it's observable: 281 00:14:41,364 --> 00:14:44,594 in the biosphere, in the atmosphere, in the ocean, 282 00:14:44,594 --> 00:14:48,498 showing these super-exponential trajectories 283 00:14:48,498 --> 00:14:51,129 characterizing an unsustainable path 284 00:14:51,129 --> 00:14:53,746 and announcing a phase transition. 285 00:14:53,746 --> 00:14:55,450 This diagram on the right 286 00:14:55,450 --> 00:14:58,450 shows a very beautiful compilation of studies 287 00:14:58,450 --> 00:15:02,160 suggesting indeed that there is a nonlinear -- possibility 288 00:15:02,160 --> 00:15:06,309 for a nonlinear transition just in the next few decades. 289 00:15:06,309 --> 00:15:09,931 So there are bubbles everywhere. 290 00:15:09,931 --> 00:15:11,895 From one side, this is exciting 291 00:15:11,895 --> 00:15:14,655 for me, as a professor who chases bubbles 292 00:15:14,655 --> 00:15:19,413 and slays dragons, as the media has sometimes called me. 293 00:15:19,413 --> 00:15:22,464 But can we really slay the dragons? 294 00:15:22,464 --> 00:15:24,608 Very recently, with collaborators, 295 00:15:24,608 --> 00:15:27,311 we studied a dynamical system 296 00:15:27,311 --> 00:15:30,215 where you see the dragon-king as these big loops 297 00:15:30,215 --> 00:15:34,136 and we were able to apply tiny perturbations at the right times 298 00:15:34,136 --> 00:15:39,071 that removed, when control is on, these dragons. 299 00:15:39,071 --> 00:15:42,005 "Gouverner, c'est prévoir." 300 00:15:42,005 --> 00:15:47,799 Governing is the art of planning and predicting. 301 00:15:47,799 --> 00:15:50,552 But is it not the case that this is probably 302 00:15:50,552 --> 00:15:54,452 one of the biggest gaps of mankind, 303 00:15:54,452 --> 00:15:57,712 which has the responsibility to steer 304 00:15:57,712 --> 00:16:00,415 our societies and our planet toward sustainability 305 00:16:00,428 --> 00:16:05,272 in the face of growing challenges and crises? 306 00:16:05,272 --> 00:16:09,767 But the dragon-king theory gives hope. 307 00:16:09,767 --> 00:16:13,335 We learn that most systems have pockets of predictability. 308 00:16:13,335 --> 00:16:18,235 It is possible to develop advance diagnostics of crises 309 00:16:18,235 --> 00:16:21,794 so that we can be prepared, we can take measures, 310 00:16:21,794 --> 00:16:24,549 we can take responsibility, 311 00:16:24,549 --> 00:16:27,296 and so that never again will 312 00:16:27,296 --> 00:16:31,150 extremes and crises like the Great Recession 313 00:16:31,150 --> 00:16:35,560 or the European crisis take us by surprise. 314 00:16:35,560 --> 00:16:37,035 Thank you. 315 00:16:37,035 --> 00:16:43,328 (Applause)