Political Risk, the Financial Crisis and Strategic Investing

by Ian Bremmer, for Real Clear Politics, March 16, 2009.

(Editor’s Note: Q&A with Ian Bremmer on his new book The Fat Tail: The Power of Political Knowledge for Strategic Investing.)

RCP: Exactly what is a fat tail risk and what is the book about?

Bremmer:A fat tail is the storm of the century that now seems to appear once every six months. It’s the low-probability, high-impact risk that occurs more often than we think. These risks are not necessarily unpredictable or unknowable-though some are. But too many companies and investors think they don’t need to worry about “extreme” events or that, especially when it comes to politics, it isn’t worth analyzing risks that don’t neatly fit into standard statistical models.

The central idea of the book is that fat tail political risks have become increasingly important for governments, companies, and investors-and that they’re both more predictable and more manageable than other sort of fat-tailed risks…(continue reading)