How has the world been doing in confronting its most obvious but unresolved risks in 2018? This was the third year that Gray Rhino & Company compiled a list of top Gray Rhino risks –a meta analysis of dozens of top risks lists– and tracked how the most obvious yet unresolved risks have evolved throughout the year.
It’s time for an end-year wrap-up, which follows the trends we identified in our mid-year review over the summer.
Analysts broadly agreed at the beginning of the year that the top risk was monetary policy errors. How well the world did in addressing this depends on how you define a monetary policy error. Is it allowing a bubble to grow until it pops of its own accord? Or is it gradually letting the air out?
The dueling Nobel-Prize winning economists Robert Shiller and Eugene Fama have famously debated whether you can tell when you are in a bubble. I come down firmly on the Shiller side -yes, you can. When market indices triple in a decade during which economic growth was nowhere there yet, you have a bubble.
To some critics, including one particularly vocal critic who shall not be named, the tumbling US stock market, represents a monetary policy error. To others (me and many people I respect) it represents a much-needed correction. To both sides, the risk of recession is high, though whether that’s the natural next stage of the business cycle or the result of policy error is a matter for debate.
The biggest potential policy error perhaps lies not within monetary policy alone, but rather in relying mainly on interest rates and central bank balance sheets to drive the economy instead of a broader approach. It’s time for a deeper policy dive into obvious danger areas –like collateralized loans, automated trading, misallocation of assets to securities markets instead of to the real economy—and changing the underlying economic incentives that create them.
The second highest risk analysts identified at the beginning of the year was Geopolitics.Risks have risen significantly since then, particularly surrounding the erratic behavior and mounting legal troubles of the current occupant of the White House. Protests in France showed that last year’s election of Emmanuel Macron proved to be only the eye in the stormof Europe’s troubles. Brexit has devolved into chaos. With the euro-area economy showing signs of weakness, expect things to get worse before they get better.
Slowing economies and looming debt crises raise the temptation for leaders around the world to resort to Deflection 101, the oldest trick in the political playbook: try to get your people to focus on another target. This raises the potential for “surprise” outright conflicts, not just the chest-thumping of which we’ve seen more and more. (Read my first book, Why the Cocks Fight, for an account of how this worked out in the Dominican Republic and Haiti.)
Early 2019 top-risks lists have started to roll in, with the recently released Council on Foreign Relations’ Preventive Priorities Survey on geopolitical risks, showing continued concern over cyber and terrorist threats.
North Korea. While it looked mid-year like the immediate threat had receded, analysts were rightly concerned that North Korea continue its missile development work. The DPRK has now come out with a very blunt statement that it will not de-nuclearize unless the United States agrees to implement its much broader definition: “the removal of all sources of nuclear threat, not only from the South and North but also from areas neighboring the Korean Peninsula.”
Gray rhino risk number four, the impact of technology on skills needs and economic disruption, may seem prosaic and slow-moving given the urgency of the economic and geopolitical threats. But it’s actually closely tied in. The disruption of job markets and uncertainty over the future fuels both the national and geopolitical uncertainties on business and policy leaders’ minds. Concentration of wealth, particularly in the tech sector, is closely tied into the stock market’s performance. Smart policy and business approaches to easing the transition of people whose jobs are affected, and to keep people from being left behind, deserve much more attention.
Five, extreme weather. Hurricanes Florence and Michael. Raging wildfires in California. Droughts. Extreme cold and heat. More than 5,000 deaths and nearly 29 million people affected. The Fourth National Climate assessment carried out by 13 U.S. government agencies, released into the post-Thanksgiving news vacuum by the Trump administration as a clear attempt to bury its findings, warned that the worst is yet to come. Yet climate change remains a partisan football in the United States.
We’ll be back in early March with our fourth annual meta analysis of the top “Top Risks” lists. Stay tuned.
#grayrhino #risk #geopolitics #monetarypolicy #NorthKorea #technology
This is the eighth installment of my new weekly LinkedIn series, “Around My Mind” – a regular walk through the ideas, events, people, and places that kick my synapses into action, sparking sometimes surprising or counter-intuitive connections.
Click the blue button on the top right hand on this LinkedIn page to subscribe to “Around My Mind” and get notifications of new posts. Please don’t be shy about sharing, leaving comments or dropping me a private note with your own reactions.
- Constructing cognitive models using the gray rhino risk framework - October 15, 2025
- Substack Gray Rhino Wrangler Short Series: the Big Ugly Debt Gray Rhino - September 30, 2025
- Kerala’s Landslide Grey Rhino - September 15, 2025
