Oct 19, 2013

Estimating Bubbles

In a presentation for more than 200 actuaries at 'Actuarieel Podium" (actuarial Platform) on October 2 (2013) (Actuary Day) in the Netherlands, I tested the ability of Dutch actuaries to estimate the number of bubbles in a bottle of champagne.


Take the Test

Test your own bubble estimation ability. Think for a while:

How many bubbles are in a bottle of Champagne?

If you think you've got the right answer, check it by clicking on the picture below...


Conclusion 
If the order of magnitude of your answer was right: Congratulations!
If not, like most actuaries at my presentation, one thing is clear:

As actuaries we fall short in estimating bubbles!!!! (crises)

Key question is: why can't we estimate bubbles?

Short answer: because we have been only professionally trained in estimating relatively small numbers and small risks, not (systemic) crises.

One thing is sure: we need to fix this educational bubble-lack in our professional actuarial training.

Links
- Beekman Wines: Champagne - How Many Bubbles?
Application of Actuarial Science to Systemic Risk Report (2013)
- Actuarial Viewpoints on and Roles in Systemic Risk Regulation
- Actuarieel Podium (Dutch)

Aftermath
49 Million Bubbles in a bottle of champagne may seem much, it's nothing compared to the U.S. Debt:



Learn more (in Dutch) on how we can do better as actuaries in the next presentation: 'From Backroom to Boardroom' (in Dutch) by Jos Berkemeijer



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