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Protecting America against catastrophe

America has been hit by a series of catastrophic failures — and the only certainty is that more are on the way.

Why it matters: Our infrastructure is failing, and the less we invest in it now, the more it's going to continue to fail in the future.


Driving the news: Our game plan for dealing with a pandemic turned out to be grossly inadequate — but the pandemic is far from the only low-probability event to strike.

  • Texas was plunged into a power crisis last month, in the wake of extraordinarily cold weather.
  • The entire payments infrastructure of the United States failed for about four hours on Wednesday.

The big picture: According to FEMA's latest national preparedness report, there's a long list of foreseeable events that would stress our national capabilities, possibly past the breaking point.

  • Earthquakes are at the top of the list. The scariest one, which could be as large as 9.2 on the Richter scale, will take place someday in the Pacific Northwest, which is ill prepared for such a catastrophe along the Cascadia subduction zone. Other regions at risk are California, along the San Andreas fault, and the New Madrid seismic zone on the Arkansas–Tennessee border.
  • An extreme solar flare could be utterly devastating, causing a magnetic storm powerful enough to result in power outages across most or all of the country. Such an event caused major damage in 1859, when America was much less electrified. If the same storm arrived tomorrow (or if it was replicated with an electromagnetic pulse weapon), millions could be without power for weeks, leading to food shortages, water shortages, and even riots.
  • A cyber attack would have a similar effect in terms of its impact on the information economy — but could be even harder to recover from if the attack was maintained indefinitely. Such attacks don't even need to target the electric grid: A recent attack in Florida, for instance, was aimed at the water supply.
  • Hurricanes and wildfires are now an annual occurrence, but Miami, Houston, Los Angeles and other major cities — including Washington D.C. — have done very little in terms of beefing up their ability to withstand such events.
  • The next pandemic could be much deadlier than this one, and even more disruptive.

What's next: The Biden administration has signaled that it intends to push for a multi-trillion dollar infrastructure bill, designed to strengthen the country's resilience in the face of climate change and other shocks. National infrastructure in desperate need of upgrades includes:

  • The Strategic National Stockpile of critical medical supplies.
  • The electric grid, and the network of power stations providing electricity for it.
  • Aviation, roads, transit, water systems, and dams — all of which received D grades or lower on the latest national infrastructure report card.
  • Housing is also crucial — America simply doesn't have the capacity to shelter the millions of people who might lose their homes in the event of a major catastrophe.

By the numbers: The cost of such work is enormous — but the cost of not doing the work is higher still. After Texas deregulated its electricity grid and refused to pay for excess capacity in the case of emergency, bills rose by $28 billion. And that number doesn't even include the costs associated with the latest crisis.

  • What they're saying: "Our country’s electric utilities need a massive makeover in which the ultimate costs will be staggering," writes Warren Buffett in his latest annual letter. "We welcome the challenge and believe the added investment will be appropriately rewarded."

Be smart: Resilience isn't something that can be bought with a one-off check. It's an ongoing process of modeling, pricing, and wargaming.

The bottom line: Catastrophe will strike. Building resilience now, and maintaining that resilience on an ongoing basis, will save trillions of dollars — and possibly millions of lives — over the long term.

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