Typhoon, from Paolo Pezzutti

April 15, 2013 |

 I have just finished reading Joseph Conrad's "Typhoon", which was first published in Pall Mall Magazine in 1902. The story is about Captain Macwhirr, who sails the steamer Nan-Shan into a typhoon in the northwestern part of the Pacific Ocean.

The personality of the Captain is interesting. He is a dull, ordinary, methodic, decent professional, who lives an emotionally uninvolved life.

"Captain MacWhirr had sailed over the surface of the oceans as some men go skimming over the years of existence to sink gently into a placid grave, ignorant of life to the last, without ever having been made to see all it may contain of perfidy, of violence, and of terror. There are on sea and land such men thus fortunate–or thus disdained by destiny or by the sea".

He was confronted with a decision that might endanger the life of his men. When the barometer and other clues began to hint at trouble ahead, he decided not to lose time on an alternate course. However, he made up his mind without being fully aware of the risks and consequences. The conversations between the Captain and Jukes, the first mate, are enlightening: ….."How can you tell what a gale is made of till you get it?"…..

….."If the weather delays me–very well. There's your log-book to talk straight about the weather. But suppose I went swinging off my course and came in two days late, and they asked me: 'Where have you been all that time, Captain? ' What could I say to that? 'Went around to dodge the bad weather,' I would say. 'It must've been dam' bad,' they would say. 'Don't know,' I would have to say; 'I've dodged clear of it.' "

…"A gale is a gale, Mr. Jukes," resumed the Captain, "and a full-powered steam-ship has got to face it. There's just so much dirty weather knocking about the world, and the proper thing is to go through it with none of what old Captain Wilson of the Melita calls 'storm strategy.'

 This is a story about destiny. The decision of the Captain started the ball rolling putting inexorably in motion a predetermined set of events. Nothing could stop them. There are immense forces that cannot be escaped once engaged. Why should a Captain of a fully efficient brand new ship change course? "Keep her facing it. They may say what they like, but the heaviest seas run with the wind. Facing it–always facing it–that's the way to get through. You are a young sailor. Face it. That's enough for any man. Keep a cool head."

99,999 out of 100,000 times, changing course would be a waste of time. But that ONE time you enter the perfect storm, you can only suffer the violence of the sea and hope in the benevolence of destiny. What is a calm and flat surface can suddenly erupt into a storm capable of destroying anything in its way. This reminds me of the inherent unpredictability of oceans and of complex systems.

There are many similarities with life and trading. You can either run away from risks and dangers. Hiding. Or you can face your choices rationally, based on facts, on models that, somehow inflexibly, frame and contextualize events. The limited experience one has of events and ever-changing cycles does not include all possible variables. Black swans happen and can have devastating effects. The fat tail of distributions cannot be simply ignored because sooner or later you may run into it. And in that situation, there is no "storm strategy". You can only trust the ability of your helmsman to face the wind and keep going. You can only trust the structure of your ship.

This is fascinating and applies to life and trading. It is this balance between fear and rationality, between the trust in our own capacities to build the future and the awareness that destiny can be stronger than us. It is the dignity of the human being, which faces bravely the unknown. With the awareness of these limits one has to navigate both calm and turbulent waters.

Far as the mariner on highest mast Can see all around upon the calmed vast, So wide was Neptune's hall … — Keats





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