When models fail

As Mia Hamm highlights in the epigraph above, although failure is a common experience, our response to it is what truly matters. She should know: she won two Olympic gold medals and two FIFA Women’s World Cup titles with the US women’s football (soccer) team. And every modeller knows it as well. In the period book-ended by the 2007–9 global financial crisis (GFC) and the 2020–23 Covid-19 pandemic, many financial models failed, but for differing reasons. The GFC failures of 2007/8 have a “we should have seen it coming” flavour, while the Covid-pandemic-related financial failures of 2020 may be classified as “we could not have seen this coming”. These are two distinct characterisations, perhaps with different lessons to be learned. The GFC is like a botched penalty kick due to a lack of sufficient preparation, whereas the financial effects of the Covid pandemic feel more like an accident while leaping for a header. The period between these two crises forms the basis of the story in this chapter: a story of failure, how we reacted and emerged (presumably) the better for it.