In 1984, Yale sociologist Charles Perrow published his classic book, Normal Accidents: Living with High-Risk Technologies. The odd term, "normal accident," Perrow wrote, is meant to signal that, given a system's characteristics, multiple and unexpected interactions of failure are inevitable. Perrow studied "normal accidents" that occur in nuclear power and petrochemical plants, at sea where ships collide in open water for no good reason, in air travel, and in defense systems.
Perrow's work is also applicable to banks, economic systems, and financial networks. When Jamie Dimon, the chief executive of JPMorgan Chase, was at Harvard Business School, Perrow's book should have been required reading. Had Dimon absorbed the book's lessons, instead of blaming the bank's recent embarrassing $2 billion dollar trading loss on errors, sloppiness, and poor judgment, he might have said, "We should expect accidents like this to occur. No reasonable level of controls can prevent them from happening in tightly coupled, very active financial systems. We can handle it."
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