Big Exits Start Small

What we can learn from Small Things about risk stories from the past two weeks.

“Perhaps it’s true that things can change in a day. That a few dozen hours can affect the outcome of whole lifetimes. And that when they do, those few dozen hours…must be resurrected from the ruins and examined. Preserved. Accounted for. Little events, ordinary things, smashed and reconstituted. Imbued with new meaning. Suddenly they become the bleached bones of a story.”
― Arundhati Roy, The God of Small Things

Risk Developments this letter:

  • Aon & Willis Merger Approved

  • Japan Steps Up Corporate Counter-Espionage

  • Palantir Files to Go Public

  • University of Arizona Prevents Outbreak

  • Protests Juxtaposed, from Belarus to Wisconsin

Image from Small Things collection at The Met (

Small Acts; Big Effects

Before getting into the developments, there are two important books that have been framing my view of events this past month. The first is “The God of Small Things” by Arundhati Roy, and the second is “Demons” by Fyodor Dostoevsky. While very different books, they both deal with intimate personal situations in a political climate that lead to catastrophic outcomes. Behind every Big Thing, there is almost always a small and personal act that sets things in motion.

In “The God of Small Things” and “Demons” these are small acts of malice. Cruelty due to boredom, eunni or "just because” should not be underestimated. Whether it is a sexual assault, a chance meeting sighting at a protest, a flippant insult or a mean bet, these actions can cause a cascade of events, particularly in a ripe environment. Similarly, small positive acts due to gratitude, purpose or because “it’s the right thing to do” can result in miraculous outcomes.

Why are these small things so important? How can a petty insult or a kind gesture result in such far fetched outcomes? The answer is in the ambiguity of the title, “The God of Small Things.” Does it mean the God of small things, a small God or God made of small things? The novel seems to suggest all three.

First, the characters who we root for are children or child-like, while the cruel one are adults who are usually grotesquely large. This is not to say that the small are always protected. Sometimes the small things are not people, but events, such as the dark vingettes that punctuate the narrative. These episodes have outsized importance and consequences that almost feel like divine wrath; The kind of undirected death and destruction that reminds one of the Old Testament God.

Second, the Small God, the God of “ …personal despair [that] could never be desperate enough. That something happened when personal turmoil dropped by at the wayside shrine of the vast, violent, circling, driving, ridiculous, insane, unfeasible, public turmoil of a nation.” When people feel trapped they draw great strength from their lack of options, and will do inexplicable things. In the face of, “That Big God [which] howled like a hot wind, and demanded obeisance. Then Small God (cozy and contained, private and limited) came away cauterized, laughing numbly at his own temerity. Inured by the confirmation of his own inconsequence, he became resilient and truly indifferent.”

Third, God composed of small things is the “public termoil a nation” the “Demons” of Dostevsky. In pop science, it is called the butterfly effect. In finance, Charlie Munger calls it the lallapalooza effect. In socio-political contexts, it gets called non-linear dynamics. The paradox is that these unexpected events must come from small things. If they were big to begin with, they would be expected. Big things grow slowly, follow rules, and maintain the status quo. The Small God breaks rules and destroys the established order. Things growing at a fast rate are small, because if they were big the rate would not be fast relative to their size. Keep your eye on the Small God of, and made of, small things. Ok, onto current events!

Aon & Willis Shareholders Back Merger

In some Big God news, the number one and number three biggest insurance brokers in the world move one step closer to a merger. This is after putting the deal on ice over a year ago. Big things go slow, is a truism that keeps proving true.

Big risk pools allow for bigger risk taking, and a bigger broker may drive larger deals by getting more underwriters in at better terms for the customer. However, fewer roads mean tolls can go up on the roads that remain. Where risk transfer is a commodity, continue to expect more competative pricing, but where it is bespoke, watch out.

Japan Steps Up Corporate Counter-Espionage

The current Japanese intelligence services can trace their roots back to the early 1900’s when a socialist-anarchist plot attempted to overthrow the emperor. The service eventually morphed into an oppressive secret police and brutal military police, both of which were disbanded during occupation. Wary western powers have kept Japanese intelligence a close ally and the announcement of a new counter-espionage organization in response to suspected Chinese IP theft will bring them closer to the five-eyes. A small, but historically impressive intelligence operation growing its capabilities is one of those small things to keep in mind.

Palantir Files to Go Public

The consulting-cum-software company has the prerequisit story about starting from a small spark of an idea that came from PayPal. It is an interesting inflection point for the company, and there are enough thought pieces out there to satisfy even the readers with the greatest appetites, so I won’t opine much. At under $1B in revenue, it is still relatively small compared to its peers, so there may be plenty of room yet to grow.

My question is not whether their top line is too big to continue growing quickly, but whether costs will catch up with them. This largely depends on whether they can sell software that only needs to be built once, or whether the value is in the customization and tailoring. Much has been made of Palantir’s name and how it serves as a warning about a powerful tool in the wrong hands. I would just add, this obsevation by the leading J.R.R. Tolkein scholar Tom Shippey, “Every time anyone looks in the Palantir, what they see is true and from it they draw the wrong conclusion.

University of Arizona Prevents Outbreak

In coronavirus news, a bright spot, as University of Arizona prevents damage by testing waste water to detect, test and quarantine asymptomatic coronavirus carriers. Detecting this small thing, prevented a big outbreak. Could this small victory be the beginning of a big turning point? I hope so.

Protests Juxtaposed, from Belarus to Wisconsin

Finally, protests across the globe continue. Unrest is no doubt in part due to coronavirus, but more structural social issues are coming forward as well. In the United States, violence erupted during protests in Kenosha, Wisconsin, a city of under 100,000 people. The desire for dissaffected young men (it is often young men) to use violence to gain status by demonstrating loyalty to the system, or to use violence to subvert the system, are both bad results that hint at larger more insidious issues. When a legitimate path towards change is not available, nihilism and vigilantism rear their ugly heads.

In Belarus, protests have been going for almost a month. The country’s strong man, Viktor Lukashenko, was seen wearing a flak jacket and carrying a gun. This not-so-subtle show of force may seem petty to an outsider, but like with the vigilante, it is the loss of control that encourages such behavior. Projecting strength is weakness. Weakness belies strength. Big is small, and small is big.