Friday, December 16, 2016

Trump and Regime Uncertainty

"Fitness report says it all. He's a wild card. Completely unpredictable."
--Rick 'Jester' Heatherly (Top Gun)

Many people seem convinced that they know precisely how Donald Trump will behave as president of the United States. #NeverTrumpers believe that he is the ultimate deplorable. For Trump backers, the future's so bright that they're already wearing shades.

It strikes me that Trump has demonstrated just the opposite--that he is one of the most unpredictable president elects in US history. As such, 'regime uncertainty' associated with his upcoming tenure is inordinately high at this time.

As Trump prepares to enter office, I find it more useful to think in terms of a spectrum of possibilities. Some good, some bad, and some in between. Because his unpredictability makes it difficult to handicap any particular scenario, applying a flat probability distribution at the outset seems prudent. In other words, all scenarios are viewed as having equal chances of occurrence. If five scenarios are envisioned, each is estimated to have a 20% (1 in 5) chance of occurring.

As Trump takes more action from the Big Chair, scenarios and their likelihoods will become more apparent.

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