The Lucretius problem

"Risk management professionals look in the past for information on the so-called worst-case scenario and use it to estimate future risks — this method is called "stress testing." They take the worst historical recession, the worst war, the worst historical move in interest rates, or the worst point in unemployment as an exact estimate for the worst future outcome.

But they never notice the following inconsistency: this so-called worst-case event, when it happened, exceeded the worst case at the time. I have called this mental defect the Lucretius problem, after the Latin poetic philosopher who wrote that the fool believes that the tallest mountain in the world will be equal to the tallest one he has observed. We consider the biggest object of any kind that we have seen in our lives or hear about as the largest item that can possibly exist. And we have been doing this for millennia. In Pharaonic Egypt, which happens to be the first complete top-down nation-state managed by bureaucrats, scribes tracked the high-water mark of the Nile and used it as an estimate for a future worst-case scenario."

Nassim Taleb's book Antifragile