A Lesson From China:
The Big Picture Matters

The analogy to ocean navigation is Euro-centered, in part because the geography lends itself to the three stages of development comparable to the expansion of risk management, and in part because the growth in navigational skills was sustained by the European culture. However, we can learn much by taking a broader view of world history to consider some episodes from Chinese navigational history. China followed a much different path to ocean exploration than the Europeans. Some key navigational tools, including the magnetic compass, originated in China long before they appeared in Europe. Chinese navigators sailed the open ocean to India and the East coast of Africa long before the European ships, encouraged by Prince Henry the Navigator, arrived in these areas. The Chinese exploration peaked with the seven voyages of Zheng He from 1405-1433 during the Ming Dynasty. His fleets consisted of as many as 300 ships, some as long as 400 feet with four decks and twelve sails. The purposes of these expeditions were both to explore and to so impress the domains visited that they would be dissuaded from attacking China. These voyages followed the custom of showering the indigent people in the lands they visited with presents to demonstrate Chinese superiority (as if sailing in with massive vessels were not enough) and generosity. This approach, while admirable, had its drawbacks. Exploration was expensive and provided little return on the investment required to sustain the voyages. The voyages ceased after 1433. By 1525, under government decree, all oceangoing vessels were destroyed. The enormous cost of the Zheng He voyages, combined with political maneuvering, ended Chinese exploration and changed the course of world history. The first circumnavigation could easily have originated from China but for this decision.

An additional lesson for actuaries is evident here. Chinese navigators did their job most effectively, producing the most advanced sailing skills of the time. The voyages accomplished their stated missions quite successfully. Nonetheless, the end result was the destruction of the Chinese navy and the end of their careers as navigators. Lavish expenses, the failure to adapt to the policies of a new set of leaders (regulators), and a poor return on investment all contributed to the end of an era of exploration. While none of these factors would normally be considered the domain of the navigator, someone had to consider these issues. To avoid a similar plight, actuaries need be cognizant of all the factors involved in sailing a company, or even the entire industry, lest we too lose our livelihoods.