During Berkshire Hathaway’s annual shareholders meeting on Saturday, CEO Warren Buffett warned that there’s about a 2% risk of a $400 billion disaster occurring as a result of a cyber attack of other issue.
“This is uncharted territory and it’s going to get worse, not better. You’re right in pointing that out as a very material risk that didn’t exist 10 to 15 years ago, and will get more intense as time goes on,” Buffett said, replying to a question about how he prepares for a big cyber-related disaster.
Berkshire Hathaway’s insurance arm offers professional liability with cyber insurance, but Buffett said he doesn’t want his company to be a pioneer in the arena, since it’s largely unpredictable.
A known unknown
“I think anybody that tells you now that they think they know in some actuarial way either what general experience is likely to be in the future, or what the worst case would be is kidding themselves. And that’s one of the reasons I say that a $400 billion event I think has a roughly 2% probability per year of happening.”
Buffett said that while insurance companies have a pretty good idea of the probability of an earthquake happening in California or a major hurricane hitting Florida, cyber disasters are still an unknown.
“Frankly, I don’t think we or anybody else really knows what they’re doing when writing cyber [insurance],” Buffett said. “It’s just really, really early in the game. We don’t know the interpretation of the policies will be. We don’t know the degree to which they’ll be correlated.”
The bad guys are always ahead
Buffett also explained that when he speaks to cybersecurity experts, they tell him that the offense is always ahead of the defense, and that will continue to be the case.
That’s a smart call, and exactly how big tech companies like Microsoft, Google, Apple and Amazon currently think of the cybersecurity landscape. To offset this, the companies actively hunt for ways attackers could penetrate their systems and plug those holes before hackers can find them.
After all, the world runs on software, and software is written by humans who are just as flawed as you and me. No matter how much they try, they’ll still end up accidentally inserting some kind of error into their code that can be exploited. That’s just how the system works.
This isn’t the first time Buffett has opined on cybersecurity. In 2017, the CEO said he doesn’t understand much about cyber attacks, but said that it is “the number one problem with mankind.” He even went so far as to compare cyber attacks to nuclear and biological weapons.
That might seem like an exaggeration, but cyber attacks can impact everything from elections, like the Russian meddling campaign during the 2016 elections, all the way up to nation state attacks on critical infrastructure like nuclear power plants. And unlike nuclear and biological weapons, cyber weapons are being created and used regularly.
But it’s not all doom and gloom, as Buffett pointed out that while a $400 billion cyber attack will destroy companies, Berkshire would still likely turn a profit in the same year.