I’ve often wondered what would be the impact on companies in Silicon Valley when the inevitable earthquake hits. Turns out I’m not the only one.
Earthquakes in the Bay Area: a “ticking time bomb”
The Bay Area is subject to major earthquakes roughly every 145 ± 60 years at the current rate. Given that it is 150 years since the Great San Francisco Earthquake of 1868, the next “big one” could happen any day now.
Apparently, about 2 million people live on the Hayward Fault and 7 million are in the surrounding area. A magnitude 7 quake would cause damage in the range of $95 to $190 billion, which would be a disaster for the citizens of the area.
Impact on the tech giants
However, my curiosity centers on what would be the impact on the giant tech corporations that are based in Silicon Valley and the wider Bay Area? Companies like Google, Facebook, Oracle, and Salesforce have their HQs and major footprints in the region, so they will be adversely affected by a natural disaster.
It doesn’t seem like they are particularly well-prepared for such an event, according to this report. Although most of the companies have data centers and operations distributed around the world, an earthquake could still cause potential disruption to the main office and therefore the leadership of the business.
As listed entities, this marks a real risk for their shareholders. Could their share prices or even the whole NASDAQ take a tumble if a major earthquake hits the Bay Area? After the 9/11 terror attacks, the Dow dropped by 14%, so this is not unthinkable.
However, I think the impact goes beyond just their own businesses. The services provided by these tech titans represent critical infrastructure for many European and American businesses, so any disruption could have a huge wider impact.
Early warning: a vital tool to prevent damage
Scientists are getting better at detecting earthquakes early. In Silicon Valley, there will soon be an app called QuakeAlert that can give up to 2-20 seconds of warning of an impending earthquake.
This might not sound like much, but even 2 seconds can be long enough for Internet of Things (IoT)-enabled devices to perform vital preparations such as: opening the doors of fire stations to prevent fire engines getting stuck; isolating certain parts of the electricity, water, and gas networks; slow down trains; and tell elevators to open their doors at the closest floor.
Solution: seismic sensor network to short the NASDAQ
Could it be possible to set up a network of seismic sensors to warn when an earthquake was just about to hit the Bay Area and then send an order to a trading algorithm that could short the NASDAQ?
A similar system could be used to create an early warning for tsunamis. One candidate is the mega-tsunami that geologists once predicted could be created by a volcanic eruption in the Canary Islands which would devastate the northeastern US coast (although further review of the original study showed that this is a worst-case scenario and probably will not happen for another 10,000 years at the earliest).