Article — From the October 2009 issue

Too Big to Burn

AIG plays God in a man-made firestorm

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The first light we ran was at Main Street and Jamboree Road, near the Hyatt, and we ran it mostly because we could. Chief Sam flicked on his siren, and eighteen lanes of traffic froze in place. We nudged into the intersection. We accelerated. We swerved. We accelerated again. Our red Ford Expedition, topped with red lights, emblazoned with the word fire, shot onto the 405, tires screeching. Car after car pulled over to let us by until, as we merged onto I-5, some civilian in a Civic didn’t. “Look at this guy,” Chief Sam muttered, and then he cut into the median to race past him.

The traffic died down near Disneyland, but the Santa Ana wind picked up—a hot wind coming from the desert, an arid wind, a wind that sucked any remaining moisture from the landscape. It funneled through the canyons in gusts, carrying brush, bits of cloth, plastic bags, and clouds of dust. The dust blasted across the freeway, ocean-bound, and our truck, now going seventy-five in the center lane, shook from side to side.

It was October 2008 in Los Angeles, less than a month after the initial, $85 billion bailout of American International Group, less than a week after the government gave the insurance company $37.8 billion more. But Chief Sam’s division of AIG, the Wildfire Protection Unit, was proceeding as if nothing had changed. The actuaries had determined that it was cheaper to prevent houses from burning than to replace them, and even as AIG was preparing to be taken over by the government, it was sending out its private army of firemen. Chief Sam stepped on the gas. He offered me a protein bar. He put headphones in his ears, picked up his Blackberry, and began making calls.

A call to his crew: “Right now, Pump 31 should be partnered up or out patrolling. Pump 42 should be teamed up and ready to be deployed. No delays. Just be out and about. A good staging location. Out of bed and get ’em married. Right now.”

A live call to KTTV Fox 11 News: “If you’re asked to voluntarily evacuate, please do so. Don’t wait, because you impede the efforts of firefighters when you evacuate at the last minute. Prepare now. We’re under Red Flag fire conditions all day long. Start getting prepared now. Don’t wait for the last minute. Get some of your belongings that are important to you, and get ’em in your car, so that you are prepared and you don’t wait until the last minute.”

A call to a radio producer: “Hi, I’m Fire Chief Sam DiGiovanna, I’ve done reports for you guys in the past. Do you want anything done this morning on these fires? DiGiovanna. D-I. G-I. O. V. A. N-N. A. And it’s just very simple. Dee. Gee. Oh. Vanna . . .”

An interview: “Smoke conditions, ashes . . . it’s rough for firefighters. But I have to tell you, they’re doing an outstanding job. We did a great job yesterday, and unfortunately Mother Nature came in and kicked up the winds . . . I think the public needs to recognize and acknowledge the firefighters. I know. I’ve been doing this for almost thirty years, and they’re doing one heckuva job . . .”

A call to yet another station: “This is Fire Chief Sam DiGiovanna. I did the reporting from last year’s wildfire. Who’s the newsroom coordinator? . . . Yes. This is Fire Chief Sam DiGiovanna, and I’ve done some reporting for you guys during the last wildfires. Do you want any live talk on this? . . . Hi, this is Fire Chief Sam DiGiovanna . . .”

On the phone, Chief Sam always identified himself as the training chief at the Verdugo Fire Academy, his part-time job. He didn’t mention AIG. Although the highway was now clear of traffic, Chief Sam turned on the siren before making some of his calls. When he finished talking, he turned it off.

We left I-5 for Highway 2. A white cloud of smoke was visible in the distance, somewhere east of Pasadena, and Chief Sam switched on the news. The flames were burning right down to the 210 freeway, the announcer said. Wall Street was finally having a bit of a rally, up 400 points. Chief Sam changed the channel to his favorite, Smooth Jazz 94.7, and an instrumental version of the Doobie Brothers’ “Minute by Minute” filled the cab of the Expedition.

Just after we turned onto the 210 we came to the first police line, a diagonal string of orange cones guarded by a single squad car. Everyone was being funneled off the freeway, causing a traffic jam, but we accelerated in the left lane. The siren came on again. Chief Sam, a firefighter for twenty-nine of his forty-nine years, dark-haired and barrel-chested, looking official in his blue uniform and red fire truck, gave a convincing wave to the cop. The cop waved back. I watched the traffic pass in a blur until we crossed the cones and were completely alone. Suddenly everything had the look of war, the scent of smoke. Chief Sam showed no emotion, but he put down the Blackberry.

The darkest clouds were chemical, from a fuel that was man-made, and toxic—not chaparral, not wood. From a burning mobile home. A burning landfill. A burning panel truck parked on a ridge. Helicopters clattered overhead, dumping white clouds of water that seemed to have no effect. Gusts blew the vapor sideways, with the smoke. On the freeway, strike teams—five-vehicle convoys sent from neighboring cities—rolled by at eighty miles an hour. A semi truck from the Los Angeles County Fire Department passed us, towing a red bulldozer. Traffic signs appeared and disappeared, obscured by the haze. The hills themselves were turning black, and where the vegetation had burned away, the rocks were set free and small landslides littered the side roads.

The AIG team was waiting at a municipal park in Sylmar, the staging area for the fight against the 5,000-acre blaze that was consuming Little Tujunga Canyon. Their trucks, Pumps 21 and 23, were red Ford F-550s with orange hoses and chrome panels—just two of the dozen such trucks commanded by Chief Sam. The men were in their twenties and thirties, clean-cut and bored. They were waiting for something to do. This neighborhood, though imperiled, wasn’t quite rich enough: AIG’s Private Client Group insures and protects only homes worth at least a million dollars.

Whether by chance or by design, the privateers were parked slightly apart from the exhausted hand crews and Forest Service hotshots, who often made them feel unwelcome. The idea that privateeers were protecting the ultrarich just bothered some people. But the logic of it was familiar, inescapable: Sure, AIG could simply let fire consume its biggest clients’ homes and then pay out millions in insurance claims. But wasn’t it wiser to step in and bail them out?fire season

The fire had broken out one year and one day after the Dow Jones Industrial Average hit its historic peak, 14,198.10 points; almost a decade after it first surpassed 10,000 points, on March 16, 1999; and two days after the index finished its worst week ever, closing 1,874.19 points down. It had broken out 355 days after a record twenty-one simultaneous southern California wildfires forced a record evacuation—346,000 homes—and 327 days after the second-largest fire in California history, the Zaca, had consumed 240,207 acres and $118 million in firefighting costs (another record).

Ten years of spectacular growth, and ten years of spectacular fire: Fire in Alaska and Siberia and Corsica and Bolivia and Indonesia and British Columbia. In New Mexico and Oregon and Idaho and Arizona. In the Black Hills of South Dakota and the swamplands of North Carolina. In Greece, the worst fires in recorded history. In Australia, the worst fire in recorded history during the worst drought in recorded history. The largest fires in Florida’s recorded history, in Georgia’s recorded history, in Utah’s recorded history.

Across the United States, an average of 7 million acres have burned each year of the new millennium—twice the 1990s average. In California, 2007 and 2008 were the worst two wildfire years in the past twenty, blackening 1.5 million and 1.6 million acres, respectively. And in 2009, on February 27, six days after he signed an ill-fated bill to close California’s $42 billion budget gap, Governor Arnold Schwarzenegger declared another state of emergency: drought. California was running out of water as quickly as it was running out of money. In November’s Freeway Complex fire, as many as five Yorba Linda homes were lost simply because hydrants went dry.

What Chief Sam noticed was the fire season: it didn’t exist anymore. The previous afternoon, he’d described the change. We were at the Hyatt, his favorite hotel, where he’d driven me right after my flight landed in Orange County, then parked his truck in the emergency lane and scored me a suite at the government rate. “Can we put the room on my Gold points?” he’d asked, giving me a conspiratorial kick under the check-in counter. “We’ll, uh, both be staying there.” Now we sat in the lounge, snacking on complimentary wasabi peas. “I just love these things,” he said.

The Little Tujunga fire was normal, Chief Sam told me. It fit the pattern. “When I started in 1977,” he said, leaning forward in his chair, “there was a definitive season”—late summer and especially fall, after the hills had been baked dry, after the Santa Ana winds returned. But no more. In April 2008, he said, unusually high temperatures and low humidity fueled a 600-acre brushfire in the Sierra Madre. In May 2009, the 8,700-acre Jesusita fire in Santa Barbara would burn eighty homes and force at least 15,000 people to evacuate. Chief Sam blamed climate change for turning fire into a “year-round event.”

Also responsible was encroachment: Los Angeles’s climb into the wind-buffeted, fire-prone foothills of the Santa Monica and San Gabriel ranges. According to the state’s forestry and fire agency, Cal Fire, 40 percent of California’s 12 million homes are now in areas of high or extreme danger. In southern California alone, the Forest Service identified 189,000 such homes constructed between 2003 and 2007. In the 1960s, wildfires burned a hundred buildings in an average year. In the ’90s, they burned 300. This decade, it’s 1,500. “Normally we consider the fuel to be trees and shrubs and brush,” Chief Sam said. “But now it’s not just trees. The homes are the fuel.”

It was only natural that mercenaries would appear: the crisis meant an opportunity. “That’s where a company like ours comes in,” Chief Sam told me. Already thousands of private contractors were battling wilderness forest fires for government agencies. Of the 280 pilots and ground-crew members in Cal Fire’s aviation program, 130 are actually employed by DynCorp International. Of the Forest Service’s $1.5 billion firefighting budget—about a third of its total budget—more than half ends up in the private sector, often with companies based in Oregon: the hub, for whatever reason, of the fire industry. The modern, privatized fire camp might have crews provided by Oregon’s Grayback Forestry or GFP Enterprises, air support by Oregon’s Precision Aviation, and catering by Washington State’s OK’s Cascade Company. It will have mobile showers, mobile laundry, and mobile offices, and also air-conditioning, Internet connections, and tents with floors. Firefighting now costs the federal government more than twice what it cost a decade ago.

The key innovation by Chief Sam’s own employer, Firebreak Spray Systems of Hood River, Oregon, was to work for the insurance industry, not the government. Founded by entrepreneur Jim Aamodt, who invented the sprayers that keep produce fresh at the supermarket, and Stan Brock, a former tackle for the New Orleans Saints, Firebreak has a proprietary system to coat houses with liquefied Phos-Chek—the same chemical retardant used by the Forest Service and first developed in the 1960s by Monsanto. The spray is colorless and harmless, Chief Sam said, and it can protect your home for up to eight months, far longer than rival gels and foams.

In 2005, Firebreak went to work for AIG’s insurance division, now called Chartis Insurance, increasing the fleet of the division’s Private Client Group from two to twelve trucks and expanding its reach from fourteen elite California zip codes—90049, 90077, 90210, etc.—to nearly 200, plus zips in Vail, Aspen, and Breckenridge, Colorado. Chief Sam joined the company in 2006, after five years as fire chief in Monrovia. He’d been planning a second career in executive coaching until he read about AIG’s new wildfire unit in Fortune. “It was the thing of the future,” he told me, “and I wanted to get in on the ground floor.”

Firebreak was growing—Chief Sam’s friend George had just started a two-truck pilot program for Farmers Insurance—but now there was competition. Chubb insurance protects policyholders in thirteen western states through Montana’s Wildfire Defense Systems, which sprays homes with rival Thermo-Gel retardant. Fireman’s Fund contracts San Diego’s Fireprotec to clear a defensible space around clients’ homes, and offers evacuation services to its richest customers. San Diego’s Fire-Pro USA sprays homes with patented FireIce gel. Wildomar’s Pacific Fire Guard deploys “the Navy SEALs of firefighters” to spray homes with GELTEC retardant. Carmel Valley’s Golden Valley Fire Suppression offers spray-foam services on Craigslist as well as “Land Clearing with use of a goat herd.” It beckons customers with an online survey. Question 6: “If you could have a private fire force that would specifically work to save YOUR home in the event of a threatening wildfire, and the price of this protection would be $35,000 (financing available), plus $1,600 per year thereafter, how likely would it be for you to hire them?”

“We’re in a tough economy. It’s important that local governments start working with privatization,” Chief Sam told me at the Hyatt. “Municipal agencies can’t do it all on their own.” We’d downed the wasabi peas. He summoned a waitress: “Hey, I hate to say this, sorry to bother you, but can I get some water from you?”

Firebreak’s trucks were outfitted with top-flight communications systems, Chief Sam bragged, including RedZone mapping software that predicted a fire’s course and revealed clients’ addresses with a “tap on the dot.” Unlike overstretched public brigades, Firebreak could afford to be better. “To be honest with you,” he said, “we’re probably more sophisticated than a lot of municipal agencies.”growth business

Chief Sam and I left the staging area and drove uphill, toward the fire, to check on the pilot program for Farmers Insurance. It was the new team’s second day facing an actual blaze. Chief Sam had just directed Pump 43 to come here from San Diego, leaving the city exposed and worrying the people back at Farmers. We pulled over to check in. “I’m on the scene right now,” Chief Sam reassured his Farmers contact as we stared at the walls of a freeway underpass. There was a pause. He stiffened. “Well, a good comeback you may want to say is, You know, we’ve got a fire chief who has thirty years of experience,” he said. “So you guys do the, uh, insurance underwriting and everything you do. I know what I’m doing. Throw it on my shoulders, and I’ll take the whipping if something happens. So hit me with a wet noodle!”

We drove on to the Little Tujunga police line, where civilians were amas-sed on the sidewalk, carrying their photo albums in pillowcases, their flat-screen TVs in cardboard boxes, their cell phones in their hands. We crossed the line with our lights flashing, nodding our heads at the police. Beyond it, garbage cans still sat curbside at every empty house—it must have been trash day—and the wind was toppling them, spilling their contents onto the street. A few stragglers in gas masks were defying the evacuation order. A kid rode his bicycle in circles in the middle of the road. An old man in a flannel shirt sprayed the sidewalk in front of his home with a garden hose.

Farmers Pump 25 was parked alone on a side street. George, an amiable man with gray hair and a gray mustache who’d fought alongside Chief Sam for decades before both retired from the Monrovia Fire Department, was in the driver’s seat. He started up the engine, and together we charged uphill until we reached a modest, single-story home—Farmers was less exclusive than AIG—that was in little immediate danger. George’s young partner hopped out wearing a yellow helmet and yellow protective gear, unspooled an orange hose, and tugged it up a set of brick steps. He squeezed the nozzle, coating the home’s sickly lawn in Phos-Chek. Chief Sam encouraged me to take some photos. I took some.

Then we waited. Firebreak’s dispatchers, up in Oregon, were trying to put more addresses on George’s priority list, which required determining where the fire was going and which Farmers homes were in its path. But the fire wasn’t moving very quickly—the Los Angeles Fire Department had it nearly contained—and the pilot program was so new, the dispatchers so unpracticed, that they seemed to struggle to find any Farmers addresses. First we waited for orders outside the house we’d just sprayed. Then we waited on Gavina, an avenue that traversed the hills, dipping where it crossed Pacoima Wash. Then we waited uphill amid the neighborhood’s newest, largest homes: palm trees, stucco roofs, trimmed lawns, territorial views, proximity to the flames. Forty minutes passed. Chief Sam called Farmers headquarters again. “Can I put in a plug for us?” he asked. “We need . . . I know we’re in a pilot program, but these guys are doing a helluva job. They are saving homes. We just need more trucks!”

We started driving back toward Gavina, watching a skycrane helicopter and super-scooper airplane dump retardant on the hills, passing dozens of public firefighters, none of whom acknowledged us. “These guys are wanting us to spray homes for them,” Chief Sam continued, “but we say, ‘Sorry, these are dedicated to Farmers homes.’”

George finally got another address, and we sped across the wash toward a gated community. We followed Pump 25 past a clump of for sale signs shrouded by smoke, then down one block, peering at house numbers, then down the next. We lurched forward, then braked, watching George’s taillights flicker on and off. Chief Sam was getting agitated. “George, is that one of ours?” he asked over the radio. “That house on the corner, is it one of ours? Well, find ours. Is that one ours? Let’s find ours and spray it.”

At 10:45 a.m., two hours after we arrived on the scene, I watched Pump 25 spray a second Farmers property, a two-story stucco home in a subdivision called Mountain Glen. By 11:00 a.m., we were parked on Gavina again, waiting for a new list.

A few minutes later, the driver of Pump 43, arriving from San Diego, called Chief Sam for his orders. Chief Sam called command: “We’re spraying homes on Santa Catalina . . . well, that . . . yeah . . . Okay. . . . Okay. . . . they . . . we . . . Okay. . . . STOP!”

He was shouting now. He calmed his voice. “We’re in a bad cell receptive area,” he said, “so we’re not going to be able to talk to you much. But I’m just gonna say this. You guys generate a list. . . . I don’t have any clue. I don’t have the capability. . . . Generate a list for Pump 43 to go spray homes. . . . We’re under duress. We’ve got fire licking at our butts. . . . Well, I don’t know what to do, because I don’t have the priority list. That’s what your guys’ job is. So we’re out fighting the fire, and he’s calling us, asking where to go. Well, I don’t know . . . ”

He hung up. The CB crackled: “Chief, Pump 43.” He ignored it.

The CB crackled again: “Firebreak team, come in.”

“Pump 43, Chief Sam, go ahead,” he responded.

“Yeah, Chief, uh, Pump 43. We are at the address command sent us to. There’s really no area we need to spray here. Just wanted to get an update on where you want us to be.”

Chief Sam’s face hardened. “Okay. You’re talking to the wrong guy. Command tells you where to go. I don’t have a priority list, Todd. Do you have command’s phone number?”

“Copy that, Chief. They advised to contact you, but I’ll contact them.”

We parked at a spot overlooking the wash and watched a weathered crew from the Los Angeles Fire Department do the less complex work of attacking the fire itself. Some men had hoses, some shovels. Their faces and jackets were smeared with soot. In the distance, six other firefighters marched single-file across the charred valley. A woman from the Los Angeles Daily News began interviewing Chief Sam as he sat in his truck, so I got out and wandered over to join George in Pump 25, arriving just in time for one of the LAFD firefighters to approach the window.

“So, do you guys just do a certain area?” the firefighter asked. “You go to certain addresses, and if . . . ?”

“If they’re in danger, we try to go ahead and spray, yeah,” George said. “We try to get ahead of it, but with erratic winds like this, you know . . .”

“Yeah,” said the firefighter. He knew.

“It’s like the old days,” George’s partner offered, “with all the insurance companies.”

It was an obscure—if accurate—reference to London in the seventeenth century, when any firefighting was done by private insurers. The firefighter took it in. After he left, George rolled up the window. “You see?” he said. “He feels better now.”

I returned to Chief Sam’s truck, and we drove around the corner, out of the smoke. The smooth jazz came on again, and then he turned it down to make another call: “Hi, I’m a fire chief here in L.A. I was just at the Hyatt, and could you send me some of those wasabi peas? . . . Which one is it? With the green ones? . . . The Hyatt . . . Okay.
. . . And how much would it . . . Yeah. Could you send me a box of those? A big box? . . . Okay. Send me three pounds.”the barbon institute

The inventor of fire insurance was a Puritan preacher’s son born in seventeenth-century London and baptized If-Jesus-hadn’t-died-for-thee-thou-wouldst-be-Damned Barbon. He went by Nicholas. In 1666, when he was in his late twenties, the Great Fire of London was lit. It started in a baker’s oven on Pudding Lane—someone overcooked some bacon—and because the baker’s house was made of wood and his neighbors’ houses were made of wood and there was no fire service, it spread easily. People ran in every direction, carting away valuables in horse carriages. “The noise and cracking and thunder of impetuous flames,” wrote one observer, “the shrieking of women and children, the hurry of people, the fall of towers, houses and churches, was like a hideous storm.” Two prisons, eighty-seven churches, and more than 13,000 homes, housing 70,000 of the city’s 80,000 citizens, were destroyed.

Barbon’s response was to give London its first firefighters since the Roman era: one contemporary described them as “Servants in livery with badges, who are watermen and other lusty persons” who are always ready “when any sudden fire happens, which they are very laborious and dexterous at quelling, not sticking in cases of necessity to expose themselves to great hazards.” His Fire Office offered insurance policies for seven, eleven, twenty-one, or thirty-one years—two shillings, six pence per pound of rent for a brick house, twice that for a wooden one, with the services of the lusty watermen included. He signed up more than 4,000 clients.

He soon attracted competition: the Friendly Society, the General Insurance Company, the Hand-in-Hand Company. Each brigade had its own uniform—blue coats with red linings, or blue shirts with silver buttons, or yellow pants and silver-buckled shoes—and its own firemarks, metal plaques posted on homes so that everyone would know exactly who should save whom. Whenever part of London burned, the brigades competed so well for water and space that authorities had to impose fines: five shillings for hitting a rival fireman; two shillings, six pence for pouring water on him. By the early 1800s, private firefighters were replaced by public firefighters, for whom the only adversary was fire.

Barbon’s other response to the Great Fire has almost been forgotten: he became a developer of newly cheap land—“the leading speculative builder of his generation,” according to the historian Leo Hollis. Such a builder that in 1684 the justices of Middlesex complained about “the many great inconveniences occasioned by the late increase of buildings” at his Red Lion Square development. But growth was Barbon’s creed. He never stopped defending it. In 1685, to protest Britain’s new building tax, he distributed a pamphlet, “Apology for the Builder.” In 1690, he followed up with “A Discourse of Trade,” which has since secured his reputation as one of the fathers of free-market economics.

In “Discourse,” published nearly a century before Adam Smith gave us the invisible hand, are the seeds of modern capitalism—and its original sin:

The Native Staple of each Country is the Riches of the Country, and is perpetual, and never to be consumed; Beasts of the Earth, Fowls of the Air, and Fishes of the Sea, Naturally Increase: There is Every Year a New Spring and Autumn, which produceth a New Stock of Plants and Fruits. And the Minerals of the Earth are Unexhaustable; and if the Natural Stock be Infinite, the Artificial Stock that is made of the Natural, must be Infinite.

“This sheweth a Mistake,” Barbon wrote, by those who would commend “Parsimony, Frugality, and Sumptuary Laws, as the means to make a Nation Rich.” He believed there were no fundamental limits to supply, no real consequences to growth; man could skim infinitely off the top of nature without being subject to its rules. What made an economy great, then, was the demand side—spend, spend, spend, grow, grow, grow—and Barbon was one of the first to recognize that man’s physical needs, the “Wants of the Body,” could play but a small part in this. It was the all-consuming Wants of the Mind that mattered. He celebrated our irrational taste for luxury, for constantly shifting styles: “Fashion or the alteration of Dress . . . is the Spirit and Life of Trade; It is an Invention to Dress a Man, as if he lived in a perpetual Spring; he never sees the Autumn of his Cloaths.”

Three hundred years before the American housing boom that fueled fires both real and metaphoric, Barbon railed against government meddling and called building “the chiefest Promoter of Trade.” He celebrated what happens when we cluster in cities: “Man being Naturally Ambitious, the Living together, occasion Emulation, which is seen by Out-Vying one another in Apparel, Equipage, and Furniture of the House; whereas, if a Man lived Solitary alone, his chiefest Expence, would be Food.” Barbon would have looked at the subdivisions spreading across the Los Angeles foothills, the gated communities, the leased Land Rovers and Mercedes Benzes—so much Artificial Stock made of the Natural—and seen a free-market economy at its peak.

Barbon died bankrupt in 1698, but his legacy survived, thanks in part to the work of one man: Maurice “Hank” Greenberg. In his thirty-seven years as CEO of AIG, Greenberg turned the company into an $81 billion icon of American capitalism—largely by inventing increasingly abstract ways to insure increasingly abstract investments—only to be forced out in 2005 when Eliot Spitzer, then New York’s attorney general, began investigating him and AIG over accounting irregularities.

In 2006, Greenberg’s aides created a think tank for him, and, in honor of another inventor of groundbreaking insurance products, they cleverly named it the Barbon Institute. It was part of a larger rehabilitation campaign: they would pay a Massachusetts public relations firm, eSapience, to hire well-known academics—-including the dean of MIT’s Sloan School of Management and professors from the University of Chicago, the Wharton School of the University of Pennsylvania, and University College London—to say good things about Greenberg, write papers that underscored his genius, and host conferences that let him be keynote speaker. According to an internal memo, eSapience would also “leverage” its “relationships with important and highly credible channels,” including the American Enterprise Institute and the Hoover Institution. “Mr. Greenberg will share his views on corporate governance,” the memo said, “as a result of his more than thirty years at the helm of one of the most successful companies in business history.”

The campaign faltered. After eSapience sent Greenberg a bill for $2.3 million, he refused to pay, the company sued him, and everything became public. When AIG itself later collapsed, Greenberg, still a major stockholder, lost at least $2 billion and got kicked off Forbes’s list of the 400 wealthiest Americans. The Barbon Institute, which eSapience had used to host a 2006 seminar at New York’s St. Regis Hotel at which Greenberg addressed fifty top insurance executives, would be the campaign’s only bright point. Its name seems cleverer by the day.looking for fire

A new fire appeared just before lunch. Chief Sam spotted it from Gavina Avenue: a plume of dark smoke rising somewhere to our west. A new crisis, a new opportunity. A real purpose, perhaps, for his men. He excitedly radioed AIG Pump 21: “I don’t know what ridgetop that is to the left, but it’s kicking up a pretty good header. Can you see it?”

Pump 21 radioed back: “Chief, are you talking about where that, uh, Skycrane just made that drop?”

“Yes. Almost looks like an independent fire from where we are.”

“Copy that, Chief. We’re right in front of that. We’re actually right where that is, and you’re right, it is a little spot kicking up there.”

“Are there any dwellings around there? I’m trying to get an assignment for Pump 43.”

“Copy that, Chief. There’s multiple single–family residences.”

“Can you give me some names of streets, cross streets?”

“Yessir, give me one second and we’ll get you some names.”

Chief Sam and I crossed the wash, passing the spot where the strike teams had gathered. Many were pulling out, leaving Sylmar to the mop-up crews.

The radio again: “Firebreak chief, Pump 21, come in.”

“Go ahead,” said Chief Sam.

“I have cross streets: Gavina Avenue and Tibbetts Street.”

Chief Sam looked in the rearview mirror. “Okay. I’m right in front of you. I see you,” he said with disgust. “That’s not the one I’m talking about. Never mind.”

We needed to find out where the blaze actually was, and two minutes later, we did. Thanks to the Incident Page Network—an $8.95-a-month public-alert system—Firebreak’s dispatchers had learned its name: Oat Mountain. It was above Porter Ranch, about a dozen miles away. They couldn’t tell us much else, but the public firefighters, racing downhill with their sirens on, seemed to know where to go. “You see that fire right there? Where all these units are being rerouted?” Chief Sam asked the crew of Pump 43. “You guys start heading in that direction.” He directed AIG Pumps 21 and 23 to follow. Porter Ranch was “an upscale community,” he said. “It’s high-volume with AIG clients.”

Chief Sam called Firebreak: “We’ve got a new fire, so we’re en route to it. It’s like we just
got this one knocked down and that one took off! . . . Okay. All right, boss, I just wanted to touch base and let you know we must have sprayed fifteen Farmers homes—actually saved ’em. We got photos for proof.” Then he called Farmers. Pump 43, he explained, was being rerouted to Oat Mountain. Pump 25 would stay here in case Little Tujunga reared up again. “If you have five extra pumps, it could come in handy with us,” he said. Then we went for tacos.

The Ranchito was a Salvadoran place in a strip mall, below the police line, next to a Rite-Aid. Everyone clapped when we walked in. “Are we doing a good job?” Chief Sam asked. He and George ordered two fish tacos apiece, and we sat down facing the television. When there was a signal, KCAL 9 had live footage of smoke and flames, aerials of burning foothills. A ticker gave updates: Porter Ranch was under mandatory evacuation. Hundreds of firefighters were converging on the area near Sesnon Boulevard. We were captivated. This was the best intel yet.

Los Angeles Mayor Antonio Villaraigosa was about to give a press conference. “I’ll bet he’ll be wearing his jacket again,” Chief Sam said. He was right. The mayor stood in front of the microphones wearing a yellow fire jacket just like the one Chief Sam was wearing. He began talking: “I’d just like to say that all the Los Angeles firefighters, all the firefighters . . .”

“. . . and Firebreak . . . ,” said Chief Sam under his breath.

“. . . are doing a great job.”

We stayed for forty-five minutes, soaking up information. As we left, the taqueria’s owner stopped us. “Do you guys want some bottles of water or anything?” he asked. We were all set, George told him.

We had barely stepped into the parking lot when a woman came running up, begging for help. Suddenly, we were all running into the Rite-Aid. A girl in line for the register had collapsed. She was lying on the floor, surrounded by a crowd. George kneeled down, speaking to her in Spanish. She was having an asthma attack, he said. He was about to move her when three LAFD firefighters, responding to someone’s 911 call, rushed through the door. Three men in yellow looked at three other men in yellow. There was an awkward pause. “We’re gonna let you guys have it,” George said, and we left to find the fire.the fire sector

Before Barbon there was Hammurabi, the sixth king of Babylon and originator of some of the first written laws and first forms of insurance. Hammurabi’s Code was harsh in places. But its edicts on insurance captured all that was communal and good about the idea. In 1700 b.c. Babylon, if a man was robbed, the community reimbursed him. If a man himself was stolen, the community paid his relatives one mina of silver. If he owed “a debt for a loan, and a storm prostrates the grain, or the harvest fail, or the grain does not grow for lack of water; in that year he need not give his creditor any grain, he washes his debt-tablet in water and pays no rent for this year.”

This is what our concept of insurance became—we understand it as a way to reduce risk, to improve life—but this is not all that insurance became. When it turned private and for-profit, part of the free market, insurance was combined with something else: the need for growth. And a system meant to reduce risk soon began to crave more of it.

Growth—growing encroachment, growing drought, growing fire seasons, growing carbon emissions, and the attendant growing need to hedge, dilute, distribute, and disperse a growing risk—was what fed Firebreak’s growing business. It was expanding “like crazy,” according to its spokeswoman, Jessica Roy, and it was not alone. Until the crash, the source of much of the GDP’s steep rise was the FIRE sector—Finance, Insurance, and Real Estate—which profited by divorcing causes from consequences, growth from its by-products. That is, by simultaneously creating and hedging risk. The sector’s main output was credit and security, backing for every kind of bet, and it became both catalyst and beneficiary of the boom. More risk meant more revenue from more fees, which meant more credit, which meant more growth, which meant more risk. FIRE firms bundled risky mortgages together and sold them as securities, which were then guaranteed by companies such as AIG in credit-default swaps. They provided insurance for risky housing developments on fire-prone hillsides and storm-prone beachfronts. Risk was spread across the system until it floated everywhere, invisible and unclaimed, like so many carbon dioxide molecules, capturing the heat of profit.

Climate change itself, the silent outgrowth of growth behind the wildfires and other disasters, illustrates the point. It’s a risk, if properly rationalized, that could grow to produce unprecedented insurance profits. “If you think about it,” says Terry Coles, manager of London’s global-warming-themed F&C Global Climate Opportunities fund, “as natural disasters start to be more common, as climate change starts to cause flooding and droughts, insurance companies—in particular reinsurers, which are the insurance companies that insure insurance companies—should get pricing power. People often think the hurricane season is a big negative for the insurers. As long as they’re pricing the risk appropriately, it’s actually quite a positive thing.” F&C’s rival, the $250 million Schroders Global Climate Change fund, lists Munich Re—the world’s largest reinsurer, with 37,000 employees in fifty countries and from $2 billion to $5 billion in annual profits—as its top holding.

In 1992, after category 5 Hurricane Andrew struck Florida and Louisiana, insurers paid out more than $23 billion in claims—$1.27 for every dollar of premium collected that year. They turned to catastrophe-modeling companies such as Risk Management Solutions (RMS)—the quants of the insurance industry—which used a century of weather data to predict future losses, and then they raised premiums accordingly. In 2005, after Hurricane Katrina, the first category 5 storm of the new climate era, they paid out more than $40 billion—but only 71.5 cents per dollar collected. That year, the industry still made $49 billion in profits. It has profited, sometimes more, sometimes less, every year since. When RMS updated its hurricane model in 2006, Allstate used the non-peer-reviewed results to justify jacking up rates in Florida by 43 percent—a move blocked by state regulators. State Farm was blocked this year from hiking rates by 47 percent. Instead, both are dropping tens of thousands of policies. They’ve had more success in California: a few weeks after the fires in Sylmar and Porter Ranch, the state insurance commissioner approved what amounted to $115 million in increases for State Farm and Farmers—hikes of 6.9 and 4.1 percent, respectively. Allstate’s 6.9 percent hike was approved in January.

Growth is everywhere for the innovative. AIG has Firebreak, but where rich policyholders are clustered on risky coastlines, the Private Client Group is offering the Hurricane Protection Unit: men with GPS units and satellite phones who are on the scene after a storm blows through, boarding up broken doors and windows, patching holes in roofs, covering skylights with tarps, evacuating valuable artwork. In the corporate world, Munich Re’s “Kyoto Multi Risk Policy” protects investors from carbon-credit defaults. For solar-power projects, its weather derivatives hedge against cloudy days. For wind-power projects, there are hedges against calm days. But the most forward–looking product was introduced last year, after Inuit residents of Kivalina, Alaska, sued twenty carbon-spewing oil and energy companies: Liberty Mutual’s Private Advantage Company Combo is the first policy to protect corporate executives from global-warming “r” us

Chief Sam and I arrived on the scene of the Oat Mountain fire at 12:40 p.m., pulling off the Ronald Reagan Freeway with our siren blaring, shooting past two police cars that blocked part of Porter Ranch Drive. “It looks like an atomic bomb blew up,” he said. A boiling gray cloud filled the horizon. Nothing was moving. Hastily parked cars lined both sides of the broad street, and their owners stood in open doors, staring uphill, transfixed. AIG Pumps 21 and 23 were waiting for us in a lot outside the Toys “R” Us, on the near side of the country club, and we led them in a convoy toward the first house on the priority list. The radio played Al Green’s “Let’s Stay Together.” The neighborhood, one of the last parts of the San Fernando Valley to be developed, was Steven Spielberg’s chosen location for the prototypically suburban street scenes in E.T. It was newer and richer than Sylmar, with a median household income of $121,428, making it the fourth richest neighborhood in Los Angeles. As we drove up into the smoke, I counted five parked Hummers.

At the top of the drive was a faux-Tuscan gatehouse with tile roofing that guarded Renaissance Summit, a subdivision where the streets were named Via Donatello and Via Botticelli and Via Sansovino. There was a crowd of people and television cameras, and flames were visible, crawling down the hills. Our convoy turned just before the gate, wrapping left around the development, only to be stopped by another gate when we tried to enter on Via Galileo. It didn’t matter: Next to us, across from the gate, the ground was already charred. Chief Sam called Firebreak command. “The fire’s already burned through here,” he said. We were behind it. We needed to be ahead of it. “We need something to the south—an area where we can save some homes,” he said. “You’re going to have to find us a better list.” His frustration was genuine. The new fire had been an abstract opportunity, yes, but now that we were here, he wanted nothing more than to fight it.

We led Pumps 21 and 23 back toward the gatehouse. “Stage side by side with me,” Chief Sam radioed when we arrived. “Park like you’re staging an engine company.” They pulled up alongside us in the middle of the intersection, in front of Renaissance Summit, and we faced the cameras and public in perfect formation, awaiting a new priority list. Chief Sam was getting tense, frantic. Two minutes later, he commanded his crew to follow him away from the intersection, and we staged on a quiet boulevard directly across from a flaming hillside. We waited. Five minutes later, he led the trucks on an impotent dash through another subdivision, blasting his siren at a side entrance that read, these gates are locked with l.a. fire dept. locks until a resident let us in, then looping right back out after forty-five seconds. The men tried to use RedZone maps to come up with new addresses, but without input from command they were blind. When the lists arrived, after nearly twenty minutes, the trucks couldn’t download them because their Internet connection, via cellular modem, was failing. The fire was knocking out our communications.

Chief Sam managed to find a momentary signal. “We have no cell service,” he told command. “We can’t talk to you. We’re watching fires about to burn up homes when we could be protecting them—but we don’t know which ones!” We parked on Porter Ranch Drive and saw the flames spreading downhill, toward the Ronald Reagan Freeway. Sade’s “No Ordinary Love” started playing. An address came through: it was on “Via Ceilino,” Pump 21 told us. On “Via Ceilini,” they said a minute later. After two minutes, Pump 23 radioed: “Pump 21, do you read me?”

“Pump 23, this is Pump 21, come in. Copy.”

“Yeah, hey Josh, they spelled ‘Cellini’ wrong.That’s probably why you can’t look it up on your GPS. Cellini is C-E-L-L-I-N-I.”

The address was in the wrong direction, behind us in Renaissance Summit, well guarded by the LAFD and probably already spared. Desperate, we responded anyway in all three trucks, shuffling lawn furniture at an ivy–covered five-bedroom, six-bath house but saving the Phos-Chek for the fight we hoped would come.

We drove downhill and parked again, and the blaze seemed to accelerate past us on the east side of the road. Smoke blew across both lanes. Embers began pelting the pavement like raindrops, swirling in the wind. Out the windows, everything took on a shade of sickly orange. “Leave the area,” Chief Sam yelled into the CB. “Evacuate the area!”

We rolled to a safer spot a few dozen yards down, and visibility went to nearly zero. We waited the firestorm out. “Pump 21, are you
okay?” Chief Sam asked.

“Yeah, Chief, we’re fine.”

“Pump 23, have you ever been through something like this?” he asked.

“Definitely not.”

“Do you have a list, by the way?” he asked.

“Negative on the list. We have an address, but we still haven’t gotten GPS or Internet yet.”

The smoke began to clear, and we edged downhill with our siren on toward the Toys “R” Us. We hadn’t saved anything. Away from the flames, the Internet began working. RedZone was back up. We turned onto the freeway, passing a smashed red Ford Explorer lying upside down, looking like it had dropped from the sky. Just beyond it, a white tow truck had rear-ended a sedan. The sedan’s make and color were unclear. It was now three feet long and charred gray.

Chief Sam called command again, imploring them to finally get the lists right. “We’re watching houses burn,” he said. “And I’m wondering: Is that an AIG home?”fuel

The key insight of modern firefighting is to recognize root causes. The danger is not fire but fuel. Southern California’s tangled brush, its chaparral, burns so well because it is supposed to burn. Let it accumulate thirty years, and there will be 25,000 tons of dead, dry fuel per square mile, and there will inevitably be a fire. Stamp it out prematurely and let the chaparral accumulate another ten or twenty years, and there will be a bigger fire, a hotter fire. In an ecosystem, fire is not a tragedy. It’s a correction. There’s no better way to clear out the rot.

In the Great Plains of prehistory, Native Americans not only allowed fires to burn but also set them themselves: in the spring, fires hundreds of miles across to improve summer buffalo forage; in the fall, fires to prepare spring pastures. Wildland firefighters have long spent winters thinning overgrown understory. They set controlled burns everywhere from Montana to Florida to South Carolina. Sometimes, when only nature is at stake, they simply let wildfires run their course. But now, as Chief Sam had said, the foothills are choked not just with chaparral but with subdivisions. The houses themselves are the fuel.

Some houses were alive. But many were vacant, stillborn—defenseless because no one was home to turn on the sprinklers and cut the grass. In 2008, America had an 81 percent jump in foreclosures, and one in four was in California. In an average month, one in 173 homes succumbed. Last year was the fourth in a row that more people moved away from the state than moved in—135,173 more. There were new homes but no new families; the growth had taken place for its own sake. Nationwide, the average million-dollar home sat on the market for 110 days in May 2008, for 130 days in September, for 145 days in November, and for 185 days by May 2009. “Zombie mansions” was the term the Wall Street Journal used. They sat there empty and unwanted, neighborhoods of dead wood, waiting to be cleared by market or fire.

The largest, emptiest mansion we saw—the largest I’ve ever seen—was at the end of a long driveway at the edge of Simi Valley, alone in the hills. It was called Hummingbird Nest Ranch, and it belonged to broadcasting-mogul-turned-financier David Saperstein, who’d bought it for his second wife, Suzanne, once described in Vanity Fair as “probably the world’s No. 1 consumer of haute couture.” The 123-acre complex had a 12,500-square-foot main house, a 20,000-square-foot horse barn, six guesthouses, ten prefab staff houses, and a helipad, and it was sitting on the market for $75 million. The Sapersteins had just divorced—he left her for their Swedish nanny—in what is thought to have been the world’s most expensive split. Their other home, Bel Air’s Fleur de Lys, a 45,000-square-foot replica of France’s Vaux-le-Vicomte palace, was listed at $125 million.

Chief Sam and I followed AIG Pumps 21 and 23 up the driveway until manicured lawns appeared, then a pond and a fountain and a building that looked like a castle. We were three trucks and there were seventeen houses. One of the pumps had just tapped a hydrant to mix a new batch of Phos-Chek, but we were running low. The fire was coming. Chaparral was everywhere around us. We drove worriedly through the complex, taking a left at the stables, dead-ending in front of the employee housing. And then we saw them: police cars, three of them, the first public resources on the scene, ready to call in public fire trucks to save the ranch from the flames. “Oh, they’re fine,” said Chief Sam, and we drove away.

With Pump 23, we set out toward Chats-worth, to the south of the Ronald Reagan Freeway, finally ahead of the public firefighters and the flames. We loaded an address on RedZone. We had our list. But with so many overgrown homes, so much fuel, I was beginning to wonder what Chief Sam could really accomplish. Maybe AIG, which had guaranteed the securities that bundled the loans that bought the houses that bought AIG insurance, could stop the burn. Disaster averted, the system would then creak along, perhaps for years, perhaps for decades, toward a bigger failure.too big to burn

The home Chief Sam saved, the one I can verify myself, was on Andora Avenue—“Pandora,” he called it, until he straightened out the list. It was ranch-style in the truest sense: sprawling, with horse stables out back and a twenty-foot American flag up front, set amid a series of equestrian estates in Chatsworth. To reach it, we went against the tide of a full evacuation. Children walked horses and mules down the middle of Topanga Canyon Boulevard. A man in a cowboy hat led a pony half his height. SUVs towing horse trailers clogged intersections. We took a detour down Chatsworth Street and passed more horses being loaded into more trailers, a sports car being loaded into another trailer, a man throwing bags into the trunk of his blue Jaguar, a sign for a missing dog. Public firefighters were nowhere to be seen. The sky was turning yellow. The flames were minutes away.

The homeowner was standing at the entrance to her estate, loading her white pickup with the engine running. Her three young daughters sprinted out of the house. All were wearing surgical masks.

“We’re with AIG, your insurance company,” Chief Sam told the woman.

“Oh, yay!” she said. “We love you!”

Chief Sam directed Pump 23 into the driveway: “Back it in! Back it in! Watch out! You guys, get out of the way!” It inched the rest of the way in, and the men unspooled the hose. A hot wind whipped the flag back and forth. We sprinted toward the stables. They began to spray the shrubs behind the white guesthouse, the estate’s first line of defense. Then the walls of the guesthouse itself. The wooden arbor alongside the guesthouse. The corral. The brown tack room. The blue Adirondack chair. The rear deck of the main house. The patio of the main house. The patio furniture’s cushions. The roof and walls and windows facing the brick back courtyard, next to the leaf-choked pool. The wooden furniture at poolside. The roof of the gazebo. The trunk of a palm tree. The roof of the four-car garage.

Chief Sam ran with the crew the whole time, slinging the hose over his shoulders to get it around corners, shouting directions, pointing. When they did it wrong, he did it for them, wresting away the nozzle and blasting the walls until they dripped. The rush ended after twenty minutes, and we gathered on the lawn, breathing hard.

A neighbor appeared. She seemed to have mistaken Chief Sam for a firefighter—for someone trying to stop the burn—and all of us attempted to play along. “You could get right to the fire at the second property down, Tres Palmas,” she said. “They’ve got double gates all
the way . . .”

“Okay, okay,” Chief Sam said. A helicopter clattered overhead.

“I’ve got trails in here,” she said. “You can pull all the way in . . .” She pointed down the street, toward the flames, waiting expectantly.

“Okay,” Chief Sam said, barely looking at her. “We’ve got more resources coming.”

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