What he's doing now: With all the changes in the energy industry through the past 15 years, Druz's career has taken him to several enterprises. He finally landed in the energy risk management group at Towers Perrin, a strategy and consulting company, after the boutique firm where he was working, Risk Capital Management, was acquired in 2006. Through all this, however, his work has focused on a similar question to his chess study: whether, in assessing energy prices, thinking about all the variables as broadly as possible can give one an edge.
The problem, he explains, is that even though experts can construct models for future energy prices that fit past data, these seldom actually do predict the future. "No matter how much work you put into it," he says, "the predictable component is overwhelmed by factors beyond the capabilities of the forecasting model." There is much "chaos and randomness." Although one can know that oil wells are capable of a certain level of productivity, it's quite hard to predict, for instance, if there will be a war in an oil-producing region 10 to 15 years from now, or three category 5 hurricanes in the Gulf of Mexico next year.
So "what you do is not try to predict the future necessarily, but try to predict certain aspects of what will happen—understanding what you're really predicting and what's left over, and taking that part that's left over and risk-managing it," Druz says. That way, "you're exposed to only that part where you feel like you have an edge and feel like you have a view." He advises companies from airlines to chemical firms on these matters, getting them to ask, "What part of the next 50 moves in the market am I predicting?"
Figuring out as many variables as possible and how to manage that risk is, like chess, complicated, but Druz credits his Westinghouse project with helping him learn to "construct my own tools to address what I specifically want answered."
Such innovation has helped him stand out in a crowded field, says Amar Saati, a colleague at Towers Perrin who first met Druz years ago when both worked for the now-dissolved PG&E National Energy Group in Bethesda, Md., trading natural gas, oil and other energy commodity futures and options (tools for managing risk or increasing profits). "Energy trading and risk management has come into its own over the past 10 years, and Tamir has been a leading practitioner over that period," Saati says, with many large firms using his state-of-the-art models. For instance, Druz has developed a risk optimization model for several leading wind power developers that helps them evaluate which project combinations and hedging strategies might yield the highest investment returns.
And Druz does still play chess on occasion. "I can't say I'm devoting as many hours to that as I used to," he says. "It's always going to be a real passion, but I guess maybe not as hot a passion as it once might have been."