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The key is choosing redundancies (backups) and distributing risk is to start with a cost-benefit analysis: how much does the "insurance" provided by redundancy and distributing risk cost, and what are the potential payoffs?

If municipal water supplies are disrupted or polluted by a natural disaster, then a water filter which costs less than $100 will have a value which is difficult to assess because we cannot live without clean fresh water. Filling a few plastic juice or milk containers with fresh water (after rinsing, of course) and storing them is cheap "insurance" indeed.

Creating an independent source of income is time consuming and difficult, but the pay-off-- a security which is not controlled by others--is equally large.

If we perform a cost-benefit analysis and then prioritize the results, we might well conclude that storing some water, grain, canned goods, spare batteries and a camp stove and lantern (items which might be bought used) would be low-cost ways to distribute risk and create household-controlled redundancies for essentials.

Longer term, such an analysis might lead us to distribute some of our assets or add some independent sources of income to the household.

Another key is to understand that reducing consumption is equivalent to increasing supply.

If the household consumes 40 gallons of gasoline a week, then reducing the miles driven or increasing the mileage of the vehicles by 50% is the same as increasing the household supply of gasoline.

If those 40 gallons of fuel enabled vehicles getting 20 miles per gallon to travel 800 miles, (40 X 20 = 800) then increasing the mileage to 30 MPG is the equivalent of getting another 20 gallons of gasoline: 30 MPG X 40 gallons = 1,200 miles, or the equivalent of 60 gallons X 20 MPG.

If a human consumes 3,000 kilocalories a day (we short-hand this to "calories" in everyday speech) then consuming 2,000 calories a day is the equivalent of having 50% more food.

The easiest way to double one's supply of gasoline is to cut consumption in half. Thus conservation is highly cost-beneficial. Reducing expenses by 50% is the easiest way to accumulate savings/surplus capital which can then be put to work for the benefit of the household. It generally costs nothing to reduce consumption, as most consumption is behavioral-based.

In cases where some capital investment is necessary, such as insulating a house to lose less heat in winter, the costs are modest compared to the long-term savings and the overall value/cost of the asset.

Oftwominds.com correspondent Harun Ibrahim has helped me understand the concept of hedging.

From what I understand about hedging it does not matter when one buys or sells. What is needed is an understanding of risk and consciously seeking ways of mitigating the known risks. For example, a farmer must raise and sell his crops. What the market price will be at harvest is unknowable and out of his control. The airline must fly but has no control over fuel prices it must purchase to conduct business. In neither instance is it practical to shut down business until prices become optimal. Since future price is unknowable, what price is optimal? And since crop and flights could not be brought into being instantly, how could we take advantage of the optimal price when it materialized?

The only constant is uncertainty. Learning to manage risk as a producer, consumer or both should be the endeavor.

Since the future is unknown there is no "perfect" time to purchase or sell anything. There is only risk. If one happened to get the highest or lowest price it occurred by chance.

We are immersed in a sea of risk as a function of our existence; however, few give conscious thought to this and therefore take no conscious steps to manage important risks. This failure to live consciously is how government grows and becomes more tyrannical.

In very simple terms, we might observe the risk of wheat rising in price due to droughts in wheat-growing regions, and buy several bulk bags of flour