Summed up by Matt Levine:
One theme in the history of finance has been the domestication of different risks. In the beginning, no one has ever heard of or thought about some particular risk. Then people worry about it in vague terms, without doing anything about it. Then they prepare for it in crude ways, with arbitrarily chosen reserves or cautious rules of thumb. Then they develop a statistical understanding of the risk, and build models allowing them to predict the range of damage it might cause, to charge appropriately for it, to diversify against it. Then they build hedging tools to transfer the risk to someone who actually wants to take it.This is in part a linear progression from ignorance into understanding, but you can also read it as a cyclical process, from complacency back into complacency. In the beginning, you don't worry about the risk, because you've never thought about it. In the end, you don't worry about the risk, because you think that it is fully understood, and that your models and hedging tools can handle it. Then you discover some risks in the models and hedging tools themselves, and the cycle repeats.