Risk-Averse Culture

The June 3, 2013 issue of The Wall Street Journal featured a front-page article written by Ben Casselman titled, “Risk-Averse Culture Infects U.S. Workers, Entrepreneurs.”

No kidding.

My first book, “How to Grow a Backbone,” published in 2000, identified three elements of Backbone: Competence, Confidence, and Risk-Taking. In the thirteen years that we have been working with these elements, risk aversion has emerged as a national emblem. Mr. Casselman writes “Economists aren’t sure what is behind the decline in risk-taking.”

I am not an economist, so my voice in this particular arena may be invalid. But here, in no particular order, are developments I have witnessed over the past two generations that impact our willingness and ability to take intelligent, purposeful risk.

Explosion of mind-numbing complexity. Couple this with an unprecedented rate of change and it’s easy to see how the fear of missing something important paralyzes even the best and brightest.

The gold star for participation rather than achievement. In an effort to preserve self-esteem, we reward attendance at the price of trial, error, failure and learning. Coping skills, once critical to health and survival, evaporated as the economy soared through the mid- and late-90s.

Reality TV. Letting it all hang out—the cruder the better—may have great entertainment value, but it is a lousy way to teach life skills. Incivility is not welcomed anywhere that matters, so by mimicking “real” behavior, some level of rejection is guaranteed. This rejection fuels poor self-esteem, anger, and in a growing number of cases, retaliation.

Finance as a means of value assessment. If there is no bottom line enhancement to a particular behavior, line of work, or entrepreneurial effort, we deem it value-less. Think about that for a moment. We are shaping the risk-averse behavior we fear, while denying this outcome as we focus instead on potential economic benefit.

Educational decline. In the face of exploding technologies, shrinking attention spans and elevated expectations, educators’ heads have been turned by new teaching technologies, pedagogical theories, union priorities and the like. Results speak for themselves.

Healthcare chaos. Similar to comments above, exploding complexity and demand for financial performance wrought chaos as groups of professionals seeking financial reward got embedded in what was once a relatively simple system of patient/physician interaction.

Decline in the nuclear family. Heck, let’s broaden this to call out a decline in commitment across the board. Sticking with a difficult situation is so yesteryear. When the going gets tough, a dash for freedom, safety and comfort rule the day, no matter promises made in happier times.

The evolution—or more appropriately, devolution—of the US Government.

In the face of out-of-control systems, institutions and social mores, the promotion of physical perfection at odds with reality seems one way to exert personal control. Yet sculpting the perfect body preoccupies many (drawing energy and attention away from other needs) and discourages many others who will never have the time, money, interest or capability to develop six pack abs.

These examples may seem simplistic, even naïve. But they are pervasive and destructive.

There is no simple economic answer to the decline in risk-taking. Which, ironically, points to another reason for such decline: our preference for a quick, clean, proven solution to implement today.

Douglass C. North, at a lecture in Stockholm Sweden December 9, 1993, where he was awarded the Nobel prize in Economic Sciences, provided profound insight. We would be smart to consider his words, particularly those with respect to beliefs.

“Institutions form the incentive structure of a society, and the political and economic institutions, in consequence, are the underlying determinants of economic performance. Time as it relates to economic and societal change is the dimension in which the learning process of human beings shapes the way institutions evolve. That is, the beliefs that individuals, groups, and societies hold which determine choices are a consequence of learning through time – not just the span of an individual’s life or of a generation of a society, but the learning embodied in individuals, groups, and societies that is cumulative through time and passed on intergenerationally by the culture of a society.”

I would argue that we have learned systematically over several generations to embrace risk-aversion. The question today, assuming we value some level of risk-taking behavior, is how to get it back. The role of leaders in championing, and at times demanding, risk taking is key. Intelligent boldness on the part of leaders, marked by vigorous discussion of current beliefs and incentives, unintended consequences, and the urgency of time, sets a standard of thought and action that transforms risk aversion.  It requires courage, strength, and a willingness to shake people out of complacency.  None of this is easy; all of it is important.

Categories: Leadership

1 comment

  1. Peggy says:

    Great Blog! Susan, you point out some interesting arguments. As I contemplate the risk averse words, I am disappointed we have the Wall Street Journal tell us so.
    We are vulnerable as a people just for thinking. At the core of all of the rhetoric is the simple fact humans are in a state of paralysis. The human spirit is very fragile and the messages we receive are so conflicted. Morals are at an all-time low. In our nation that moral compass spiraling even farther down. In fact, with the IRS scandal and now the recording of phone conversations across the board, do we even have such a thing as privacy? And it is done in the name of national security. Or is it?
    Companies are counting our every move with the end result being gains for the shareholder. Taxes have eaten the wage increases for Americans as they struggle to stay ahead of the ever mounting cost of life. Jobs are granted to younger so called smarter people who come with a lower salary requirement. Older working adults face cutbacks, job loss, and/or salary cuts. Why do we only celebrate the young? We have so much to teach each other!
    Mental illness abounds and their conditions result in tragedies across the country. Economic cutbacks at least 20 years ago changed the scope of care for these troubled people. As they try to cope in society, the many psychotics are not often able to digest right and wrong. War games on computers celebrate killing and so does Hollywood. Obliterate the bad guy! Just who is that anyway? If it is carried out in real life by them is their illness honestly treated? How do we help them ahead of time? And are we further encouraging mass destruction among so called stable people? This evolves into a vicious cycle of chicken as to whose driving anyway?
    When we listen to advertising, we are only “good enough” if we have this cream, that device, upgrade to faster internet, have this fancy car, clothes, and more, not to mention staying young and beautiful. So as consumers we overspend trying to keep up and validate our existence at home and at work. We are literally running in circles chasing the dream. It is not the things that make us, but the almighty dollar clouding our self-worth.
    As the human condition has faced many difficulties through the centuries, our so called civilized lifestyle in present tense has taken a giant leap backward. Society must end the rewards for bad behavior, and bring around a sense of right and wrong instead of this flip floppy attitude which leaves us all feeling very confused. As I approach retirement, I wonder if I will even be able to do so. I hope my investments are safe and I have made the right choices. Should I say at the “risk” of commenting further, am I risk averse? Yes, I am well aware!


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