Wed 3 Oct 2007
Without the risk there’s no reward.
Posted by themaninthedoorway under Out of Control , Risk ManagementI know JP has talked about this area before and I think I may have done at one point but that may have been over a coffee or in a dream rather than in a more public forum. In any case, can’t find any previous post so at the risk of repeating myself or, as always, becoming a master of “the bleeding obvious” here we go …
I was once asked the question at a previous employer: what is your capacity for risk? I gave what I though was a wonderful answer in that I explained I did not recognise risk intrinsically as being in any way separate from reward so the question was malformed and could not be honestly answered. (I am entirely sure they were stunned into submission by the wit and exactitude of my answer). The issue we have in society currently (and I do believe it is more of a recent development) is that we believe it is possible to assess risk independent of reward or maybe more exactly that the reward part of the equation can be discounted to zero leaving only the risk.
In Investment Banking (an industry well-tuned, whatever you may read or hear, to risk and the understanding of risk) the units used to measure risk and reward are the same. Money. In fact, there is no intrinsic difference between risk and reward. The calculations one makes shows that you will make a known amount of money if this and that happen and lose a known amount of money if this, that and the other occur. Of course, this is not true in life. A child climbing a tree gains the reward of adventure, curiosity and learning and runs the risk of a broken limb - it is clearly more difficult to understand the relationship between risk and reward and concomitantly more difficult to provide a balance.
But if the reward part is removed or discounted then the risk part becomes easy to quantify and the obvious result is you never let your child climb a tree. Parents are generally excellent at balancing the risk and reward - society (by which we mean elected or otherwise appointed governments serving as proxy) are not.
Society itself has of course changed drastically over the last few years (since the end of the Second World War). Previous to and during this event life was hard and life was fraught with risk. Death was common. The further back one goes the more common death becomes to a point, one assumes, where people lived with it and the threat of it every day. One must also assume that a society such as this with risk everywhere (seen and unseen) would have a much different attitude to a tiny bit of extra risk (such as climbing a tree). As society becomes (every year) more and more inherently de-risked through better health-care and other measures that tiny extra little bit of risk becomes measured against an ever-decreasing total risk. This is, of course, a good thing but the unwanted side-effect is that we concentrate far too much on this little extra bit of risk. It is far, far more important to us than it would be to a society 100 years ago.
I have a few more posts on this subject.
October 3rd, 2007 at 11:04 pm
[...] Malcolm touches upon one of my favourite subjects, the nanny state, its attempts to de-risk society, and the totally inane consequences of such actions. [...]
October 4th, 2007 at 2:36 am
One of the issues with our protectiveness of our children is that it is parents who are more cognisant of the risk, but any rewards accrue to the child, so there is not only an imbalance in the risk:reward comparison because of a unit-of-measure mismatch, but also because of a conflict of “measurer”.
It also seems a little hypocritical of me to bemoan the lack of “outside” fun that my children had compared to my childhood, without recognising that it was me who curtailed it!
October 4th, 2007 at 8:15 am
Interesting point Ric - I hadn’t thought of that! Maybe though if you look at Richard Dawkins’ The Selfish Gene it may answer this? His thesis may be that you are rewarded by your children’s experience as it helps your genes survive.
October 4th, 2007 at 10:47 am
Perfect timing! I have just succeeded in getting agreement to get my work desk raised by 20mm. This has taken the best part of 3 weeks, numerous phone calls and a risk assessment. All to raise the desk by 20mm!
In fact this is the latest in a string of run-ins with health and safety officers. Why is it for example that an ordinary desk lamp or fan suddenly turns into a death trap that needs health and safety sign off as soon as you bring it into an office?
October 5th, 2007 at 2:48 pm
“As society becomes (every year) more and more inherently de-risked through better health-care and other measures that tiny extra little bit of risk becomes measured against an ever-decreasing total risk. This is, of course, a good thing but the unwanted side-effect is that we concentrate far too much on this little extra bit of risk. It is far, far more important to us than it would be to a society 100 years ago…”
I think there’s an extra layer of paradox here. In parallel to the reduction of day-to-day risk (through healthcare, etc.), there has been a growth of another kind of risk, so apocalyptic that we generally filter it out of our perception - the risk of major nuclear conflict, of a bio-tech disaster, or (far higher) of catastrophic climate change.
Is the micro-management of risk, without the balancing with reward, in part a ritual performed to stave off the almost unimaginable risks that hang over us?
October 6th, 2007 at 12:42 pm
Dougald hi!
An interesting theory that I am sure has basis in known psychological disorders - the fear of one thing manifesting in another area and that type of stuff that I really know nothing about
I am not sure though that psychologically this is substantively different from the fear of a medieval villager where the destruction of their village would have destroyed, for them, much of the known world.
Not sure though.