More Thoughts on Risk

I don’t think I’ve ever come across a single reference to, much less in-depth exploration of, the notion of risk in theological literature. Very occasionally someone tries to tackle “luck” or “fate” or maybe even “chaos,” but risk as such doesn’t exist in our conceptual world. Maybe because it sounds like the opposite of providence. Or, maybe because you retroactively launder all risks as providence… which might indeed be helpful after the fact, whether you win or lose, but doesn’t do much to help you moving forward into a risk.

The ontology of risk would be a good topic for exploration—maybe following chaos as a topos, or randomness, or freedom, or complexity. But for now, I’ll extend my previous ruminations on risk from the human perspective and what it means for creativity, business, and governance.

Risk is a funny thing. The person most willing to assume risk has absolutely nothing to lose, whereas the person with a very tiny something to lose is probably most averse to risk.

Curiously, though, a person with an enormous quantity of fortune or power or reputation is also extremely risk-averse. There’s just too much to lose, and the comfort of what is presently possessed takes over all other considerations. But that itself is a risky proposition. It’s probably why family fortunes tend to peter out after three generations. It works on the same principle of staying in your room for fear of getting hit by a bus—you won’t get hit by a bus, but a whole lot of other bad things will happen to sap your mental and physical health, and ultimately your life.

Another curious contradiction within the human experience of risk is the desire to undertake it, in the quest for adventure, set against the desire to make someone else pay for it. In other words, we undertake risk hoping great returns, personal or financial or romantic, and the risk itself will make the reward sweeter (not to mention our narration of it after the fact).

But if we fail in the risk, we want to shove it off on someone else. That is the constant temptation and the source of most of what goes wrong in risky enterprises. It has the potential to corrupt risk horribly (like the bailout out of the banks that held subprime mortgages).

It seems absurdly obvious to say, but necessary all the same: risk is only risk if it’s risky. You can’t have unrisky risk.

So a good moral rule of thumb: if you are trying to get someone else to assume your risk, before or after the fact, you’re cheating. You’re making someone else pay for your risk.

This is the logic behind all-inclusive health insurance: it’s cheating to refuse to pay while your risk is low, but then expect others to pay when your risk is high.

However, it’s also cheating to have a health industry that lies, disguises, and distorts in order to avoid its own risks.

Probably we should have a universal and mandatory health insurance system, but *only* if both health insurance and health industry are transparent and fair where their own risks are concerned. Which is why we are nowhere near to solving this problem.

Or again, environmental regulation. It’s cheating to off-load the risk of your industry by dumping toxins in the water or polluting the air. Then you’re making people who have not opted into your risk pay for it, with no chance of sharing your profits. (A variant on “the tragedy of the commons.”) So probably it’s necessary for government to set in place regulations to monitor, prevent, and penalize the offloading of such risk.

But, that beneficial regulation is corrupted when it actually gives permanent taxpayer-funded imprimatur to an industry that no longer has to compete or innovate to hold its position; or when a particular technology is enshrined as the solution to the problem, also putting it in a risk-free position. (A variant on “rent-seeking.”)

Is there to be no protection against risk at all? It depends on the risk. It’s pretty much agreed in the world now that there should be some protection against the risk of total destitution and ruin (unless doggedly self-inflicted, and even such people will probably encounter lots of opportunities to exit their self-destruction). Not-too-stringent bankruptcy laws are a good idea. Controversial as limited liability is, it also allows a lot of people to pool risk without any of them being in a position to lose absolutely everything. (Again, the problem is when the risk is offloaded on, say, stakeholders who are not shareholders.)

Barring such extremities, though, the urge to protect oneself or others against risk is usually a dangerous idea. Protecting oneself leads to offloading the cost of one’s risks onto others—harken back to Tom and Daisy Buchanan of *The Great Gatsby* using their money to protect themselves from all risks and all consequences. At the same time, preventing others from taking risks because of the risk of the risk going wrong either stifles all initiative and creativity or invites abuse of the system (a variant on the “free-rider problem”).

And finally, to protect against risk is to simply eliminate it altogether, which means an attempt to crush out chaos, complexity, randomness, and freedom. It won’t do the human family any good, because the unexpected always arises anyway. We’ll just be unprepared to meet the unexpected because no one will have taken the risk of getting ready for it.

And inside all people is some kind of hunger, small or large or vast, for risk—for adventure—for the heroic quest. We are better people anyway if we prepare to fight the dragon, and then actually go fight it ourselves, than if we send slaves or servants or robots to fight in our place.