For much of my 20 year career in the aerospace industry I worked I worked in risk management. In the early days it was my job to assess the risk of an aviation accident at the technical level and later to manage such risk at the organisational level. So I know a thing or two about taking risks.
I can tell you that there is an element of risk in almost everything we do. There are no certainties.
So how do we deal with life when there are no certainties, especially when, according to the psychologist Maslow, safety and security (or certainty) is one of the basic human needs? Given the choice, people choose certainty. Let me give you an example. When offered the choice of a guaranteed amount of money versus a chance of a much higher amount of money, most people will pick the guaranteed smaller amount of money (you see this on TV quiz shows such as Who Wants to Be a Millionnaire but the theory is known as The Allais Paradox after the Nobel Prize winning economist who observed the phenomenon).
We make calculated decisions everyday
But we actually make calculated risk-based decisions every day. When to cross the road, when to brake whilst driving, which electrical devices to leave on when we go to bed. We put in place plans to reduce the risk. We buy houses that aren’t in flood risk areas, we save money in case we lose our jobs and purchase insurance so that we can rebuild our homes.
So why do so many of us find it so difficult to accept uncertainty when it comes to making decisions about our work, our relationships, our dreams? Why can’t we accept that there is risk inherent whichever way we chose to go? So many of us wait until we can be certain it is going to work out. But you can never be certain. It seems that when it comes to making decisions about things that might improve our lives and make us happier we aren’t quite so hot at judgement and decision-making. And psychologists have proven this.
There is a gap between what we should do and what we actually do
Cognitive psychologists have found although we ‘should’ decide if to choose option A over option B by assigning likelihood values to the various factors and computing the optimal decision (this is exactly what engineers do when calculating the risk of an catastrophic aircraft accident), in reality, although our brains are capable of making these calculations at an intuitive level we don’t always make optimal decisions. In fact psychologists have found that people even make different decisions based on exactly the same facts depending on how those facts are presented to them.
Would you save 200 people or risk saving 600 but possibly losing all 600?
The psychologist Daniel Kahneman, winner of the Nobel Prize for Economics and author of the International Best-selling book ‘Thinking, Fast and Slow’, and his colleague Amos Tversy presented two groups with the same hypothetical problem regarding an outbreak of a disease expected to kill 600 people. They presented the participants with two life-saving programmes: one that was risk-less and one that involved some risk. The groups were presented with exactly the same problem and the same programmes to choose from but Group A were told the number of lives that would be saved by each programme. Group B were told the number of lives that would be lost. The facts were the same, just a different presentation. When presented with lives lost the participants were far more likely to pick the risky option (with a 66% chance that all 600 would die).
When presented with lives saved the group were far more likely to pick the risk-less option (which saved 200 lives).
If you’re still awake, what does all this research tell us? It tells us that we have to make decisions all the time faced with an uncertain outcome. It tells us that we may well make a different decision depending on how the problem is framed. In fact, in spite of decades of research by economists and psychologists into human judgement and decision making we still do not really understand why and how humans make decisions. The real wonder is that we make effective decisions at all.
All human decision-making is fallible
I tell you this so that you realise that all human decision making is fallible and that even the most prominent experts have yet to come up with a fool-proof way to make optimum decisions.
Where does that leave us? Well you, your career or your business can continue to stay in the same place, never changing, never growing, because the only decision you make is to not make a decision. You can forever wait for the optimal decision, for 100 per cent certainty – but you will be waiting a long time.
Or you can just make a decision.
There are no wrong decisions.
Eminent Nobel Prize winning economists and psychologists cannot tell you the right decision and how to make it. There will always be risk and there will always be uncertainty and that is what you have to accept. You can and should evaluate the risk based on the information you have available – but then make a decision! Don’t stand still because you are uncertain. There is a risk in staying where you are and a risk in moving forward.
What level of risk are you prepared to accept? Once you know that the decision will be easier. But don’t fool yourself into thinking that staying where you are is the risk-free option.
The safest aircraft is one that never leaves the ground
One of the first things I learned as an aviation safety and risk specialist was that the safest aircraft is one that never leaves the ground. But what’s the point in an aircraft that never leaves the ground? How can you expect to get where you want to go, if you never take off and fly?
So take a calculated risk. Start up your engines (or spread your wings or you’re a bit sick of the aircraft analogie), take off and fly and only then will you achieve the dreams you have for yourself and your business.
Are you comfortable taking risks? Do you accept uncertainty, weigh up the risks and the take-off? Or are you permanently stuck on the ground? Drop me a comment and let me know.