An odd sort of risk aversion

We’re so risk averse.

I’d bet today’s Americans are more risk-averse than any previous generation.

But it manifests oddly. So oddly.

Young Americans engage in personal behavior that is riddled with risk. Sexually, financially, professionally. Multiple sexual partners, often in rapid succession. Borrowing more than we can earn in 10 years to get degrees in fields with terrible job prospects. Quitting jobs to “tour the world” on credit.

From that perspective, we’re the opposite of risk-averse.

But we simultaneously lend our unwavering support to policies and ideas designed to combat what we believe are systemic, existential threats on our way of life. We fear big things that haven’t happened. We worry so much about the “system” falling apart.

Take universal healthcare. Almost certainly unsustainable. Definitely inefficient. Sure, there might be ways of accomplishing universal healthcare that we’ve yet to try. But to dive into something this wide, this massive, with little or no evidence and almost no possibility of turning back ought to be something few people are willing to do.

But polls show that most young people are willing, because they fear these systemic, existential threats to society enough to justify almost any society-wide action to combat them. Even giving up their own freedoms—their own liberty to live as they wish. If it means we won’t all die of some disease, sure, I’ll give up 1% of my income. If it means no mass genocide, sure, I’ll give up another 2%.

This adds up. Fast.

What’s vexing about this phenomenon is that we really have no ability to curb these things. We can’t predict a Black Swan, and it’s the Black Swans that hurt the worst. But for some reason, we believe that enough resources guards against Black Swans, and that once we’ve set up those new defenses, we couldn’t possibly have been totally wrong, or things couldn’t possibly change so much that the old defenses are literally worthless.

Think Social Security. Medicare. Nuclear weapons. Most literally couldn’t imagine the world without these rather arbitrary defenses against exogenous shocks. Yet they are old programs that have really done little to combat the true, underlying problem. Indeed, the most contentious debates in Washington are perennially the same—how do we solve these “problems” that we’re supposed to have solved a million times before? Poverty. Healthcare. Defense.

These programs, and the miniscule (and shrinking) number of people willing even to consider that they might not work, are evidence of the risk-aversion I mentioned earlier. Big existential fears that literally paralyze our critical thinking, coexisting with lifestyles that seemingly belie a defeatist attitude about our prospects for long, happy lives.

Bottom line is we don’t fear the consequences of our actions as much as we fear exogenous shocks to the “system” that threaten our way of life. But ironically, it’s the former that is statistically proven to be vastly more influential to our well-being.

Our personal choices and their consequences are responsible for most of what happens to us, yet it’s precisely this we, today, do not fear. We fear what others might do. We fear what else might happen. Nuclear war. Worldwide pandemic. A breakdown of the “system.”

This is irrational. Why do we think this way?

Maybe we watch too many movies. Maybe we don’t know our history, or don’t take it seriously.

Whatever it is, it’s the cause of most of our problems. Bad thinking about our problems and what causes them. “Whataboutism” that ends any attempt (not just particular conclusions) to measure how much blame poor or unhappy people might have for their own condition.

But this isn’t doom-and-gloom. Yes, we have it all wrong. But getting this right in your own life will vastly boost your prospects for success—especially in your professional and financial life.

Think more about what you can do to change your circumstances. Think less about things you can’t control. Spend less on insurance, more on improving yourself. Take what you planned to put toward your retirement next year (especially if you’re under 35) and take a class—learn to program, join a gym, take a class in negotiation.

Your choices make the big difference. And they can improve the way you handle exogenous shocks.

Fear yourself the most.

When asked “What’s wrong with the world?”, GK Chesterton replied, “I am.”

Take that seriously, and apply it to your fears. What’s most likely to kill you before your time? Your choices. What’s the fastest way to get rich? Your own hard work on a good business idea.

You get the point.