Elimination of risk

One post on decisions, and lack of knowledge, avoid risk! Now one on taking it...!

Our guiding principle in this country is to avoid risk – there are masses of legislation to reduce, avoid and cater for any piddley little risk or unforeseen event that may or may not come to pass. And we, the majority, have to comply lest one poor and maybe thoughtless individual should fall into a hole clearly in front of him, drink milk that smells like drains or otherwise suffer some catastrophe that a moment’s thought might have avoided. The State is our brain, filled with so so many things to guard against. Most of which will not and never will concern us.

This assumes that we are happy that someone or something else does our thinking for us. Most of this seems to involve some sort of regulation and form (or forms) to be filled in. We are required (how I hate that - can't someone simply say "can you please...?") to give information. Have you noticed the main point of this exercise is the filling in of the form, the assumption of authority over some trivial act we may have committed or omitted? The form is king – what anyone does with the information contained seem somewhat secondary – except to the official with the form who can then prove that their job has been done.

Would Baby P and others like him be so at risk through Social Services failures if those people charged with looking out for him had more time to do and less time spent on administering? The cry went up "we follow procedures” but to what end? Not the procedure itself, but so it seems. And whilst I’m at it, nurses spend 30% of their time nursing – you can guess what the rest of their time is spent on. And please don’t stop at nurses.

Where does this take us with risk? Ever fallen in love? Bit of a risk, putting yourself out there - so vulnerable, so open? Ever get burned? Did you do it again? Why? No Health and Safety edict and set of forms for romance yet. If they did, forget falling in love, as in practical terms it would be impossible.

We know what is certain in life – death and taxes! Ignoring taxes – no we won’t – did you know that the taxes statues now run to 11000 pages having more than doubled over the last 14 years? More than any developed country. Mainly in the name of eliminating loopholes, and achieving fairness. Can you quote them? Me neither, although I do know that more legislation (the accountant’s friend!) leads to more loopholes. And - why are we blaming people who exploit loopholes, when perhaps our ire is better directed at those who draft and pass such laws.

On to death then. Do we want to eliminate risk? Or we do we want our journey through life to be worth the price we pay for it? Do we want to be in the position where we are empowered to do the most we can with what we’ve got? If we do, then we need to be aware of risk and dangers, and enough information to be able to make an informed decision. But essentially, we want it to be OUR decision, don’t we?

There was a subversive but wonderful advert with an elderly couple; one says to the other: “Do you remember the time we almost went to Turkey?” Just go!

Risk aversion is fine. Measured, considered and then accepted as the price we are willing to pay for a life well lived. Which is also true of how you run your business life and I think, doesn’t contradict my earlier Ignore negative advice – I think..

Ignore negative advice!

Actually, don’t..whatever your psychological hang-ups. Which we all have – psychologically we avoid negative advice. But people do not realise that success comes from avoiding losses in the main, rather than making profits.

Think about it. Where do you get positive advice? Bookshops are full of it. There are so many self help books, none called “What I learned from going bust”. A pity, because those lessons, hard learned, are more compelling and more lasting.

And whilst I’m at it, this country doesn’t give failures a chance. In America, someone fails, and people assume they have learned something, so at the least, they will not repeat that particular mistake. Here, more of a stigma. Once a failure, always a failure. Obvious nonsense when you think about it, but so true to the British, more pessimistic, mentality.

Linked to this need for positive advice, is the need to take some sort of action. Even when doing something is damaging. There is a presumption in business men that they are decision makers, so they must make a decision. Ignoring the fact that doing nothing is also a decision. How have they assessed the chance of error, if there is this need to make a decision? And how have they learnt how to do this?

For error avoidance is a skill, and it needs to be learnt. It comes from thought, research and planning. Decisions later..

But I’m getting ahead of myself. No chance of a decision until you’ve thought about the limitations of your knowledge.

When did medicine start saving lives? Any further back than last century? No, I’m not being rude. It’s simply that knowledge wasn’t advanced enough to save more than a small proportion of patients. Sometimes there was enough knowledge, sometimes it was luck, most times mortality rates improved through better sanitation and nutrition. And which doctor, when faced with symptoms outside their knowledge, would admit it? They would have a go, do their best, and hope.

So, for the business man, should he explore what he doesn’t know before he acts? But, when would any decision ever be made, I hear you ask? Later! Or not..

If we are trying to rely on financial markets, we now know (for the moment) we can’t. We thought we could. Our regulators have let us down .And we have been gullible and thoughtless. So is more regulation the answer? Doubtful, when the regulators don’t understand the ever more complex financial products available for a willing customer to buy (who certainly can’t be expected to know what they do).

We and our betters have relied upon the risk measurement scores of credit agencies, which weakened the system as bankers used them to build the very positions that failed. Simply put, no one really knew what the products actually did. And we, poor saps, jumped in – lemming like - so we didn’t lose out, relying upon other people’s assessments of risk and reward. They weren’t trying to mislead – they simply didn’t realise the limits of their knowledge.

Stop assuming that your house will provide your retirement fund, or that it will go up year on year, as it simply is putting too many eggs in one basket. (This country is obsessed by house prices!) Your shares, unit trusts, pensions plans aren’t given to certainties, no matter how many expert opinions you get. Use all the facts you can, realise where the knowledge stops, and if you don’t understand it, don’t do it!