One Less Myth

Evaluating Risk

Evaluating Risk

Figuring out our risk in a situation can be hard to evaluate.

Sometimes the info we need is confusing, incomplete, or feels conflicting.

Sometimes our past traumas and fear can cloud our judgement.

By default, we are really bad at evaluating risk. Our aversion to risk served our ancestors well in the wild. But that doesn't always serve us well in a stable society.

When we talk about risk there are some important concepts that we need to understand:

Risk Aversion (Our default)

Part of what has allowed humans to survive has been our default tendency to be cautious of things we don't understand. Our ancestors faced a complex, confusing and dangerous world. Fear helped them to survive predators and poisons.

In a modern context however, that default to fear when faced with the unknown doesn't always serve us quite as well. We are safer when we unite in groups and societies. We know more about the world around us. That gives us a clearer view of what actually is dangerous, and what's not. When we stick to our default of fear, we fall back to bigotry (fear of people different from us), and war (fear of countries different from us), feeding our worst instincts and making us more isolated and less safe.

So our challenge is to move beyond our default, and train ourselves to evaluate risk with less bias and fear.

Our Biases

Nearly every thing we do contains some risk. It might be psychological, like the risk of social rejection. Or perhaps it's a physical risk of harm, like an unknown disease or a potentially dangerous activity.

We don't approach any risk with a clean slate. We bring our ancestor's risk aversion, and our past traumas, our mental health state, our economic stability, and our emotional biases to play as well. These could impact our fight/flight/freeze instincts in ways that don't benefit us.

Sometimes they can distract from other mitigating factors, or other risks reduced by taking an action. Our fear of the risk of social rejection for instance might prevent us from equally weighing the risk of isolation on our mental health.

It is important for us to recognize our biases. This doesn't mean that we discount them, but simply that we identify them, so that we can see their impact on our reasonings.

Our biases can create valid feelings, but that doesn't always mean those feelings are accurate.

Absolute vs Relative Risk

If I tell you Action A is twice as risky as Action B, that sounds like Action A is just really significantly riskier. But if I tell you that Action B has a 0.00001% risk of something bad happening, then Action A has a 0.00002%. That means that while A is twice as risky as B, neither is truly risky in a real sense. The absolute difference between them is really small.

Active vs Passive Risk

We tend to evaluate active risks, risks occur when we take an action, as higher than passive risks, the risks that exist when we take no action, or as a result of our inaction.

Focusing on the active risk, while ignoring the passive risk, can prevent us from taking action. This can feel safer, even while increasing our actual risk!

Evaluating risk in context

Once we understand the risk of something, it then can be helpful to look at it in the context of other risks. It gives us perspective.

We also have to bring in the potential value of the action in question, as well as the costs of inaction. Not looking at the full picture gives far too much weight to the cons of our actions, further leading to risk paralysis.

Managing Risk vs Avoiding Risk

We get to a point where we understand that everything has risks. Knowing that helps us realize that risk avoidance will not serve us in normal day-to-day decisions. Our goal can't be to avoid risk, but to manage the risks we face while pursuing our survival and fulfillment in life.

Risk management tells us that while driving a car is risky, we can lower that risk by wearing a seat belt, and obeying the rules of the road. These things lower the risk further, to a level that allows us to carry on with life.

Risk Tolerance

We all have a different tolerance for risk. Take a simple example: If I have full coverage on my vehicle, I may be less concerned about getting into a low-speed fender bender than if I only have liability insurance. It's impact on my life is much lower.

There are so many different factors in all our lives. They can impact the level of risk we are willing to take on.

There is a huge difference between helping others accurately evaluate the risks in their lives, and telling them what level of risk they should be willing to accept.