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You Are What You Risk: “A successful community or nation is one where people come together to reduce risk…”

Jun 4, 2021

Author and strategist Michele Wucker coined the term “gray rhino” for obvious, probable, impactful risks, which we are surprisingly likely but not condemned to neglect. She is the author of four books including the global bestseller THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore, which China’s leadership has used to frame and communicate its crackdown on financial risk. The metaphor has moved markets, shaped financial policies, and made headlines around the world. It helped to frame the ignored warnings ahead of the COVID-19 pandemic and inspired the lyrics of the hit pandemic pop single “Blue & Grey” by the mega-band BTS, about depression as a gray rhino. Michele’s 2019 TED Talk has attracted over two million views.

Michele is founder of the Chicago-based strategy firm Gray Rhino & Company, drawing on three decades of experience first as a financial journalist and then media and think tank executive. She has been honored as a Young Global Leader of the World Economic Forum and a Guggenheim Fellow. She has held leadership positions at The Chicago Council on Global Affairs; the World Policy Institute; and International Financing Review. Her writing has appeared in publications around the world including The Economist, The New York Times, The Washington Post, and The Wall Street Journal. She has been a sought-after media commentator on the Covid-19 pandemic.

Praveen Gupta (PG): I am tempted to call your book the Bible of personal risk?

Michele Wucker (MW): Oh my, what a compliment – but perhaps blasphemous? YOU ARE WHAT YOU RISK is meant to be a wide-ranging set of principles that help to guide people through their lives. And I quote the Bible in the book when re-telling the story of the Parable of the Talents: the master who gives three servants money and reprimands the one who does not invest it. But I also talk about how different religions and value systems shape people’s individual responses to risk in very different ways. The Bible is only one tradition. So perhaps a better description might refer to the great books of many religious and philosophical traditions, since each brings its own perspective to the question of risk.

PG: From business, policy, strategy, financial risk of ‘Gray Rhino’ to the personal approach to risk ecosystem, the new book bridges the two sides of risk?

MW: The deeper I got into researching and writing the book, the clearer it became that we need to look at risk-taking holistically and see the connections that link personal risk attitudes, beliefs, and behaviors to organizational risk culture and the wider risk values that societies embrace and that governments implement. It was a challenge at the beginning, coming from a background in policy, finance, and business strategy, and fearing it was too risky a stretch to take a deep dive into personal approaches to risk. But as I made progress, I came to see that strategic business and policy decisions need to take personal and group risk attitudes into consideration.

In their new book, Daniel Kahneman, Olivier Sibony, and Cass Sunstein disparage such influences as “noise” that interferes with decision making. While we agree that those influences demand attention, I take issue with their premise that some decisions ought to be identical across different scenarios. The risk fingerprints of individuals, organizations, and societies, and the feedback loop among them, are at the heart of who we are, and thus are the most important component of decision-making; decisions are the symptoms.

PG: Gender and colour are ongoing challenges and hence a big obsession for diversity?

MW: Gender and colour can affect our risk decisions, but most likely not in the way you might think. Julie Nelson of the University of Boston has revealed problems with earlier research on gender risk differences; her research suggests that there is a 95 percent overlap between how much risk men and women are willing to take on. This is particularly true when education and experience levels are similar. The biggest difference comes from the experiences that each group shares, which change the risks they face. A woman speaking up in a meeting is more likely to be ignored, or called bossy for being too assertive, or seeing a man take credit for the same idea after she was ignored for raising it. Thus, the risk and reward equation is different for the social risk of speaking up – and women have lots more experience, which makes them better at decision making.

Also, risk stereotyping is a real problem, which often leads to women and people of color being passed over for promotions or investments in their companies. Many women entrepreneurs share war stories of venture capitalists not thinking that women will take enough risks to be worthy of their investments, even though research disproves that stereotype and other research suggests that start-ups founded by women are more likely to succeed than those founded by men.

People may mistakenly think of gender and color as proxies for diversity in risk attitudes. Instead, boards and people making hiring and promotion decisions and assembling team should look explicitly at risk attitudes.

Decision making groups would benefit from ensuring that there is diversity in risk attitudes and tolerance among their members so that they can make better risk decisions. People may mistakenly think of gender and color as proxies for diversity in risk attitudes. Instead, boards and people making hiring and promotion decisions and assembling team should look explicitly at risk attitudes. There are tools for this, like the Risk Type Compass out of the UK. They also can learn a lot from posing scenarios and asking questions like “What’s the biggest risk you’ve ever taken?” and “What’s the biggest risk you’ve ever turned down?”

PG: What numbs humans to recklessly ignore climate risk? What are the chances of us waking up to it, in time?

MW: Humans’ reckless ignorance of climate risk is the consequence of a combination of influences. First is what some social scientists call “solution aversion” which is a tendency to deny the seriousness of problems when we don’t like the solution. This is quite prevalent in part because most humans don’t like change of any kind, so solution aversion comes into play more than we think. Manufactured denial also comes into play: people who don’t like solutions to climate change because they are making money from dirty energy know that they can exploit human nature. The media also comes into play. Here I hesitate to repeat the mistaken impression they disseminate, lest I reinforce it, but I think it’s important to call out as false – that climate change is “slow moving” and something that will happen in the future. It’s here now: extreme weather, rising seas and inland water levels, droughts, wildfires. Finally, a sense of agency is important, but climate change feels so big that many people feel powerless, even though we have more power than we think.

PG: Insurers understand risk. Yet they – the large American ones in particular – continue to invest in and insure the very reasons that are responsible for the Climate Crisis?

MW: It’s very much in insurers’ interest to help solve the climate crisis, and you’re right – it’s a big problem that many insurers continue to invest in and insure the fossil fuel industry. If you insure coastal real estate, businesses and individuals who are prone to flood or fire damage, or any other entities vulnerable to climate change-induced extreme weather, why would you want to contribute to the very influences that put your insured clients – and in turn, yourself – in harm’s way? That question is especially apt when it’s clear that fossil fuels are at a turning point when both investors and policy makers are going to be making big changes.

There has been rising concern by financial regulators and by insurers themselves over whether the industry has enough capitalization to withstand expected losses caused by climate change, and it’s time to stop hand-wringing and take serious action.

There has been rising concern by financial regulators and by insurers themselves over whether the industry has enough capitalization to withstand expected losses caused by climate change, and it’s time to stop hand-wringing and take serious action. The insurance industry also is well positioned to push for meaningful changes by insured entities. Just like many auto insurers reduce your premiums for avoiding accidents, driving fewer miles, and allowing apps to monitor (and hopefully improve) your driving habits, there are so many ways that insurers could nudge clients to reduce their carbon impact.

PG: Would you prescribe risk education at an early age so as to inculcate equity in societal wellbeing?

MW: Kids are getting a risk education already, whether intentionally or not. They see how their parents, teachers, and peers respond to risk misinformation, embracing or rejecting it. Particularly in the West, parents and nanny societies try so hard to protect kids from risks that they teach them to avoid it instead of how to weigh risks thoughtfully. What we need is intentional education in risk literacy: how to understand probabilities and impact, how to acknowledge the respective roles of emotion and reason, and honing those skill sets in practice in different risk scenarios.

PG: Though early days, any signals from the American individualism?

MW: There’s interesting research on the differences between individualist and collectivist cultures on risk responses: how risky people see something as being, what choices they make on their own versus in the group, how gender stereotypes play out, and how much power people feel they have allowing them to make a difference. Paradoxically, sometimes individualist cultures can make people feel that they have less power as individuals, compared to collectivist cultures.

The pathologies of American hyper-individualism have played out in the Covid-19 pandemic, as we’ve seen a stark difference between people who wear masks and are vaccinated to protect others as much as themselves, and others who insist on going mask-less and rejecting vaccines as a show of individualism and political statement.  The latter have made it harder to fight the pandemic. A successful community or nation is one where people come together to reduce risks, and the first sign of decay is when members ignore their responsibilities as citizens.

PG: The Gray Rhino is a well-established metaphor. Any likely ones expected to emerge from your latest work?

MW: The biggest one is the risk fingerprint: the set of influences behind your risk choices, including your innate personality, upbringing, social environment, values and sense of purpose, physical environment, and neurobiology. Like a real fingerprint, some of the aspects cannot be changed, but others can be optimized through awareness, habits, and processes. You cannot control your innate personality nor your upbringing, but you can practice good risk habits, surround yourself with peers with a diverse set of risk fingerprints, and be aware that what you eat, what music is turned on, and the temperature in the room can all sway your decisions.

Your choices leave an imprint much like a real fingerprint does on a flat surface, which forensic investigators can then use to identify the person who left it. This imprint identifies you to the world, much as the fingerprint defines you. That’s why the cover of the book prominently features a maze in the shape of a fingerprint: the maze representing choices and uncertainty, and the fingerprint standing in for identity.

PG: Grateful thanks for these brilliant insights, Michele. May your new book become an international bestseller, too!

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One Comment
  1. A very unique take on risk! Made a great reading!!!

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