teaching risk tolerance
Risk is the possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood. (from Wikipedia)
That’s the definition from my profession, auditing. Basically risk is the possibility of something bad happening. It does not necessarily follow that if the risk event doesn’t happen, something good will happen – simply that the negative outcome won’t. Most people have a subjective perception of risk.
For example: you and I may perceive bungee jumping in vastly different ways. Let’s say that 1 out of every 1 million bungee jumps goes really wrong – it snaps and the jumper dies. If it does not snap, you get your thrilling giant rubber band ride up and down. For me, the 1 in a million chance of death renders the benefit of the jump (a thrill) as unacceptably risky. For you, 1 in a million may not be enough to make you forgo the benefit. You have what is known as a higher risk tolerance.
I think that risk tolerance and lack of fear is key to achieving great things. Don’t assume this means being a risky adventurer like Steve Fossett. This simply means not being afraid to risk failure. Most of the great entrepreneurs and thinkers have been characterized by a boldness and lack of concern about risks in their personal and private lives. They were not afraid to fail. Their willingness to accept a potential negative outcome was much higher than the average individual’s.
So my question would be a simple one: is risk tolerance learned or inherited? I’ve been wondering about this as we start teaching my still-less-than-2-years-old son about ‘danger’ – don’t jump off the stool! Don’t touch hot stuff! Slow going down the stairs! Don’t jump around in the tub! While you certainly would never want to encourage risky behavior, is this teaching him to be less risk tolerant and more fearful? And – I mean this very seriously – is this good or bad? Should we encourage fearlessness, risk-taking and boldness? If so, how do you know it’s not too much, making your children reckless? And it extends beyond children, too: how could I teach myself to be more fearless and risk-tolerant in my old age? Should I?
What do you think?