MT's Risky Business Week: Erik Britton of Fathom Consulting

The economist explains why our capacity to love risk is confounding the theorists.

by Matthew Gwyther
Last Updated: 24 Aug 2011

This week is Risky Business week on We’ve got five interviews with bankers, economists, entrepreneurs and insurance people on what risk means to them, and how they deal with it.

It’s a fascinating subject, because how one deals with risk is so central to business. Before the crash we were being told by sages like Alan Greenspan that risk had almost been eliminated, and a new paradigm was in operation as toxic sub-prime mortgages were spread around far and wide like animal filth on the land. What a fool he looks now. What dupes we were to believe him. The paradox is that it’s business with an appetite for taking a chance on new opportunities that must now drag us from the mire as we try to get the economy growing again.

In an ideal world, business would be subject to no risk at all. But life doesn’t work like that. One of the highlights of my researches on the subject was discovering Peter Bernstein’s 1996 book ‘Against the Gods: The remarkable story of risk" which is an unlikely rollicking good read. Bernstein writes: ‘The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature…risk is a choice rather than a fate. The actions we dare to take are what the story of risk is all about. And that story helps define what it means to be a human being.’ Just make sure you make the right choices.

The first interview is with ex-Bank of England economist Erik Britton, who is now a director of Fathom Consulting (and an MT blogger), on how economists are having to rethink their models as we consumers prove that we're not the risk-averse, rational automatons they’d previously assumed. It turns out that not only do we take risks on a regular basis – but actually, we rather enjoy it.

Matthew Gwyther

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