UK: Handy's View - Progress is a risk you have to take.

UK: Handy's View - Progress is a risk you have to take. - Charles Handy believes that rather than avoid or attempt to eliminate risk from our lives, we would do well to embrace it and the opportunities it offers.

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Last Updated: 31 Aug 2010

Charles Handy believes that rather than avoid or attempt to eliminate risk from our lives, we would do well to embrace it and the opportunities it offers.

Against the Gods, by Peter Bernstein, made the best seller lists in America earlier this year. It has not yet had the same impact over here. That is odd because it is a wonderful read, but perhaps the clue lies in the subtitle: The Remarkable Story of Risk. Bernstein's argument is that an understanding of risk is at the heart of progress. 'When investors buy stocks, surgeons perform operations, engineers design bridges, entrepreneurs launch new businesses, astronauts explore the heavens and politicians run for office, risk is their inescapable partner.' True, but my suspicion is that on this side of the ocean we would prefer that risk were our subordinate rather than our partner, something to be controlled and avoided as far as possible rather than embraced.

But first, the book. Peter Bernstein has done the impossible. He has written an enchanting book about numbers. If someone as number-averse as myself can enjoy his explanations of probability, sampling, regression to the mean, game theory and rational versus irrational decision-making, there must be some magic in his method. He humanises his subject by describing how all these things were invented or, more often, stumbled upon by a curious bunch of geniuses down the ages. A glance at his chapter headings gives a taste of his entertaining style - The Remarkable Notions of the Remarkable Notions Man, The Man with the Sprained Brain, The Man Who Counted Everything Except Calories.

Bernstein believes that by calculating risk, we increase our freedom because we can make informed choices rather than leave it to chance or to others to decide things for us. Hence the importance of the numbers.

But risk is about much more than numbers. There is also a psychological dimension and a societal one. Some see risk as an opportunity, like Bernstein, others as a danger. When my son announced that he was going to be an actor, I pointed out that while Equity can boast some 50,000 members only 500 of them actually earn more than £10,000 a year from acting. He said: 'That many? Well, that's all right then!' I told him that he didn't understand percentages. He replied that I underrated his determination and ability.

America is a society conditioned to risk. The upside and the downside of life are both more extreme than in Europe. Americans argue that Europe's welfare cushions make us soft and risk-averse. Europeans argue that welfare is a safety net not a cushion and besides, a civilised society should not tolerate the levels of poverty found in some US cities. There is truth in both points of view. To some extent we Europeans seek to take much of the risk out of life, both through our welfare schemes and through regulations to protect us from danger, disease and disappointment. Appliances must be safe, food fresh, adverts truthful and employers shackled. Surprises are bad for us, it seems, and, just in case, we can insure ourselves against most of them.

America puts more of the onus on the individual. If he or she gets a bad deal, they can sue. Otherwise they ought to look out for themselves, get a good education, save for rainy days and retirement, be self-sufficient and have good networks. Life is tough if you don't do all these things but there is more opportunity around if you do. The result, they claim, is a more entrepreneurial society, one where liberty matters more than equality. Too much regard for equality stifles freedom, but freedom breeds inequality. What is needed, the French would say, is more fraternity to balance the two, but fraternity is in short supply in our increasingly mobile world where few feel that they owe anything to anyone except their nearest and dearest.

The debate between Europe and America, about the necessary balance between flexibility and protection in the labour markets, or, more generally between liberty and equality in society, surfaced at the G7 meeting in Denver in June. The argument will rumble on because it is not really about economics but about the riskiness of our different societies and the degree of risk which we are prepared to tolerate. My hunch is that we over here could do with more risk, in the hope that this would result in more personal responsibility, while the Americans would be wise to worry about the inequality in parts of their society which is often the result of unfair levels of personal risk.

Meantime, we could usefully look at our own institutions. Most of them seem designed to eliminate risk and to avoid mistakes. Not only does this mean that many will never learn because the erroneous decisions from which they could have learnt will never occur but more crucially, they will have no exposure to risk. They will not learn how to measure and assess risk, nor will they acquire the attitude which sees risk as a challenge and opportunity instead of a danger. If Bernstein is right, they will stand in the way of progress. Of course if we loosened the reins of control too much, it would be risky. To ensure that it is not too risky we must be able to put boundaries on the downside, to know how far we can rely on each individual and to be sure that we are all on board the same boat, heading in the same direction. In the end the French are right, fraternity bonds liberty and equality, and so makes risk acceptable. Put another way, risk management becomes more about trust than about numbers. I think we should be glad.

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