Homo periculans
What shapes our risk behaviour? The Stone Age brain, our genes, early cultural influences, recent history? An attempt to get to the bottom of the human risk cocktail.
By David Fehr
Life consists of breathing, eating, sleeping – and decision-making. Day by day, we make tens of thousands of decisions. Fortunately, the consequences are generally mundane. Shall I take this bus or the next one, wear my black or my blue jacket, order menu one or menu two? Other decisions can change our lives, including those that have to do with business and finance in the broadest sense. Do I want to study business or art? Should I save assets, invest them in a broadly diversified portfolio or increase/gamble them away at the casino? Should I seek a secure job as an employee or realise my dreams and found my own company?
A look around the world shows: Homo periculans – our Latin-based neologism for the risk-taker – has a wide range of answers to these questions. But why is that so? What influences and shapes individual risk behaviour?
The search for clues begins in the brain, where our decisions are made. The brain is a fascinatingly powerful machine with 86 billion neurons and up to 100 trillion synapses and, in most cases, it serves us well. According to the theory of evolutionary psychology, however, when it comes to risk assessment, our supercomputer occasionally lets us down . The theory is based on the fact that the physical structure of the brain has hardly changed over the last 100,000 years. Genetically, there have been adaptations, but anatomically, the brain still strongly resembles that of our ancestors. Shaped by life in prehistoric times, the brain cannot easily shed old patterns.
Brain and genes
Christian Fichter confirms that the evolutionary shaping of the human brain still influences us today. The Professor of Social and Business Psychology works at the interface between business and psychology, where he combines research with teaching activities. “Our brain is trained to make quick, intuitive decisions when faced with uncertain situations. That was key to survival when we were still hunters and gatherers,” explains Fichter. “These mechanisms are still in place today and impact both our personal and professional lives.” He is referring to behavioural patterns such as optimism bias, i.e. overestimating chances, versus the excessive fear of loss. Both were important in prehistoric days, but today they often get in people’s way.
A study by the University of Zürich shows that there are congenital differences in how pronounced this tendency is. Scans were used in this study to demonstrate that the brains of risk-seekers work differently than those of risk-averse test subjects. Overall, however, the proportion of these genes is low: according to the study, they only explain a little more than two per cent of the difference in risk behaviour.
The anatomical makeup of the brain and the genes therefore play a role, but do not explain the enormous global differences in risk behaviour. These are due to the second level of influence, the cultural influences. And over the last 100,000 years, there have been more than just a few changes. In fact, everything has changed.
Cultural potpourri
Primeval utterances developed into around 7,000 languages, thinking advanced to philosophy, cave scribblings became art. Primitive tools became technology, nomadism became sedentarism and agriculture, myths and stories became religion. Tree trunks became ships, barter became globalisation, wooden sticks became nuclear warheads.
The developments responsible for shaping risk behaviour – and how exactly they develop – have not yet been conclusively determined. Most likely religion and spirituality played a role and, depending on the region of the world, still do. Strongly religious societies, for example, often curb risky behaviour by setting clear rules. Cultures that believe fate is inevitable take a similar approach: after all, why take risks when everything is preordained?
The influence of economic, legal and political boundary conditions is undisputed. Pronounced capitalism encourages risk-taking to a greater degree than a planned economy, which offers only few opportunities for advancement. A lack of legal certainty makes risky projects even riskier and curbs the hunger for innovation. Stable political conditions are more conducive to risk-taking, while instability leads to extremes: you will either defend what little you have left – or everything collapses, giving way to audacity.
According to a study by Yale University, even language influences risk behaviour: the greater the linguistic differences between present and future tenses, the more distant the future appears and the more risks are taken, including financial ones.
However, a broad cultural sweep is not enough to identify the risk inclination of a particular region. Risk inclination develops on a smaller scale and it must also be looked at on this scale. The following examples show what can contribute to the evolution of risk cultures.
Japan – harsh conditions require communal thinking
Japan’s roots go back 10,000 years to the Jōmon Period. What connects the people of that time with their descendants are the harsh conditions: an isolated island country with scarce resources and not much arable land, and inhabitants who are plagued by heat, earthquakes and tsunamis. To survive and wring yields from the barren land required long-term planning and collective action. Risk in the form of maverick behaviour was of little use, collaboration was all the more important. “Nature and culture interact with each other,” says Christian Fichter. “Nature dictates environmental conditions and culture must develop around these, otherwise people will die.”
Japan is also characterised by Confucian values such as respect, harmony and community. Rituals, hierarchies and the seniority principle are still central today – and happiness is pursued collectively rather than individually. Honour is important, failure means losing face. All in all, these are not the ideal prerequisites for willingly embracing risky endeavours: risk is hardly ever seen as an opportunity here, but as a danger.
The exact opposite is the case in the USA, where the enthusiasm for risk-taking dominates everyday life.
USA: no risk, no fun
Fifteen failures? No reason not to try a sixteenth time. Assets, even pension schemes, are not parked in savings accounts, but invested in shares. Or in Bitcoin, forty per cent of which is held in the USA. Even housing involves risk-taking: in regions that are regularly affected by hurricanes or forest fires, construction is easy and inexpensive – and if buildings are destroyed, they are simply rebuilt. Healthcare and education are also fraught with risk: a medical incident can result in a lifetime of debt, and the same goes for paying off a student loan if someone fails to secure a top job after graduating.
The USA has become the land of risk: people stand a lot to gain – and just as much to lose. According to Fichter, the reason lies in the history of the country’s foundation. “Historically, the USA has been characterised by the pioneering spirit: the arrival of hopeful emigrants, the gold rush, the American Dream. US Americans have learned through experience that progress can often only be achieved by taking risks.”
The settlers provided the earliest success stories: those who settled in a fertile location were able to acquire a fortune from which their descendants still benefit today. A willingness to take risks has also paid off in recent times. Take Elon Musk, for example, who faced bankruptcy several times, risked everything and is now the richest person in the world. Or Mark Zuckerberg, who turned down a Facebook takeover bid of one billion dollars in 2006. Today, he is a 250-fold billionaire. Or Fedex founder Frederick Smith, who went to Las Vegas in 1971 with his last 5,000 dollars in company assets and won 27,000 dollars playing blackjack – now, more than 50 years later, Fedex employs 500,000 people. Why should you not achieve something similar yourself?
The example of the USA also shows that a risk culture does not have to develop over millennia, a few centuries are enough. However, according to Fichter, developments in more recent history show that this might be changing. “It appears to me that things are beginning to tilt. With an increase in social tensions, political uncertainty and economic pressure, the need for security is increasing. Even cultures that are built on risk can become risk-averse.”
Switzerland is described as risk-averse. As is so often the case, however, the country is a special case when it comes to this topic.
Risk is optional in Switzerland
In theory, conditions in Switzerland are ideal for risk-taking: it has a stable democracy, a reliable legal system, a comparatively social form of capitalism and only few religious restrictions. Nevertheless, safety awareness predominates. “The phenomenon is called fear of loss,” says Christian Fichter: “If you have a lot, you have a lot to lose. And whoever has a lot to lose will protect what they have.” Stability is held in very high regard in Switzerland – historically, culturally and economically. “Banks, insurance companies, the welfare state: everything is safety-oriented. This safety culture shapes our collective behaviour.”
Seen this way, the outcome is positive: Switzerland is a good place to live even if you are not prepared to take risks. “With its education system, labour market and social security, the Swiss model already offers very good life prospects. There is not much pressure to take a plunge into the unknown, which makes society as a whole risk-averse. And it explains why the Silicon Valley mindset only takes root here occasionally,” adds Fichter. Even those who do take a risk and fail will land comparatively softly.
Eight billion risk cocktails
Japan has its climatic conditions and values, the USA its founding history and Switzerland its prosperity: cultural risk inclination comes in different guises. But while this provides background knowledge, it fails to supply a definitive explanation. Everyone carries their own cocktail of risks, formed by upbringing, environment, personal experience – and thus not least by chance. The moulding process begins early: “Even toddlers show different temperaments and different levels of daring. Together with what they experience in their family and in their cultural context, they form different ways of dealing with risks,” says Fichter.
In other words, more than eight billion variants walk our planet, and their exact compositions remain a mystery. While this mystery may shape us for life, it does not necessarily have to determine our lives: “Like all of our behaviours, we cannot simply shed our risk preference,” says Fichter. “But we are not at its mercy, either. We can change our behaviour if we are motivated and able to do so. It requires tenacity and hard work, but can be worth the effort.” Homo periculans may have ancient roots, but they can take their future into their own hands.
