How The Perception Of Risk Distorts Our View Of Reality
Risk is an inherent condition of life, but just how risky is life? The primary function of our brain is to make decisions that ensure our survival, so we are hardwired to avoid risky endeavors. As a result, we typically overvalue the odds of negative outcomes. Let’s consider three scary potentially life-threatening incidents that have gotten a lot of press this summer: getting struck by lightning, dying in a plane crash and dying of a shark attack.
These events rarely happen, but receive quite a bit of attention when they do. Media coverage serves to stoke our fears that these events might happen to us. So, what are the odds? According to National Geographic, “The odds of becoming a lightning victim in the U.S. in any one year is 1 in 700,000.” The odds of dying in a plane crash are one in 11 million according to David Ropeik, a Risk Communication instructor at Harvard. And, the odds of dying in a shark attack are one in 3.1 million.
I don’t know about you, but I haven’t known anyone who has been struck by lightning or attacked by a shark. A coworker of mine was involved in a plane crash, but he survived. Even with these incredibly low odds, there are people who fear flying on commercial airliners or swimming in the ocean. Of course you could avoid these activities all together and reduce your odds of dying from them to zero. If you are afraid of lightning, you can greatly decrease your likelihood of getting struck by simply seeking shelter when a thunderstorm approaches. Unfortunately, rubber shoes do nothing to protect you from getting struck by lightning (but they may help you run faster to shelter).
These fears, while irrational, can be overpowering because they involve our greatest fear: death. Often, what we fear and the odds associated with that event actually occurring are completely out of whack. For example, MIT professor Arnold Barnett addressed our fear of flying in this way: “a traveler could on average fly once a day for 4 million years before succumbing to a fatal crash.” I’ll take those odds. If you really want something to worry about, according to the National Safety Council, the lifetime odds of dying in a motor vehicle accident is 1 in 103; unintentional poisoning is 1 in 119; and, dying from falling is 1 in 152. Everyday activities and hazards are much more lethal than headline grabbing (and rarely occurring) events, yet they don’t produce the same level of fear or risk aversion.
Our perception of risk is usually distorted in favor of safety, but risk is only one side of the equation. The other side is reward. Consider the risk examples I gave earlier. Some people rarely need to fly, so the reward may not be worth the risk to someone with aviophobia (fear of flying). The reward of swimming in the ocean may not be worth the perceived risk for someone with Galeophobia (fear of sharks) and to be honest, Astraphobia (fear of being struck by lightning) is just common sense. I can’t think of a reward for being out in a thunderstorm. However, one almost couldn’t function in the modern world without engaging in riskier activities like motor vehicle transportation, walking on stairs, or taking medication (which is a common cause of poisoning). As I said earlier, these risks are inherent in everyday life.
So, why do we place a higher value on risk than reward, even when the odds are stacked in our favor? This might be due to the Loss Aversion Theory: If we have enough of what we need to survive, increasing our resources would be nice, but losing resources could be fatal. Therefore, we are particularly sensitive to loss. From an historical standpoint, we lead a particularly safe existence in the developed world, but for most of human existence loss aversion has been necessary for survival.
Unfortunately, our loss mitigation mindset goes beyond scenarios that threaten our true survival and this is when we pass on opportunities. Our fear of loss is greater than our desire for gain and this mental program can prevent us from reaching our dreams. Remember Dr. Albrecht’s five fear categories? Risk aversion plays on all five: Extinction, Mutilation, Loss of Autonomy, Separation and Ego-Death. That’s why the seventh deadly sin of decision-making, risk aversion, is so powerful.
Remember, it’s riskier to climb a ladder than it is to swim in the ocean—although, it doesn’t feel that way after binge-watching Shark Week episodes on the Discovery Channel.
I’ll write more on risk aversion over the next few weeks. Until then, have you passed on a big opportunity because your fear of loss was greater than your desire to gain? If so, can you identify which of the five fear categories drove your risk aversion?