As a researcher of risk and risk taking capacity. I am always intrigued by studies on why as humans we make the choices we make, what leads us to those choices, and are we willing to take a risk in our choice making. Daniel Kahneman in his book Thinking Fast and Slow dedicates an entire section to choices and Chapter 31 specifically to risk. There were a few things I gleaned from his work that help to understand the complexities of risk for individuals and organizations.<\/p>\n
Kahneman’s focus in the chapter on risk is centered around financial risk taking, but it is applicable to risk taking in our lives and as leaders. He identifies 2 biases that exist when thinking through risk, “the exaggerated optimism of the planning fallacy and the exaggerated caution induced by loss aversion”.[1] His proposal is to have a “Risk Policy”, to have a set of pre determined processes that help you process through the choice at hand. His proposal is that we have a plan before we are faced with a risky decision. He also talks about an outsider view as being helpful in evaluating and thinking through risk. As individuals this can be hard to accomplish when we are stuck in a risk aversion mindset. When we try to avoid the discomfort felt in the uncertainty of risk we often can’t make a “policy” or plan because we don’t have the experience to know what process might be helpful. This leads to the place many find themselves in, a place of being stuck in their fear of risk taking. The fear of the unknown takes hold and maintaining the status quo, the safe zone, becomes essential for survival.<\/p>\n
This state of status quo is not limited to the individual experience. Leaders of organizations face this aversion to risk and maintenance of the status quo in their organizations too. Kahneman discusses in a video interview about what he calls the status quo bias in relationship to organizational change. The status quo bias exists at the individual level and in the organization. “Any Change or reform will have winners and losers. The losers will fight a lot harder to keep what they have than the winners will fight for the change. This makes reform quite difficult”[2] Kahneman also points out that leaders who are reformers are looking at the long term and can see the anticipated improvements, while inside the organization there are individuals who can see that some of them will loose and some of them will win which leads to the risk aversion. So, as leaders of organizations casting vision for reform, understanding this risk aversion becomes key to successful reform and change implementation.<\/p>\n
What does this mean for us as individual and as leaders, how do we engage with risk when our human condition wants to avoid the unknown and the potential losses that risks hold?<\/p>\n
Simply put, we have to have positive risk experiences that can help us develop understanding, habits, even policies around risk. So that when faced with a risk decision we have the experience and thought process to work through the risk in a healthy way and can lead our organizations through a needed risk while balancing the needs of the individuals within.<\/p>\n
[1] Daniel Kahneman,\u00a0<\/span>Thinking, Fast and Slow<\/span><\/em>\u00a0(New York, NY: Farrar, Straus, and Giroux, 2011), 340.<\/span><\/p>\n [2]Daniel Kahneman: “Loss Aversion & Status Quo Bias in Change Management”\u00a0https:\/\/www.youtube.com\/watch?v=llPu94GDV74<\/p>\n","protected":false},"excerpt":{"rendered":" As a researcher of risk and risk taking capacity. I am always intrigued by studies on why as humans we make the choices we make, what leads us to those choices, and are we willing to take a risk in our choice making. Daniel Kahneman in his book Thinking Fast and Slow dedicates an entire […]<\/p>\n","protected":false},"author":160,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[2426],"class_list":["post-29324","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-kahneman-dlgp01","cohort-dlgp01"],"acf":[],"_links":{"self":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/29324","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/users\/160"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/comments?post=29324"}],"version-history":[{"count":2,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/29324\/revisions"}],"predecessor-version":[{"id":29327,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/posts\/29324\/revisions\/29327"}],"wp:attachment":[{"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/media?parent=29324"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/categories?post=29324"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.georgefox.edu\/dlgp\/wp-json\/wp\/v2\/tags?post=29324"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}