This is what defines our society.
On the one hand we have high risk individuals such as bankers, celebrities, drug dealers and their ilk, who rightly or wrongly take on large supposedly calculated risks for huge reward.
And on the other we have the safe low risk individuals such as public sector workers, families, accountants and related groups, who exchange great reward for certain reward.
The question is which is better for our society, you see as a society we want things:
- we want to progress and achieve
- we want people to be happy and settled
- we want to live longer and be healthier
And yet given that 2 out of 3 of these are safe options it is still the riskier amongst us who are supported the most and its the safe and certain group which which is punished the most. This seems odd.
An example of this is the banks they took huge risks including
- giving mortgages to people with no income and no money
(I was at a Royal Statistical Society talk last year where this was seen as the big learning point for a bank, most of us realize that leading a fiver to your mate who doesn't have a job might not be re-paid and yet these people thought they'd get back their half a million dollars and they are allowed to have jobs, astonishing)
- being fooled into thinking success is related to skill, instead of luck and insider trading, it is well known that a lot of their success is down to randomness (see Fooled by Randomness by Nassim Nicholas Taleb)
- creating bubbles in markets that cannot sustain them, from tulips to houses, and from oil to the Internet all their bubbles will bust eventually and of course they know this, it's what their risky game is based on.
And yet on the other hand you have academics who:
- slowly plod through endless research to get at something new, and make sure that what they find is accurate (of course there are those that cheat)
- who have to suffer the indignity of having to find more money every year just to keep going
- who's ideas have great difficult in being taking on in the real world (thought is notable that many of the best new companies in the last few years have benefited from the the American university system of allowing development of work, Google being the most obvious one)
Which is better? On the one hand you have people who are in it for the long term and generally want things to get better for all and on the other we have self-centred individuals in it for the short term gain and couldn't care less for the outer world. Risk in the long term ain't so great from that point of view.
Especially if you consider history in the broad sense where the people who took the biggest risks were soldiers and leaders of nations who fought endless wars over millennia for little scraps of land. We've seen that progress doesn't happen in uncertain times but in times where strong empires/governments happen such as Rome, Britain and the USA. Thankfully we're trying to get rid of this sort of thing and yet the modern equivalent of the land grab mentality is the 'Market' which we still bow and scrape to.
To highlight this point further there's a part of Fooled by Randomness which hits on risk versus certainty in individuals. It concerns how to succeed and how to spot who will get on. The book talks about previous history having an impact on future which is logical to us all, that those that succeed must have some skill or other than means they will succeed in the future. However the book also says you need to take into account the number of people involved in the profession and how much randomness is involved.
From this you can see that banks are mainly run by survivors those that were the lucky ones, because so many people are involved and there is so much randomness. The reward is survival in this instance. Whereas in raising a family there is less randomness in success and so the human race carries on.
The only trouble is, is that risk is needed for progress. Going out on a limb when everyone around you is saying the opposite. Sacrificing certainty to pursue the dream. But it's so badly handled by society that it's pure luck whether we go forward or backwards.
What we need is balance, so instead of the government talking about messing around with public sector pensions and giving bankers huge bailouts; what we need is to give people who have safe lives the opportunity to take some risks (i.e. greater pay now and lower working hours along with reduced pensions) and to give people with risky life's an encouragement to be a little safer (i.e. reward based on longer term success, penalties for larger risks).
That would give us progress but progress with safety for all, and with any luck equality and a true meritocracy.
- Posted from the ether.
