Monday, April 16, 2012

Taking Risks to Avoid Loss

Here's a fascinating TED talk that persuasively makes the case that humans (like other primates) are willing to take on greater risks in order to avoid loss.

The presenter closes with the idea that what makes humans unique is that we are able to know and understand these limitations, and therefore design systems that prevent us from taking unwarranted risks, even though our instincts are screaming at us to do so. That may be possible, but I think it's somewhat rare in the real world. Most people, like the monkeys in the video, consistently engage in the riskier behavior when the stakes include non-trivial losses.

Except, strangely, when it comes to taking the risks that are necessary to drive innovation. Organizations and the people in them are unwilling to take risks (i.e., to try something new) precisely because they are trying to avoid a perceived loss of prestige or reputation. We can't launch this idea. It's half-formed. What will the members think if it falls on its face? The threat of loss in these situations doesn't motivate them to take risks. It makes them risk-averse.

But what if we redefined loss in these situations so that it was associated with doing nothing instead of doing something? What if we came to see entrenching behind proven programs as the action more likely to result in the loss of prestige or reputation? Then, I believe, the natural instincts the presenter talks about would help compel us to engage in the riskier behavior. We'd be willing to try something new. It may not work, but it may lead to even greater success.

The trick is getting the people in your organization to see things through this lens. To see that standing pat threatens the organization more than doubling down. It may seem counter-intuitive, but I believe it more accurately describes the situation many associations are facing.

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