Uncertainty Avoidance

By Dr. Thomas J. Bussen

“The only limit to our realization of tomorrow will be our doubts of today.”

– Franklin D. Rooseveltⁱ

Think about the future—say, five years from now. Did a tingle of excitement just course through your body, or was it something closer to anxiety, fear, or maybe even dread? As with most cultural dimensions, your answer may vary, depending on where you call home—some societies are made more anxious by the future than others, and thus seek to avoid the risk of uncertainty in their lives. These people are said to have a strong uncertainty avoidance (UA).

A good example for this can be seen in a study done on American, Chinese and Japanese graduate students. The participants in the study were presented with two options. Under the first option, the participants would gain an immediate reward. Under the second option, they could potentially receive a bigger reward, but that larger amount had a payout probability ranging from 5 percent to 95 percent. The participants had to indicate which option they would choose. Rational people of course discount the value of that larger payout as the probability of getting it decreases, but the amount of discounting varies by culture. In this case, Japanese and American students discounted very similarly, whereas the Chinese students showed less discounting, suggesting they were less risk averse.ⁱⁱ

It may be that nature coded some of us to be more risk averse than others. Susan Cain’s research illustrates how a population’s variant risk-seeking and risk-avoidance behaviors can actually benefit a species’ survival. “From fruit flies to house cats to mountain goats, from sunfish to bushbaby primates to Eurasian tit birds, scientists have discovered that approximately 20 percent of the members of many species are “slow to warm”, while the other 80 percent are “fast” types who venture forth boldly without noticing much of what’s going on around them. [Researchers believe] that both types of animals exist because they have radically different survival strategies, each of which pays off differently at different times. … “Shy” animals forage less often and widely for food, conserving energy, sticking to the sidelines, and surviving when predators come calling. Bolder animals sally forth, swallowed regularly by those farther up the food chain but surviving when food is scarce and they need to assume more risk.” ⁱⁱⁱ

A similar survival mechanism may help explain the diversity of risk aversion in human societies. But our level of risk aversion is not just a natural occurrence. Just as animals would over time learn to be more adventurous when food levels fall, and less adventurous when predators rise, so too is our risk aversion likely to be higher where the future is objectively dangerous than in situations where it is safer. It is clear, for example, that a poor farmer has more to fear of the future than a wealthy aristocrat. If the crops were to fail next year, after all, it is the farmer and not the aristocrat who would suffer more.

The best way for the farmer to reduce his exposure to this risky future may be increasing his stockpile of food—by, in short, becoming wealthier. If the best way to do this is to install new machinery, the farmer is likely to be fast to do just that. If the stockpile remains too small for comfort, he may advocate a study of the sciences—perhaps by pushing his child to study in the university or by willingly paying taxes for a stronger educational system. If the farmer is prone to have his food stolen by the aristocrat, then he may call upon the courts to provide greater legal protections.

These actions—the embrace of the rule of law, of technology, and of science—are precisely those taken by many societies that have a strong desire to minimize future uncertainty. Over time, these are likely to make the society quite stable and wealthy, just as the farmer had hoped.^iv Thus the descendants of this farmer are unlikely to give much thought to the possibility of a crop failure. The granaries of the local Walmart are full, and they can even afford to enjoy their favorite delicacies at French bistros, Italian joints, and steakhouses. They are more likely to be educated and more likely to be employable in a variety of fields—perhaps even a variety of countries—in the event the proverbial crops fail and one’s immediate employer goes out of business. Their fear of the future, therefore, is much minimized relative to that of their great-great-grandfather. With this greater cushion, they may be willing to take greater risks in their own lives.

If, however, the state is too weak to staff the universities with scientists, to collect taxes for the educational system, and too fractious to impose restrictions on the rogue aristocrat, then the farmer is likely to rely on self-help mechanisms. For instance, he may band together with other precariously situated farmers to uphold justice, and perhaps use this force to steal from others during times of scarcity. In this case, the great-great-grandchildren of this farmer will be in much the same position as their ancestor, and still rather exposed to, and thus concerned about, the future.

This idea that the environment in which we live affects our risk tolerance is more than speculation. Adam Grant, in his work Originals: How Non-Comformists Move the World, noted that researchers Frank Sulloway and Richard Zweigenhaft made a surprising statistical finding involving professional baseball players. As it happens, the most prolific base stealers in history are predominantly younger brothers. They found that younger brothers attempt to steal a base 10.6 times more often than major leaguers who are older brothers, and when the attempt is made, they are 3.2 times more successful.^v The correlation was so strong that numerous studies have been extended to determine whether younger children were less risk averse than older siblings, not just on the baseball field, but in all facets of life.

Researchers found that, indeed, younger children are more likely to take risks in their personal and professional lives: they are more likely to go against the status quo as scientists, and more likely to take risks as politicians.^vi They are also more likely to use drugs or alcohol, to perform poorly on standardized tests, and to disdain prestigious occupations.^vii We would expect that this risk-taking would carry over into the world of business decisions, causing the younger born to be more open to risk. If the statistics on base stealing are any indication, we might expect that these individuals will in fact take better chances than others, if for no other reason than because they have more experience taking risks.

Why would this happen? The reason may be that parents are more likely to coddle younger children, which leads those children to view the world around them as less threatening than older children. This may contribute to positive risk-taking behavior. Less favorably, parents may alternatively pay less attention to younger children, leading to a world view in which there are few consequences for wrongdoing and which may lead to negative risk-taking behavior. Just like the farmer and his descendants, children are an evolving, ever learning product of their environments.