The rise and rise of risk aversion

Writing in 1896, Norwood Young opined in the Badminton Magazine that:

“A great change is gradually coming over the world. Adventure, sport, enterprise, are giving way to caution and the calculation of averages. Men do not take the risks they used to. The modern man is surrounded by police constables, sanitary inspectors, and insurance agents.”

Granted, the Badminton Magazine, with full title ‘The Badminton Library of Sports and Pastimes’ was a journal that covered in full detail the adventures of the day, with detailed articles on sports such as cricket, football and rowing, but also shooting, motor racing and cycling. It was both a manual and celebration of adventure. Norwood was clearly miffed that the sporting attitude and  let’s have a go mentality was on the wane. He may have been premature – he wrote this before Scott, Shackleton, Amundsen et al set off on foot in their various adventures to find the South Magnetic Pole.

Fast forward to 2014 and listen to the character Cooper in the film Interstellar complaining that “It’s like we’ve forgotten who we are – explorers and pioneers, not caretakers.”

More than 100 years passed between the writing of the essay in the Badminton Magazine and the writing of the Interstellar screenplay. Yet both spring from the same yearning, the same perception, the same disappointment.  It is too easy to dismiss these views as the misconceived grumblings of individuals who never grew up and never moved on from boyhood adventure games and fantasy. Great adventures are still planned and undertaken today but society makes it much harder for those individuals than ever before. It is inconceivable that anyone would set off today on the equivalent of a South Pole exploration so ill-equipped as were Scott and his team. ‘The authorities’ would not permit it. When young sailors plotted a trans-ocean adventure 50 years ago, the media didn’t know about the trip until after it was completed, as was the case for Robin Lee Graham. Today, in some cases courts of law intervene to ban the planned trip, as in the case of Laura Dekker. In others, community anger and backlash against the trips can be feral, as was the case with Jessica Watson.

Examples of nanny-state controls imposed on our lives are everywhere. They can be a whole lot of fun, when viewed from afar. Children not being allowed to use playground equipment, a mayor of New York who tried to introduce a legislative ban on large bottles of soft drink (small bottles were ok), it being illegal to have rubbish in your car or hang out washing and other such examples serve to lighten one’s day, provided one is not subject to the controls. But these controls are everywhere. Where do they come from? Why do they exist? What purpose do they serve?

In the world of retirement planning, saving and spending, the controls in Australia are staggering. It is such a highly regulated activity that to understand and adhere to all the rules requires a team of lawyers, financial planners, actuaries, communication experts to assist. The rules on consumer disclosure have become completely ridiculous – the sheer volume of reading material that must be given to consumers by a superannuation fund is enormous. I know of nobody who reads it, other than the lawyers during the production process. Thereafter, it is effectively scrap. Useless.

All these rules and requirements have come from the desire of some people to control the behaviour of others. Anyone who professes the view that individuals should be responsible for their own behaviour, and their own lives, including how they want to fund their retirement living expenses and what they want to do with their retirement lump-sum, will quickly find themselves alone in the kitchen at parties.  It is not so much that individuals are losing the appetite for risk and adventure, it is an ever-increasing part of our society that is stamping on any individual who wants to do their own thing.  The justification usually comes from any combination or permutation of a) we know best, b) it’s for your own good, c) we don’t want you claiming assistance from the taxpayer when you’re old, sick or injured.

When the attitude of self-reliance is beaten out of people, they lose the ability to distinguish the important from the unimportant. Their whole life is becoming increasingly micro-managed by the state and their attention is then concentrated on tiny details of immaterial significance. They focus on trivial items such as whether they are being charged 5 basis points too much in asset management fees in their predominantly bonds Conservative Investment Option and totally oblivious to the real risk in their portfolio that over a 50+ year time horizon, they probably should not be investing in a bond fund! Proposed changes in Government policy are not viewed with an overview of what is good policy for the country but rather by how many dollars per week better or worse off shall I be? It is the short term triviality, rather than the big picture, that gets attention.

Meanwhile, those in positions of power within the rule-making laboratory of the State, observe that their rules are not working as effectively as they should be. Scams continue. Employees do not contribute enough. They make bad investment choices. They take their lump-sums and go on a round-the-world holiday. People run out of money in retirement. The rule-makers and associated busy-bodies purse their lips and conclude that they must devise more rules.

Norwood Young and Cooper both lamented what they perceived as the loss of adventure and pioneering spirit. Both were right.  The spirit is gradually being strangled by the state grinding down the adventurous side of the self-reliant.