We’re taking fewer risks and that’s holding us and society back, economist argues

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Taking risks powers careers and our economy. But economist Allison Schrager argues risk-taking is declining in our society.

“I’m concerned that while the wealthiest among us are taking risks and reaping the benefits, the bottom 95 per cent of us are shut out of healthy risk-taking and have grown risk-intolerant,” she writes in Worth the Risk.

She believes we are becoming less resilient and less able to live with ambiguity. A sign is that we’re moving less, changing jobs less often and are reluctant to marry and form families. Our income doesn’t grow as fast as it used to and the lack of risk in our lives is contributing to widening inequality, stagnation and increasing anxiety. That will persist as the economy transforms, leaving many people behind.

Among them will be young people. “Bold risks once defined early adulthood. It was how people jump-started their lives and made their mark,” she says.

But these days, young people are wary – protective. The share of 35-year-olds who own a business has fallen 65 per cent in the U.S. since the 1980s and she notes that cohort is on track to be the least entrepreneurial generation in history. Despite the notion that Millennials and Gen Zers are continually job-hopping, she points out people in fact have become less likely to change their jobs. “Taking a risk and succeeding was once the American Dream; now the dream is achieving safety and security,” she says.

She argues we have unjustifiably high expectations of what we need to have in place before we take the plunge on home ownership, marriage or starting a family. “The message young people today receive is that taking less risk means they could have more. But that’s exactly wrong. If you don’t take risks, you generally wind up with less,” she writes.

That risk delusion, as she terms it, most affects recent college graduates from middle- and upper-middle-class families. “Nothing is stopping them from taking risk, except for a cultural norm that success is narrowly determined and that certain things have to be in place to take risks. Odds are that most of them will do fine in life, but the anti-risk messaging they take in inhibits them and keeps them from thriving,” she says.

The immediate rejoinder from younger people would be that they have student loans to pay off, home ownership is soaring in cost and job losses appear to be on the horizon. But that just results in a vicious cycle: Fear of risk leading to stagnation which leads to further fear of risk.

She says moving, changing jobs and entrepreneurship are all linked to an increase in wages and it’s wise to be more open to those opportunities – now more than ever. With the economy transforming, those who take risks and try new ways to work will be the ones who will get ahead.

“We can’t get more wealth or income if we don’t take risks, and our lack of risk-taking makes the life we want simply unaffordable. Taking risks when you are young and have less wealth and income is especially critical. Your choices when you are young set up your skills and earnings trajectory for the rest of your career,” she says.

Risk need not be all or nothing. High wire walkers and other daredevils are carful to mitigate risk. Just as we buy different types of stocks, knowing some of the investments may not work out but others might pay off big, you want to diversify career risks.

“The right strategy is key. I am not arguing that we should take moonshots with what little we have and risk total financial devastation. We need to face the possibility of some loss, but also need to insure against extreme loss and be thoughtful about the risks we take,” she writes.

You can start small, just with a side hustle. The more risks you take, she insists the better you will get at it. But avoiding risk will only ensure you fall behind.

Quick hits

• Author James Clear says it’s remarkable how often the real problem is not what happened but how it was communicated.
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