The danger of playing it safe
How fear of risk hinders your progress
🏷️ Categories: Decision making and biases.
“Better the devil you know than the good you don't know.”
I admit that this phrase has always generated rejection in me, but I understand why many people have this philosophy. Change, taking risks, stepping out of the safe...it's all scary. And that fear leads us to choose the known, even when the unknown could offer immense, life-changing rewards.
That's the zero-risk bias, avoiding risks even when we know their benefits.
It's a common phenomenon, but it can be avoided. You may have heard that virtue lies in the middle ground. Being totally courageous makes us reckless, but being totally cautious makes us cowards. If you learn to recognize bias, you will make more courageous and strategic decisions, bringing out the full potential of your actions.
So how do you find that balance between courage and prudence?
Here's the answer.
The ancient origin of bias
Our psychology is deeply linked to our evolutionary history.
If we go to the earliest days of humanity, we encounter a world full of dangers: from predators to incomprehensible natural catastrophes, everything seems to be a constant threat (Santos & Rosati, 2015; Haselton et al., 2015).
To live is to be at risk.
To survive, we had to develop a cautious mindset; we had to anticipate risks and avoid them. Since then, this bias has accompanied us to this day, and although times have changed, we still tolerate uncertainty poorly.
In the past it was to flee from predators, today it is to flee from uncertainty.
We choose stable jobs, secure routines and accommodate the predictable. And it is not wrong to want security. The problem comes when this preference leads us to make decisions that, although safe, hinder our progress.
That's where the zero-risk bias comes in.
The Allais paradox
A famous example is the “Allais Paradox” (Allais & Hagen, 1979). Imagine you are offered 2 options to make money:
Option A: $100 million, insured.
Option B: 10% chance of winning $500 million, 89% chance of winning $100 million, 1% chance of winning nothing.
Even though Option B has a much higher expected value, most people choose Option A only because Option B includes a 1% failure rate, and that small risk is perceived as intolerable. This is the human mind working in “zero risk” mode. Something similar to what happens when we feel loss aversion.
The fear of losing is much more intense than the joy of winning.
Even if we miss incredible opportunities by avoiding risks.
When to be prudent and when to take risks?
Prudence case 1: Delaying the decision does not have a high cost.
If the risk is unknown, but the costs of waiting are low, it is better to wait. If you don't rush, you gain time to accurately assess the best decision.
If you plan to change your college major and you know which one to choose, wait a few months to do more research. It's a small investment of time with big benefits.
Before buying a new car, take a good amount of time to compare prices and features to make an informed choice that will determine much of your future years.
Prudence Case 2: Prioritize Future Flexibility
Sometimes, one decision severely limits us in the future, while another equally valid option is flexible in the future. Think about the value of flexibility.
If you are between buying a house or renting and you are not sure where you would like to live in the long term, renting gives you flexibility for the future.
If you are thinking of buying a car and you don't know how much your needs will change in the coming years, choosing a second-hand model that is as versatile as possible will allow you to adapt to the future without major losses.
Prudence case 3: Prioritize prevention
If the risk is low but critical, it is better not to take risks if there are good alternatives, especially if you do not know the risks well, but you do know the safe options.
If you are going to invest in a sector that you do not know well, opt for a safe investment fund that is less risky.
Risk case 1: Inaction has a high cost.
If not acting will cause more damage than taking a risk, risk is the safe option.
If your business is in trouble the cost of inaction is going to be bankruptcy. Taking the risk to make changes could be the option to save the business.
If you want to progress professionally and you don't find options in your current job, you may want to take a risk.
Risk case 2: You know the risks and can mitigate them.
When the risks are obvious and the consequences are clear, assess whether the potential benefit justifies the risk. If the risk is something you want to take, then mitigation is key.
If you decide to invest in startup stocks with the knowledge that there is a risk of loss, but also a significant potential gain, this calculated risk is appropriate if you know how to mitigate it. For example, you could have a savings cushion to be safe in case all else fails. A precautionary reserve.
Risk case 3: There is only profit if there is risk.
Risk is not always avoidable. If you are only willing to make decisions without any uncertainty, you are likely to miss important opportunities. In this case, caution becomes a liability.
If you are afraid to change cities, but the only way to grow and achieve your goals is to move, fear prevents you from realizing your true potential. You must take steps to mitigate the risk and take the plunge.
If you write but avoid publishing your work for fear of negative reviews, you are making your own writing career impossible.
Living without risk is not possible, nor is it healthy.
What matters is knowing when to take risks and when to be cautious. The “zero risk” bias is designed to protect you, but in many cases, it's a trap. The next time you are faced with an important decision, remember: courage and prudence are complementary virtues. Wisdom will let you know which to choose.
A small risk is just what you need to unleash your true potential.
✍️ It's your turn: How do you balance prudence and courage in your important decisions? By knowing our own biases we become freer.
💭 Quote of the day: “With all the risks they were taking, love was probably the most dangerous choice of all.” Kristin Hannah, The Nightingale.
See you next time! 👋
References 📚
Allais, M., & Hagen, O. (1979). Expected Utility Hypotheses and the Allais Paradox. En Springer. URL
Haselton, M.G., Nettle, D. and Andrews, P.W. (2015). The Evolution of Cognitive Bias. In The Handbook of Evolutionary Psychology, D.M. Buss (Ed.). URL
Santos, L. R., & Rosati, A. G. (2015). The Evolutionary Roots of Human Decision Making. Annual Review Of Psychology, 66(1), 321-347. URL