The Risk Economy

Let's start with an observation:

There are two kinds of things you can do. You can do something that's been done before or you can do something that's never been done.

Doing something that has been done before is low-risk. After a factory has produced a million pens, you can be quite sure that it can produce the million and first.

Doing something that you've never done is higher-risk. If you've never painted a portrait and you need to paint a good one before a deadline, you may not succeed.

But doing something that no-one has done before is the highest-risk. The first person to climb Everest took a greater risk than the second person.

Here's another observation: when you hire an employee, the employee is doing two things:

  1. They are doing work,
  2. They are taking risks,

If you instruct your employee to build a wall, the work that they do has been effectively delegated as you no longer need to build a wall.

But the risks that your employee has taken have not been delegated. If your employee, in the course of building the wall, decided to use a different kind of brick, they took a risk. Since you are now the owner of the wall, you took a risk too.

For this reason, whether it is articulated this way or not, employees are trained to be risk averse.

The last observation I have to make is this: The important, valuable work in the world is high-risk. Low-risk work can be automated and done by machines, but risk-taking cannot be automated. If a machine takes a risk under your command, then so do you.

If you want to learn to do valuable things, you must learn to take risks.