Fear, risk and being human — Lionesses of Africa

by the Lionesses of Africa Operations Department

“If there be light, then there is darkness; if cold, heat; if height, depth; if solid, fluid; if hard, soft; if rough, smooth; if calm, tempest; if prosperity, adversity; if life, death.” — Pythagoras. “…if prosperity, adversity” or put another way, ‘if profit, there is risk’. Risk is there, it may be hidden, but it is there… you cannot have one without the other.

Last weekend we looked at our sub-conscious fear of the finite time we have on his earth (a mere 4,000 hours if you live to 80 – here) and how this fear, with the recognition that we simply do not have enough time for everything, sends our brains into a tizz and we end up procrastinating or being distracted. Yes, sounds totally counter-intuitive doesn’t it, less time means we waste more time, but no-one said our brains worked perfectly, we are after all only human!

Being human is the crux of our article this weekend, because our sub-conscious works in mysterious ways especially over fear and the understanding of risk. Following the 9-11 bombing in America, millions turned away from flying and drove instead, yet thousands more die in the USA from driving than through flight. Who knows how many extra people sadly lost their lives through that wrong fear-driven decision (some very clever Lioness owning and running an actuarial firm will we hope write in with the answer)!

We were looking this week at what makes a good Board decision, when we realized that a decision can only be as good as the information or data given to make that decision. If you remember back to the days of music being delivered through Vinyl records (time to dust down your old copies, they are now worth huge sums of money), it didn’t matter how good your actual system was if the needle you used was rubbish. For the purists, the needle, then the arm, then the turntable, then the amp and then and only then the speakers, is the order of where you would spend your money. This is because if you are not picking up the perfect information from the Vinyl, no amount of money spent on the rest of the system will improve this. It may increase the bass, treble, even become so loud it blows the roof off your neighbour’s roof, but the information will still have the taint from the cheap needle.

So too with decisions. We are told information and data are the basic starting points, but what if your subconscious gets involved and starts to cherry-pick the information it wants? What if your board is only getting half the story? Our minds have inbuilt biases and it is only if we become aware of these, can we really then look at the data with clear eyes. Why do we have these biases? It is a safety issue. At the root of it all is that we are herding animals, we love being part of a pack. This is safety in numbers, standing alone we can be picked off, but if we are in a herd or pack, or club, there is safety in numbers. Once we realize this, we can start to look at the biases and then recognize the risk these bring.

So what are the more obvious biases? Let’s start with the one all sales people love – The Anchor! The second hand car salesperson will often start by saying – “What a beauty, sold one last week at $10,000.” Bingo – your mind will start to think it is good looking (even if pink with purple spots is not quite to your taste), but more importantly, if someone else has bought there, we can’t look stupid also paying that price – so you start to think the car is worth $10,000. This is called anchoring. When the sales person says “Yours for $9,750!”, you immediately think of the saving of $250 (which believe us, is an imaginary saving), and how you ‘beat the other person’ (which makes you feel good), not of the massive $9,750 cost! That is a bias that your subconscious welcomes with open arms. Try it next time you want to steer the argument in your favour. The secret is simply to get your ‘anchor’ in early and then from that point onwards, the conversation will be ‘anchored’ by that level or information.

Confirmation Bias is one we like to publicize because it is so dangerous. We subconsciously search for data that confirms our initial belief. Many people have wrongly been arrested and put in jail because of this and then many years later released because new facts came to light (often ignored because the facts didn’t fit the initial belief). Shockingly true. In business facts also get ignored if they don’t fit the initial belief. Be very careful of this one. Picking the ‘facts’ that suit your argument.

The Fireman’s Bias is next, which maybe a bit unfair on Firemen and Firewomen! All it takes is a group of people spending time together for views to start to all look and sound the same. It is called after Firemen/women because they tend to spend long hours together doing nothing and talking whilst waiting for the fire bell to go before bravely springing into action. It’s that slow drip of talking together that brings views in line until it becomes difficult to be a dissenting voice. Look out for those long court cases and the jury being out for days and days deliberating. Likewise if your top team has been together for years, perhaps they cannot see the wood from the trees, because they are all looking in the same direction…

Ratio Bias is another dangerous one. The mentioning of a number without giving context. Our HoF complains of people not mentioning the currency when they say: “4 million”. What does that mean? US$ 4 million is very, very different from 4 million Rand, or Naira, or Cedi, or Kwacha or Shilling…   

Likewise Covid has sadly killed 5.7 million people, yet the Antonine Plague (165-180AD) killed only 5 million and the Japanese Smallpox Epidemic a mere 1 million (735-737AD) seen here. Did we forget to mention that the proportion of the human race killed by the Antonine Plague was a whopping 2.6% of the world’s population and the Japanese Smallpox Epidemic killed a third of their population.  The Spanish Flu killed 45 million and that was 2.5% of the world’s population at the time (1919), Covid by comparison has taken out a mere 0.07% of the world. Whilst obviously not wishing to take anything away from the pain and suffering felt by millions over these past three years, in business when someone misses the context (often because they want to dramatically make their point), how can anyone make a decision? (To add context for those interested, the Black Death killed 51% and Smallpox just over 12% of the population)

Fear sells, sadly this is a factor of life. Fear of missing out, fear of not being prepared, fear of not being part of the gang. Once fear has taken hold, confirmation bias does the rest as you will only take in that which confirms your first suspicions. If you think that this doesn’t have an impact in our lives, there are some Politicians who constantly use this and social media then feeds the fears. We have all heard: “You must do it or we will lose the client”, or “Our competition is doing this – we must too…”. Take a deep breath, fear is no way to run a company.

On top of all of these biases, the problems become magnified (here) when:

1. Rubbish! You simply refuse to see the risks. They are hidden in plain sight. It is only when you welcome a new employee into the company that they see what has been ignored for so many years.

2. No Chance! There is a denial of the risks. Such a denial was seen by the banks who lent out money into the mortgage market of 2006/2007 and then packaged these loans and sold them on. It was so popular that anyone could get a mortgage. The risk of a loan default was denied in the rush to package and sell. Then 2008 happened, the world of finance collapsed and many companies went bust. Thanks!

3. Who cares? Or ‘Risk Inertia’… Sadly this has hit us all at one time or another. It must be true – look here on my excel! Not only the world’s most used business tool, but also the world’s most risky business tool. The massive global investment bank JP Morgan dropped dramatically in size when they misjudged risk because there was a mistake on their excel spreadsheet. Misjudged risk by a massive US$6 Billion by the way. Did not check until it was too late. Oooops!

4. Finally Let’s just look the other way – it’ll never happen! Or ‘Risk Compromise’. So the risk has been evaluated and the boss says the company cannot pay and anyway it’ll never happen (this after paying expensive experts to tell you that this is a risk that should be covered!). “In 2016 the UK Department of Health ran a stress test to cope with a surge in demand for services due to a novel virus. Exercise ‘Cygnus’ found that the NHS would be overwhelmed and needed substantial resource upgrades to meet public demand. In 2020 when Covid-19 struck it was found that the risk had subsequently been downgraded and investment reduced by the Treasury.” Cash saved in 2016 in the millions, cash spent to rectify, in the billions…

In the excellent book simply called ‘Risk’ by the award-winning investigative journalist, Dan Gardner  here, he says having recognised that risk is an everyday part of our lives, the solutions are:

1. “The first step in correcting our mistakes of intuition has to be a healthy respect for the scientific process.” i.e use data – that does not mean search on Dr.Google or Professor Wikipedia (although to be fair, the references listed at the bottom of the page are often an excellent source), but use the company’s data, search for verifiable information, never assume (which as all know just makes an ‘ASS out of U and ME’).

2. “The next step in dealing with risk rationally is to accept that risk is inevitable…It is often possible to make something safer, but safe is usually out of the question”

3. “We must learn to think hard” and please question the obvious.

And finally:

“If Head and Gut still don’t match up, swallow hard and go with Head”.

Never be afraid of pushing employees, managers and your c-suite to explain, to investigate deeper, to question – even if you agree with them, to test their conviction in their information, because ultimately you make the decisions and those can only be better made if information and data given is provided needle sharp.

Being part of the crowd is just part of being human, but just make sure it is a crowd you (not your or their sub-conscious) want to be part of.

Stay safe.