The Cost of Risk Aversion
Jason George uses the evolution of the aviation industry as a means to explore the cost of risk aversion and how it can stymie growth.
Building in every possible contingency as part of a strategy can end up producing something so encrusted with extraneous elements that agility is compromised. Alternatively, it may hew so closely to known and safe paths that it ends up losing the novelty that would make it compelling. If you can’t cut yourself loose from a certain strategy or mental model, your degrees of freedom become limited. In the process new paths are closed off, even though they might unlock a different way of operating. Sometimes caution is a crutch whose real costs are not adequately calculated. A better path might involve getting rid of the safety net.
When faced with ambiguity too often we choose the guaranteed loss, which might be greater than the as-yet unknown costs of taking the riskier path. The safe route may be comfortable, but it is costly.
Points explored include:
- Contingency as part of a strategy
- Product cannibalization
- The cost of the safe route
Read the full article, Calculated Risks and the Costly Status Quo, on Jason’s website.