Risky Business 2
Risk is life. Every living organism has to take risks. That mound of grass out there sure looks appetizing, but what if there’s a tiger crouching on the other side? If I stop grazing because I am afraid tigers will get me, I will starve to death in a few days, but if I am killed by a tiger, I am dead in the next ten minutes.
Life is always a roll of the dice.
But systems of risk are relatively new. Imagine if the deer and the tigers came to an agreement: we will select two or three of our clan every day for you to eat and in return, you promise not to spring at us from every corner.
This way, the tiger gets her supper while the deer get to plan their lives until the moment they are the meal. Not the ideal situation for the deer, for they would prefer not to be eaten at all, but it’s more predictable and less stressful until the day flesh meets claw. And it’s a great deal for the tigers, who don’t have to hunt any more. It’s an unequal system but one that offers some advantages to both parties.
The modern world is full of such risk mitigation agreements, institutions, technologies etc.
But the story of risk doesn’t end there, for risk never goes away. Efforts to reduce risk at one level may bring it back in catastrophic form at another level. Now that deer can plan their lives, they start having more kids. Everyone’s happy for a bit. The deer are happier because they can have a carefree time with their children until they’re dinner and the tigers are happier because there are more deer to eat. They too start having more children.
The more tigers there are, the more deer they eat. Of course the deer resent the tigers’ easy life backed by deer bodies. Why should we keep sending ourselves for slaughter when the tigers give us nothing in return? Why participate in this one sided market?
The deer go on strike. No more fresh meat deliveries they say. The tigers aren’t happy but being the generous killers they are, the cat council gives the deer a week to come to their senses. But the victims love their newly found freedoms. The deer authority adopts “we are winners, not your dinners!” as its official slogan.
The tigers aren’t going to stand for such an insult! They attack the deer en masse one evening. Unfortunately, the tigers have forgotten their hunting skills. The deer avoid their predators with ease. Not just that first time, but every subsequent occasion as well.
End result: The tigers starve to death.
With nothing left to check deer population growth, the deer eat all the grass in forest. With nothing left to graze, they too starve to death.
A roving band of hyenas notices the profusion of deer and muscles into the tiger’s territory. The deer aren’t as quick on their feet as they used to be. The hyena gorge themselves on deer meat for a month before moving on. The deer population never recovers. With no meat left to eat, the tigers….starve to death, of course.
Moral of the story: those who can ride out a storm might find themselves blown away by a hurricane.
A risk management system can make our lives easier by smoothing out small bumps, but leave us defenseless against large variations. Which would be fine as long as the large variations are exceedingly rare, but what if the risk management system increases the probability of large variations? Like how the plentiful deer attract hyenas, or how globalized commerce and travel increases the probability of pandemics.
That would be an unintended consequence wouldn’t it?
There’s a vast literature on risk, from fields as disparate as philosophy and chemistry. No doubt we need to consult those texts, but we might also want to glance at risky literature, i.e., not literature about risk (often written by scholars who have never risked a thing in their lives) but literature that’s a form of risk taking in itself.
The most famous collection of risky literature is the 1001 nights, with the storyteller facing the knife every sunset, but there’s also the Pancatantra and its Arabic translation - the tales of Kalilah and Dimnah. I just learned the writer/translator of Kalilah and Dimnah - Ibn al-Muqaffaʿ - was employed by the first Abbasid Caliph’s uncle and executed by the second Abbasid Caliph for writing lines that criticized him.
He who lives by the pen dies by the sword. The martyr of Basra is one of the patron saints of risk, but he was writing before the stock market and the insurance policy. Premodern literature was typically a hero’s journey, a story about an extraordinary individual. Only they had the capacity for risk taking. The modern system isn’t just about the commodification of labor and material goods. It’s also about the commodification of risk - the stock market and health insurance has made risk takers of us all.