Free Yourself from Fears (20 page)

You cannot plan for every contingency. There is usually only one way for things to go right, but an infinite number of ways for them to go wrong, just as there are more ways for a room to be untidy than tidy. Plan for important contingencies, where there is a greater than usual risk, or where the risk may not be great, but the consequences would be devastating.

The seventh law of safety:

Have a contingency plan.

There are three ways to prepare for eventualities: J
Prepare a plan
. Sometimes this is enough. What will I do if the deal falls apart? What will I do if I don’t get the job?

J
Mentally rehearse
. Decide what you will do in advance and imagine doing it in detail. This technique is crucially different to worrying.

Worrying is thinking “What if this happens?” and then agonizing over that imagined scenario. Mental rehearsal is about action and prepares you for the worst.

J
Physically rehearse what you will do
. This is important when what you are doing involves physical skill, for example horse riding or martial arts.

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HOW WE ASSESS SAFETY AND RISK

Risk

A ship in harbor is safe—but that's not what a ship was built for.

Contingency planning brings us to the idea of risk. Risk is the possibility that something dangerous will happen. When we are at risk we are afraid, and we can manage our fears by managing risk. Risk management maximizes the areas where we have some control over the outcome and minimizes those where we have no control.

There are four elements in risk

J
Our resources
. What do we have to lose?

J
The probability
. How big a probability is there of winning or losing?

J
The stake
. What is at stake? What do we stand to lose or gain?

J
Our values
. What is important to us? How much do we value a win? How important is the loss?

Our resources influence the risks we take. A rich man might risk $1,000

on a spin of the roulette wheel. The odds against him winning are large, but if he does win, he wins the jackpot. The highest probability is that he will lose his stake. Does he care? Not if he can afford to lose $1,000

and he probably only wants to play for high stakes. He has to take a bigger risk of losing if he wants the chance to make a lot of money. This is how a rational rich man might behave, but he may have his own agenda.

He may gamble just for the thrill of it. He may be greedy for more money, even in (to him) small amounts. He may be testing his gambling method and so on. So we cannot talk about risk in the abstract, there has to be a risk taker, with their own values, beliefs, and motivations.

Risk aversion

We say that people are risk averse, but more accurately they are
loss
averse. Loss is painful. The possibility of loss is what adds danger to risk and this makes us afraid, so we are willing to pay for peace of mind, even when mathematically the odds are against us. For example, we pay our insurance premiums because we prefer to have 157

FREE YOURSELF FROM FEARS

the certainty of a small loss (the premiums) to avert the (small) possibility of a large loss (injury, fire, robbery, flood, etc.).

We do not act rationally about risk. We see the risk of loss more strongly. Loss is behind all fear. We hate to lose. Consider this experiment, published by Kahneman and Tversky in 1984.

They proposed that a rare disease has broken out in the community and it is expected to kill 600 people. There are two possible plans to deal with the threat:

J Plan A—200 people will definitely be saved.

J Plan B—there is a 33% probability that everyone will be saved and a 67% probability that no one will be saved.

Which would you choose? Choose one plan before reading on.

Rationally Plan A has to be better and 72% of people they asked chose this option.

Now they posed the problem differently: the same disease, with two new programs:

J Plan C—400 people will definitely die.

J Plan D—a 33% chance that no one will die.

Now 78% of the same respondents went for Plan D. They could not take the loss of 400 lives. I wonder if the figures would be different if they were told that they were part of the community, rather than an outside observer.

Rationally, of course, the two problems are identical. This experiment makes it clear that our decisions are influenced by the way they are posed—whether the loss or the gain is in the foreground.

Advertising, opinion polls, and referendums use this principle.

Costs and losses are the same in accounting terms, but we tend to value them differently. We may tolerate something if we see it as a cost, but not if we see it as a loss.

One professor of finance has a good strategy to help him deal with small losses. At the beginning of every year, he sets aside a gen-158

HOW WE ASSESS SAFETY AND RISK

erous donation to his favorite charity. Whenever anything bad happens during the year—he loses money or has to pay a fine, for example—he charges it to his charity account. Then he feels better because he has not lost it, the charity has. At the end of the year, the charity gets what is left over, The perfect, self-interested philanthropy strategy!

We also tend to pay more attention to dramatic and unusual events than to routine events. We remember them and they sway our decisions and our choices in taking risks.

There is a good joke that nicely illustrates this. Three heads of state are talking together at a United Nations reception. One is the head of a powerful and aggressive state, the second is his ally, and the third is neutral.

Powerful is talking about his invasion plans for a small country.

He says to Neutral, “We are send in our troops next week. We will kill about 2,000 peasants and three chiropodists.”

“Neutral replies, ‘What! Why on earth are you going to kill three chiropodists?’”

Powerful turns to his ally and says, “See, I told you no one would care about the peasants.”

Ambiguity aversion

In practice, we evaluate risk every day based on the probability of loss and the seriousness of the consequences. We put the two factors together and come to a decision based on what we perceive to be at stake. The more uncertainty, the more risk. The more risk, the more possibility of loss. Also, we usually tolerate familiar risks over strange ones, so we may judge something a bigger risk if we are unfamiliar with the situation. This is known as “ambiguity aversion.”

So a working definition of risk is:

Risk = the perceived danger of loss, evaluated from: J The perceived probability of loss.

J The value of the possible gain.

J The seriousness of the loss.

J How familiar the situation is.

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Here is an example to illustrate. A few weeks ago, I was a guest at a wedding that was held on a country farm. There were wonderful walks all around and a small river went through the land. A group of us walked down to the river through some shady paths that hid hundreds of multicolored butterflies that flickered through the trees like small flames, until we came to a place where we could bathe in the river. The sun was shining and the river was clear, no more than waist high but very cold. A little way upstream there was a small waterfall where some large rocks blocked the flow of the current and a tree had fallen across the stream. The rocks and branches formed natural rapids. Further upstream the water was calm again. It was the perfect adventure playground for adults.

A group of us went into the water and clambered over the rocks that were blocking the stream. They were slippery and mostly over-grown with moss; many were sharp, especially under the water. The fallen tree provided some handholds, but it also contained a number of suspicious-looking spiders. Disturbing Brazilian spiders is not a good idea, since they can give you a nasty bite.

I moved through the rocks, jumping from one to the other, taking care and judging what was possible, until I reached a comfortable one in midstream. The sun was high by this time, I was hot, and I had forgotten to put on sun lotion. I saw a rock in the shade over to the side of the river and decided to try to get there. It meant a jump; there was no other way. I gauged the distance and thought I could probably make it, but the stones were slippery and if I did not make it cleanly first time, I risked falling into the rocky water, cutting and bruising myself badly, and at worst breaking a limb. I estimated that the probability of failure was about 30%, and I gave a high figure (say 70%) to the seriousness of the consequences. I did not jump in the end, because it was not very important to me to get to that rock, there was plenty of easier shade to use, and I did not want to spend my holiday in hospital.

Andrea was following me across the waterfall and I went back to help her. She crossed and after sunning ourselves a little we went back, carefully avoiding disturbing the spiders.

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HOW WE ASSESS SAFETY AND RISK

Talking with her afterward about her experience of climbing through the rapids to the rock where I was, she thought that her probability of failure without help was 60% and the consequences of failing were the same as mine—bruises and possible broken limbs (70%).

She saw a higher risk than me and she did not want to do it without help. Help reduced the probability of failing and also reduced considerably the seriousness of the consequences, so it made it a reasonable risk and she went ahead because it was important to her.

Risk is a subjective concept. Everyone has to decide the probability of loss for themselves and also give a figure to the seriousness of the consequences. It depends how the risk is made up. If the consequences are very serious, then you may not take the risk even if you are reasonably sure of succeeding. You would only take the risk if the probability of failure were zero. (This is a special case because there is then zero risk.) On the other hand, if the consequences are not at all serious, then you may take the risk even if you think you have very little chance of success; after all, you have nothing much to lose.

Risk does not come down to cold-blooded, mathematical probabilities. You assign the values, and you will suffer the consequences; risk has an emotional value as well as a mathematical one.

Your values do not change, so to reduce a risk you must either reduce the seriousness of the consequences (in my example the seriousness would have been less if I had been wearing protective clothing) or increase the probability of success. The value can sway the balance. Someone may risk high consequences with little chance of success if it is very important. Andrea did negotiate the rapids.

The risk may be high, but if the motivation is high, we will take the risk anyway.

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Skill for freedom

Checklist for risk

You want a change and this means taking a risk.You can evaluate the risk with this checklist.

1 What is your estimate of the probability of your failing to get what you want?

2 What is your assessment of the consequences of failure?

3 What is important to you about the possible gain or loss?

4 How can you decrease the risk by:

J Decreasing the seriousness of the consequences of failure?

J Getting a higher probability of success?

5 What resources do you need that will give you a higher probability of success?

6 Can you trust these resources?

7 What reference experiences have you had in the past that give you confidence in these qualities?

8 How important is the change you want to make?

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Acting on Fear:

When to Heed the Warning

HOW DO YOU KNOW WHEN TO ACT ON YOUR FEAR?

Sometimes it is obvious. There is immediate, physical danger to yourself or your loved ones. You get the full biochemical jolt and you are ready for action—fight or flight. For example, someone jumps out at you in the dark, or a crazy driver pulls in front of you on the motor-way. You do not have time to think or agonize over what to do; you react quickly and often surprisingly calmly, considering the hormonal ferment in your body, although you may shake with fear afterward.

Because authentic fear normally makes you react without thinking, there is a danger that you will do the wrong thing—if you have learned the wrong thing. For example, I once lost control of my car on a wet road and started to skid. I had never been in a skid before, so I tried to compensate by turning the car in the opposite direction to the skid.

This seems the obvious, commonsense thing to do. The car goes one way, turn the wheel the other way. Of course, this is the wrong thing to do. It makes the skid worse, and now I know this from personal experience. The car finished upside down in the middle of the road. I was unhurt and crawled out of the broken rear window. I knew in theory what to do: turn into the skid. I even thought of that when I was skidding, but my hands just would not do it. I did not believe it at the crucial time. If I had practiced getting out of a skid, even once before, I am sure I would have done the right thing. Sometimes it is not enough to
know
what to do in theory, you have to practice it, if not physically, then mentally.

FREE YOURSELF FROM FEARS

Warning signals

Most of the time, however, situations are ambiguous. Sometimes you should be afraid, but do not notice the warning signs. Here is an example from my experience.

I have spent a lot of time in Rio de Janeiro, one of the most beautiful cities on the planet, perched on the Atlantic coast of Brazil and blessed with some of the world’s best beaches. Rio is a tourist mag-net, set as it is on the slopes of purple mountains that drop down toward the Atlantic. Flying into the international airport you see a view that you will never forget.

Rio has unparalleled nightlife, wonderful restaurants, and a hedo-nistic culture that pursues pleasure with enthusiasm. Christo Redentor, the huge granite statue of Christ, looks down on its inhab-itants from the peak of Corcovado with his arms open and accepting.