Risk Tolerance and Culture

This is an interesting study on cultural differences in risk tolerance.

The Cultures of Risk Tolerance

Abstract: This study explores the links between culture and risk tolerance, based on surveys conducted in 23 countries. Altogether, more than 4,000 individuals participated in the surveys. Risk tolerance is associated with culture. Risk tolerance is relatively low in countries where uncertainty avoidance is relatively high and in countries which are relatively individualistic. Risk tolerance is also relatively low in countries which are relatively egalitarian and harmonious. And risk tolerance is relatively high in countries where trust is relatively high. Culture is also associated with risk tolerance indirectly, through the association between culture and income-per-capita. People in countries with relatively high income-per-capita tend to be relatively individualistic, egalitarian, and trusting. Risk tolerance is relatively high in countries with relatively low income-per-capita.

Posted on September 14, 2011 at 2:02 PM • 13 Comments

Comments

Henning MakholmSeptember 14, 2011 2:53 PM

"Risk tolerance is relatively low ... in countries which are relatively individualistic. Risk tolerance is also relatively low in countries which are relatively egalitarian and harmonious."

Um, are people then more risk tolerant in countries that follow a middle road between egalitarianism and individualism, or what? Sounds like something has been miscounternegated.

Rob SheinSeptember 14, 2011 3:01 PM

"Risk tolerance is relatively low in countries where uncertainty avoidance is relatively high..."

To me, this is an error in implied causation; I believe it would be the other way around. I would think that a low tolerance for risk would lead to attempts to classify and control more forms of it, which in turn invariably results in uncertainty avoidance...the more fuzzy things are, the harder it is to quantify and control risk, after all.

John CampbellSeptember 14, 2011 3:51 PM

Risk tolerance is, I suspect, mostly dependant upon how well failure is accepted... enough punishment will cause the culture to withdraw from risk.

So...

In our current security-conscious culture (a culture being defined by "consensual memes", I guess) trying to join the mile-high club can get your airliner escorted by F-16s. (All right, so I'm doinking with the basic story-line.)

Mind you, a litigious culture is going to be risk averse.

Look at NASA.

"Leadership maximizes Gains, Management minimizes Losses"... so Leadership is only really possible in a risk-tolerant culture.

Petréa MitchellSeptember 14, 2011 4:18 PM

The finding about risk tolerance and individualism is certainly food for thought for someone who's grown up in a country that believes extreme indivudualism leads to people taking more dynamic, bold actions.

Peter E RetepSeptember 14, 2011 10:03 PM

Aside from the following confusions, the study does make great strides towards its intended objective and promises a decisioning structure of some real utility, especially if callibrated to cross cultural contexts necessary to a nation of immigrants and their descendants from many societies. I offer these to assist in future clarifications.

1 - Between "Social construct" and "Psychological construct" is more than a narcissistic "distinction without a difference". The whole field of PTSD recovery dynamics requires appreciating this difference. Perception itself is one of the processes that can be re-enforced by a self-conditioning loop, independanty of, or in concert with, socially offered and socially shared perceptual elements and weights.

2 - Certain subjective measures can beand are both experimentally and emprically valid, such as, "Are you hungry?" and "Did you sleep enough to be alert?' Other measures are very subject to suggestion, and all are subject to modification. Confusing these with what are subjective opinion statements fogs the issues. Similarly, biases [what subjects fill in the blanks with] are different from the qualifying assumptions [decisions researchers use to frame events].

3 - The Pinto example inherited concerns from another car model, which did on occasion ignite when a crash was sufficent to bend the frame, trapping those in the car, and which was comicly dramatized in a then very popular movie about a rock musician and cold war.

The meme of a mini-car exploding was one that then infected public perception of the Pinto. The added considerable weight of a political movement [Nader's Raiders], mass media, trial reports, and a movie registering a climactic moment of peak emotional release with a demonstration of the meme factoid [which could cause the audience to say "I saw it"] greatly adjusted and amplified the vast general public's risk perception at a time of competitive first car purchasing.

I very much hope the study's efforts will continue with these clarifications in mind, and produce practical, applicable results.

Peter E RetepSeptember 14, 2011 10:42 PM

The pervious was my response to Jenkins' the Psychological Nature of Risk, but it didn't get posted to the HSAJ.
Parts of it apply as concepts equally to cross cultural consideration studies.

paulSeptember 15, 2011 9:44 AM

So it seems to follow that countries that are relatively egalitarian and harmonious are ones where people don't trust one another?

Clive RobinsonSeptember 15, 2011 10:48 AM

@ John Campbell,

"Leadership maximizes Gains, Managemen minimizes Losses"

Is incomplete you left out the bit about Leadership can also "maximize loss".

What most people do not realise is in many cases leadership is a con game based on partial knowledge at best. The results can be good or bad as you would expect with any roll of the dice.

AppSecSeptember 15, 2011 11:02 AM

@Clive

I think John Campbell is referring to goals of the role, not unintended consequences. Otherwise you can say that Management can also minimize gains by attempting to minimize losses.

Peter E RetepSeptember 15, 2011 9:12 PM

@ clive
If integrity is a shared social construct,

then the leader is not rolling his dice.


"Not believing people, but only evidence,

makes people more limited in function,"

observed a Euro aristocrat this week,
when a bureaucrat mis-functioned
because something unusual was ipso facto incredible.

DanielSeptember 15, 2011 11:00 PM

@Peter.

The problem is that so often human beings believe in people without any evidence whatsoever or on the flimsiest of evidence. The old saying, "Trust, but verify." springs to mind. To me the words you quoted come across as ass covering for the latest "rogue trader" debacle.

I agree that turning human beings into nothing but functions diminishes the human experience. At the same time, that sentiment is easily abused...has been abused.

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