Trapped in the “zero-risk” society and how to break free

6 Pages Posted: 1 Sep 2020 Last revised: 14 Sep 2020

See all articles by Didier Sornette

Didier Sornette

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute; Southern University of Science and Technology; Tokyo Institute of Technology

Peter Cauwels

ETH Zürich; Director Quaerens CommV

Date Written: September 1, 2020

Abstract

We live in a ‘zero-risk society’, characterized by a culture that is obsessed with controlling and removing any possible risks. Obviously, one of the fundamental objectives of any civilization is to improve the safety and security of its citizens. However, we should not let the cozy comfort that comes with this progress let us fall into a doze. Human societies are intrinsically out-of-equilibrium, constantly exposed to endogenous and exogenous shocks, extreme events that may be known unknowns but even unknown unknowns. This may sound like a paradox, but, bold risk-taking is an essential ingredient of any resilient society. It is the only way to prepare for the totality of growing challenges that we are facing today. Unfortunately, the past decades have been characterized by technological stagnation, principally in discoveries and inventions, and more recently also in innovations, and by social, cultural, intellectual and institutional exhaustion. The authors attribute this to five deeper causes: (i) risk aversion as a consequence of increasing wealth and aging; (ii) increasing inequality with a growing proportion of citizens that have no or less access to opportunity; (iii) technology creating an ‘illusion of control’; (iv) herding and imitation through social media and (v) management shaped by extremes and overreaction. The only way out of this trap is to promote a culture in education where failure is seen as part of the learning process, and aggressively fund explorative, high-risk projects, encourage playful, creative, even apparently useless tinkering. Finally, incentives and rewards should promote risk-takers, explorers and creative inventors in the same way as it does with social media influencers and Hollywood or sports stars. Our analyses call for massive creations of DARPA-like institutions and bold super Apollo-like projects to break free of the zerorisk = dying societies.

Keywords: risks, uncertainty, unknowns, dragon-kings, extremes, out-of-equilibrium, risk-taking, innovation, invention, discovery

JEL Classification: D81, G32, H50, I20, I30, O30

Suggested Citation

Sornette, Didier and Cauwels, Peter, Trapped in the “zero-risk” society and how to break free (September 1, 2020). Swiss Finance Institute Research Paper No. 20-78, Available at SSRN: https://ssrn.com/abstract=3684550 or http://dx.doi.org/10.2139/ssrn.3684550

Didier Sornette (Contact Author)

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Southern University of Science and Technology

1088 Xueyuan Avenue
Shenzhen, Guangdong 518055
China

Tokyo Institute of Technology

2-12-1 O-okayama, Meguro-ku
Tokyo 152-8550, 52-8552
Japan

Peter Cauwels

ETH Zürich

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Director Quaerens CommV ( email )

Bruges
Belgium

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