Risk and Other Four-Letter Words

Wriston, Walter B.


The men and women who founded our country were at once adventurers who took personal risks of the most extreme kind and pragmatists who wrote a Constitution based on the tested theory that men are not gods. No assumptions were made that elected leaders would all be selfless persons devoted to the public interest. Rather, the rock upon which our structure rests is a Constitution that diffuses power, lest one person or group grow too powerful. Alexander Hamilton put it succinctly when he said, "If men were angels no government would be necessary." The system they devised based on this assumption about human nature has stood the test of time. Our government has proved to be one of the most enduring in history.

While the constitutional framework set limits on power, the driving force of our society is the conviction that risk-taking and individual responsibility are the ways to advance our mutual fortunes. Our Founding Fathers were themselves political adventurers and fighters who did not hesitate to sign a document pledging "our Lives, our Fortunes, and our sacred Honor" in pursuit of a brighter future against overwhelming odds. They would have been more than a little surprised to learn that what they were really fighting for was a totally predictable, risk-free society.

Today, however, the idea is abroad in the land that the descendants of these bold adventurers should all be sheltered from risk and uncertainty as part of our natural heritage. We seem to have raised a generation of advocates, writers, and bureaucrats to whom the word "risk" is an acceptable term only when used in connection with promoting a state lottery. Emerson's counsel, "Always do what you are afraid to do," is now rejected as too upsetting, and one should steer the safe non-controversial course. One has only to look at the gray stagnation of planned societies where this idea is far advanced to wonder how such a system can continue to attract so much intellectual support. But it does.

It can be argued that if the desire to avoid risk above all else becomes the predominant objective of American society, it may in the end destroy not only our economic system but our form of government along with it. At bottom, democracy itself rests on an act of faith, on a belief in individual responsibility and the superiority of the free marketplace, both intellectual and economic, over anything that might be devised for us by a committee of bureaucrats disguised as guardian angels. There is real reason to fear that those who do not share that faith, in their efforts to build a risk-free society, have in fact not only drained the spirit of our people but have already seriously impaired the viability of the most productive economic system that the world has ever seen.

This is a relatively new problem for Americans. The whole of this country was opened up by people who were--no less than the Founding Fathers-- at one adventurers and patriots. My own grandmother, in company with hundreds more, went West in a Conestoga wagon which by today's standards was unsafe at any speed. The environmental problems were enormous. They used buffalo dung to fuel their campfires. Half of the wagon train in which my grandmother traveled was massacred by Indians. But many more followed in their tracks along trails which today no government agency at a city, state, or federal level would think of certifying as safe for travelers. In fact, the pioneers would probably not even be allowed to settle down at the end of their journey. The sparkling exciting city of San Francisco was built and rebuilt on a set of hills that would test the footing of a mountain goat. And if that is not bad enough, it lies along the San Andreas earthquake fault which has already destroyed it once. No modern urban planner could possibly approve the building of San Francisco today. The risk would be said to be too great.

The unremitting atmosphere of protective custody which now seems to surround us is producing a new kind of national mood. The American spirit of optimism and enterprise is being overwhelmed by a malaise perhaps best described by the English journalist, Henry Fairlie, when he wrote, "If the American people for the first time no longer believe that life will be better for their children, it is at least in part because they are beginning to think that there will be no food which their children will be able to eat without dying like rats of cancer, no form of transport that will be considered safe enough to get them from here to there, and in fact nothing that their children may safely do except sit like Narcissus by a river bank and gaze at their wan and delicate forms as they throw the last speck of Granola to the fish."

This is a far cry from the spirit of enterprise that turned a raw continent into a great nation. Of course, there have always been those among us who bewail all forms of risk: political, economic, or personal. They are the ones who have never understood the Biblical injunction, "For whosoever will save his life shall lose it." But such people of little faith did not always have a nationwide, instant forum for their timid views nor the power to enforce them upon others. When the great English constitutional scholar, Lord Bryce, uttered his judgment that the American "Constitution is all sail and no anchor," his verdict was not proclaimed electronically around the world. In fact, it passed almost unnoticed. There was no clamor for a new Constitutional convention to remedy our disastrous mistake, so clearly identified by an "expert." Today, however, we all live in Marshall McLuhan's "global village," and Chicken Little runs through the square twice a day.

In times past, ideas spread by pamphleteer and later on in books and by the press. Great centers of learning grew up which refined and nurtured ideas and passed them on from one generation to another. This same function was also performed by the churches. Today, a pop phrase rooted in some private discontent, some transient desire to transfer responsibility for one's own actions to somebody else, or some simple-minded panacea for complex problems is echoed and re-echoed throughout the land in a matter of minutes on the 6 o'clock news.

The signs carried by a hundred protesters on the site of a nuclear plant may be seen instantly by 50 million Americans in living color. Contrast the impact of this with the great draft riots in New York in 1863 where mobs ranged over the city for four days and four nights, looting and burning. It was only on the fifth day that 6,000 federal troops poured into the city and order was restored. Most Americans living at that time never heard of the incident. One of the so-called "volunteer special" policemen who was involved in the riot said, "No adequate account of the draft riot of 1863 has ever been printed."

Today cameras zoom in on the face of the man struck by the rock or the policeman's club. I do not argue here that this is bad, far from it. But I have to observe that, for the first time in the history of Man, our life with all the flaws inherent in human nature, all the breakdowns in technology, and all of our social foibles is communicated instantly to the world. Things will inevitably go wrong, because men still are not gods. But because all the failures, the mistakes, and the accidents intrude upon our consciousness in an almost unbroken stream, the clamor grows for a fail-safe society.

This growing thirst for an impossible physical and economic security has a direct bearing on whether or not we will maintain our spiritual and political freedom. The relevance of risk to liberty is direct and clear. For in the end, it always turns out that the only way to avoid risk is to leap into the arms of an all-knowing government. George Gilder put it best when he wrote:

"Strangely enough, the man who sees a future blighted by coercion and scarcity also tends to believe that the present can be made as free of risk and uncertainty as the past, receding reassuringly in the reliable lenses of hindsight. He calls upon government to create an orderly and predictable economy with known energy reserves always equaling prospective needs; with jobs always assured in current geographic and demographic patterns; with monetary demand always expanding to absorb expected output of current corporate goods; with disorderly foreign intruders banished from the marketplace or burdened by tariffs and quotas; with invention and creativity summoned by the bureaucrats for forced marches of research and development; with inflation insurance in every contract and unemployment insurance in every job; with all windfall wealth briskly taxed away and unseemly poverty removed by income guarantees. In this view, risk and uncertainty are seen to be the problem and government the solution in the fail-safe quest for a managed economy of steady and predictable long-term growth."

If you carry this logic to its bitter end, it all gets reduced to the motto under the pictures of Mussolini which plastered Italy at the height of his power. It said, "He Will Decide." The responsibility no longer belonged to the individual. The leader would decide. The pattern is always the same. A bureaucracy is put in place to coerce the people into doing something for "their own good." The bureaucracy then assumes a life of its own, and the coercion continues as the bureaucracy's primary task, long after the original purpose has been forgotten. The Securities and Exchange Commission was created in response to a felt need to protect the investor against fraud. It was a worthy objective, but little by little its role has expanded until now it's attempting to dictate everything from how aboard of directors should govern a company to how lawyers should exercise their professional judgment. The ultimate in what now seems to be the trend in corporate governance, incidentally, was achieved by the City Bank as long ago as 1844, when we had nine employees, but 15 directors who assisted in the day-to-day operations. If we are obliged to revive that ratio, we are going to end up with 83,000 new directors.

Our American economic system, like our political system, is untidy--it offends those people who love tidy, predictable societies. We make a lot of mistakes in this country, we have a lot of failures. Some people see only the failures; they cannot seem to grasp the fact that the failures are the price we pay for the successes. It's as though they wanted to have "up" without "down" or "hot" without "cold."

We read in our newspapers, and even in our business magazines, solemn words about "risky investments" and "risky loans" from writers who do not seem to realize that these phrases are as redundant as talking about a one-story bungalow. All investments and all loans are risky because they are all based on educated guesses about the future rather than the certain knowledge of what will happen. Despite the most sophisticated market research, no one really knows if the public will buy the product or use the service which we are about to produce. The new product might be an Edsel with a $400-million price tag, or it might be Peter Goldmark's long-playing record. It could be the decision of a Joe Wilson, risking all the resources of his small company to make a copier later called Xerox, and doing it in the face of a careful study which showed that it would be a bad substitute for the familiar carbon paper.

The odds against success of any kind in our society are formidable. Some 300,000 businesses are started each year in America and only about a third of them survive as long as five years. Proponents of a safe, stagnant, boring tomorrow view this as a wasteful process, to say nothing of its being irrational On the contrary, George Gilder has argued that:

"...such waste and irrationality is the secret of economic growth. Because no one knows which venture will succeed...a society ruled by faith and risk rather than by rational calculus, a society open to the future rather than planning it, will call forth an endless stream of innovation, enterprise, and art."

Our bookshelves today are piled high with books warning us that the pace of change has become too much for human beings to tolerate, that it is not just risk that people fear, but the future itself. We are being overwhelmed we're told by new technology. When we see what the electronic computer has done and is doing to the world, and consider that it was invented in 1946, this argument may seem plausible. But go back a hundred years to 1846 and the argument falls apart.

That was the year Brigham Young led the Mormons out of Illinois on the way to Utah--and coincidentally the year that saw the invention of the sewing machine and the steel moldboard plow. Historians have called the period that began then and lasted to the outbreak of World War I, the "heroic age" of invention. From the sewing machine in 1846 to the radio vacuum tube in 1911, a major new invention appeared on the average of every 15 to 18 months, and was followed almost immediately by a new industry based on the invention. That's what the last half of the 19th century was like, but there were few voices then calling, "Stop the world, I want to get off."

There were a few, of course. Not long after Lee DeForest invented the vacuum tube amplifier, he was arrested for stock fraud. He'd been going around saying that his service would be able to transmit the human voice across the Atlantic. At his trial, the prosecuting attorney said: "Based on his absurd and deliberately misleading statement, the public, your Honor, has been persuaded to purchase stock in his company."

The jury acquitted DeForest, but the judge admonished him to forget his crackpot inventions and go "get a common, garden-type job and stick to it."

If Deforest were inventing his gadget today, and he could convince people it worked, he might still be in trouble. Before he could go into production, there would probably be a long delay while committees were formed to study the environmental impact of bouncing radio waves off the ionosphere.

The people who insist on seeing only the failures have still another debilitating affect on our society: they frequently manage to make us feel guilty even about our successes.

Malaria, for thousands of years the number one killer of human beings, was finally brought under control after World War II by DDT. But instead of hearing about the tens of millions of human lives that have been saved over the past 30 years, we are told about the damage to our natural environment. Concern for the environment is obviously justified, but the highly publicized demonstrations, complete with rock stars and movie actresses, would have us believe that Man, and particularly his technology, is single-handedly polluting what would otherwise be a pure and benign Nature, something like Disneyland on a nice day in September. Michael Novack recently reminded us that this just is not so. He wrote:

"Nature was raw and cruel to nature long before human beings intervened. It may be doubted whether human beings have ever done one-tenth of the polluting to nature that nature has done to itself. There is infinitely more methane gas--poisonous in one respect, and damaging to the environment--generated by the swamps of Florida and other parts of the United States than by all the automobile pollution of all the places on this planet. In our superhuman efforts to be nice and feel guilty, we sometimes try to take all the credit for pollution improperly."

Be nice, feel guilty, and play safe. If there was ever a prescription for producing a dismal future, that has to be it. It is a sure prescription for the demise of our way of life.

It is almost impossible to exaggerate the importance to the general welfare of the willingness of individuals to take a personal risk. The worst thing that can happen to a society, as to an individual, is to become terrified of uncertainty. Uncertainty is an invitation to innovate, to create; uncertainty is the blank page in the author's typewriter, the granite block before a sculptor, the capital in the hands of an investor, or the problem challenging the inventive mind of a scientist or an engineer. In short, uncertainty is the opportunity to make the world a better place. Despite this, everything in our natural life today seems designed to encourage our natural caution, urging us to play it safe, to invent a risk-free system and give up being tough-minded. The tax structure discourages the innovators, penalizes the successful, and preserves the inefficient. Even many medicines in common use around the world to prevent human suffering are denied to Americans on the slender grounds that an overdosed mouse has contracted a tumor. This is not prudence. Prudence is one of the intellectual virtues, and there is very little intelligence to be found in all this. It is institutionalized timidity, and I submit that it does not represent the will of the vast majority of the American people.

If we observe the world around us, Americans as individuals seek out risk. Every child who plays football, or hockey, or any other contact sport, risks injury. There is no shortage of test pilots for new aircraft, nor candidates for any of the other hazardous jobs in our society, including the job of President of the United States. If we perceive that life is too easy, we put sand traps and other obstacles on the golf course and create artificial hazards where none exist. In short, risk is a necessary part of life and one which belongs on our list of natural rights.

Let those who seek a perpetual safe harbor continue to do so. Let them renounce risk for themselves, if they choose. What no one has a right to do is renounce it for all the rest of us, or to pursue the chimerical goal of a risk-free society for some by eliminating the rewards of risk for everyone.

The society which promises no risks and whose leaders use the word "risk" only as a pejorative may be able to protect life, but there will be no liberty, and very little pursuit of happiness. You will look in vain in the , the Declaration of Independence, or the Constitution for promises of a safe, easy, risk-free life. Indeed, when Woodrow Wilson called for "a world safe for democracy," it was left to Gilbert Chesterton to put that sentiment in perspective. "Impossible," he said, "democracy is a dangerous trade."

  • This document was created from the speech, "Risk and Other Four-Letter Words," written by Walter B. Wriston for the Economic Club of Chicago on 25 October 1979. The original speech is located in MS134.001.004.00004.
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