Tag: risk

The Custer Bias

In June of 1876, a regiment from the 7th Cavalry of the United States was in a conundrum.

Scouts had found a large encampment of Native Americans along the Little Bighorn River in the Montana Territory. This tribal encampment violated laws confining Native Americans to reservations. And the 7th Cavalry’s mission was to force them to comply.

Relations between native tribes and United States Army installments in the region were not good. Several skirmishes had broken out between the two already, and the 7th Cavalry had every reason to believe this encampment would be hostile to their demands.

And so, the regiment’s leader – Lieutenant Colonel George Custer – charted an attack. The Cavalry would be split into three brigades, encircling the encampment. The troops would trap the natives into compliance.

It was a bold strategy, but also a risky one. Custer had no idea how many warriors might be among the tribe, and how those ranks compared with his own. He also knew far less about the terrain his regiment was on than the natives.

By pressing ahead, Custer was taking a chance. And anyone who’s taken an American History class knows the rest.

The first brigade got bogged down by Lakota Sioux and Chayanne warriors just as Custer’s brigade was trying to flank the encampment. Native warriors spotted Custer’s men and attacked them with superior numbers.

The brigade had nowhere to retreat to, and not enough firepower to press on. It was systematically cut down. Every member of its five companies – including Custer – were killed.

The Battle of Little Bighorn was effectively over. But the legend of Custer’s folly was just beginning.

For generations, Americans would hear of Custer’s Last Stand. It was the ultimate cautionary tale of risk gone wrong.

Why would Lieutenant Colonel George Custer attempt such a bold maneuver? Why would he so unabashedly put the lives of his men in danger?

Military historians have been trying to answer this question for decades. For Custer wasn’t exactly a novice when he reported to the Montana Territory. He was an accomplished military leader who had led Union Army brigades in the American Civil War.

The volunteers under Custer had repelled Confederate forces at just about every turn, including the Battle of Gettysburg in July 1863. He knew what he was doing.

Or did he?

You see, at Gettysburg, Custer’s volunteers faced off with a Confederate cavalry force twice their size. Custer’s brigade was somewhat detached from the heart of the Union Army, and the Confederate cavalry caught him by surprise.

Undeterred, Custer led counterattack after counterattack with his own cavalry. The vicious fighting stalled the Confederate brigades, effectively preventing them from rendezvousing with other columns of fighters.

Once the cannon fire of the main battle could be heard in the distance, the Confederate cavalry retreated. Custer had won.

Custer had taken a massive risk exposing his cavalry so extensively. The chances of them getting overrun were as good as them prevailing.

It was effectively a coin flip. But the coin came up in Custer’s favor. The risk paid off

This certainly gave Custer confidence. Confidence to assume even more risk.

That attribute was what allowed him to rise to the rank of Lieutenant Colonel, and to get posted to the Montana Territory. And it’s likely what made his daring plan at Little Bighorn seem anything but.

Live by the sword. Die by the sword.

Call it The Custer Bias.

Lieutenant Colonel George Custer met his demise nearly 150 years ago. So, why discuss his travails in such detail.

Well, I believe they’re just as prescient in this era as any other.

We are a far different country now. A global superpower, fueled by big business.

But today’s industrial leaders are just as happy taking risks as Custer was. If not more so.

This sustained boldness perhaps most notable in big tech, where companies can shift from hypergrowth to cost cutting on a dime. But it’s also present in manufacturing, thanks to the rise of just-in-time inventory processes. It’s present in retail, where large brands venture into new product lines or sales channels time and again. And it’s present in dozens of other industries.

There are many reasons why this behavior is so present among corporate leadership. Many have pointed out that investors don’t stand still. And neither do competitors.

That’s all accurate. But the biggest reason leaders lean into risk-taking? It’s The Custer Bias.

Think about it. Just about any corporate leader has already taken a risk to get where they’re at. Maybe they were an entrepreneur, who defied the odds to found the business they now helm. Or perhaps they rose through the corporate ranks, trying something bold to fuel their breakthrough.

With those bold moves in their rearview, these corporate leaders are keen on rolling the dice once more. For all the market forces out there – consumers, competitors, investors – are yearning for them to push the envelope.

Of course, it could all go sour. And if it does, they could lose everything they’ve attained.

Such an outcome would sting. But not as much as the status quo does for others.

It’s easy to idolize the maverick leaders. To deify a Steve Jobs or a Howard Shultz or a Reed Hastings.

But for each one of them, there’s someone who failed at their mission. Someone who took a risk to create a tech company, or revitalize a small coffee shop, or disrupt the entertainment industry. And someone whose risk didn’t pay off.

These failures lurk in the shadows. You can’t prove a negative, and we have little patience for tales of what could have been.

And so, we comb through the success stories. We search for patterns and commonalities – all while forgetting about the inherent randomness.

Yes, success can seem inevitable if you weed out the duds. And that delusion can make risk-seeking appear less dangerous. Safe, even.

This is undoubtedly a tragedy. Not perhaps not in the way you might think.

Those burned by a risk gone bad will surely suffer – regardless of whether it’s the first or fifteenth risk they’ve taken. But those who avoid risk will suffer even more.

For there is no safe passage for the risk averse these days. Those who play it safe will still find themselves under the direction of renegades.

They’ll find themselves reporting to dice rollers infested with The Custer Bias. In this modern era, how could they not?

Yes, it is all too possible to stay away from the fire and still get burned. But what if that such a fate wasn’t so inevitable?

It’s time to turn the tables on The Custer Bias. To be less cavalier with the risks we take. To pay more credence to the odds of chance. And to avert our eyes from the shine of favorable outcomes.

Such actions run counter to our nature. But they’re essential to our survival.

So, let’s stop following the path of Lieutenant Colonel George Custer. Our story deserves a better ending.

Risk Reduction

I sat on the snowy ground and tried to regain my bearings.

I had just fallen for the umpteenth time while trying to grab onto a T-Bar ski lift. Frustration was mounting, and I needed a minute.

So, I sat there, staring out at what lay ahead.

It was late June. Back home, it was beach weather. But here on the border of Chile and Argentina, snowy peaks surrounded an alpine lake — their wintery reflection reflected immaculately in the frigid water.

This view, this place — it was any American skier’s dream. But not mine.

You see, I had never skied before. And I hadn’t harbored a strong desire to, either.

But I’d ventured to South America for a study abroad program. And my classmates — all avid skiers — had begged me to join them on a weekend excursion to the Andes.

So, here I was, giving this new experience a go. And struggling mightily.

Getting on the lift was just one issue. Making it down the bunny slope was another. And stopping my momentum before plunging into the lake was a third.

For much of the day, I was miserable. Not only was I flustered, but I was also terrified of injuring myself.

Finally, I started to make some progress. I stayed on my skis all the way down the slope, feeling the wind rush by my face. My form was still a work in progress, but the misery was gone.

Sadly, so was my energy — and daylight.

I made my way back to the lodge to turn in my rental skis. But I pledged to give it another go when I was back in the United States.

For a while, I made good on my promise. I’d hit the slopes about once a year. Despite some misadventures, I did get better at skiing. And I found the experience of gliding down a snowy slope uniquely exhilarating.

But eventually, I stopped trekking up to the mountains.

My demurral from skiing wasn’t driven by its costs or the travel distances to the slopes — although both were significant.

The cause? Risk reduction.

My family tree is marked by community influence.

Both my parents are educators. So too were my maternal grandparents.

My paternal grandfather is a doctor. My uncle is a renowned surgeon.

If there’s one commonality among my relatives, it’s a devotion to helping others be better, safer, and healthier. And that means reducing risks.

When I was growing up, my parents would encourage me not to make the same mistake twice. And my grandfather would often share the most basic doctorly advice in the book.

If it hurts to move your leg like that, don’t move your leg like that.

I was primed to steer clear of recklessness from the start. And I’ve followed that North Star into adulthood.

These days, I make a living in the insurance technology industry. So those risk reduction edicts have only further solidified.

Now, this hasn’t turned me into a frightened recluse. I don’t spend my days assuming everything will go wrong.

But I do imagine what could go sideways. And I try to avoid that outcome as much as possible.

This ethos has underpinned many of the choices I’ve made over the years. It spurred my decision to stop eating dairy and fast food. It led me to quit drinking alcohol.

And it led me to stop skiing.

You see, I was never fully in control on skis. I took turns too wide and still struggled to stop on a dime when I got into trouble. I feared that my shaky form would lead me directly into a tree — and a broken leg.

I’d also taken up running during this time — first for exercise and eventually as a competitive endeavor. As my devotion to running deepened, the costs of a ski run gone awry started to seem as steep as a Black Diamond slope. It just wasn’t worth trying.

Now, this decision was not exactly a prevalent one in the athletic community. I know of several runners who have won distance races weeks after a ski vacation.

But for me, the potential costs were too high. Getting to the starting line healthy was paramount. Nothing that could jeopardize that mission was worth engaging in.

This line of thought constitutes Risk Reduction 101. And it’s worked as expected for me.

Or has it?

As I write this, it’s been a decade since I went skiing. And it’s been four months since I went for a run.

A high-speed crash on a snowy slope hasn’t paused my running career. But I’ve come across some significant injuries, nonetheless.

There hasn’t been a single cause for these setbacks. Some were due to overtraining. Some were due to chronic physiological issues. Some were simply due to bad luck.

But regardless, I’ve paid the price.

I’ve lost four months of an activity I love. I’ve dropped out of five races, forfeiting hundreds of dollars in the process. I’ve gone through surgery and an arduous rehab process.

If I had a skiing mishap, I’d likely have missed about the same amount of time while healing. My rehab process would likely have been somewhat similar.

Taking all this into account, my decision to cut out skiing doesn’t look all that stellar. After all, those risks I was trying to avoid found me anyway.

I might as well have lived with reckless abandon. I might as well have let the chips fall where they may.

This is a tantalizing argument. Yet, I don’t buy it for a second.

Sure, I’ve encountered a bit of a rough patch lately. I’d even call it the nadir of my running career.

But such an outcome can’t be viewed in a vacuum.

The odds of what happened to me without skiing are lower than they would have been if I kept hitting the slopes.

No, I might not have avoided fate. But I didn’t actively invite it either.

This is an important distinction.

All too often, we view risk as binary. We either aim for total avoidance or throw caution to the wind.

Neither approach truly steels us for a bad outcome.

In one case, we’re forced to reckon with our recklessness in the most brutal of fashions. In another, we’re left wondering why we threw away the chance at adventure — only to encounter its bitter toll.

The best way around this is to take the middle path. To accept small risks and shun outsized ones.

This requires judgment without clear guardrails. It requires a feel for the odds. And it requires us to embrace the gray.

Put it all together, and we’re left with an incredibly high bar to clear.

But with some discipline and devotion, we can clear it. I am proof positive of that.

So, let’s take this journey together.

Let’s resolve to feel the rush of the wind without getting in over our skis. Let’s be mindful of risk, but not paralyzed by it.

We might not always win this way. But we’ll surely lose less.

Second Level Risk

Are you sure you want to do this?

The words filled me with dread. But before I could reply, the technician continued.

Because if this repair doesn’t take, we’ll be out of options. Your device is considered vintage.

I took a moment to try and unpack these words.

I struggled to comprehend how my laptop computer could be a relic. This wasn’t a dusty Remington typewriter from the 1970s. I’d gotten it — new — less than 10 years earlier.

The transaction had cost a small fortune. And I had a hard time believing the computer was now vintage.

But technology moves fast. New editions of the laptop had hit the market since I got mine. Versions with new processors, updated displays, and a completely redesigned keyboard.

This would prove to be a problem, as I desperately needed to fix some busted keys.

I could either take a leap of faith with the technician, hoping he could get the misaligned keycaps back in place. Or I could decline the repair and make do with a compromised keyboard.

It wasn’t much of a decision.

I’d like you to try to fix It, I replied. It’s not working well for me right now, so leaving it as is doesn’t seem like an option.

The technician nodded and took the laptop to a back room. After a few minutes, he returned triumphant. The keyboard was fully intact once again.

When I entrusted the technician with my computer, I was taking a risk.

This was an opportunity to make something broken whole again. But it was also a final roll of the dice.

There were no guarantees that the repair would work. And there was the possibility of inflicting further, irreversible harm to my keyboard.

Such an outcome wouldn’t be beneficial to anyone.

I would be left with a mangled computer. The technician’s reputation would be tarnished. And the manufacturer would face the potential of legal action — if I were so inclined to pursue it.

And so, the technician seemed hesitant — unwilling, even — to proceed. The risk seemed too big to ignore. And the status quo seemed more enticing.

I was decidedly not on board with this thinking.

You see, the computer technician put all risks in the same grouping. But I don’t.

Indeed, I consider the history behind the status quo when making these calls.

If everything is going well, a repair would indeed appear risky. Sure, tinkering might provide new capabilities or unlock new features. But it could also screw up something that was working just fine.

I call this type of scenario a First Level Risk. And I rarely consider it worthwhile.

But if something is already damaged or off-kilter, the risks of a repair seem less stark. Sure, another layer of damage would cause further headaches. But living with a compromised status quo is hardly palatable.

I call this scenario a Second Level Risk. And I’m more willing to take it on.

So yes, I commanded the technician to repair my computer with little hesitation. I made a similar choice regarding surgery for an injured ankle. And yet another to get some rodent-damaged wiring replaced in my vehicle.

I couldn’t imagine making do with what I had. I couldn’t imagine jumping through hoops to maneuver around the damage. (Or not jumping at all, when it came to my ankle.)

Fixing the damage seemed like the only salve. Even if that fix was far from a sure thing.

Second Level Risks were worthwhile.

When I was growing up, I would often go shopping for furniture with my parents.

The store had an As Is showroom. And we would always scour it for discounted furniture.

The As Is items changed out frequently. But they tended to have one thing in common — defects.

Many found these defects acceptable — or at least acceptable in exchange for a lower purchase price.

But to the best of my recollection, my family did not.

I was too young to have an informed opinion back then. But now, decades later, I find myself continuing my family’s legacy.

I don’t want anything of mine to be As Is. I don’t want to be hindered or compromised.

And so, I do what I can to avoid that fate. I entrust others with the task of making me whole.

Until recently, it hadn’t occurred to me how unusual such a decision is.

Indeed, many in our society will gladly take a First Level Risk. But they’ll avoid a Second Level one.

Take my late grandfather as an example.

This was a man who enlisted in the United States Navy at age 17, during the waning months of World War II. He could have stayed in high school until the summer of 1945, likely avoiding the risk of ever being drafted into the conflict. But instead, he decided to put his life on the line for his country.

Shipping off to the Navy during a global war was perhaps the most commendable of First Level Risks. But it was a substantial risk, nonetheless.

My grandfather was placing all kinds of trust in his commanding officers to make it through the ordeal. And that faith ultimately paid off.

You would think such unwavering trust would flow into other risky decisions my grandfather faced. But it didn’t.

All too often, my grandfather would try to fix household appliances himself, or leave them in a compromised state. Good enough was sufficient for him— even if neglected or MacGuyvered repairs put parts of his house in structural danger. Entrusting trained professionals with a solution was just too risky.

In hindsight, my grandfather’s allergy to Second Level Risks seems comical. But in practice, it’s all too understandable.

For America is built upon the pattern my grandfather espoused. We’re implored to take big risks to seize bigger opportunities. But we’re also indoctrinated on the value of self-sufficiency.

Embracing only Second Level risks is an affront to all of this. If we play it safe when things are going well, we’ll leave countless opportunities on the table. And if we turn to others when things are broken, we lose autonomy.

As such, many have followed my grandfather’s pattern. They’ve taken chances when it wasn’t strictly necessary. And they’ve avoided taking chances when the situation could have called for it.

While I understand the sentiment, I also find it a bit baffling.

Are we really that comfortable with spinning the wheel on those First Level Risks, with their massive opportunity costs? And if we are, shouldn’t the Second Level Risks seem doubly enticing?

The answers tend to be Yes and No, respectively. But it’s time we flip them around.

It’s time to listen to reason. It’s time to follow common sense. It’s time to manage our risk tolerance.

We have less to lose with Second Level Risks than we do with First Level ones.

So, let’s stop throwing away a good thing in pursuit of more. And let’s take the calculated risks we need to fix something that’s gone rotten.

This is the sensible way to make decisions. It’s about time we adhered to it.

The Components of Safety

Safety.

It’s a term that instantly stimulates our minds.

It evokes imagery of a blanket. Or a lock and key.

These connotations demonstrate just how pervasive this aspect of our lives is. What else can combine images of something so warm and soft with something so cold and metallic?

Even so, it’s hard for us to pinpoint why safety is so essential. Much like True North or gravity, we seem to take its presence in our lives for granted.

I believe this assumption is less willful than it is inevitable.

We inherently know to hold safety in high regard. Yet, we can’t seem to verbalize our instinct.

Perhaps this is the case because the concept of safety crosses basic boundaries of classification. There’s the physical component, which insulates us from mortal injury. And then there’s the mental component, which insulates us from disastrous consequences.

At first glance, the physical component would seem to be the most important. After all, if this aspect were to eviscerate, so would our existence.

The physical component of safety is the reason there are railings on balconies and seat belts in cars. It explains why we know better than to jump from a cliff face onto jagged rocks below. Or why we shuffle our feet when traversing icy sidewalks in tennis shoes.

By tending to our physical safety, we prevent ourselves from getting maimed, paralyzed or killed. Perhaps just as critically, we avoid reduction of our existence to a statistic of infamy.

The list of tragic blunders is already quite lengthy. Anytime we say Don’t do that. It can kill you. it means two things.

  1. Someone did do that very thing and paid the ultimate price.
  2. Someone else likely witnessed the tragedy and warned others not to repeat the action.

If we keep safety front and center, we avoid becoming one of these cautionary tales.

So, yes. The physical component of safety is quite essential. But it doesn’t hold a candle to the mental component.

The mental component of safety is what insulates us from undesired outcomes. These can include the loss of status, the loss of income and the loss of possessions.

These circumstances are seemingly less severe than major injury, paralysis or death. While those outcomes are permanent, it’s possible to recover from the setbacks from a loss or prestige or earthly possessions.

Yet, the mental component of safety has an outsized impact on our behavior. While the physical component impacts our actions in the moment, the mental component impacts our behavior over the long term.

And this is not always to our benefit.

Consider this.

When we prioritize our mental safety, we often aim for stability. This causes us to become risk-averse to a fault.

Why? Because risk provokes change. And change threatens stability.

Avoiding risk is tantamount to maintaining our status quo. So, the safe play is the least risky option.

Yet, risk-aversion can cause us to limit our potential. It can cause us to sacrifice happiness for steadiness. It can cause us to leave opportunities on the table when they aren’t a sure thing.

The more decisions we make under this guise, the more we find ourselves trapped.

We settle for what we get. And we stick with it, even if it saps the joy and vitality out of our lives.

Worse still, our society actively reinforces this behavior.

We’re expected to work to earn the money that pays the bills. To follow the well-worn path others have walked before. To be inconspicuous, safe and normal.

Our happiness and our untapped potential don’t factor into these expectations.

Sure, we pay lip service to these factors through Christmas cards, Hollywood movie scripts and the year-end bonus system. But we are trained to be means to an end. To promote the system that keeps us all ordinary, and thereby protects us.

The problem is that all of this is a grand illusion.

No matter how safe we’re taught to play it, risk abounds. Bad circumstances continue to lurk around the bend, looking for the right moment to strike.

And since we’re ingrained with the values of stability, we find ourselves woefully unprepared to deal with sudden and unexpected changes.

When we lose our job or our home, we feel violated. And when we lose our status, we’re devastated.

These situations generally don’t leave us dead or disfigured. They generally don’t leave us in mourning over the loss of a loved one.

Even so, we end up emotionally broken.

We’re completely unable to cope with circumstance. The house of cards we built to organize our lives has been toppled by a Jenga tower. And we don’t know what to do next.

There’s only one way out of this maelstrom. And that’s to take a sledgehammer to the rules of the mental component of safety.

Only by accounting for risk can we be prepared to deal with it. That means acting a little bolder, staying a little truer to our spirit and even formulating Plan B while Plan A is humming along.

By making ourselves a little more vulnerable, we strengthen our resiliency.

And if we do this at scale, we can break the chains that bind us. We can formally reject the societal codes that leave us defanged in our volatile world.

So, let’s stop running from risk. And let’s embrace a universal truth.

Safety is important. But it’s not a panacea.

Act accordingly.