A recent article in the Wall Street Journal has confirmed a gut feeling that I have had for a while now. It addressed the notion that we have become a more risk adverse society. This shouldn’t shock us. The financial collapse of the past five years has destroyed the comfortable belief that our future is bright and that our major investments, like our houses and retirement, would see us through to the other side.
It’s true that the banks are mostly stable. Wall Street is zipping along, but the rest of us are scared. We are scared for our retirement; we are scared for our children; we are even scared of the weather. What’s not to fear? Our retirement will have to be put off; our kids have to live with us while they look for jobs (hopefully); and the weather is showing what global climate change really means.
Of course, scared people don’t take risks. We want to hold on to the little that we have. We don’t want more outsiders coming and taking our jobs, and we don’t trust our government to spend money on anything that doesn’t directly benefit us. We don’t want to give anything up, but we want to maintain our lifestyle so we continue to pile on debt. Corporations have been risk averse for years. Investors reward the bottom line, not risky innovation. They want innovation, but they want those innovations to simply appear as positive cash flow to the bottom line within a few short quarters. They don’t want to fund the expenditures that it takes to develop those innovations. Corporations find it cheaper to let someone else take the risk, and then pick up the low hanging fruit.