Same Odds, Different Choices: Why We See Risk Differently
Biology, experience, and culture all shape our tolerance for risk.
The boardroom was quiet after the consultant finished her presentation.
The numbers were clear: bringing back the popular but outspoken former CEO carried good odds. If he succeeded, the company could recover its lost momentum and reenter the market’s top tier. The consultant felt that was 80% likely. However, if he failed, the damage would be swift and possibly irreversible.
Everyone saw the same forecast. The same probabilities. The same reputational risks.
But the room was split.
One director leaned forward: “This is our best shot. The odds aren’t bad, and they’re better than drifting into irrelevance.”
Another shook her head: “Even if the numbers are right, we can’t afford a one in five chance of losing so much.”
The group wasn’t arguing about the data. They were arguing about risk tolerance, and how much uncertainty each could live with in pursuit of the same outcome.
The Hidden Drivers of Risk Tolerance
When we are considering the outcome of an action or decision, we look at risk. But how we look at that risk comes from more than just logical analysis. Two individuals, facing the same set of circumstances, can make wildly different choices. We understand that people naturally vary in their appetite for risk; but why is that?
How we measure risk isn’t just a function of spreadsheets and forecasts. Nor is it simply a matter of personality. Instead, it is correlated with a number of things that we have no control over. In part our level of comfort with risk comes from genetics. It has also may vary according to age, gender and cognitive ability. Our social environment also plays a role, which can outweigh some of these other factors.
Experience Changes Risk Tolerance
If some level of risk tolerance is hardwired, much of it is still shaped by what happens to us, and what we learn from those experiences.
In the long term, lived experience recalibrates risk-taking behavior. For instance, those who experience rare adverse events and are not harmed, tend to underestimate the likelihood of future harm by similar rare occurrences.
On the other hand, humans have a built-in accelerator so that those who suffer negative stresses become less risk-averse in their decisions. We have seen this drive gamblers into behaviors that end badly. In the corporate world it can mean a willingness to double down when other, unrelated, factors are damaging the company.
Culture Shapes How We See Uncertainty
Risk tolerance is as diverse as the world’s cultures. Understanding how different societies assess and manage risks is pivotal for leading diverse teams, or making informed business decisions in varying markets.
A recent study comparing Canadians from European backgrounds with those from Asian (mainly Chinese) backgrounds found consistent differences. The Euro-Canadian group tended to view chance events through a linear framework, predicting that a series of similar random events would continue. That makes them vulnerable to the “hot hand fallacy.” The Asian Canadian group held the opposite belief. They expected that a series of similar random events would reverse, making them more vulnerable to the “gamblers’ fallacy.”
Different cultural lenses affect how teams assess opportunities and dangers. Leaders who recognize and integrate these perspectives improve collective judgment.
The Genetic Roots of Risk Tolerance.
Risk attitudes also have a biological component.
In 2019 a genetic study looked at more than one million individuals and identified a variety of genes associated with general risk tolerance and risky behaviours. It showed that the same variants influenced willingness to take risk across multiple dimensions. The authors emphasize that genetic factors contribute only a modest proportion of variance; social environment still plays a key role in determining how the tendency to a high or low tolerance is expressed, as does the specific context in play at the time of decision-making.
Scientists have also demonstrated that the link between these genes, and the behaviors, resides in observable differences in brain structure (for instance the amount of grey matter in a specified brain region).
Studies like these help frame how risk preference might originate not just in past experience or culture but also in underlying predispositions — which may help leaders understand teams/individuals better. They offer a bridge between biology and how people actually decide under uncertainty. Knowing there’s a neurological basis means you have additional insight when designing team processes, decision frameworks, or risk policies.
Leadership and Organizational Implications
As leaders, we need to recognize that our approach to risk is partly determined by factors not shared with others, especially when we are making decisions that have implications for others. We can’t control where our risk tolerance comes from, or simply override our team members’ instincts and experience.
Knowing that risk perception has biological, cultural, and experiential roots also means that organizations should design decision environments that balance risk perspectives. Tools such as structured dissent, scenario planning, and reflective decision frameworks can go a long way to override irrational inputs into tolerance. So can addressing those things that drive fear of failure.
Diversity of lived experience is another way to ensure that decisions on risk appetite draw on a variety of attitudes and approaches. This is particularly true of senior leadership teams or boards when dealing with risk at the corporate level.
Wise leaders understand that differences in comfort with risk come from many sources. But they are simply starting points; they are not destinies.
Sources
Aydogan, G. et al. (2021) “Genetic underpinnings of risky behaviour relate to altered neuroanatomy” Nature Human Behavior. 5 (6).
Ayton, P. et al. (2020) “The impact of life experiences on risk taking.” Journal Economic Psychology.79.
Li-Jun J. et al. (2015) “Culture and gambling fallacies.” Springerplus. 2015 Sep 17; 4:510.
Linner, K. et al. (2019) “Genome‑wide association analyses of risk tolerance and risky behaviors in over 1 million individuals identify hundreds of loci and shared genetic influences” Nature Genetics. 51.
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