The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Risk and Strength

Ironically—just as in the investment world—the willingness to tolerate a reasonable amount of risk actually reduces overall systemic risk in a society, because the assets of the society become diversified, more robust. The existence of a powerful military force—and the will to employ it—means that the society is less likely to be attacked, not more likely. Exposing a society's business enterprises to foreign competition means that, overall, those enterprises will be stronger, not weaker. The knowledge that we can be fired for incompetence or indolence makes for better, not worse, employees. Thus it is that risk-averse societies are more risky overall than non-risk-averse societies, in precisely the same sense that risk-averse investors end up holding portfolios that are more risky than those of non-risk-averse investors.

Of course, there is no gainsaying that costs are paid by societies that expose themselves to risk. In my own city of Pittsburgh, years of inefficient management, obsolete plants, and a legacy of powerful, militant, and unaccountable unions destroyed the Pittsburgh steel industry in one generation. A city that, during World War II, produced more steel than all of Germany and Japan combined produces, today, not one ton of steel. In barely more than a decade, nearly 100,000 steelworkers lost their jobs. These were men (almost all were, in fact, men) wholly unsuited by training or culture for any other remotely equal employment. Thousands of businesses ...