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Nothing ventured, nothing gained

Very few people wish to take a risk at the moment. With both consumers and businesses hunkered down in the trenches and the shells of uncertainty flying overhead, merely hanging onto and guarding what you’ve got rather than going forth to multiply is the order of the day.

Very few people wish to take a risk at the moment. With both consumers and businesses hunkered down in the trenches and the shells of uncertainty flying overhead, merely hanging onto and guarding what you’ve got rather than going forth to multiply is the order of the day.   
 
Risk requires confidence and the latter is currently in short supply with so much in the global economy looking so uncertain. Risk is an endlessly fascinating subject because how one deals with it is so central to business. Before the crash we were being told by sages like Alan Greenspan that risk had almost been eliminated and a new paradigm was in operation as toxic sub-prime mortgages were spread around far and wide like animal filth on the land. What a fool he looks now. What dupes we were to believe him. The paradox is that it’s business with an appetite for taking a chance on new opportunities that must now drag us from the mire as we try to get the economy growing again.
 
In an ideal world, you could argue, business would be subject to no risk at all but life doesn’t work like that. One of the highlights of Peter Bernstein’s outstanding 1996 book Against the Gods: The Remarkable Story of Risk – an unlikely rollicking good read – is where Bernstein writes: “The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than a whim of the gods and that men and women are not passive before nature … risk is a choice rather than a fate. The actions we dare to take are what the story of risk is all about. And that story helps define what it means to be a human being.” Just make sure you make the right choices.
 
Differences in attitudes towards risk between family-owned and non-family-owned businesses are extremely interesting. There are those who argue that family business is inherently more conservative and therefore risk averse, whereas others claim the opposite. The contrarians say the absence of multiple, distant shareholders who need to be kept happy and in their frequent dividends means a proper calculated risk that may take time to pay off is more feasible. It’s often down to the timescales over which a return is expected. The plc boss wants instant fixes and is all too aware he will forgo his bonus or long-term incentive plan if some dicey new venture fails. A family business can take a longer term view.
 
Henry Ford was a serious risk taker. Way back in 1914, at the outbreak of war, when many people were feeling decidedly queasy about global economic prospects, he made the mad announcement that he was going to pay his workers the unheard of wage of $5 (€3.9) a day. His reasoning was, by modern standards, really extremely odd. Low wages, he believed, led to uncertainty and therefore weak levels of growth. (He was also fed up with rampant absenteeism and a staff turnover of nearly 400% annually.) His assertion was that by paying his staff more they could afford to buy more Model Ts and therefore return their wages to his pocket.  
 
Fordism has been termed a "manufacturing system designed to spew out standardised, low-cost goods and afford its workers decent enough wages to buy them". A virtuous circle of growth was the result. The current lack of this in the US where the middle classes have suffered a wage freeze and even decline over the last half decade will prove a critical area of the coming presidential battle. And it’s not just over the Atlantic where some virtuous circles would not go amiss. The only circle in Europe at the moment looks like the ever-widening gyre – the swirling vortex threatening to suck us all under.

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