From public policy to private investing, it is the central question of our time: how high a price should we pay to keep ourselves safe from harm?
And this begs even more fundamental questions: should risk mitigation come at a cost at all, or should it rather come with rewards? That is, shouldn’t risk mitigation be “cost-effective”? And if not, what is it good for?
Think of your life like an archer releasing just one single arrow at a target. Naturally, you want to make your one shot at life a good one — to hit your bullseye — and this is why you mitigate your risks: to improve your precision (or the tightness of the grouping of your potential arrows) as well as your accuracy (or the closeness of that potential grouping to your bullseye). We often lose sight of this: safety is instead perceived as improving precision (removing our bad potential arrows) at the expense of accuracy.