Risk aversion

When most of my days were consumed by trying to get 'impossible' experiments to work, I thought about experimental risk in a particular way. I assumed that most experiments would not work but that, eventually, I would figure out how to get them to work. The risk was not that they would not work but that they might work and then I would have to figure out why they worked. I was not at risk in my job for having months worth of things that did not work. I was attempting a project that no one had ever done before. 'Not working' was expected.

Recently, in my role as a counselor, I have talked with many people in town. Most of them say that they are 'risk averse.' They put their money into LANB, sometimes in a CD. They work diligently for many hours at their job. They are 'risk averse.'

Something seemed wrong about this phrase 'risk averse.' Finally, thanks to a friend, I think that I know what is wrong. He and I were talking about inflation and how inflation eats into a family's budget and savings. I made a calculator that figures out what an average family's inflation rate is, based on the things that they buy, including college tuition and various kinds of insurance. This 'family inflation rate' is, currently, about 6% a year.

So, a person who puts their money into a bank account that yields 3% a year is losing 3% a year in buying power. It feels that we are each getting poorer because we are. The increased number of dollars that we have this year over last year is not enough to allow us to buy the same things that we bought last year. The same logic, of course, applies to a 3% COLA (cost of living adjustment). We have 3% more dollars but are losing ground to inflation.

A risk averse approach to, for instance finances, would be one in which net income rose faster than the rate of inflation.

So, what do people mean when they say that they are 'risk averse?' In fact they are losing 3 to 8% of their worth every year.

I think that they really mean that they are 'time averse.' They are unwilling, for many reasons, to realize that their 'risk averse' strategy is not really risk averse (the risk of losing money every year is constant) but is stable, soothing, and not very demanding of their time.

So 'risk averse' seems to mean 'time averse' and 'not very emotion inducing.'

I am coming to think that this community would be much stronger if more people were willing to really be 'risk averse.'