Passion 2

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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In a previous blog I wrote about the desirability of passion for risk management over simply knowledge and intelligence about risk management.  I briefly argued that risk managers who are passionate about risk management tend to be more effective than those who simply know a lot about risk management.

I believe there are many reasons for this – enough that would fill a book.  However, one that readily comes to mind is that passion is contagious, while knowledge and intelligence is not.  A passion for risk management (or anything else for that matter) tends to circulate and catch on.  When others outside the risk management function become passionate about risk management then risk management is almost certain to be effective.  After all, one of the current risk catch phrases is that “risk management is everyone’s job”.  That statement is totally vacuous if there is not a positive culture around risk management.  A positive culture starts with passion, while knowledge frequently kills the culture.  (What was your favorite subject in school – was it the one where the teacher was passionate or simply knowledgeable about the subject?)

Passion 1

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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In my life I have been very fortunate to be around many very intelligent people and many people who are very passionate about their profession.  Passion and intelligence are not mutually exclusive, nor are they substitutes for each other.  You can be quite passionate about something, yet somewhat ignorant of it.  Likewise you can be quite intelligent or knowledgeable about a field yet have little or no obvious passion for it.

What I have noticed however is that people who are passionate about something also tend to be the most effective in it.  The same cannot be said for intelligence or knowledge.  Possessing intelligence or knowledge, while desirable, does not automatically make one effective. 

In my experience this also holds for risk managers.  Those risk managers who are passionate about risk management tend to be the most effective.  Those who are simply the most intelligent or knowledgeable tend to be quite ineffective (again in my experience).  Ironically though, those who are the most passionate also become the most practically intelligent and the most practicably knowledgeable.  Hmmmm…  Maybe it is practical knowledge and practical intelligence that I should be blogging about.  For now, I’ll stick to passion as the key ingredient.

AI

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.

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Lots of jokes have been made about AI (Artificial Intelligence); Artificial Ignorance and Artificial Imbecility are two that readily come to mind.  AI is a tool, and a very useful tool at that – in my opinion.  However, AI does not replace the human factor.  AI does not understand the human factor.  AI cannot (almost by definition) deal with the paradigm shifts caused by the human factor – namely human creativity.  Likewise, AI is not so good at dealing with or predicting seemingly random human stupidity.

The point that the good risk manager remembers is that virtually all risk is human in nature.  Humans are real.  Humans are not artificial (okay, some reality TV stars – and former reality TV stars – are very artificial).  While AI is a very helpful risk management tool and a complement to human wisdom and intuition, ultimately you need humans to understand and manage humans.  Risk is human, and so ultimately the final word in risk management should be human as well.