When Do People Take Huge Risks?

If you’re like most people, the answer is somewhere around $20. This little experiment, popularized by economist Daniel Kahneman, demonstrates a phenomenon called loss aversion. The idea that losses loom larger than gains, documented in years of psychological and economic research, is thought to be an important component of human decision-making.

But Derek Rucker, a professor of marketing at the Kellogg School of Management, and his colleague David Gal, a professor of marketing at the University of Illinois at Chicago, found this notion difficult to square with what they observed all around them: football coaches calling for risky plays in high-stakes games, students waving off the familiarity of their hometown for a college far away, or people leaving secure jobs to start new businesses. If we’re so loss averse, why do we take such big swings in our lives?

Their theory: courage. The ability to take purposeful action in the face of fear is widely prized across cultures; one study found that courage was among just six values shared by nearly every philosophical and religious tradition.

Because much of the research on risk and loss aversion focuses on low-stakes financial gambles, Rucker and Gal suspected different patterns might emerge if they studied important life decisions, where courage is most likely to emerge.

Indeed, across several experiments, that’s precisely what Rucker and Gal found. When facing a risky choice with meaningful consequences for their lives, people have the opportunity to display courage. And because people prize being courageous, in contrast to prior research findings, they may be more likely to opt for the high-risk, high-reward path.

“This suggests that, in contrast to some of the findings in controlled laboratory gambles, people might have a radically different response to risk in some situations,” Rucker says. “When people see an opportunity to be courageous, and want to see themselves as courageous, that may actually lead to a preference for the riskier option.”

The Courage to Take Risks

To see how courage influenced peoples’ willingness to take risks in different types of decisions, in one study, Rucker and Gal recruited 508 online participants. Half the participants—the courage group—wrote about a time they or someone they knew had exhibited great courage. The control group wrote about a time they or someone they knew did something ordinary.

Next, participants read scenarios in which they had to make either an important or a trivial choice. The half who were presented with an important choice were asked to imagine facing a chronic illness. They could either continue in their current quality of life, or try a treatment that might either significantly improve or significantly worsen their situation. The other half of the participants, who read a scenario describing a trivial choice, were asked to choose whether to accept a gamble in which they had a fifty–fifty chance of winning or losing $15.

Among participants who read about the medical decision, those who had written about courage were significantly more like to choose the risky treatment than those in the control group: 57 percent of the courage-group participants opted for the treatment, as opposed to 37 percent of the control-group participants. Thinking about courage, in other words, had made them likelier to take a significant risk.

But when facing a low-stakes financial gamble, the difference between how many participants in the courage group and the control group chose the risky option was relatively small. In other words, the desire to be courageous did not significantly influence people’s willingness to take risks when facing a trivial choice—only a significant one.

Is Courage Just a Greater Appetite for Risk? Not Exactly.

The researchers next wanted to test that it was courage—and not simply high stakes—that led participants to take significant risks.

For their second experiment, they decided to up the stakes in the financial gamble so that it induced the same amount of fear as the other gamble, but lacked a critical aspect of courage: a sense of purpose. As Gal explains, “Courage is not just taking risk. It is confronting fear in a task that is linked to a higher-order goal or that has meaning to the individual.”

They recruited 402 new online participants. Half of the participants read a scenario about a career gamble: they could accept a risky assignment that would either significantly help or hinder their advancement, or continue in their current duties.

The rest read about a significant monetary gamble: a 50 percent chance to win or lose the hefty sum of $5,000. While both scenarios elicited fear, a pretest confirmed that the career gamble was widely thought to be more purposeful, courageous, and worthy of respect. Next, all participants rated from one to seven how much they valued being courageous in life.

The researchers found that, for participants in the career-decision group, valuing courage more highly was associated with a stronger preference for the risky option.

Valuing courage was also somewhat associated with a preference for the risky financial gamble, but much less strongly. Rucker and Gal think this may be because the desire to be courageous and an overall willingness to take risks are interrelated traits—or perhaps because some participants found the financial gamble to be an important life decision, with stakes as high as the career choice.

Either way, the results showed that courage increases peoples’ risk appetite more strongly when the decision has long-term significance for their lives.

Courage Requires Agency

In thinking about courage, Rucker and Gal had a realization: for a decision to be truly courageous, it must be within your control. After all, taking a risk you didn’t choose doesn’t feel like courage. It just feels, well, risky.

So the researchers decided to study this key dimension of courage—agency—because it would allow them to understand more clearly whether participants were making risky choices out of a desire to act courageously rather than simply out of a desire to take on risk.

As before, some participants read a scenario about an important choice (this time, a risky call in an important sports game), while others read a scenario about a fear-inducing but nonetheless less important choice (another monetary gamble).

But this time, there was a twist. Within each group, some participants were told they would get to make the choice, while the rest were told someone else would decide. Then participants stated their preferences and rated on a six-point scale how much they would respect a decision-maker facing an identical situation who took the risky option.

For the high-importance decision, participants who had agency chose the risky option 65 percent of the time—precisely what the researchers expected to happen when the desire to be courageous kicks in. But among participants who did not have agency—that is, they were asked what they would want someone else to choose for them—that old human impulse toward caution dominated. Just 42 percent of these participants opted for the risky call.

For participants who contemplated the lower-importance monetary gamble, on the other hand, having agency had no significant effect on preferences for the risky option.

In general, people reported higher levels of respect for a decision-maker who took the risky option in the sports situation than the monetary gamble. In fact, their level of respect for the risky decision-maker predicted how likely they were to prefer the risky decision—except when they lacked agency.

“If you take away my ability to choose,” Rucker explains, “I can no longer credit myself as being courageous.” Gal elaborates, “when someone else is making the decision, I can’t show courage—so go ahead and give me the safe option.”

The Gifts and Perils of Courage

To these researchers, this work highlights an important and understudied aspect of decision-making: values like courage can override other psychological impulses, especially when the real-world stakes are high.

It also suggests that we need to evaluate how our desire for courage might push us toward decisions that aren’t wise in the end. “You could imagine where you might get into trouble,” Rucker says. “There’s a danger of saying ‘I want to feel courageous’ when you’re going down a path that is not a good decision.”

“Sometimes you do need to be bold and courageous. But other times you might want to ask yourself, ‘Wait, is being bold the right decision here, or do I need to take a step back and think through an appropriate, measured action?’”