Innovation and risk

19 06 2009

A new report from the Future Foundation on attitudes to risk and innovation in the business community makes depressing reading. It found that two thirds of the companies canvassed thought that risk aversion would lead to lost opportunities. The report concludes that this is because of,

..a lack of available finance, a lack of confidence in the future economic prospects, a concern that investors are also averse to risk-taking, a desire to follow the example of others and even our inherent British conservatism.

In what is surely a further sign of how enfeebled and conservative British capitalism has become, fewer than half the business leaders said they admired risk-takers and little more than half thought entrepreneurs who took risks should be rewarded. When even the people who are running British capitalism are repulsed by risk taking and wealth creation then we surely are in a bad way. This is a classic example of how the culture of limits, a general sense that economic growth is a bad and dangerous thing, has infused our society at every level.

As James Woudhuysen has argued in his fine contribution to a forthcoming debate on innovation after the recession, this conservatism leads directly to inadequate investment in research and development, which further hinders economic progress. As I will be arguing at this event, the barriers to innovation have to be seen in a political and cultural context, not simply as an economic issue. It may be true that decisions to invest are made by the owners and managers of capital rather than by society in general, that is the nature of capitalism, but it is also clear from this report and others that investment decisions are influenced by  broader social and cultural factors. This is what makes a public debate on the need for more investment and more risk taking so vital and why stronger leadership in the political sphere is also urgent.

It is inherent in the paradox of risk  that caution seems to be a better option in the short run. We are still deep in recession and businessmen, like everybody else, are fearful of what may be round the next corner. It as at times like these that society needs to pull together to strengthen everybody’s resolve and encourage ways of investing and growing our way out of trouble.