Rationality and Risk

The summer before my senior year of high school, my parents told me we would be moving from Portland, Oregon to Edmond, Oklahoma. Until that point, I had assumed I would simply follow in my older brother’s footsteps by attending Oregon State University. OSU had a decent engineering program and, at only 80 miles from home, would allow me to visit my family (and dogs!) on the weekend. The big college question so many high schoolers stress about had hardly even crossed my mind. Knowledge of the move opened my eyes to the options that had been there all along. I was never told I had to choose a state school, and finding out my familial roots were being transplanted led me to question the possibilities. Still uncertain on what I wanted to do or where I wanted to be, I ended up applying to a dozen schools across the US.

I share that story because it is the first important decision I made in my life and it was filled with uncertainty. Obviously if you’re in econ 490, you know what school I ultimately chose. As much as I researched colleges, the things I learned were grounded in facts and statistics. Having never so much as stepped foot in the state of Illinois, these were the only things I could base my decision on. My choice to attend Illinois was formed almost completely on the reputation of their engineering program (fun fact: my original major was bioengineering). Out of all the colleges I was accepted to, Illinois’ engineering program was the most highly ranked, so it seemed like my best option.

This decision was the first of many that would be made in the interest of my future. By the end of my first semester at Illinois, it became apparent to me that engineering was not my passion. As an unsure high schooler, I had selected engineering based on my mathematical ability and the prospect of a lucrative career. Now the discontent I felt was evident in my mood and my grades. No matter how hard I studied, it seems I just couldn’t grasp material that was coming so naturally to everyone else. Why hadn’t I prepared better, even studied over the summer to get on track? At Christmas, I flew home to Oklahoma for the first time, feeling dejected and scared to admit, even to myself, that choosing Illinois might have been a mistake.

One month spent with family during winter break was enough to refresh me; upon going back to Illinois I decided I was just going to have to try harder. Engineering at Illinois had to work out, because I couldn’t handle feeling like I had failed all my friends and family I had abandoned when I moved to the middle of these cornfields. I wasn’t a quitter, and if I could just push through these next 7 semesters I had almost sure job placement and a sweet starting salary to look forward to…

Not to spoil the end of the story, but in the interest of speeding it up, you’ve probably already figured out that engineering didn’t work out for me. After one more semester, I decided to switch from bioengineering to materials science engineering. Optimistically, I hoped that maybe it wasn’t engineering I disliked, but just the major I had chosen. After one more year struggling through the materials science program I finally conceded. I was never going to enjoy engineering, and the more time I spent trying to force myself to like it because of pride, greed, or whatever insanity was fueling me just wasn’t worth it. I didn’t want to waste any more time in a program I disliked, and I especially didn’t want to spend the rest of my life in a passionless career.

After more research, I decided to switch to economics. Essentially this was a choice revealed through eliminating other alternatives. It was too late to switch to the business program, actuarial science was hardly accepting any applicants (not to mention the thought of being a number cruncher for life seemed daunting), and economics was something I had enjoyed since high school. Since I still wasn’t sure what I wanted in terms of a career, it seemed like a general enough platform that I could propel myself through college and have plenty of options after. Better yet, the college of LAS was opposite the college of engineering in almost every regard.

My decisions in terms of majors have always been made with an eye toward the future. It’s important to enjoy your career, but majoring in something simply because you enjoy it when there are slim job prospects never made much sense to me. At least in my family, having a career is the ability to support yourself and make a positive impact. My dad likes to tell us kids that “if you have more good days than bad days, you’re doing okay” and I think that is true for a career as well. You might not love every single day you go to work, but if you are passionate about what you do and feel like your work is making a difference, you will likely perform better and ensure more good days than bad.

My parents are very supportive of their children’s decisions, but they have always stressed the importance of rational decision making – thinking through all the potential outcomes, weighing your options, doing the research. In a way, they have been teaching us how to eliminate risk and uncertainty. I’m very lucky to have parents that have supported all the twists and turns in my life’s journey thus far. Their generosity in paying for my college has alleviated the stress of loans; had I been paying for every credit hour, I may not have switched my major and instead endured the grueling bioengineering program to wind up in a field I was not truly passionate about.

Working throughout college I’ve managed to save more than I spent over the last four years, which is something I couldn’t have done if I had paid for school myself. This cushion will help alleviate some of my future income risk. The ability to base my job search out of my parent’s home will lessen this burden even more, as my expenses will drop to practically zero. While I hope to find a job within three months after graduation this winter, I’m lucky that I don’t have to stress about running out of money in the process of looking.

Sixteen years of education have prepared me for the moment when I will enter the real world. Over that time, my experiences have built who I am, preferences have been revealed, and dreams have taken shape. I’m as ready now as I have ever been to face the future. And yet I’m going to say what is on pretty much every collegiate mind throughout history as they have stood on this same cliff just before graduation where I now find myself: I am both terrified and thrilled for what is to come.

Diving into these emotions, I think they are rooted in the very same topics we are now discussing in class, risk and uncertainty. Regardless of which end of the risk spectrum you classify yourself, all humans share an emotional response to risk. For the risk seekers, this might be a sense of thrill, a rush of adrenaline. For the risk adverse, these emotions might manifest themselves as anxiety or fear.

Perhaps the more risk adverse you are, the more you might plan so that uncertainty can be mitigated. This is a thought I had never really considered until writing this post, but now that I think about myself I find it to be true. As someone who tends to be more risk adverse, I have always been a planner. I make lists. I always schedule in more time than I think I’ll need to get ready or to travel somewhere. I’m not sure when these habits first emerged in my life, but reflecting on them now, I am almost certain they evolved as a response to my negative feelings toward uncertainty. The biggest exception to these habits that subconsciously govern my life pertains to my future. When it comes to where I will be working less than one year from now, there is a massive black hole on the road map of my life. Despite this, I feel a sense of calm that defies my usual response to uncertain outcomes.

My optimistic perception of the job market is certainly shaped by the experiences of family and friends who had to deal with these things before me. My dad was a farm boy from rural Nebraska who was recruited out of college to do consultant work; 30 years later he is the type of businessman I can only aspire to be. My brother, whom I mentioned earlier, graduated OSU with a pre-pharmacy/chemistry degree. In the interim summer between undergrad and applying to grad school, he got a job through a family friend at an asphalt paving company. 10 years later he is now a chief estimator for that same company and is happier getting to work in the field than he ever could have been in a lab.

For me, these are all examples that life works out for the best. Sure, the decisions we make are all important in the sense that they can set us on the right track, but I think I’ve learned just as much from the plans I made that didn’t work out; things like perseverance, the importance of maintaining a good attitude, and even how to deal with failure. Admittedly, I have not taken every possible precaution to manage my future income risk, but I’ve learned to trust the process. Humans are emotional beings, so unfortunately making the “rational decision” isn’t always our best bet, as my experiences mentioned above have indicated. Risk adversion, in other terms, is a fear of the unknown, and I don't think decisions should be made out of fear. Sometimes the best outcomes are a result of taking a risk, trusting your gut, and jumping off the cliff into the unknown on a leap of faith.