Airbag - steering-wheel continuum

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The Karma Police, yesterday

In which the curmudgeonly old sod puts the world to rights.
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In a Nutshell: You only need airbags if you don’t steer straight.

The “airbag - steering-wheel continuum” is a management thought experiment[1] that asks: Which is your “containment device” of choice?

Where, in other words, does your risk strategy sit, on the spectrum between: “I will conduct my affairs using market experts, whom I have empowered, to deal with sensible customers, whom I know well, in a prudent manner, with a view to maximising shareholder return in the long run and minimising the firm’s exposure to extreme events, even if that means foregoing short-term gains in some cases” — in the terms of this metaphor, this is the “steering wheel” tactic — and “sod it, I have an ejector seat, I’m okay, so dammit, let’s bet the house on red!” — this is an “airbag” tactic.

Should things not go according to plan, the likely outcome of the former is gradual, unspectacular prosperity. The likely outcome of the latter, in the best case is you write off your car, but walk away — with a only a mild case of whiplash and a luxuriant regulatory enema to look forward to.

Risk managers: if your first question, at an unexpected turn of events, is “hey, legal eagles, can I close out?”, you are an airbag sort of person.

Employers: if you hire risk managers who are airbag fans, you are an airbag sort of person.

Don’t be an “airbag” sort of person.

Contractual risks

Those contemplating outsourcing could profitably spend some time with your standard form contracts considering to which extent they address economic events — wherein the steering wheel, accelerator, brake and clutch are important — and to what extent they truck in formal legal risks — wherein the precise textual articulation is the key — and to what extent, by accident, design or the basic operation of universal entropy, the first has elided into the second. We have more thoughts about that here.

See also


  1. I know what you are thinking: Who knew management experimented with thought?” Actually, the JC made it up, and it is not a management thought experiment, though it should be. It is a constructive management thought experiment.