11 Categories To Rate Your Risk Preference
Updated: Sep 24, 2024
Elaine Marie Christine has a mission to bring peace to every mind. She is the founder of Aquaterra since 2005, the number 1 best-selling author of The Peace Prophecy trilogy, and host of the Peacemakers podcast.
What is the effect of your risk preference on making decisions? Eleven categories show how you make choices based on the dominance of your brain hemispheres.
Risk preference story
In 1999, I was in Phoenix, Arizona, presenting my one-day Managing Risk tutorial for the Society of Women Engineers. At the convention, I tested over one hundred people with my Brain Dominance Quiz to determine how the mind might wobble. The women were given an open-ended question and wrote down an answer.
Given a choice to work as an employee for $25K or bid on a contracting job worth $40K, the rationale from risk-seeking to risk-averse varied with their brain dominance. When I sorted the responses by the percentage of brain dominance, I was amazed to learn their answers spanned a polarity from risk-seeking to risk-averse. In my study of the decision-making process, I found that risk is a key to human consciousness!
What is risk preference?
Risk preference is a quick way to understand how people make choices. My research shows that risk preference indicates brain dominance, which affects the decision-making process. Risk is the one single factor that essentially divides the brain hemispheres. The effect of brain dominance helps you become aware of your risk preference and motive for making choices.
Risk preference categories
There are eleven categories of risk preference from risk-seeking to risk-averse. The risk preference categories share actual responses to the open-ended question I asked in Phoenix.
1. Risk-seeking
Risk-seeking (0/100) is 100 percent right brain. People at the extreme right make their choices quickly. The decision-making process is not difficult because the criteria are simple. Driven by the opportunity of a good outcome, the decision maker compares 40K contractor to 25K employee. A risk-seeking individual wrote, “Contractor – My time is more valuable than to be an employee. The world is full of opportunities.”
2. Have faith
Have faith (10/90) is 10 percent left brain and 90 percent right brain. One person noted, “Contractor – Because I have faith in myself and my abilities. I know I will win this contract, if given the opportunity, and if not I’m willing to accept the possibility of continued unemployment.” Another believed, “Contractor – more opportunity. If you lose this once – there are more opportunities in the future. An employee is more stuck: the contractor has larger gains if you can soak up and manage the risk.”
3. Make assumptions
Make assumptions (20/80) is 20 percent left brain and 80 percent right brain. This individual said, “Contractor – Confidence in being able to get job. Willing to take risk. I know the job better than anyone else. For incompletely specified situation, I can make reasonable assumptions.” Another supposed, “Contractor – More opportunities will come along if unsuccessful. If win, more $. If not, can learn & reapply.”
4. Feel confident
Feel confident (30/70) is 30 percent left brain and 70 percent right brain. A person penned, “Contractor – I would bid for the job for 40K based on the fact that I believe that I could do the job & express my abilities to win the job.” Another declared, “Contractor – I am confident that I would win the bid. The risk of losing is small because of my confidence. I would also have the opportunity to try again.”
5. Feel certain
Feel certain (40/60) is 40 percent left brain and 60 percent right brain. One individual answered, “Contractor – I would choose the contractor position. I have done my research and feel certain that I would obtain the contract. If I don’t win the contract, I have other options.” Another stated, “Contractor – It’s the potential customer’s loss, not mine, if I’m not selected. I bring value wherever I go.”
6. Difficult decision
Difficult decision (50/50) is 50 percent left brain and 50 percent right brain. This person considered both sides and multiplied the numbers for greater contrast, “Contractor – Scale number’s by 3: Employee $75K, Contractor $120K. Assume win/lose is 50/50 to start. Employee is stuck at $75K. First contract or two may be 50/50. But odds will improve with experience…P is function of (t), number of proposals, etc. Better opportunity for contractor. Employee always faces risk of job loss... Contractor has more control of risk of job loss.”
7. Need certainty
Need certainty (60/40) is 60 percent left brain and 40 percent right brain. Employee is seen as a guarantee and chosen by 80 percent of the people in this category. An individual replied, “Employee – Choose employee because guarantee of income.” Another thought, “Employee – Would choose employee because I wouldn’t hazard the gamble of no salary. More comfortable with the certainty.”
8. Need information
Need information (70/30) is 70 percent left brain and 30 percent right brain. Employee is selected 100 percent because there is too much unknown. One person pronounced, “Employee – Mainly because there is not enough information, in my opinion, to decide otherwise. I might be willing to take a risk for the $40,000 but I don’t know the risk. Is it 10% or 90% likely?” Another recorded, “Employee – decision – to be employee. Know nothing about what is required for the task. Too much risk to go for $15,000 more. Employee route is safe because money is guaranteed.”
9. Need security
Need security (80/20) is 80 percent left brain and 20 percent right brain. Employee is seen as secure and chosen almost 100 percent. This individual stated, “Employee – In order to come out ahead, the probability of winning would have to be > 62.5%. I prefer the stability of employment.” Another noted, “Employee – I need to perceive that the probability is greater than 62.5% of winning. I’ll be an employee. I face this in my career, and have accepted being an employee as opposed to contracting.”
10. Avoid loss
Avoid loss (90/10) is 90 percent left brain and 10 percent right brain. Employee is chosen 100 percent to avoid loss. One person said, “Employee – known. Stable. Avoid risk. Contractor makes $40K – expenses.” Another answered, “Employee – probability of some money is best.”
11. Risk-averse
Risk-averse (100/0) is 100 percent left brain. Employee is chosen 100 percent because there is no risk. People at the extreme left make their choices quickly. The decision-making process is not difficult because the criteria are simple. A risk-averse individual replied, “Employee – No risk of experiencing the outcome of no income.” Another exclaimed, “Employee – Because the P is unknown and there is a risk of loss of my job. I’m risk averse!”
Risk preference resources
Download and print the Effect of Brain Dominance on Decision Making in PDF format to get the complete list of responses and results of the research study. To learn more about the Brain Dominance Quiz, read Elaine’s article, 10 Questions To Determine Your Brain Dominance.
Read more from Elaine Marie Christine
Elaine Marie Christine, Mindfulness Expert, Best Selling Author, & Keynote Speaker
Elaine Marie Christine is a Mindfulness Expert, number 1 Best Selling author, and International Keynote Speaker. She earned an MBA, Master in CS (1983), and PhD in Computer Science with a minor in Artificial Intelligence from the Florida Institute of Technology (1995). Her landmark text, Managing Risk, was published by Addison Wesley Longman (1998). She is the tech-savvy Sole Proprietor and Owner at Aquaterra, publishing digital content (since 2005). Dr. Elaine Christine was inducted into Who’s Who in America (2021).
