Barton Swaim opens his review with a claim he admits may be an exaggeration: most college-educated Americans have lost the ability to assess risk. Then he spends the rest of the column making it hard to dismiss.
The book is “Worth the Risk,” by Manhattan Institute economist Allison Schrager, out next week from Yale. Its argument is a century long, and its investing implications are immediate enough to be worth a careful read even if you disagree with the politics.
The thesis
America’s economic dominance, Schrager argues, owed a great deal to a risk-welcoming culture. The few protections that shielded economic actors from ruin in the 19th century — bankruptcy protections, limited-liability laws — didn’t deter risk-taking, they encouraged it, by capping the downside of trying.
The shift she traces is not from protection to no protection, but from insuring against specific risks to preventing them. Her line, quoted by Swaim, is the sharpest in the review: rather than insuring against a specific risk that went badly in the past, “the government started heading off opportunities for risk altogether, explicitly forfeiting growth in exchange for safety.”
Swaim adds two illustrations at opposite ends of the scale. At the top, the Federal Reserve has long assigned itself the job of steering the economy away from busts — but recessions are also what rid economies of the inefficiencies and excesses that stop them growing robustly afterward. At the bottom: few public playgrounds these days feature seesaws or monkey bars.
The two myths worth knowing
Schrager debunks several beliefs she says keep Americans from taking healthy chances. Two are directly useful to a household.
“Work is riskier than it used to be.” The odds of being laid off, she finds, haven’t changed appreciably since the 1950s. This is worth internalizing, because the felt sense that employment has become precarious drives a great deal of over-conservative financial behavior — oversized cash holdings, avoided career moves, delayed business formation.
“Student loans are why millennials can’t buy homes.” Conventional wisdom says the debt blocks the house. The data, Schrager writes, shows a positive correlation between student debt and homeownership — because people with more student debt tend to earn more.
She is not defending the debt. Her point about how it got there is the sharper one: politicians starting in the 1980s presented college as a risk-free road to financial security, federal and state governments made loans easy, borrowers became less price-sensitive, and colleges “responded rationally by bumping up tuition.” As she puts it: “When college is touted as a ticket to a certain lifestyle, it seems smart to agree to almost any price tag and any amount of debt.”
Which is a lesson about what happens to prices when someone else guarantees the downside — applicable well beyond tuition.
Where it lands today
Swaim reads current politics through the book and finds a pattern: the response to the pandemic normalized alarm, and U.S. politics now moves from one moral panic to the next. Yesterday a virus variant; today data centers and the AI apocalypse.
His evidence is a Politico poll published Wednesday: 46% of Americans think there is a moderate or significant risk that “AI will destroy humanity,” and another 17% think it all but certain. Swaim’s assessment of those numbers is two words long and not suitable for a compliance-reviewed newsletter, but his conclusion is worth quoting straight: in technological innovation as in financial markets — and in everyday life — excessive fear of risk comes at the cost of growth.
The part that applies to your own account
This is where the book stops being a political argument and starts being a planning one.
The dominant risk in most household portfolios is not a crash. It is running out of money during a retirement that lasts longer than the plan assumed. A portfolio held at maximum safety feels responsible and quietly guarantees the slow version of that failure, because cash does not outrun inflation over thirty years.
Schrager’s framing is the useful one: risk is not a thing to minimize, it is a thing to price. The question is never “is this risky?” It is “what am I being paid to take this risk, and what happens to me if it goes wrong?”
Which is, incidentally, a question with a fifteen-minute answer for most households, and a statement is all it takes to start it.