West Point cadets are more risk averse & programs aimed at increasing women & minorities are likely to increase the risk aversion

Bell, Patrick and Engel, Rozlyn and Hudson, Darren and Jamison, Julian C. and Skimmyhorn, Bill, Risk Preferences in Future Military Leaders (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=3055387

Abstract: Although hundreds of studies have demonstrated that risk preferences shape people’s choices under uncertainty, the complexity of how attitudes toward risk play out across various pivotal settings and key populations leaves considerable gaps in knowledge. We study a unique sample of a cohort of future military leaders at the United States Military Academy (West Point), nearly all of whom now hold commissions in the US Army officer corps. Using a hypothetical instrument to elicit preferences across a variety of domains, we find that cadets are risk averse, on average, which has potentially important implications for future management of military conflicts and programs. Our results also show that diversity programs aimed at increasing the number of women and minorities at West Point are likely to increase the average level of risk aversion within the officer corps. This finding suggests that working with officers to strengthen cognitive flexibility and to be attuned to a possible wedge between their innate preferences and the needs of the situation may be important, particularly for those who wish to enter occupational fields where the willingness to take risks is critical.

Keywords: risk preferences, risk aversion, uncertainty, occupational risk, leadership