The way we perceive risk and, therefore, how we assess it, depends on many factors, most of them subjective: family, cultural, religious, political heritage…
In the long and tireless quest for wisdom, I would like to highlight a new factor to be taken into account.
Linguistic relativity is a theory that combines different fields of knowledge, such as anthropology, psychology, sociology, neurology and pedagogy. This theory enunciates the following postulate: how we perceive reality and how we think it is influenced by language structures, i.e. how we verbalize the objects and concepts we handle mentally.
Edward Sapir and Benjamin Lee Whorf developed this theory in the 1940s. Many empirical studies have been conducted in populations that speak different languages, comparing how the different perception of reality can be influenced by the language used.
Particularly interesting are the analyses on how the perception of colors varies based on the native language spoken. Based on the book “Basic Color Terms, Their Universality and Evolution” by Brent Berlin and Paul Kay (you can read it here), interesting conclusions have been drawn: Lenneberg and Roberts (1955) found that the Zuni Indians, who use the same word to refer to yellow and orange, have great difficulty distinguishing both colors.
Returning to our financial and risk worlds, we can offer some thoughts:
- If we don’t have a word to define a risk, it will be very difficult for us to perceive it, and even more to assess it correctly, and very complicated for us to agree on a way to manage it.
- Let’s imagine we have a cow on a green field. David Hume, the father of empiricism, would have asserted that if we close our eyes, we will not be able to claim for certain that the cow exists. According to the linguistic relativity theory, we can assert that if we don’t have a word to identify the cow, we possibly won’t even see it, or we may confuse it with the happy overweight farmer.
- From the point of view of risk management, the great challenge is first to identify the sources of our potential losses. And we can attribute our successes and failures to causes very different from the real ones.
- But we do have a powerful ally: technology. Technology connects us and brings us nearer, it enables us to share experiences with people around the world. We therefore perceive the fears, aspirations, experiences and considerations of different people from very diverse origins, which enriches us considerably. This broader perspective can help us perceive more clearly the risks we face.
- And this communication on the technological platform occurs, preferably, in English. For better or for worse, we use the same language structure. We standardize knowledge, and if we think that this single language can limit our view of reality, precisely because of linguistic relativity, we should bear in mind that more and more people are interconnected, trying to translate their own experiences and perceptions into a language that is not their mother tongue, thus enriching both languages.
If technology brings us nearer and enables us to share experiences, we can move toward a risk management model that is commonly shared, standardized and enriched by peripheral views, and improved and driven by a concept that is now becoming known and developed: Collective Intelligence.
Pedro Agudo
Economist, BBVA, Madrid (Spain)
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