Emanuel Derman separates real tools from passing trends in the risk management vocabulary. This article is adapted from his talk on Future Innovations in Risk Management, presented at the April Risk 2002 Conference in Paris.
There is an attractive theory in linguistics known as the Whorf hypothesis, or sometimes, more accurately, as the Sapir-Whorf hypothesis. Loosely speaking, it claims that a culture’s language determines the perceptions, thoughts and even behaviour of its native speakers. Simply put, you can’t think about things you don’t yet have words for, and you can’t have words for things you haven’t yet thought of.
Whorf’s most famous example concerns the Eskimos, who, he claimed, have many more words for snow than we do. Because the qualities of snow are so important to their survival, the argument goes, the Eskimos have learned to perceive (and hence talk about) finer variations in snow quality. It’s a captivating story, but not necessarily true. Some studies have claimed to show that other languages transmit the same degree of snow discrimination by using phrases rather than single words, and further studies have contradicted those.