Posts Tagged ‘risk’
“Fortune sides with him who dares”*…
Understanding the origin of the modern concept of risk…
Lately, we have all become risk assessment and risk management experts, thinking, talking and Tweeting about the chances we take when we engage in once-mundane activities. It’s hard to imagine doing without risk: the analytical instrument we use to calculate the advisability of undertakings that can result in gain or loss. Yet when the word risk entered the languages of western Europe during the 12th century (at roughly the same time as other words used to jigger the scales of Fortune: hazard and chance), it took some time to catch on. Niccolò Machiavelli (1469-1527) and Francesco Guicciardini (1483-1540) – the two great writers of the Italian 15th and 16th centuries who wrote about contingency and power while everything was collapsing around them – did not use the Italian rischio in the works for which they are best remembered, even though the Italians were early adopters of the word and the speculative behaviours it names.
The first known usage of the Latin word resicum – cognate and distant ancestor of the English risk – occurs in a notary contract recorded in Genoa on 26 April 1156. The captain of a ship contracts with an investor to travel to Valencia with the sum invested. The contract allocates the ‘resicum’ to the investor. In a typical arrangement, the captain received 25 per cent of the profit at the end of the journey. The investor or investors pocketed the resicum payout: the remaining 75 per cent. This contract also reminds us that the medieval Italian ship’s crew was an egalitarian society. It specifies that the voyage would be extended from Valencia to trade at Alexandria before returning to Genoa, but only if a majority of the men on board agreed.
Resicum worked a kind of practical magic in these early contracts. Canon law forbade the payment of interest on loans in medieval Europe (as Islamic law did in the eastern and southern Mediterranean). By inventing a bonus paid to the investor in the event of the successful completion of a journey, the resicum provided a workaround for venture capitalists and for the captain seeking capital. It also gave those who could not journey an opportunity to earn investment income. A small but significant proportion of the investors in these maritime contracts were retired seamen or women. Finally, it parcelled out the risk assumed by those who undertook the trans-Mediterranean journey…
The fascinating story in full: “How 12th-century Genoese merchants invented the idea of risk,” from Karla Mallette (@karlamallette) in @aeonmag.
See also: “Genoa: The Cog in the New Medieval Economy” source of the image above.
* Virgil (reminding us that a sense of contingent peril and prospect predated the Middle Ages)
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As we roll the dice, we might recall that risk came in a variety of forms in Medieval times: it was on this date in 1307 that Wilhelm Tell (or we tend to know him, William Tell) shot an apple off his son’s head.
Tell, originally from Bürglen, was a resident of the Canton of Uri (in what is now Switzerland), well known as an expert marksman with the crossbow. At the time, the Habsburg emperors of Austria were seeking to dominate Uri. Hermann Gessler, the newly appointed Austrian Vogt (the Holy Roman Empire’s title for “overlord”) of Altdorf, raised a pole in the village’s central square, hung his hat on top of it, and demanded that all the local townsfolk bow before the hat. When Tell passed by the hat without bowing, he was arrested; his punishment was being forced to shoot an apple off the head of his son, Walter– or else both would be executed. Tell was promised freedom if he succeeded.
As lore has it, Tell split the fruit with a single bolt from his crossbow. When Gessler queried him about the purpose of a second bolt in his quiver, Tell answered that if he had killed his son, he would have turned the crossbow on Gessler himself. Gessler became enraged at that comment, and had Tell bound and brought to his ship to be taken to his castle at Küssnacht. But when a storm broke on Lake Lucerne, Tell managed to escape. On land, he went to Küssnacht, and when Gessler arrived, Tell shot him with his crossbow.
Tell’s defiance of Gessler sparked a rebellion, in which Tell himself played a major part, leading to the formation of the Swiss Confederation.
Tell and his son (source)
“Fortune sides with him who dares”*…
Timing is everything: risk and the rhythm of the week…
The seven-day week originated in Mesopotamia among the Babylonians, and it has stuck around for millennia. However, it’s not inherently special. Egyptians once used a ten-day week, and Romans used an eight-day week before officially adopting a seven-day week in AD 321.
Still, the seven-day week is so ingrained that we may notice how days “feel.” I was recently caught off guard by a productive “Tuesday”, realizing halfway through the day that it was actually Monday. Recent research shows that a big player in the psychology of weeks is a tendency to take risks.
“Across a range of studies, we have found that response to risk changes systematically through the week. Specifically, willingness to take risks decreases from Monday to Thursday and rebounds on Friday. The surprising implication is that the outcome of a decision can depend on the day of the week on which it is taken.”…
“Feels like a Tuesday: research explains why days ‘feel’ certain ways,” from Annie Rauwerda @BoingBoing. The underlying research, by Dr. Rob Jenkins, is here.
* Virgil
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As we take a chance, we might recall that it was on this date in 1908 (a Thursday) that Thomas Etholen Selfridge became the first American to die in an airplane crash. An Army lieutenant and pilot, he was a passenger on Orville Wright’s demonstration flight of the 1908 Wright Military Flyer for the US Army Signal Corps division at Ft. Meade, Maryland. With the two men aboard, e Flyer was carrying more weight than it had ever done before…
The Flyer circled Fort Myer 4½ times at a height of 150 feet. Halfway through the fifth circuit, at 5:14 in the afternoon, the right-hand propeller broke, losing thrust. This set up a vibration, causing the split propeller to hit a guy-wire bracing the rear vertical rudder. The wire tore out of its fastening and shattered the propeller; the rudder swivelled to the horizontal and sent the Flyer into a nose-dive. Wright shut off the engine and managed to glide to about 75 feet, but the craft hit the ground nose-first. Both men were thrown forward against the remaining wires and Selfridge struck one of the wooden uprights of the framework, fracturing the base of his skull. He underwent neurosurgery but died three hours later without regaining consciousness. Wright suffered severe injuries, including a broken left thigh, several broken ribs, and a damaged hip, and was hospitalized for seven weeks…
Wikipedia
Two photographs taken of the Flyer just prior to the flight, show that Selfridge was not wearing any headgear, while Wright was only wearing a cap. Given speculation that Selfridge would have survived had he worn headgear, early pilots in the US Army were instructed to wear large heavy headgear reminiscent of early football helmets.
“Doubt thou the stars are fire”*…
Solar storms are a relatively regular occurrence. But in 1859, a massive solar storm occurred; solar flares created the one of the largest geomagnetic storms on record. Telegraph service failed… but otherwise the event was largely a curiosity.
A new study calculates that our sun may produce another ‘superflare’ in the next 100 years… and suggests that the resulting damage to electronic systems on which we’ve come to depend could be devastating.
How much more disruptive would a superflare be? It’s hard to say because the damage would seem to be incalculable. A superflare even a hundred times more powerful than what we normally experience would almost certainly hit every unprotected electronic system on Earth in some fashion, disrupting or outright crippling powergrids around the world, disabling machinery and manufacturing, blowing out cell phones, satellites, and all the rest. Transportation systems depend on electronics, as do utility systems, communications systems, in short: everything could just stop working overnight, even though we probably wouldn’t feel a thing.
If the superflare was thousands of times more powerful than normal? For all we know, it could send humanity back to the Age of Sail practically overnight–at least until we can repair or replace the entire planet’s electronic infrastructure, a tall order when you have no power transmission to manufacture replacement electronic components and we’re all reduced to communicating using carrier pigeons and old fashioned letters…
The solar storm of 2012 was of similar magnitude to the 1859 flare, but it passed Earth’s orbit without striking the planet, missing by nine days. For more on what we might expect of we’re not so lucky next time, see “Massive Superflare Eruption from Sun within 100 Years Possible, New Study Says.”
And for more background see: “Solar Flare: What If Biggest Known Sun Storm Hit Today?”
* Shakespeare
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As we slip on our shades, we might spare a thought for Giovanni Battista Riccioli; he died on this date in 1671. He is known, among other things, for his experiments with pendulums and with falling bodies, for his discussion of 126 arguments concerning the motion of the Earth, and for discovering the first double star. But he is perhaps most remembered for introducing (in in Almagestum Novum in1651) the current scheme of lunar nomenclature: he named the more prominent features after famous astronomers, scientists and philosophers, while the large dark and smooth areas he called “seas” or “maria”. The lunar seas were named after moods (Seas of Tranquillity, Serenity) or terrestrial phenomena (Sea of Rains, Ocean or Storms).
“Not taking risks one doesn’t understand is often the best form of risk management”*…
Jerry Taylor is the CEO of the Niskanen Center. A veteran of conservative and libertarian think tanks (including the infamous ALEC) who spent much of his career working to thwart climate change mitigation moves, he has had a change of heart…
I spent the better part of my professional life (1991-2014) working at a libertarian think tank—the Cato Institute—arguing against climate action. As Cato’s director of Natural Resource Studies (and later, as a senior fellow and eventually vice president), I maintained that, while climate change was real, the impacts would likely prove rather modest and that the cost of reducing greenhouse gas emissions would greatly exceed the benefits.
I changed my mind about that, however, because (among other things) I changed my mind about risk management.
If we think about climate risks in the same fashion we think about risks in other contexts, we should most certainly hedge—and hedge aggressively—by removing fossil fuels from the economy as quickly as possible.
Let me explain…
And so he does, at “What Changed My Mind About Climate Change?”
*
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As we struggle to be good ancestors, we might recall that it was on this date (as nearly as scholars can mark it), that the first long-distance electric power transmission line in the United States was completed: 14 miles between a generator at Willamette Falls and downtown Portland, Oregon. While the distance seems trivial today, the feat was considered a major engineering accomplishment in its time.
An illustration of the Willamette power station and transmission line painted by one of its engineers
“Fortune sides with him who dares”*…
… or not:
Does hot weather actually make us hot-headed? Does a warming planet induce us to take more risks? According to new research, there is indeed a correlation: When it comes to rational decision-making, changes in climate shape how individuals think about loss and risk—even if it takes centuries for that evolution to occur…
New research finds that people living in climatically turbulent regions tend to make riskier decisions than those in relatively more stable environments. The full story at “How volatile climate shapes the way people think.”
* Virgil
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As we feel the heat, we might recall that it was on this date in 1945 that Volume 1, Number 1 of the Bulletin of the Atomic Scientists was published. Concerned with scientific and global security issues resulting from accelerating technological advances that might have negative consequences for humanity, the group created “The Doomsday Clock” which has featured on its cover since its introduction in 1947, reflecting “basic changes in the level of continuous danger in which mankind lives in the nuclear age.”
The current “setting” is 2 minutes to midnight, reflecting the failure of world leaders to deal with looming threats of nuclear war and climate change. This is the clock’s closest approach to midnight, matching that of 1953,
The cover of the Bulletin of the Atomic Scientists has featured the famous Doomsday Clock since it debuted in 1947, when it was set at seven minutes to midnight.
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