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“Fortune sides with him who dares”*…

View of Genoa by Christoforo de Grassi (after a drawing of 1481)

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)

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