Oct 102011

In a recent blog post I addressed the Sapir-Whorf Hypothesis, which holds that language affects thought because humans think in terms of the languages that they speak.

Those of us who speak more than one language know firsthand that some ideas are easier to express in some languages than in others. The Sapir-Whorf Hypothesis implies that certain concepts should be easier for speakers of some languages to grasp than for the speakers of other languages that lack words or phrases to express those ideas naturally, and that by learning other languages one’s worldview can change.

For example, try explaining the difference between ‘freedom’ and ‘liberty’ to someone who does not speak English, or the difference between ‘greedy’ and ‘selfish’.  Alternatively, note that in German the word for ‘policy’ — Politik — is the same as the word for ‘politics’; and the word for ‘debt’ — Schuld — is the same as the word for ‘guilt’.  One can only wonder to what degree such linguistic differences affect differences in individuals’ perceptions of the world and each other, especially with languages as diverse as English and other Western European languages on the one hand and, e.g., Arabic, Chinese, and Persian on the other.

In other words, culture matters.

Related to this is the famous — though inaccurate — claim that Eskimos have an extremely large number of words for ‘snow’, because it is such an integral part of their lives, and subtle differences have significant impacts on their lives.  Similarly, financial managers have more than one term for ‘return on investment’, including return on equity (ROE), return on assets (ROA), return on sales (profit margin), and several others; and several terms for ‘profit’, including net income, earnings before tax (EBT), earnings before interest and tax (EBIT), earnings before interest, tax, depreciation, and amortization (EBITDA), and gross profit.  When one studies business, as opposed to economics, one comes to see instinctively that ‘return’ and ‘profit’ are vague terms; more categories than specific concepts.

Seen in this light, business education is largely a branch of language education. We are teaching concepts and terms with specific meanings as much as — if not more than — we are teaching particular skills. Granted, we use graphs and equations to illustrate the points that we are making, but these are shorthands for the underlying stories that we are telling.

Whether one is dealing with self-interest in economics, risk management in finance, the difference between assets and equity in accounting, or human resource psychology in management, one is telling stories.  As one tells those stories, and students begin to see the world in terms of those stories, one leads students to see the world differently.  If that worldview conforms to reality more accurately than conventional wisdom does, then students who embrace that worldview – learn that language or dialect, as it were – are in a position to benefit from that knowledge by almost literally seeing the world through different eyes.

Given that the vast majority of individuals in urban areas around the world are engaged in business at some level, it is a travesty that Accounting, Economics, Finance, and Management Psychology and Sociology are not standard features of the primary and secondary school curriculum.

If we are going to entrust individuals with the vote, then they should be able to tell legitimate policy proposals from populist magical thinking.  It is one thing to disagree over legitimate policy proposals, because all value is subjective, but it is another thing entirely, when political activists and candidates call for and promise dancing unicorns, singing bunnies, and rainbow fountains.  And, it is yet another thing when voters are unable to distinguish between the two categories.

Our goal here is to provide some tutorial services in the language of business.

Invest accordingly.

Prof. Evans

Oct 092011

Reuters via Yahoo! reports, “American[s]… are placed on a kill or capture list by a secretive panel of senior [US] government officials, which then informs the president of its decisions… There is no public record of the operations or decisions of the panel, which is a subset of the White House’s National Security Council… Neither is there any law establishing its existence or setting out the rules by which it is supposed to operate.” [emphasis added]

Naturally enough, some people have a problem with this.

One could rail against the unfairness of it all, post angry comments below blog posts, or even go to the extreme of sending a sharply worded email to someone in power. As an act of absolute desperation, one might wait two, four, or six years and… vote.  Alternatively, one could look for the investment implications.

Because I am neither licensed nor qualified to offer investment advice, and everything that I post here is for educational and entertainment purposes only, I will not make any speculative recommendations, but I will provide some guidelines for forming and testing your own hypotheses.

First, consider that the US Department of Homeland Security (DHS) has begun testing a project to predict future crimes on members of the public, called the Future Attribute Screening Technology (FAST) project.  FAST “is designed to track and monitor, among other inputs, body movements, voice pitch changes, prosody changes (alterations in the rhythm and intonation of speech), eye movements, body heat changes, and breathing patterns.” Best of all, a field test was performed at a large venue in the USA earlier this year.

The US Federal Bureau of Investigation (FBI) [i.e., national police] by mid-January 2012 will activate a nationwide facial recognition service in some US states that will allow local police to identify unknown subjects in photos.

In other words, privacy is dead.

Love it or hate it, ask yourself, “Who benefits?”

You might not be able to stop Rome from burning, but you can try to profit from it, so that you avoid being a burden on others.

Invest accordingly.

Prof. Evans