The biggest barrier to communicating risk – with Maria Konnikova

A key reason people have spent decades trying to work out how to communicate risk effectively, sighs writer, psychologist and our latest podcast guest, Maria Konnikova, is the human brain is just not a fan of nuance


Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

One of the knottiest problems with risk is how to communicate its range and potential effects. After all, as we have discussed in articles such as What risk means to you and Matter of interpretation, here on The Value Perspective, this critical element of finance – and indeed life – is hugely subjective, which has led to plenty of discussion around how best to avoid ambiguity and convey nuance.

Some innovative solutions have been attempted – for example, you may remember Global Parametrics CEO Hector Ibarra, a guest on The Value Perspective podcast last summer, discussing a dice game showcased by the Red Cross at a UN climate change conference, which involves “changing assumptions to see how groups of players react – and encouraging them to draw conclusions on the uncertainty of risk”.

As our most recent podcast guest points out, however, a key reason psychologists and other experts have spent decades trying to work out how to communicate risk effectively is the human brain is not a fan of nuance. Whether we use percentages or frequencies, for example, says writer and psychologist Maria Konnikova, “when you try to communicate the nuance, people get mad”.

“Think about how often people get mad at the weatherman – just because they predicted it could rain,” she continues. “If they said there was a 70% chance of rain and you bring your umbrella and it doesn’t rain, you get mad, right? Because it was ‘supposed’ to rain today. And if they said there was 10% chance of rain and you don’t bring your umbrella and it rains, you also get mad – because it was ‘not supposed’ to rain today.


“This is because people cannot wrap their minds around the fact the chance of rain is not absolute – it is not zero and it is not 100. Almost nothing in life is absolute and so it is a constant struggle. There has been a lot of work done on the best format for communicating nuance – do we use percentages? Do we use odds – you know, there is a one chance in four, say? Do we use examples? Do we try to convey an emotional message?

The underlying problem

“None of it is ideal because none of it gets to that underlying problem – that it is hard for people to understand nuance because our brain does not want to. We want a straightforward answer – not that 70% does not mean 100%. We want to round up. And you see the struggle – not just how you communicate weather but how you communicate environmental disaster risks, say, such as the risk of an earthquake or a flood.

People who have to think like that for a living, such as insurers and actuaries, may be able to take nuance in their professional stride, says Konnikova, but it is a lot harder for those on the other side of the desk. “When you are the consumer, it is very difficult to figure out the actual risk you are facing – or are comfortable with,” she adds. “And so it tends to lead to very emotional or personal decisions.

“I wish I had a better message for people who try to communicate risk but there is little you can do when someone has an emotional or personal take on something. Even if, say, I find a perfect way to communicate your risk of catching Covid-19 depending on if you do or do not wear a mask – well, in the US, mask-wearing has become so politicised that, no matter how I put across that risk, you may well not be listening to me.

“You may have already made up your mind about what you are going to do. So anyone who communicates risk is up against this human element. And that is really difficult because, when the human mind does not want to internalise a message, it is an uphill battle. It is something I have thought about for such a long time and I wish I had a nice answer for you – but nothing is perfect when it comes to communicating risk.”


Juan Torres Rodriguez

Juan Torres Rodriguez

Fund Manager, Equity Value

I joined Schroders in January 2017 as a member of the Global Value Investment team. Prior to joining Schroders I worked for the Global Emerging Markets value and income funds at Pictet Asset Management with responsibility over different sectors, among those Consumer, Telecoms and Utilities. Before joining Pictet I was a member of the Customs Solution Group at HOLT Credit Suisse.  

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