Metaphorically Speaking

What do metaphors have to do with financial education?

To explain this, let me ask you to think back to the last time you worked a jigsaw puzzle. At first the task of assembling the puzzle seems daunting. But then you start noticing similarities in pieces. There are pieces with straight edges that form the borders of the puzzle. There are similarities of color or pattern that enable that help you start to group the pieces. Soon you begin to find pieces that fit together. The more you assemble, the easier it gets. It has to do with framework. The framework helps you connect each new piece. The more framework, the easier it is to incorporate a new piece.

Your mind works the same way. You have a hard time remembering a stray fact. It’s much easier if you have something to connect it to. This is born out by much research. Metaphors are one way to provide a connection.

Some financial concepts have richer networks of connections than others.

Take the concept of risk.

Risk can mean something very different for an insurance underwriter than it does for a securities rep. The insurance underwriter’s view of risk is probably closer to the common layperson idea of what the word means. Risk is bad. Risk is a chance of a loss. To the securities rep, the concept is expanded. Yes, risk is a chance of a loss, but it is also a chance of a gain.

These different views lead to different strategies for managing risk.

There is an old story about four blind men who encounter an elephant. One touches the trunk and describes the elephant as like a snake. Another touches the tusk and describes the elephant as like a sword. Another touches the elephant’s side and describes it as like a wall. The last touches a leg and describes the elephant as like a tree.

Metaphor is a tool to approach understanding and knowledge, but a metaphor is not the thing itself. It provides connections but not complete pictures. Skillful use of metaphor is a powerful tool, but it is only a part of the puzzle.

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Countering Conventional Wisdom

If you are financially sophisticated, I want you to think about how you talk to a person who knows nothing about the topic. If you are a financial know-nothing, I want you to think about talking to a financial professional.

The question I have for both of you is the same: How do you talk to each other? What is you common language? What assumptions does one make that are totally foreign to the other?

This is the challenge of financial education. Knowledgeable or not, people make assumptions about money.

Often assumptions are heavily colored by public debates about taxes and insurance and entitlements and regulation. Even though we know that public debate is loaded with misinformation, we can help being swayed by it.

In some fields of education, students are blank slates. They know nothing. In the field of financial education, however, student can be steeped in the “conventional wisdom” and the conventional wisdom is wrong. As an educator, how do you counter this?

Well, you can’t become a counter-advocate. You are not there to advocate for policy. You are there to educate people about concepts. You need to be aware of common misconceptions, but leave the polemics at the door. You need to be the authority. And you have to make sure you don’t inadvertently buy into the controversies yourself.