Growing up, I often heard my father, who was in the Navy, measuring distance in nautical miles. I always wondered why we couldn’t just use kilometres. A nautical mile, I learned, is about 1.8 times longer than a kilometre, based on the Earth’s circumference. Using kilometres for distance felt easier and uncomplicated.
This experience isn’t unique to the Navy. Walk into a doctor’s clinic, and you’re likely to hear terms like “hypertension” (high blood pressure), “echocardiogram” (an ultrasound of the heart), and “prognosis” (a likely outcome). Medical professionals use these medical terms for precision, but to the untrained ear, it sounds plain Greek & Latin.
“The contract is void ipso facto if terms aren’t met,” is a very common sentence used by lawyers. To an average person, this might sound complex, but it simply means the contract automatically becomes invalid if specified conditions aren’t fulfilled.
The tech industry is no different. If you’ve ever heard someone talk about “debugging,” you might wonder why bugs and insects are involved in Tech. In reality, debugging is simply the process of finding and fixing errors in code.
The Finance industry might be the worst. In my 15 years in finance, I’ve learnt to finally understand the jargon, but it can sound perplexing to non-finance people. Take Alpha and Beta, for instance. These are just Greek alphabets, but in finance, alpha measures a portfolio’s performance relative to a benchmark. At the same time, beta indicates its volatility relative to a benchmark (volatility—a fancy word for the movement of stock prices).
Then there are bulls and bears. In the financial world, bulls are investors who believe the market will rise, while bears think it will fall.
On the other hand, we have Bid and Ask prices. It also took me some time to internalise these terms. Essentially, ‘Bid‘ is the price at which a dealer or buyer is willing to purchase a stock, while ‘Ask’ (also known as ‘Offer’) is the price at which a dealer or seller is willing to sell it.
So, if you, as a retail investor, are looking to buy a stock, you will have to pay the Ask price, and if you want to sell, you will receive the Bid price.
The Bid price is always lower than the Ask price (the buyer is seeking to buy at a lower price vs the seller who is looking to sell at a higher price). So if we want to buy, we need to meet the Ask (seller’s) price and if we want to sell, we need to meet the Bid (buyer’s) price. Now, regarding market dynamics: when there are more Bids than Asks, it generally indicates higher buying demand.
Isn’t it a bit confusing? Why couldn’t it just be called the buy price or the sale price rather than Bid and Ask! These examples only scratch the surface, as there are countless other jargon you probably encounter daily across all facets of life.
Jargon isn’t inherently bad; it helps experts communicate precisely. However, to those unfamiliar with it, jargon can make them feel excluded from the conversation and maybe the social circle.
Next time you encounter confusing terms, remember: it’s not your fault — it’s the jargon. Life might have been simpler if we didn’t use them as much. But would it have been as fun? Let me know your thoughts.
Till the next time,
Vijay
CEO – InCred Money
