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Must Watch Video:
Video: Invisible Gorilla: Seeing the world as it isn’t - via Invisible Gorilla Blog – When we look at the world around us, we feel that we are seeing it as it is. Most of the time, we are — but not because our visual system perceives the world precisely as it is. Rather, our visual system makes informed guesses about the contents of the world based on the compressed signal projected onto our eyes. And, for most practical purposes, those guesses are pretty good. Moreover, this “guessing” system work so seamlessly that we rarely notice any discrepancy between our guesses and reality. Only when we “break” the system can we reveal these default assumptions.
A Documentary on Behavioral Finance By PBS Nova - via Finance Professor-
Another Fantastic Marketing Ploy: How JayZ transformed a $50 champagne into the next Cristal—and received millions for doing so – via Atlantic- Jay-Z’s sudden change in attitude wasn’t without cause. In June 2006, a reporter from The Economist asked Frédéric Rouzaud, manager of Louis Roederer, which produces Cristal, what he thought of rappers drinking his champagne. “That’s a good question,” Rouzaud replied. “But what can we do? We can’t forbid people from buying it. I’m sure Dom Pérignon or Krug would be delighted to have their business.” As soon as Jay-Z caught wind of the comments, he publicly denounced Rouzaud and replaced Cristal with Krug and Dom Pérignon in his clubs, as Rouzaud had mockingly suggested. But the release of the “Show Me What You Got” video on October 10 immediately established Armand de Brignac as his favorite. By simply associating himself with the brand, Jay-Z was able to almost singlehandedly lift it from obscurity to the heights of celebrity chic; the gilded champagne sold out its initial production run (and all subsequent ones, according to representatives). In the weeks following my return from France, I realized that the answers had been here in the U.S. all along. I spoke with a number of sources close to the matter—including a prominent executive at a major record label, a wine distributor with ties to the entertainment industry, and the chief executive of a notable liquor company, to name a few. None of them would let me quote them by name for fear of damaging business relationships, and when I related everything I’d learned, all of them confirmed that Jay-Z receives millions of dollars per year for his association with Armand de Brignac. The connection wasn’t through the Cattier family, but through Sovereign Brands.The math looks extremely favorable for Jay-Z. The production cost per bottle of Armand de Brignac is about $13; the wholesale price is $225. The maximum output is 60,000 bottles per year. If Jay-Z splits the $212-per-bottle profit evenly with Cattier and Sovereign, a back-of-the-envelope calculation suggests his annual take would be a little over $4 million. One of my sources confirmed that number, and added that Jay-Z may have received equity in Sovereign Brands worth about $50 million. All for dropping a few lyrical references and featuring Armand de Brignac in a couple of videos.
Corporations and the Arab Net Crackdown – via FPIF – In Libya, the Gaddafi regime plunged the nation into digital darkness during the first week of March, where it has remained. In Bahrain, the kingdom reacted swiftly to pro-democracy demonstrations by filtering sites that let locals share cell phone videos, blocking YouTube pages containing videos of street protests, and taking down a large Facebook group that called for more demonstrations. And even in Egypt, despite the departure of Mubarak, the interim military authority has taken a harsh stand against pro-democracy activists, while trying to stop the sharing of looted state security files, which reveal the extent to which the government uses the Web to spy on Egyptians. These accounts of Internet abuse have not gone unnoticed. Less known, however, is the degree to which U.S. and European companies have enabled the crackdown. Corporate Enabler Egypt’s Internet crackdown appears to have been aided by Narus, a Boeing-owned surveillance technology provider that sold Telecom Egypt “real-time traffic intelligence” software that filters online communications and tracks them to their source.
Damodaran: Catastrophe and consequences for value: how investors must properly think about japan – via Musings on Markets- The airwaves have been inundated with news about natural disasters in Japan and their aftermath. Without minimizing the human impact – the thousands who have lost their lives and belongings – and the dangers of a nuclear meltdown, I want to focus on the impact of catastrophes, natural or man-made, on markets and asset values. While each disaster is different, here are some common themes that emerge after the disaster:
Proactiv’s celebrity shell game: The blockbuster acne treatment may have mega-star endorsements, but its ingredients are painfully ordinary -via Salon – He’s right, and perhaps the three-step “Proactiv System” helps make it easier for teens. But the real key to Proactiv’s success is celebrity. Endorsements have helped make it the acne product to buy. A-list youth stars like Katy Perry, Justin Bieber, Jessica Simpson, Avril Lavigne and even P. Diddy offer testimonials online and on TV about how terrible it was to have all that acne, and how ProActiv transformed the star into someone beautiful, confident and successful. (P. Diddy famously claimed that he uses ProActiv to “moisturize my situation and preserve my sexy.”) Viewers see those hideous “before” pictures — some mysteriously dark, pimple-faced headshot of an unseen somebody — followed by the “glorious” after shot, glowing and perfect.
A Study on Regret - via Mind Hacks- The ‘Regrets of the Typical American’ have been analysed in a new study that not only looks at what US citizens regret most, but provides some clues for those wanting to know whether it is better to regret something you haven’t done, or regret something you have.
Phil Tetlock:Poor forecasting: one approach to doing something about it- via Understanding Uncertiainty – One area of forecasting that Tetlock considered was intelligence (in the sense of trying to find out what’s going on in other countries, particularly those your country doesn’t get along with). Recently, for example, there’s been adverse comment on how well (or badly) Western intelligence agencies predicted the unrest in many Middle Eastern countries. On the other hand, intelligence agencies are in the business of making predictions based on what are often very small quantities of very uncertain information, which is hardly a situation where accurate forecasting is always going to happen.
Mispricing of Dual-Class Shares: Profit Opportunities, Arbitrage, and Trading – via Empirical FInance Blog- “This is the first paper to examine the microstructure of how mispricing is created and resolved. We study dual class-shares with equal cash-flow rights, and show that a simple trading strategy exploiting gaps between their prices appears to create abnormal profits after transactions costs. Trade data from TAQ shows that investors shift their trading patterns to take advantage of gaps. Contrary to common perception, long-short arbitrage plays a minor part in eliminating gaps, and one-sided trades correct most of them. We also show that the more liquid share class is usually responsible for the price discrepancies. Our findings have implications for the literature on risky arbitrage and asset pricing more generally.”
The symphony of trading- via Deric Bownds – You might think that a gaggle of financial traders on a large exchange floor, who make on average about 80 trades a day, would collectively generate orders with no particular time structure. A 7-hour working day is roughly 25,000 seconds, so the chance of one employee’s 80 trades randomly synchronizing with any of his colleague’s is small. Uzzi’s group, to the contrary, found that up to 60% of all employees were trading in sync at any one second. What’s more, the individual employees tended to make more money during these harmonious bursts.
How I Did It: Blockbuster’s Former CEO on Sparring with an Activist Shareholder Carl Icahn - via HBR – Long before Carl Icahn arrived on the scene, Blockbuster faced its share of challenges. Indeed, expectations of failure were hovering over the company even before I joined in 1997. Most outsiders were convinced that our bricks-and-mortar video retail business would be killed off by market shifts and technological advances. But I firmly believed we could keep the Blockbuster brand relevant, no matter how people decided to watch movies. Even though Blockbuster nearly doubled revenues to more than $6 billion from the time I joined the company, plenty of people were betting against us.
Why Everyone’s a Hypocrite - via Channel N – Hypocrisy isn’t hard to spot around us. Politicians vow publicly to uphold morals and then violate them privately. Celebrities vacillate between desperately seeking attention and demanding privacy. And professional athletes act as models of human strength but rely on performance-enhancing drugs. More routinely, all of us crave junk food but start diets, dream of financial stability but can’t stop spending, and routinely act without knowing why.
Yes, you can own sunlight: Curious Story Of Modern Property Law - via Boston.com -It might seem that the notion of property is on uncharted ground — that we’re attaching new and ever more slippery meanings to an age-old concept. Not so fast. In his new book, “American Property,” out from Harvard University Press this month, UCLA law professor Stuart Banner takes a hard look at the ways in which our nation’s idea of property has evolved over time. The nature of property, he argues, has been shifting for centuries, as society and technology change. Some types of property have vanished, like commons laws that stretch back to the first North American Colonies, while new ones have emerged, like ownership of the airwaves.
The Psychology Behind The New York Times Paywall - via Fast Company – The biggest, baddest psychological bouncer that the Times must get past is the “Endowment Effect”–our tendency to hoard what we already own, even at greater cost. Nobel Laureate Daniel Kahneman found that when a test group was given a coffee mug for free, they demanded more money to give up the mug compared to a separate control group asked how much than they were willing to acquire in the first place. In other words, ownership has its own value, beyond simply the utility of the product.
Walmart : What does store design have to do with price increases - via Iterative Path – A lot of things have distracted us from our pricing mission. We got enamored with presentation as an example. We walked people through our [remodeled] stores and they were gorgeous.
Steven Levit on John List: This Is What I Call Being Risk-Averse – via Freakonomics- I found myself in a Las Vegas sports book with good friend and economist John List the other day. Since we both live in Chicago and have kids who play baseball, we thought it would be fun to bet some money on the Chicago White Sox. It would give us a reason to root for the White Sox, and give our kids a reason to open up the morning paper to see if the team had won.
Why do women find funny men attractive? - via Bakadesuyo- The current study lends support to the prediction that effective humor production acts as an honest indicator of intelligence in humans.
Does sharing negative attitudes of others promote feelings of familiarity? - via Bakadesuyo- Holding similar negative—versus positive—attitudes toward a third party has been shown to predict increased closeness to a stranger.
Entrepreneurial Case Study: How Carrots Became the New Junk Food - via Stingy Investor- “The company has been around for nearly a century now, but it boomed in the 1990s, with a breakthrough product. A local grower named Mike Yurosek had become frustrated with all the waste in the carrot business. Supermarkets expected carrots to be a particular size, shape, and color. Anything else had to be sold for juice or processing or animal feed, or just thrown away. Yurosek wondered what would happen if he peeled the skin off the gnarly carrots, cut them into pieces, and sold them in bags. He made up a few test batches to show his buyers. One batch, cut into 1-inch bites and peeled round, he called ‘bunny balls.’ Another batch, peeled and cut 2 inches long, looked like little baby carrots. Bunny balls never made it. But baby carrots were a hit. They transformed the whole industry. Soon, the big growers in Bakersfield were planting fields with baby carrots in mind, sowing three times more seeds per acre, so the carrots, packed densely together, would grow long and skinny, for the maximum number of 2-inch cuts. Yields and profits climbed. The really big deal, the thing nobody expected, was that baby carrots seemed to make Americans eat more carrots. In the decade after they were introduced, carrot consumption in the United States doubled.”
Wealth, White Women, and High Rates of Cancer - via Stats – A new study published in the Archives of Dermatology finds the rate of melanoma for women between the ages of 15 and 39 is highest among those who earn the most.
Women’s Funding Network Study is Junk Science - via Village Voice – The Schapiro Group members weren’t academic researchers, and had no prior experience studying prostitution. In fact, the group was best known for research paid for by the American Chamber of Commerce Executives. The study found—surprise—that membership in the Chamber of Commerce improves a business’s image.
Why Angry Birds is so successful and popular: a cognitive teardown of the user experience - via UX Blog- Over the past 30+ years as a consultant in the field generally known as human factors engineering (aka usability engineering), I have been asked by hundreds of clients why users don’t find their company’s software engaging. The answer to this persistent question is complex but never truly elusive. This question yields to experience and professional usability analysis.
Health Care Myth Busters: Is There a High Degree of Scientific Certainty in Modern Medicine? – via Sciam-
Most of us are confident that the quality of our healthcare is the finest, the most technologically sophisticated and the most scientifically advanced in the world. And for good reason—thousands of clinical research studies are published every year that indicate such findings. Hospitals advertise the latest, most dazzling techniques to peer into the human body and perform amazing lifesaving surgeries with the aid of high-tech devices. There is no question that modern medical practices are remarkable, often effective and occasionally miraculous.
Richard Bookstaber: Human Complexity & Financial Markets - via Rick Bookstaber – Complexity can be either an annoyance or a boon, depending on one’s enthusiasm for tricky problems. We all know intuitively that complexity makes accidents both more likely and more severe. After all, any machine with many parts has more risk of having something go wrong, and with more interconnected mechanisms there is more risk that a single failure will propagate to cause the entire machine to fail. For markets, the accidents are market crises. I pointed to complexity and tight coupling as key components in the origin of market crises in my book, A Demon of Our Own Design.
Do Women Fear Appearing Intellectually Less Able?- via Journal of Social Psych – Two ecologically valid studies involving anticipated public performance offer insight into women’s tendencies to avoid placing their abilities under a spotlight. First, in an experimental study, women felt less comfortable than did men and experienced more personal risk when they anticipated that their test scores would be public. Second, in a naturalistic observational setting, students taking an experiential forensic psychology course were required to perform intellectually challenging activities in public. Women displayed more concern about the course requirements than did men, and subsequently dropped the course in disproportionate numbers. Higgins’ (1997) regulatory focus theory provides a theoretical framework for interpreting the data.
How A a typical MBA programme has not kept pace with the developments in finance theories (or reality) – via Jayanth Varma -The paper concludes that the finance curriculum in a typical MBA programme has not kept pace with the developments in finance theories in the last decade or more. While a lot needs to change in finance teaching, finance theory also needs to change though to a lesser extent. Many ideas that are well understood within certain subfields in finance need to be better assimilated into mainstream models. For example, many concepts in market microstructure must become part of the core toolkit of finance. The paper also argues that finance theory needs to integrate insights from sociology, evolutionary biology, neurosciences, financial history and the multidisciplinary field of network theory. Above all, finance needs more sophisticated mathematical models and statistical tools.
James Surowiecki: Creative destruction & japan – Via New Yorker- Even if Japan’s nuclear crisis is contained, its earthquake and tsunami now seem certain to be, economically speaking, among the worst natural disasters in history, with total losses potentially as high as two hundred billion dollars. In response, fearful investors sent the Nikkei down almost twenty per cent on the first day of trading after the tsunami, and it’s still down more than ten per cent. Yet, while the fear is understandable, this may turn out to have been an overreaction: history suggests that, despite the terrifying destruction and the horrific human toll, the long-term impact of the quake on the Japanese economy could be surprisingly small.
3 Ways to Show Your Kids That It’s Not About Being Good, It’s About Getting Better – via Hunffington Post – Understanding why some children dig in and work hard when faced with something new and challenging to learn, while others get anxious or give up, has been a focus of research in psychology for decades. Most people assume it has a lot to do with intelligence, but that’s surprisingly wrong. No matter how high your I.Q. is, it says nothing about how you will deal with difficulty when it happens. It says nothing about whether you will be persistent and determined, or feel overwhelmed and helpless.
A Review of The Sunk Cost Fallacy – via You Are Not So Smart- Your decisions are tainted by the emotional investments you accumulate, and the more you invest in something the harder it becomes to abandon it.
Bilinguals See World A Different Way - via Science Daily – Learning a foreign language literally changes the way we see the world, according to new research. Panos Athanasopoulos, of Newcastle University, has found that bilingual speakers think differently to those who only use one language.
Downing a bitter drink makes people more likely to express moral disapproval- via WSJ- The authors were also interested in the different reactions of liberals and conservatives, because previous studies have shown a greater overlap among conservatives between moral judgments and judgments about cleanliness and “purity.” Indeed, conservatives’ opinions changed to a greater degree—that is, they became more harsh—than liberals’ did.
Freakonomics: How creating “layers of accountability” can enhance your chance of losing weight and keeping it off.- Via Freakonomics-
Us vs. Them – what shapes the urge to harm rivals? - via Deric Bownds – Intergroup competition makes social identity salient, which in turn affects how people respond to competitors’ hardships. The failures of an in-group member are painful, whereas those of a rival out-group member may give pleasure—a feeling that may motivate harming rivals. The present study examined whether valuation-related neural responses to rival groups’ failures correlate with likelihood of harming individuals associated with those rivals. Avid fans of the Red Sox and Yankees teams viewed baseball plays while undergoing functional magnetic resonance imaging. Subjectively negative outcomes (failure of the favored team or success of the rival team) activated anterior cingulate cortex and insula, whereas positive outcomes (success of the favored team or failure of the rival team, even against a third team) activated ventral striatum. The ventral striatum effect, associated with subjective pleasure, also correlated with self-reported likelihood of aggressing against a fan of the rival team (controlling for general aggression). Outcomes of social group competition can directly affect primary reward-processing neural systems, which has implications for intergroup harm.
How well do you know your friends - via Psych Science – Some people knew their friends’ triggers well; others had almost no idea what set their friends off. And that made a difference to the friendship. People who had more knowledge of their friend’s if-then profile of triggers had better relationships. They had less conflict with the friend and less frustration with the relationship. Other research has shown that it’s not that hard to come up with a list of traits that describe someone; casual acquaintances can do it. “But, if I’m close to someone, I can really start to learn the if-then profiles, and that’s what’s going to pay off in my relationship,” Friesen says.
US Gas Prices vs World Gas Prices – via Flowing Data