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From Ridiculous to Brilliant: Why We Play at Work – via MIT World
Video: Ted Talk – Try something new for 30 days
Video: Great Documentary on Professors - via Empirical Finance Blog- For all you parents out there looking to drop $50,000 a year on your kid’s education–Buyer Beware.
Taking Little Bets: How Breakthrough Ideas Emerge - via Leadon Young- Little bets are what Peter Sims defined as the very factor which separates breakthrough innovators and outstanding achievers from the rest of us. In his most recent book, Little Bets: How Breakthrough Ideas Emerge from Small Discoveries, Sims tried to figure out how creative thinkers and doers discover great ideas and why most of us don’t work the same way.
A single, Internet-enabled utility, taking a little extra off the top of every resident’s bill - via Longform- On the development of South Korea’s New Songdo and Cisco’s plans to build smart cities which will “offer cities as a service, bundling urban necessities — water, power, traffic, telephony — into a single, Internet-enabled utility, taking a little extra off the top of every resident’s bill.”
The Spam Factory’s Dirty Secret - via MotherJones- On the cut-and-kill floor of Quality Pork Processors Inc. in Austin, Minnesota, the wind always blows. From the open doors at the docks where drivers unload massive trailers of screeching pigs, through to the “warm room” where the hogs are butchered, to the plastic-draped breezeway where the parts are handed over to Hormel for packaging, the air gusts and swirls, whistling through the plant like the current in a canyon. In the first week of December 2006, Matthew Garcia felt feverish and chilled on the blustery production floor. He fought stabbing back pains and nausea, but he figured it was just the flu—and he was determined to tough it out.
Fall of the House of Busch - via Business Week- It took four generations to build Anheuser-Busch, one of the most celebrated companies in America. And only one for it to come apart
How To Be A Movie Star: Perceived success is the name of the game in Hollywood - via Every NBA team starts a home game the same way: by announcing the visiting team’s starting lineup, then turning out the lights and cranking a song that’s either hip-hop happy or gratuitously goose-bumpish (like Phil Collins’ “In the Air Tonight”). Within seconds, a JumboTron highlight-video launches with a dopey slogan like “Our Time Is Now” or “Rise Up.” It’s crammed with awkward close-ups, dunks and alley-oops, as well as players muttering things like, “This is our city” and “Let’s do this.” The video almost always ends with the team’s best player staring into the camera and screaming, “AHHHHHHHHHHH!” or “LEMME HEAR IT!!!!!!!!” Then, the lights turn back on and they introduce their starting five.
Can the American economy produce more decent jobs? – via Considering The Evidence- That’s the topic of a New America Foundation forum, with contributions by Josh Bivens and Heidi Shierholz, Thomas Kochan, Paul Osterman, and yours truly. Mine is titled “Low-wage jobs and no wage growth: Is there a way out?’
Inequality & Risk Taking Behavior - Via Ed Hopkins- The disadvantaged in society rationally engage in risky behavior when social rewards are sufficiently unequal. Finally, as greater inequality in terms of social status induces gambling, it can cause greater inequality of wealth.
Top-Secret America - via Buysiders.com- From the “better late than never series”, a July 2010 special series (links inside) by the Washington Post is way too enlightening to ignore even now. It’s about the huge inefficiencies brought by uncontrolled – and unaccountable – spending in the Intelligence/Military complex after the 9/11 attacks. Some will point out that, since then, a certain high-profile terrorist has been found and dealt with, but it doesn’t change the main arguments of the articles. In fact, there’s still a world of lessons to be learned and mental models to be taken from these pieces.
Jeff Bezos on innovation - via Value Investing World- When you look at something like, go back in time when we started working on Kindle almost seven years ago…. There you just have to place a bet. If you place enough of those bets, and if you place them early enough, none of them are ever betting the company. By the time you are betting the company, it means you haven’t invented for too long.
Who Is Consistent? – via Overcoming Bias- Young rich well-educated men make more consistent choices. Family structure, risk tolerance and personality type don’t matter.
Why You Shouldn’t Buy Those Quarterly Earnings Surprises – via WSJ- Everyone loves surprises. But perhaps you shouldn’t get too excited over them. This month, market strategists, television commentators and other investing pundits will bombard you with breathless updates on the percentage of companies in the Standard & Poor’s 500-stock index that have reported profits even higher than what analysts expected—in Wall Street lingo, a “positive earnings surprise.
Obesity Linked to False Perception of Food Scarcity – via Miller McCune- New research from Finland finds people with a high BMI take longer to notice hidden food items.
Collars for Dollars: How the drug war sacrifices real policing for easy arrests- via Reason.com- When I was a police officer in Baltimore, one sergeant would sometimes motivate his troops in the middle of a shift change by joyfully shouting, “All right, you maggots! Let’s lock people up! They don’t pay you to stand around. I want production! I want lockups!” He said this while standing in front of a small sign he most likely authored: “Unlike the citizens of the Eastern District, you are required to work for your government check.”
Searching for Something Good to Say About India- via NYT-But over the years, it has become evident that beneath the topsoil, Indian talent does not run deep. Hundreds of thousands of graduates are unemployable as they pass out of substandard institutions. And many of them who have begun to work in call centers cannot be trained beyond a point because their fundamentals are weak. For instance, they have never attended an English-language school.
The Four Kinds of Economies - via Ribbonfarm- I don’t normally do straight-up reblogs here, but the new post, Unifying the Value Universe from Greg Rader at onthespiral.com is very relevant to some themes we are starting to attack here. It divides up value exchange into four types of economics: gift, transactional, relationship and attention that can be neatly arranged in a 2×2. As with any 2×2, the identification of the axis variables to use is key, and I think the ones Greg has picked really might be the right ones: relatedness of the parties and refinement of the value-add being exchanged (in the sense of rough vs. polished). Click on and read. He has a more detailed analysis of how this diagram works and in particular, of transactions that cross quadrant boundaries.
How U.S. Budget Cuts Prolong Global Slavery - via Time – Three days before the U.S. congressional elections last fall, Hillary Clinton stood halfway around the world from Washington, pledging to young victims of human trafficking at Cambodia’s Siem Reap Center that they would continue to enjoy the support of the U.S. State Department, which then provided some $336,000 to the shelter. The acclaimed center, situated near the magnificent temples of Angkor Wat, was an oasis of peace for some 50 survivors who, before they were rescued or escaped, had endured slavery in brothels, where they were forced to have sex with as many as 30 men a day. At the shelter, they received counseling, studied hairdressing, learned to sew, and otherwise worked to rebuild their lives and reclaim their humanity. In the evenings, they did aerobics together.
Nudge to nobesity II: Menu positions influence food orders - via Nudge Blog- “Very small but cumulated decreases in food intake may be sufficient to have significant effects, even erasing obesity
over a period of years” (Rozin et al., 2011). In two studies, one a lab study and the other a real-world study, we examine the effect of manipulating the position of different foods on a restaurant menu. Items placed at the beginning or the end of the list of their category options were up to twice as popular as when they were placed in the center of the list. Given this effect, placing healthier menu items at the top or bottom of item lists and less healthy ones in their center (e.g., sugared drinks vs. calorie-free drinks) should result in some increase in favor of healthier food choices.
Mission Impossible: beating the market over long periods of time- via Empirical Finance Blog- I’ve been thinking about “extreme” returns recently. After all, who wouldn’t mind earning a few extra bucks in the stock market?
Reasons for being rational - via Less Wrong- And there’s one last conclusion I can draw, albeit from a sample size of one. Not everyone can be a contrarian rationalist. Not everyone can rebel against their parents’ religion. Not everyone can disagree with their friends and family and not feel guilty. But everyone can be rational if they are raised that way.
Charlie Munger’s Parody from a “Morning With Charlie” – via Value Investing World- A Parody Describing The Contributions Wantmore, tweakmore, totalsuc, countwrong, and oblivious to the tragic “great recession” in boneheadia and thoughts of some people relating to this disaster.
India: More to graft than the money- via India Today- But we also have to fight corruption in the way we have to fight pollution. If pollution is defined as a degradation of our physical environment then corruption can be defined as a degradation of our social environment – an attack on the clean, life- sustaining relations we need to maintain between human beings. The problem is, unlike a straightforward murder or assault, it gets tricky when you try and define pollution or corruption; both problems ( or crimes) are so vast that we are all implicated in some way or the other.
Decision Making/ Behavioral Economics/Psychology/ Risk:
How your brain pursues pleasure - via Human nature, at war for itself.For centuries, that was the fundamental view of our interior life: a perpetual struggle between the brain — the capital of rationality — and the heart, the sloppy seat of passion.
Bet on the Losing Team: Why would the team that’s down at the half be more likely to win the game? - via SciAm- In this year’s NBA playoffs the Dallas Mavericks displayed an uncanny ability to come from behind and win. Uncanny because to do so implies a defiance of expectation – teams that are ahead should, obviously, have a greater chance of winning a game. However, new research from Jonah Berger and Devin Pope suggests that once we account for some basic psychological principles of motivation, the odds of winning might, in some cases, be reversed. In other words, being behind by a little can actually increase a team’s likelihood of winning.
Are men always higher in social dominance orientation than women? - via Wiley- The belief in the gender invariance of many traits is a view that dominates much of psychology. In social psychology, this position is clearly represented by social dominance theory and the construct of social dominance orientation (SDO) where it is argued that, all else being equal, men will be higher in SDO than women. In other domains, though, these assumptions are being questioned, and researchers are arguing for a gender similarities hypothesis. The argument is that men and women are more similar than different, and where there are effects for gender, these are small. In this investigation, men and women are compared under similar cultural (Study 1), ideological, (Study 2) and status (Study 3) contexts to examine whether, all else being equal, men really are higher in SDO than women. In an additional study (Study 4), a meta-analysis is conducted aggregating the effect sizes of the previous studies. Results demonstrated either no effect for gender or an interaction between gender and the relevant social context and only a small effect size of gender—findings that disconfirm the ceteris paribus assumption of social dominance theory. In conclusion, the implications of the findings for understanding gender effects in social psychology are discussed.
The REAL Truth About Why You Support (or Oppose) Gay Marriage - via PsychFiles- What is the REAL reason why you either support or oppose gay marriage? We may give logical reasons for our opinions, but the roots behind your opinion lies – where else? – in your past. So let’s dive into your mind as we always do here in the Psych Files and learn how our attitudes develop over time and how strong attitudes especially come to be held.
Power and Decision Making - via Everyday Sociology Blog- In California, the sexual orientation of a judge has become news following his judgment about Proposition 8. Prop 8 was passed by California voters in 2008, and served to amend the state’s constitution to deny access to marriage for same-sex couples. Recently, the judge’s sexual orientation has been disclosed as “homosexual,” and some are suggesting that the decision he made was biased because of his personal status.
Understanding uncertainty: The big risk test - via Plus Magazine- Do you think bungee jumping is riskier than smoking? Would you take a medicine with a 10% risk of serious side effects? Or board a plane with a 1% chance of crashing?
The DSM-V is set to label problem gambling an addiction. - via Addiction Inbox- I used to gamble. Back when I did, I was also an active alcoholic and a chain smoker. Camel filters, if you’re wondering. And we had a running joke, my wife and I, although the humor leaked out of it for her pretty quickly. We would breach the doors of the gambling palace, and plunge into the dark, icy interior of a casino at Las Vegas or Tahoe, and stand on the edge of the gaming room, taking it all in for a moment. “Ah,” I would say, surveying the roomful of cigarette smokers with drinks in their hands, making bets or hitting buttons at one o’clock in the morning, “my kind of people.”
Should you buy collision insurance? - via Decision Science News- People like us (the type who would read this blog) probably have health, and if they have a home, homeowners insurance. At the same time, people like us laugh at the idea of buying extended warranties from the big box electronics stores. The question we pose: Where do we draw the line?
Good Leaders Acknowledge What Can’t Be Done - via Harvard- It’s never easy to decide to stop pursuing a strategy. Americans got a reminder of that in President Obama’s speech last week on Afghanistan; it was dispiriting to hear him describe the extended timetable required to remove even just the incremental troops who went in as the surge. But at least Obama did manage to make a decision to scale back. Many leaders faced with a strategy that isn’t working don’t get that far.
Why Do We Share Our Feelings With Others? - via PsychScience- People often share stories, news, and information with the people around them. We forward online articles to our friends, share stories with our co-workers at the water cooler, and pass along rumors to our neighbors. Such social transmission has been going on for thousands of years, and the advent of social technologies like texting, Facebook, and other social media sites has only made it faster and easier to share content with others. But why is certain content shared more than others and what drives people to share?
How comparing decision outcomes affects subsequent decisions:The carry-over of a comparative mind-set – via SJDM- In the current paper we investigate how feedback over decision outcomes may affect future decisions. In an experimental study we demonstrate that if people receive feedback over the outcomes they obtained (“factual outcomes”) and the outcomes they would have obtained had they decided differently (“counterfactual outcomes”), they become regretaverse in subsequent decisions. This effect is not only observed when this feedback evoked regret (with counterfactual outcomes being higher than factual outcomes), but even when the feedback evoked no regret (with factual outcomes being equal to counterfactual outcomes). The findings suggest that this effect on subsequent decisions is at least partly due to the transfer of a comparison mind-set triggered in the prior choice.
Am I a science journalist? - via Discover- In the evolving world of science communication, how do we define a science journalist? This panel will discuss whether the venerable word “journalist” can or should be applied to some, all, or none of the new generation of science bloggers and educators who are remaking the field.
The ten greatest liars in history - via – Marbury- This is a piece I did for the Radio Times, to accompany the serialisation of Born Liars on Radio 4. RT have kindly given me permission to republish it here…
Money and Mimicry - via Pysch Science- “This study demonstrates money’s ability to stimulate a longing for freedom, as money-reminded people perceive the affiliation intention expressed by mimicry to be a threat to their personal freedom, leading them to respond antagonistically in defense. This could have important implications for social bonding and forming interpersonal relationships, as affiliation attempts by others can backfire,” states Liu and her colleagues.
Power, alcohol make you drop guard - via The Times of India- Power can either lead to great acts of altruism, or corruptive, unethical behaviour. Being intoxicated can lead to a first date, or a bar brawl.
What does it mean to be human? How salience of the human category affects responses to intergroup harm - via EJSP- Two studies explore how salience of the human category influences responses to intergroup harm and how different images of humanity modify these effects. In Study 1, British participants (n = 86) contemplated acts of terrorism against their group. When the human category (versus intergroup distinctions) was salient and when the prevailing image of humanity was malevolent (versus benevolent), participants were not only more understanding of terrorism, blamed this less on religious group memberships, but also more strongly endorsed the use of extreme force by countries to defend their boarders, preserve the peace and prevent future attacks. In Study 2, British participants (n = 83) contemplated the torture of Iraqi prisoners by British soldiers. When the human category was salient and the prevailing image of humanity was malevolent, participants experienced less guilt and justified torture more. We conclude that the effects of human category salience on interpretations of intergroup harm depend on what it means to be human. When human nature is perceived negatively, thinking in terms of the human category can normalise intergroup harm regardless of whether the outgroup or the ingroup is the perpetrator. Implications for re-categorisation approaches to conflict reduction are discussed.
The dark side of swearing – it may deter emotional support from others - via BPS Research – Each culture has its agreed-upon list of taboo words and it doesn’t matter how many times these words are repeated, they still seem to retain their power to shock. Scan a human brain, swear at it, and you’ll see its emotional centres jangle away.
Can’t get over me: Ego depletion attenuates prosocial effects of perspective taking - via EJSP-Many studies attest to the beneficial and prosocial effects of perspective taking. The present research tests the notion that such perspective taking is a process involving active self-regulation and, hence, that effects of perspective taking on prosocial behaviour are more pronounced when self-control resources are high, rather than low. Results confirmed this hypothesis. Across two experiments using acts of compliance as a specific form of prosocial behaviour, perspective-taking participants were more willing to comply with a request for help by the experimenter (experiment 1) and donated more time to a charitable cause (experiment 2) than participants who did not engage in perspective taking, but only when self-regulatory resources were in sufficient supply. Under conditions of ego depletion, the impact of perspective taking on compliance was attenuated.
Why does buying experiences make us happier than buying material goods? - via Bakadesuyo- We found that participants were less satisfied with their material purchases because they were more likely to ruminate about unchosen options (Study 1); that participants tended to maximize when selecting material goods and satisfice when selecting experiences (Study 2); that participants examined unchosen material purchases more than unchosen experiential purchases (Study 3); and that, relative to experiences, participants’ satisfaction with their material possessions was undermined more by comparisons to other available options (Studies 4 and 5A), to the same option at a different price (Studies 5B and 6), and to the purchases of other individuals (Study 5C). Our results suggest that experiential purchase decisions are easier to make and more conducive to well-being.
How our attention can be highjacked. - via Deric Bownds- Here are some interesting observations by Anderson et al. on how our attention can be highjacked by stimuli irrelevant to the task at hand, causing failures of cognitive control.
Want to Get Rich? Be (Moderately) Happy - via APS- Some people believe that earning the most money will make them incredibly happy. What they probably don’t know is that being incredibly happy may not earn them the most money. A new study finds that when it comes to financial success, you’re better off being a moderately happy person rather than someone who’s chronically ecstatic.
Mindfulness Increases Positive Judgments and Reduces Negativity Bias - via Sage- The present research examined the relation between mindfulness and negativity bias, or the tendency to weigh negative information more heavily than positive. A randomized experiment compared a brief mindfulness induction to an unfocused attention control condition. Negativity bias was assessed with a subjective measure of optimism and pessimism and an objective measure of negativity bias in attitude formation, BeanFest, which required associating novel stimuli with positive or negative outcomes. Participants in the mindfulness condition demonstrated less negativity bias in attitude formation. That is, they correctly classified positive and negative stimuli more equally than those in the control condition. Interestingly, the difference in negativity bias stemmed from better categorization of positives. Furthermore, those in the mindfulness condition reported higher levels of optimism compared to the control condition. Together, these results suggest that mindfulness increases positive judgments and reduces negativity bias.
Complex Social Consequences of Self-Knowledge- via Sage- Psychology theories disagree on the most effective self-presentation strategies—some claim possessing positive illusions is best, whereas others claim accuracy is best. The current experiments suggest that the role of perceivers and what perceivers believe has been underappreciated in this debate. Participants acted as recruiters for either a swim team (Experiment 1) or a company (Experiment 2) and evaluated hypothetical applicants who made claims about their own abilities and personalities. Overly positive statements about oneself were beneficial only when perceivers had no reason to believe they were unfounded. In addition, conveying self-knowledge was more beneficial than being modest. The results are consistent with the presumption of calibration hypothesis, which states that confidence is compelling because, barring evidence to the contrary, perceivers assume others have good self-insight. Therefore, to make the best impression, people should be as positive as is plausible to perceivers.
Social Influence and Household Decision-Making: A Behavioural Analysis of Household Demand - via Cam.UK- Housing markets are subject to many interrelated sources of instability on both a microeconomic and macroeconomic scale. Housing decisions of different individuals will be interdependent, generating non-linearities, discontinuities and feedback effects. This paper focuses in on some behavioural factors that contribute to complexity in housing demand. In particular, the impact of herding and social influence is captured using a model incorporating the impact of social information on willingness to pay. This model is tested in an experimental context and this experimental evidence confirms first, that social information has a statistically significant impact and, second, this impact is determined by a person’s individual characteristics including gender and personality traits.
Empathy, Guilt-Aversion & Patterns of Reciprocity- via Unica.it- This paper reports the results of an experiment aimed at investigating the link between empathy, anticipated guilt and pro-social
behavior. In particular we test the hypothesis that empathy modulates the anticipatory effect of guilt in bargaining situations and, more specifically, that it correlates with subjects’ willingness to give and to repay trust in an investment game. We also control for the effect of individual risk attitude. Our main results show that empathy significantly influences players’ pattern of restitution in the investment game and that risk-propensity weakly affects the decision to trust; we also find a significant gender difference in the distribution of empathy. These results seem to indicate that empathy affects pro-social behavior in a more complex way than previously hypothesized by existing models of social preferences.
Chewing Gum Makes You Smarter - via Paul Kedrosky- Chewing gum was associated with greater alertness and a more positive mood. Reaction times were quicker in the gum condition, and this effect became bigger as the task became more difficult. Chewing gum also improved selective and sustained attention. Heart rate and cortisol levels were higher when chewing which confirms the alerting effect of chewing gum.
Cheated-On Personalities - via Overcoming Bias- Ron Guhname took a dataset of ~1500 people, and predicted which people said their spouse cheated on them from the victim’s five-factor personality, as well as his or her age, social class, religiosity, and body mass index. He found less cheating on religious people, on older and less agreeable men, and on conscientious and closed-to-experience women. These personality effects are much bigger than the religion effect!
Preference towards control in risk taking: Control, no control, or randomize? – via Springerlink- This paper experimentally investigates preference towards different methods of control in risk taking. Participants are asked to choose between different ways for choosing which numbers to bet on for a gamble. They can choose the numbers themselves (control), let the experimenter choose (no control), or randomize. Classical economic theories predict indifference among the three methods. I found that participants exhibit strict preference for control, preference for no control, and preference for randomization. These preferences are robust as participants are willing to pay a small amount of money to implement their preferred method. Most participants believe that the winning probability under different methods is the same. This result contributes to the literature by clarifying that for most participants who exhibit preference for control, their preference is not due to illusion of control, but by source preference. Participants invest less in the risky gamble when they are not offered their preferred method.
Bad reasoning about reasoning - via Rationally Speaking- A recent paper on the evolutionary psychology of reasoning has made mainstream news, with extensive coverage by the New York Times, among others. Too bad the “research” is badly flawed, and the lesson drawn by Patricia Cohen’s commentary in the Times is precisely the wrong one.
How the Brain Understands Food and Appetite - via SciAm- In studies where the food intake and energy expenditure of subjects are carefully monitored over a period of weeks to months (which tends to average out day-to-day fluctuations) a remarkable balance between calories consumed and calories burned was observed. When various mammals, from mice to monkeys, are either overfed or starved for a few weeks, their weight soon returns to normal levels when free access to food is resumed. Crucially, our mammalian bodies seem to be able to regulate feeding based on the amount of energy available in the food we consume, not just on the volume of that food. One example of many: When groups of rats were fed nutrient solutions of varying concentrations, they adjusted the volume consumed to achieve a constant inflow of calories. It’s a lot like the thermostat in your house: When its thermometer registers a drop in temperature, it sends a signal to the heater to warm the house until the desired set point is reached.
Stress Doesn’t Cause Ulcers! Or, How To Win a Nobel Prize in One Easy Lesson: Barry Marshall on Being … Right - via Slate- Not that long ago, Barry Marshall was an obscure physician studying the etiology of ulcers at a hospital in Perth, Australia — several thousand literal and figurative miles from the center of the medical universe. His work was unconventional, not to say heretical, and in 1986, he was invited to discuss it at a gastroenterology conference in the United States. His wife came along and, while doing some sightseeing, overheard a conversation among some other gastroenterologists’ wives who happened to be sitting in front of her on a bus. “They were talking about this terrible person that they imported from Australia to speak,” Marshall told me. “You know: ‘How could they put such rubbish in the conference?’ ”
Want to Know What Burgers and Gift Giving Reveal About Human Nature? - via Psychology Today- Last week, my trade book The Consuming Instinct: What Juicy Burgers, Ferraris, Pornography, and Gift Giving Reveal About Human Nature was released. I am delighted to report that the early buzz has been very encouraging. Here are some early reviews/interviews:
Business/ Entrepreneurship/Finance/ Investing:
The Confluence of Technology & Finance - via MitWorld- Andrew Lo of MIT on the confluence of technology & finance, and what is has wrought, for good and … much less good. And, yes, John Thain is in this too.
Funny Money: Why Bitcoin Is a Scam – via Good- Technology- In 2009, Satoshi Nakomoto (possibly a real person, possibly a pseudonym for one or more hackers) invented Bitcoin, the first peer-to-peer currency. Bitcoin, which works along the same lines as the Bittorrent network you might use to download movies and music, isn’t the first online currency. Linden Dollars, the unit of exchange in Second Life, are widely traded and regulated by game’s maker, Linden Lab. Nakomoto’s innovation was using math-heavy cryptography techniques to create a medium of exchange that doesn’t require a central authority or physical tangibility (like gold) to deter counterfeiters and regulate the money supply.
The Progression of Innovation - via Future Blind- It’s good for any investor or business person to know where their company fits when it comes to the progression of innovation. Even if a certain company or product isn’t new, at some point in time the business it’s in was. Throughout history, innovations (whether they be technological inventions or innovations in business model) came about that performed a certain “job” better than the status quo. Most of these innovations didn’t arrive spontaneously — they were built upon or evolved from their predecessors.
When is a Liability not a Liability? Textual Analysis, Dictionaries, and 10-Ks- via Empirical Finance Blog- “Previous research uses negative word counts to measure the tone of a text. We show that word lists developed for other disciplines misclassify common words in financial text. In a large sample of 10-Ks during 1994-2008, almost three-fourths of the word count identified as negative by the commonly used Harvard Dictionary represents words that typically do not have negative meaning in a financial context. Words like tax, board, foreign, vice, and liability, simply describe company operations. Two potential solutions are explored. First, we develop an alternative negative word list that better reflects the tone of financial text. Second, we show that using a common term weighting scheme reduces the noise introduced by misclassifications. Without term weighting, our list generally outperforms the Harvard list; with weighting the performance appears comparable. However, we also find evidence that some of the power of the Harvard list could be attributable to misclassified words that proxy for other effects. Five other word classifications (positive, uncertainty, litigious, strong modal, and weak modal) are also considered. We link the word lists to 10-K filing returns, trading volume, subsequent return volatility, fraud, material weakness, and unexpected earnings.”
DuPont and Corporate Social Responsibility – Rhetoric vs. Reality - via Miller McCune- DuPont is proud of its “publicly established environmental goals,” but the company has also faced lawsuits over allegations of contamination, and it’s associated with 103 Superfund sites.
Transocean: No Apologies Over Gulf Oil Spill - via Businessweek- From the day its Deepwater Horizon rig exploded, Transocean has denied wrongdoing, deflected blame, and paid dividends, not cleanup costs. So far, its hardball strategy is working
Is Brazil’s economic boom a bubble ready to burst? - via BBC- “House prices in some parts of Rio are up nearly 80% in the past year,” says Ronaldo Coelho Netto, an estate agent in Rio de Janeiro, looking up at a new development near the city centre.
Advanced Distressed Debt Lesson: Fraudulent Conveyance and Tousa - via Distressed Debt Investor- In an earlier post, I explored fraudulent conveyance in concept and as it related to the current Tousa decision at that time. Our contributor, Josh Nahas, principal of Wolf Capital Advisors and moderator at the upcoming NYSSA Distressed Debt Panel, explores the issue in much more detail as well as adding updates to the Tousa decision with reversal coming from District court. This is a lengthy read where all distressed debt investors should learn a thing or two. Enjoy.
If the Decision Makers Didn’t Expect This, They Shouldn’t Be Making the Decisions- via StreetWise Proessor- Bloomberg reports that much of the oil being sold out of the Strategic Petroleum Reserve is being put right into private storage. Which is exactly what the figures in this post showed would happen. Indeed, the only thing that is preventing more oil from moving into private storage is the fact that market participants now anticipate that it is more likely that oil will be released in the SPR in the future, thereby reducing the returns to private storage.
The Eclectic Mix:
The philosophy of applied mathematics - via Plus Magazine- My work is possible because of a stunning fact we often overlook: the world can be understood mathematically. The party goer’s misconception reminds us that this fact is not obvious. In this article I want to discuss a big question: “why can maths be used to describe the world?”, or to extend it more provocatively, “why is applied maths even possible?” To do so we need to review the long history of the general philosophy of mathematics — what I will loosely call metamaths.
Video:The March of Technology – via Mit World – Moore’s law and energy efficiency emerge as themes in these two lectures on past and future progress in microprocessors and robotics.
The game theory of choosing flight seats - via Mind Your Decisions- ’ve been traveling a lot and thinking about the strategy of picking the best seat on a plane. Here is an interesting question that came across my mind.
XXX: Sex Critic Susie Bright on Being Wrong – via Slate- Gentle readers, a survey: Are you appalled or aroused by the idea of a threesome? Do you share Christine O’Donnell’s views on masturbation, or are your browser’s other open windows showing porn? Have you ever regretted a sexual experience? Do you sometimes wonder if you’re doing it “wrong”? Have you figured out yet where babies come from? As these questions suggest, there’s a rich area of overlap between my area of expertise (wrongness) and that of famed “sexpert” Susie Bright. One of the country’s foremost sex educators, activists, and writers, Bright is an outspoken advocate of sexual equality and freedom. She was one of the co-founders of On Our Backs , the first sex magazine by, for, and about women, as well as the founder and longtime editor of The Best American Erotica series. Her memoir, Big Sex Little Death , will be published in April 2011. In this interview, she and I talk about why the Vatican is the original sexpert, whether anti-sex crusaders are also anti-intellectual, and which physical activity is (to her own surprise) making Bright sweat these days.
The Plan to Reduce Income Inequality by Driving down the Wages of College Graduates - via Reality Base- Georgetown University’s Center on Education and the Workforce is proposing to increase the number of college graduates America turns out each year in order to create an oversupply and drive down the wage premium from 74% to 46% vs. high school graduates. If we don’t do this, the report says, the college wage premium will rise to 96% by 2025, and that would be bad. The report, The Undereducated American by Anthony P. Carnavale and Stephan J. Rose and funded by the Lumina Foundation and the Bill and Melinda Gates Foundation, was released June 27, 2011.
The Intelligence of Beasts- via CHE- Cognition researchers move past ‘chimpocentric’ theories, raising new questions about human uniqueness
Gender Roles & Ancient Farming- via Vox- Gender inequality is an old story. This column presents new evidence to suggest it may be as old as the horse and plough. It says there is a robust negative relationship between historical plough-use and unequal gender roles today. Traditional plough-use is positively correlated with attitudes reflecting gender inequality and negatively correlated with female labour force participation, female firm ownership, and female participation in politics.
Another Look at Entropy - via Understanding Uncertainty- Entropy is a term that draws both fear and reverence from the greatest physicists and mathematicians. How do you describe it? What does it even mean? Who in their right mind would want to quantify a phantom concept that’s impossible to see or touch?
Adaptive Advantages of Overconfidence in War - Paul Kedrosky -Overconfidence has long been considered a cause of war. Like other decision-making biases, overconfidence seems detrimental because it increases the frequency and costs of fighting. However, evolutionary biologists have proposed that overconfidence may also confer adaptive advantages: increasing ambition, resolve, persistence, bluffing opponents, and winning net payoffs from risky opportunities despite occasional failures. We report the results of an agent-based model of inter-state conflict, which allows us to evaluate the performance of different strategies in competition with each other. Counter-intuitively, we find that overconfident states predominate in the population at the expense of unbiased or underconfident states. Overconfident states win because: (1) they are more likely to accumulate resources from frequent attempts at conquest; (2) they are more likely to gang up on weak states, forcing victims to split their defences; and (3) when the decision threshold for attacking requires an overwhelming asymmetry of power, unbiased and underconfident states shirk many conflicts they are actually likely to win. These “adaptive advantages” of overconfidence may, via selection effects, learning, or evolved psychology, have spread and become entrenched among modern states, organizations and decision-makers. This would help to explain the frequent association of overconfidence and war, even if it no longer brings benefits today.
Created by: Forensic Science