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Special Edition: All Things Ed Thorp
(Highly Recommended) Biggest Collection of Links To Ed Thorp & Kelly Criterion – via BerkshireMystery@ Corner of Berkshire & Fairfax
Interview with Ed Thorp - via Paul Kedrosky- I think that the opportunities for quantitative investing are likely to get better, simply because markets are becoming larger and more interconnected and the tools the quants have continue to improve. So that’s one side of it. The other side is there there can be a disconnect between the models that the quants build and the real world, and that disconnect can lead to serious trouble, for example the mortgage pool models or the Long Term Capital Management approach to doing things with super-high leverage, assuming the world is Mediocristan rather than something else.
Most Important Reads:
London Riots: Understanding Mob Psychology – via MindHacks- But what we do know about is the interaction between large crowds and the police and you could do much worse than check out the work of psychologist Clifford Stott who researches how crowds react to policing and what triggers violence. In his 2009 report on the scientific evidence behind ‘Crowd Psychology and Public Order Policing,’ commissioned by the UK constabulary, he summarises what we know about public disorder and how the authorities can best manage it.
Stop Coddling the Super-Rich - via Warren Buffet @ NYT- Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
The moral decay of our society is as bad at the top as the bottom – via The Telegraph- David Cameron, Ed Miliband and the entire British political class came together yesterday to denounce the rioters. They were of course right to say that the actions of these looters, arsonists and muggers were abhorrent and criminal, and that the police should be given more support. But there was also something very phony and hypocritical about all the shock and outrage expressed in parliament. MPs spoke about the week’s dreadful events as if they were nothing to do with them.
Bill Gates: The Most Gratifying Job on Earth – via Gates Notes- Anyone who wants to seriously engage in giving faces two important questions: where can you make the biggest impact, and how do you structure your giving so it’s effective.
Interview: Martin Luther King Jr. - via Longform- This is a litany to those of us in this field. “What more will the Negro want?” “What will it take to make these demonstrations end?” Well, I would like to reply with another rhetorical question: Why do white people seem to find it so difficult to understand that the Negro is sick and tired of having reluctantly parceled out to him those rights and privileges which all others receive upon birth or entry in America? I never cease to wonder at the amazing presumption of much of white society, assuming that they have the right to bargain with the Negro for his freedom.
The rise of data science – via Information Processing- Where do you find the people this versatile? According to DJ Patil, chief scientist at LinkedIn (@dpatil), the best data scientists tend to be “hard scientists,” particularly physicists, rather than computer science majors. Physicists have a strong mathematical background, computing skills, and come from a discipline in which survival depends on getting the most from the data. They have to think about the big picture, the big problem. When you’ve just spent a lot of grant money generating data, you can’t just throw the data out if it isn’t as clean as you’d like. You have to make it tell its story. You need some creativity for when the story the data is telling isn’t what you think it’s telling.
George Soros: Thoughts on Philanthropy & Society - via NY Review of Books- I have made it a principle to pursue my self-interest in my business, subject to legal and ethical limitations, and to be guided by the public interest as a public intellectual and philanthropist. If the two are in conflict, the public interest ought to prevail. I do not hesitate to advocate policies that are in conflict with my business interests. I firmly believe that our democracy would function better if more people adopted this principle. And if they care about a well-functioning democracy, they ought to abide by this principle even if others do not. Just a small number of public-spirited figures could make a big difference.
Ideas that are convenient, popular, and acceptable have become sacrosanct - via Iterative Path- There is incessant and increasing attack on our intellect. We are fed simple ideas based on convenient samples and bombarded with regurgitation of weak ideas extended by other popular gurus. As Galbraith wrote first in introducing The Conventional Wisdom by John Kenneth Galbraith, ideas that are convenient, popular and acceptable have become unquestioned truths. Times may change, new fads replace old fads – but our acceptance of what is convenient, familiar and popular as sacrosanct remains the same.
In Their Own Words: Explaining Obedience to Authority Through Milgram Participants’ Comments - via Sagepub- The authors examined data generated during a replication of Milgram’s obedience studies to address some lingering questions about those studies. In Study 1, judges coded comments participants made during experimental and debriefing sessions. Participants who refused to follow the experimenter’s instructions were significantly more likely to express a sense of personal responsibility than those who followed the instructions. Participants who expressed concern for the well-being of the learner exhibited a greater reluctance to continue the procedure than did those not expressing this concern. However, whether participants expressed concern for the learner was not related to whether they ultimately continued the procedure. Study 2 looked at participants’ reactions to each of the experimenter’s four prods. The further along the prod sequence the experimenter went, the less likely participants were to continue the procedure. This pattern challenges interpretations of the obedience studies based on the notion that participants were following orders.
Phil Tetlock: Uncovering and Punishing Unconscious Bias – Via Cognition & Culture- Recent technological advances in psychology hold out the promise of detecting unconscious biases before they cause harm. Advocates of the technology may fail to appreciate its many potential uses and costs. We present experimental results demonstrating the ideological filters through which this new technology and its potential uses are evaluated: (1) liberals supported use of the technology to detect unconscious racism among company managers but not to detect unconscious anti-Americanism among applicants to security jobs; conservatives showed the reverse pattern; (2) few participants of any ideology supported punishing individuals for unconscious bias, but liberals and conservatives supported punishing organizations that failed to use the technology to root out each group’s prioritized societal harm; (3) concerns about scientific bias and Type I and II errors mediated perceptions of misuse potential and willingness to punish organizations; (4) political “extremists” were more likely than “moderates” to reconsider support for the technology when confronted with a less palatable alternative use they had not considered.
How The Manhattan Project Screwed Indigenous People- via maisonneuve- A mine in the Northwest Territories provided much of the uranium used during the Manhattan Project—unbeknownst to the indigenous people who worked there.
The Balanced U.S. Press -via NBER- We propose a new method for measuring the relative ideological positions of newspapers, voters, interest groups, and political parties. The method uses data on ballot propositions. We exploit the fact that newspapers, parties, and interest groups take positions on these propositions, and the fact that citizens ultimately vote on them. We find that, on average, newspapers in the U.S. are located almost exactly at the median voter in their states. Newspapers also tend to be centrist relative to interest groups.
Network Stability, Network Externalities and Technology Adoption- via Nber- This paper investigates how the destabilizing of a social network may increase the scope of network externalities, using data on sales of a video-calling system made to an investment bank’s employees and subsequent usage by these customers. The terrorist attacks of 2001 led potential customers in New York to start communicating with a new and less predictable set of people when their work teams were reorganized as a result of the physical displacement that resulted from the attacks. This did not happen in other comparable cities. These destabilized communication patterns were associated with potential adopters in New York being more likely to take into account a wider spectrum of the user base when deciding whether to adopt relative to those in other cities. Empirical analysis suggests that the aggregate effect of network externalities on adoption was doubled by this instability.
Flying is cheap: Some of you aren’t buying it, but even with those dreaded extra service fees, air travel is affordable - via Slate- And yeah, it’s an affordable one too. Time again, maybe, to drag out that old American Airlines ticket coupon that I keep on a bookshelf here at home. A friend of mine found it in a flea market a few years back. It dates from 1946. That year, a man named James Connors paid $334 to fly each direction between Shannon, Ireland, and New York City. Using the Consumer Price Index conversion, that’s equivalent to well over $3,000 today.
Decision Making/ Behavioral Economics/Psychology/ Risk/ Sciences:
Do We Need Placebos? - via Neuroskeptic - The piece looks at experimental neurosurgical treatments for Parkinson’s, such as “Spheramine”. This consists of cultured human cells, which are implanted directly into the brain of the sufferer. The idea is that the cells will grow and help produce dopamine, which is deficient in Parkinson’s.
The persuasive power of false confessions – via MindHacks- The APS Observer magazine has a fantastic article on the power of false confessions to warp our perception of other evidence in a criminal case to the point where expert witnesses will change their judgements of unrelated evidence to make it fit the false admission of guilt.
(Even) God is a Satisficer – via Decisions & Infogaps - There is a deep psychological motivation for satisficing, as Barry Schwartz discusses in Paradox of Choice: Why More Is Less. “When people have no choice, life is almost unbearable.” But as the number and variety of choices grows, the challenge of deciding “no longer liberates, but debilitates. It might even be said to tyrannize.” (p.2) “It is maximizers who suffer most in a culture that provides too many choices” (p.225) because their expectations cannot be met, they regret missed opportunities, worry about social comparison, and so on. Maximizers may acquire or achieve more than satisficers, but satisficers will tend to be happier.
On Being Consistently Inconsistent - via Less Wrong – Robert Kurzban’s Why Everyone (Else) Is a Hypocrite: Evolution and the Modular Mind is a book about how our brains are composed of a variety of different, interacting systems. While that premise is hardly new, many of our intuitions are still grounded in the idea of a unified, non-compartmental self. Why Everyone (Else) Is a Hypocrite takes the modular view and systematically attacks a number of ideas based on the unified view, replacing them with a theory based on the modular view. It clarifies a number of issues previously discussed on Overcoming Bias and Less Wrong, and even debunks some outright fallacious theories that we on Less Wrong have implicitly accepted. It is quite possibly the best single book on psychology that I’ve read. In this posts and posts that follow, I will be summarizing some of its most important contributions.
The Ideology of No: New research into how liberals and conservatives think differently- Via SciAm- Long before Barack Obama chose “Yes We Can” as his 2008 campaign slogan, Republicans had been dubbed the Party of No. The label is popular among liberals as an insult for the GOP, but it’s also been embraced by conservatives as a proud self-description: for some on the right, the Party of No conjures the adults in the room saving future generations from an orgiastic spending spree, in the spirit of William F. Buckley’s proclamation that conservatism “stands athwart history, yelling Stop.” These conflicting views were on display in the recent debt ceiling negotiations, with liberals frustrated by Republican obstructions, and conservative Tea Party members seeing it as their duty to say No to another debt ceiling increase.
Over Confidence Increases Productivity- Via Kinari- Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects exhibiting progressively higher degrees of overconfidence solve more mazes. This result shows a positive aspect of overconfidence, which usually has been examined in its negative aspect as an expectation bias.
Being Normal: It Aint All Its Cracked Up To Be - via Knowledge is Necessity - This is my second installment in our conversation on Nassir Ghaemi’s “A First-Rate Madness: Uncovering the Links Between Leadership and Mental Illness.” (See The Normal Paradox.) Dr Ghaemi is by no means the first to comment on the positive association between manic-depressive tendencies and outstanding achievement, but he goes much farther by calling “normal” into question.
Can Constructive Thinking Predict Decision Making? - via Wiley- We assume that executive function constitutes an integrated set of cognitive processes that mediate working memory, planning, inhibition, flexibility, and decision making. Despite the acknowledged theoretical connection between executive function processes and emotional intelligence, such relationships have rarely been investigated. The purpose of this study was to examine the potential relationship between constructive thinking, conceived as a component of emotional intelligence, and executive function, as indexed by various existing neuropsychological and experimental instruments. We used the Constructive Thinking Inventory as a measure of emotional intelligence. We found that some constructive thinking subscales were able to predict distinct executive function variables. Emotional Coping, Categorical Thinking, and Esoteric Thinking subscales explained performance on various measures of executive function. Thus, we conclude that intervention programs designed to train a specific component of emotional intelligence, namely constructive thinking, could also facilitate performance in executive function processes, and vice versa.
Modularity and decision making - via Cognition & Culture - Mechanisms that are useful are often specialized because of the efficiency gains that derive from specialization. This principle is in evidence in the domain of tools, artificial computational devices, and across the natural biological world. Some have argued that human decision making is similarly the result of a substantial number of functionally specialized, or “modular” systems, brought to bear on particular decision making tasks. Which system is recruited for a given decision making task depends on the cues available to the decision maker. A number of research programs have advanced using these ideas, but the approach remains controversial.
When explaining becomes a sin - via MindHacks- the cacophony of politicians and commentators replaces that of the police sirens, look out for the particularly shrill voice of those who condemn as evil anyone with an alternative explanation for the looting than theirs. For an example, take the Daily Mail headline for Tuesday, which reads “To blame the cuts is immoral and cynical. This is criminality pure and simple”
People have a strange and worrying tendency to admit to things they have not, in fact, done – via Economist- It seems hard to imagine that anyone of sound mind would take the blame for something he did not do. But several researchers have found it surprisingly easy to make people fess up to invented misdemeanours. Admittedly these confessions are taking place in a laboratory rather than an interrogation room, so the stakes might not appear that high to the confessor. On the other hand, the pressures that can be brought to bear in a police station are much stronger than those in a lab. The upshot is that it seems worryingly simple to extract a false confession from someone—which he might find hard subsequently to retract.
Positive fantasies predict low academic achievement in disadvantaged students – via EJSP- Unlike other forms of positive thinking (e.g., expectations), research finds that positive fantasies (experiencing one’s thoughts and mental images about the future positively) predict low effort and little success in several domains. However, for vocational education students of low socioeconomic status and minority ethnicity, for whom the present environment is especially difficult, perhaps it would be appropriate to indulge in positive fantasies that depict the future as bright and easily attained. Three studies show that this is not the case. Positive future fantasies measured early in the program predicted more days absent (Studies 2–3) and lower grades at the end of the program (Studies 1–3), even when adjusting for initial academic competence, expectations of successful achievement, and self-discipline. Expectations of successful achievement predicted fewer days absent and higher grades only when measured midway through the school year, once participants had experience with their own academic standing (Study 3). Results indicate that positive fantasies, which allow people to indulge in images of a bright future, predict poor achievement even in vocational students immersed in a particularly difficult environment.
Social Acceptance and Rejection: The Sweet and the Bitter – via APS- For proof that rejection, exclusion, and acceptance are central to our lives, look no farther than the living room, says Nathan Dewall, a psychologist at the University of Kentucky. “If you turn on the television set, and watch any reality TV program, most of them are about rejection and acceptance,” he says. The reason, DeWall says, is that acceptance—in romantic relationships, from friends, even from strangers—is absolutely fundamental to humans.
Should you trust your memory? – via Bakadesuyo- Robert Burton describes an experiment in his book On Being Certain: Believing You Are Right Even When You Are Not, which everyone with a strong opinion should read. Immediately after the Challenger explosion in 1986, the psychologist Ulric Neisser asked 106 students to describe in writing where they were when they heard, who they were with, how they felt, what their first thoughts were. Two-and-a-half years later, the same students were assembled and asked to answer the same question in writing. The new descriptions were compared with the originals. They didn’t match. People had changed facts about where they were, who they were with, what they felt, what they thought. When confronted with the original essays, people were so attached to their new memories they had trouble believing their old ones. In fact, most refused to revise their memories to match the originals written at the time. What struck Burton was the response of one student: “That’s my handwriting, but that’s not what happened.”
Third of three special JDM journal issues on the Recognition Heuristic – via Decision Science News- The journal Judgment and Decision Making has published the third special issue on “Recognition processes in inferential decision making (III)” edited by Julian N. Marewski, Rüdiger F. Pohl and Oliver Vitouch. At first, there was supposed to be just one special issue on the topic, but so many good articles were received it was expanded to two (which explains our older post referring to “first of two” special issues) and now it has been expanded again to a third and final issue. All the articles address the recognition heuristic [Goldstein, D. G. & Gigerenzer, G. (2002). Models of ecological rationality: The recognition heuristic.
A Mouthwatering Prospect: Salivation To Material Reward- via Jstor- The term “hunger” and terms referring to its physiological correlates, notably “salivation,” are used to refer to desire for material rewards across languages and cultures. Is such usage is “merely metaphorical,” or can exposure to material reward cues evoke a salivary response? Results of an experiment show that individuals salivate to money when induced to experience a low power state but not when induced to experience a high power state. A second experiment shows that men salivate to sports cars when primed with a mating goal but not in a control condition. These findings suggest that salivary secretion is stimulated by material rewards in the presence of a highly active goal to obtain the rewards and that the motivation to acquire material rewards might more closely resemble physiological hunger than previously assumed. Implications for material addictions and decision making and directions for future research are discussed.
Business/ Entrepreneurship/Finance/ Investing:
To Catch a Thief: Can Forensic Accounting Help Predict Stock Returns? - via SSRN - An earnings manipulation detection model based on forensic accounting principles (Beneish 1999) has substantial out-of-sample ability to predict cross-sectional returns. We show that the model correctly identified, ahead of time, 12 of the 17 highest profile fraud cases in the period 1998-2002. Moreover, the probability of manipulation estimated from this model (PROBM) consistently predicts returns over 1993-2007, even after controlling for size, book-to-market, momentum, accruals and the level of open short interest. Separating high PROBM from low PROBM firms within each of these characteristic deciles greatly improves long/short hedge returns. Further analyses show that PROBM also helps predict future earnings because of its ability to anticipate the persistence of current years’ reported accruals. Overall, our findings offer significant empirical support for the investment approach advocated by forensic accountants.
Tutorial to Quickly Detect Changes in the Footnotes - via Old School Value- You’ve heard and read it over and over again. Management will try to hide information in the footnotes, therefore read the footnotes, read the footnotes, read the footnotes. But if you are a normal person you don’t like to spend all day, or don’t have the time to spend, reading every fine print in the quarterly and annual reports for each of your companies.
When money brought us together: A history of Currency Unions - via Boston.com- As the American economy reckons with the fallout of the debt-limit crisis, it’s easy to forget about the far bigger train wreck underway in Europe, where the continent’s grand experiment with a common currency is becoming more imperiled by the day. The euro, the powerful currency unveiled to great fanfare a little over a decade ago as a symbol of a new, united continent, is quickly becoming a victim of the very nationalist infighting that prompted its creation in the first place.
Stock Market Drops. Then It Rallies. What Happens Next for Funding?- via Mark Suster- Venture Capitalists typically have partners’ meetings on Mondays. Why is that? Who knows. But probably because as a group we travel a lot. So the industry formed around a day of the week when all partners could avoid having company board meetings or traveling.
Q&A With Author of Bernie Madoff: Wizard of Lies - via Wharton - Diana B. Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust, expands on why Madoff decided to grant her two interviews from prison, whether his family knew about the Ponzi scheme before it unraveled, and what question she wished she had asked him.
THE BUSINESS OF WRITING ABOUT THE BUSINESS OF ROLLER COASTERS - via The Believer- At the time I knew almost nothing about amusement parks and attractions. Publications assistant was the sort of entry-level position that would give me a chance to learn. I’d file contracts and send copies of Funworld to anybody who requested them. I’d edit articles that no one else wanted to edit, like the twenty-six-page case study on the effects of G-forces on roller-coaster passengers (negligible), which had awaited revision for two years. And the article about shuttle coasters, which began with the sentence “Whooooooosh!”
Tomgram: Barbara Ehrenreich, On Americans (Not) Getting By (Again) - via Toms Dispatch- It was at lunch with the editor of Harper’s Magazine that the subject came up: How does anyone actually live “on the wages available to the unskilled”? And then Barbara Ehrenreich said something that altered her life and resulted, improbably enough, in a bestselling book with almost two million copies in print. “Someone,” she commented, “ought to do the old-fashioned kind of journalism -- you know go out there and try it for themselves.” She meant, she hastened to point out on that book’s first page, “someone much younger than myself, some hungry neophyte journalist with time on her hands.”
Policy vs Luck in the Financial Crisis - via Paul Kedrosky - The macroeconomic performance of individual countries varied markedly during the 2007-09 global financial crisis. While China’s growth never dipped below 6% and Australia’s worst quarter was no growth, the economies of Japan, Mexico and the United Kingdom suffered annualised GDP contractions of 5-10% per quarter for five to seven quarters in a row. We exploit this cross-country variation to examine whether a country’s macroeconomic performance over this period was the result of pre-crisis policy decisions or just good luck. The answer is a bit of both. Better-performing economies featured a better-capitalised banking sector, lower loan-to-deposit ratios, a current account surplus, high foreign exchange reserves and low levels and growth rates of private sector credit-to-GDP. In other words, sound policy decisions and institutions reduced their vulnerability to the financial crisis. But these economies also featured a low level of financial openness and less exposure to US creditors, suggesting that good luck played a part.
The uncertainty shock from the debt disaster will cause a double-dip recession - via Vox.eu- The potentially explosive combination of Eurozone debt contagion, vulnerable banking systems, and European and American political paralysis has pushed stock-market volatility to levels nearly as bad as the days following the 11 September 2001 terrorist attacks. Nobody knows what happens next. This column reviews research on 16 previous shocks and concludes that today’s uncertainty shock will create a short, sharp contraction in late 2011 of about 1% with a rebound coming in spring 2012.
The Eclectic Mix:
What Factor Analysis Reveals about Our Tastes for Tunes - via Scientific American - In an effort to understand the science of musical taste, Peter Rentfrow, Lewis Goldberg, and Daniel Levitin conducted a factor analysis of musical preferences. Much like in the Sesame Street example, the researchers were looking for factors to explain differences in the data – only instead of Muppets, we are now examining people’s ratings of 15-second music samples. The final set of “factors” should do a thorough (yet succinct) job of explaining overarching “like” and “dislike” patterns in people’s ratings (for example, a pattern showing that rock & roll fans also tend to like punk and heavy metal).
Robert Cialdini Interview by SUCCESS Magazine - via Value Investing World- Robert Cialdini has spent his entire career learning and teaching the science of influence. His book Influence: Science and Practice has sold more than 2 million copies and can be found in 26 languages.
Big Brother is tracking you: GPS and the 4th Amendment - via Slate - When is a search not a search? Or, more pointedly: When are electronic or other forms of surveillance of an individual considered a search under the Fourth Amendment -- thus requiring a valid warrant to conduct such surveillance in a manner that protects the individual from "unlawful search and seizure"?
Groups Call for Scientists to Engage the Body Politic - via NYT- When asked to name a scientist, Americans are stumped. In one recent survey, the top choice, at 47 percent, was Einstein, who has been dead since 1955, and the next, at 23 percent, was “I don’t know.” In another survey, only 4 percent of respondents could name a living scientist.
The Wrong Imperative - via Thinking Things Through- As economies develop and become richer, manufacturing – “making things” – inevitably becomes less important. But if this happens more rapidly than workers can acquire advanced skills, the result can be a dangerous imbalance between an economy’s productive structure and its workforce. We can see the consequences all over the world, in the form of economic underperformance, widening inequality, and divisive politics.
Cancering : Listening In On The Body's Proteomic Conversation - via Edge.Org- We make a mistake when we think of cancer as a noun. It is not something youhave, it is something youdo. Your body is probably cancering all the time. What keeps it under control is a conversation that is happening between your cells, and the language of that conversation is proteins. Proteomics will allow us to listen in on that conversation, and that will lead to much better way to treat cancer.
The Robin Hood of the East Bay - via LongForm- She was the biggest tipper the waiters at some of the country’s most gourmet restaurants had ever seen. She treated casual acquaintances to elaborate vacations. Few saw the tiny bungalow where she lived amongst hundreds of boxes of unopened jewelry, and none knew the source of her wealth. When her multi-decade embezzlement scheme was revealed, the artisans and waitstaff whose lives had been changed by her generosity were left to sort out the pieces and consider their own relationship to her scam.
Why Are Humans So Darn Nice: - via Brainiac - Human generosity is a bit of a puzzle for evolutionary biologists. There are sound reasons for people to be generous with one another - they may be part of the same family, or work together. Over the years, though, experiments have found that people are far more generous to strangers than those factors suggest they should be. Why are we so nice?
Indulging In Indirection - via Overcoming Bias- Subjects significantly preferred the spoiled versions of ironic-twist stories, where, for example, it was revealed before reading that a condemned man’s daring escape is all a fantasy before the noose snaps tight around his neck. Subjects read stories as-is and with introductory paragraphs that gave away the endings, or spoilers. In almost all cases, they preferred the “spoiled” stories. The same held true for mysteries. … Subjects liked the literary, evocative stories least overall, but still preferred the spoiled versions over the unspoiled ones.
Law Without (As Many) Lawyers - via Miller McCune- In a podcast conversation with law and economics professor Gillian Hadfield, she expounds on ways to bring more legal services to Americans without requiring vast new armies of expensive lawyers.
Risk-Loving or Stupidity? - via FalkenBlog- There are lots of cases where insanely risky assets have low, even negative returns. Highly volatile stocks have insanely poor returns. This is part of a general pattern, such as when lottery tickets with the most extreme odds have the lowest returns. The longshot bias in horseracing noted by Griffith in 1949, and remains: 100/1 or greater loses 61%, the favorite loses only 5.5%, the average bet loses 23%.
The Business of Scrap Metal- via NYT- Inthe scrap-metal industry, Petersen is known as a peddler, and his presence here is proof of the catholic nature of S. D. Richman Sons. It buys from the many (any legitimate source who has steel, iron, copper, aluminum or brass) and sells to the few (mills that melt the old metal to make new metal). When the scrap comes in, it’s cleaned, sorted into piles and cut down to size, with either a torch, a baler or hydraulic shears. Then about half is shipped to mills in the U.S. and the rest sails to places like China, Korea, Taiwan or especially Turkey, which makes most of the steel used in the Middle East. “We bring the [expletive] in, we clean the [expletive] up and we send the [expletive] out,” said David Richman, a spry man of 64 with wire-rim glasses and a white beard. He added, “Clean up the expletives.”