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Must Read(s) of The Week:
Royal Society Opens Online Archive; Puts 60,000 Papers Online – via openculture - 60,000 peer-reviewed papers, including the first peer-reviewed scientific research journal in the world, are now available free online. The Royal Society has opened its historical archives to the public. Among the cool stuff you’ll find here: Issac Newton’s first published research paper and Ben Franklin’s write-up about that famous kite experiment. Good luck getting anything accomplished today. Or ever again.
The Milgram Experiment Yet Again (Again!) – Via The Situationist – The Discovery channel’s CURIOSITY asks “How Evil Are You?” and replicates the Milgram experiment on Sunday, October 30, 2011 at 9PM e/p.
Presentation Uncollege Manifesto: Your Guide to Academic Deviance Replacing College with Self Directed Learning- via Dale Stephens one of Peter Thiel’s College “dropout” super kids
Activist News: All things Activism, Income Inequality, & Occupy Wall St
Ted Talk – How economic inequality harms societies – via Value Investing World- We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust.
The top 1 percent by profession – via infoproc.blogspot.com – Notice anything funny about the trends? Source: tax data (complete tables at the link; what I display below is truncated).
Why Has Income Gone Up So Much For The Top 1 Percent? – via www.npr.org - Income rose across the board for U.S. households over the past 30 years, according to a new report from the CBO. But it went through the roof for the households in the top one percent of the income distribution.
How Do Corporations Play Politics?: The Fedex Story – via SSRN - Using a case study methodology, the Article examines the political involvement of one company, FedEx, in a series of regulatory reforms over a forty year period. Drawing upon the business context, the legislative record, campaign finance materials and interest group analysis, the Article demonstrates that political activity has been an integral component of FedEx’s business growth and operations. FedEx has successfully used its political influence to shape legislation, and FedEx’s political success has, in turn, shaped its overall business strategy. Moreover, in identifying the specific components of FedEx’s political activity, the Article highlights the range of mechanisms that corporations use to engage in politics, revealing that the exercise of political influence is far more complex than the purchase of political favors in a spot market. Regulation is becoming an increasingly important factor for United States businesses. As a result, corporations must integrate political activity into their overall business strategy and must develop and manage their political capital in the same way that they manage other business assets. The FedEx story demonstrates the importance of politics to business and explains the growing investment by corporations in political capital. It further explains how the business world has responded, and will continue to respond, to regulatory restrictions by developing alternative mechanisms for exerting political influence. By understanding how and why corporations participate in politics, policy-makers can better address concerns about the effect of corporate political influence.
The growing wealth gap – The top 1% owns 36% of all wealth – via CNNMoney - Wall Street protests have gotten many of us wondering about the disparity in wealth between the rich and middle- and low-income Americans. Here are some of the facts.
Occupy Wall Street: Where’s our share? – via The Term Sheet: – Operation Occupy Wall Street, which started with a handful of protesters in New York City’s Zuccotti Park on Sept. 17, has spread to scores of cities around the world and attracted hundreds of thousands. While the protesters in the U.S. haven’t put forth a clear agenda, their growing numbers suggest that many Americans are unhappy with the economic status quo.
Charlie Rose: A discussion about Occupy Wall St – via Charlie Rose – A discussion about Occupy Wall Street with journalist Chris Hedges and Amy Goodman of Democracy Now!
David Graeber, the Anti-Leader of Occupy Wall Street – via Businessweek - Graeber’s politics have been shaped by his experience in global justice protests over the years, but they are also fed by the other half of his life: his work as an anthropologist. Graeber’s latest book, published two months before the start of Occupy Wall Street, is entitled Debt: The First 5,000 Years. It is an alternate history of the rise of money and markets, a sprawling, erudite, provocative work. Looking at societies ranging from the West African Tiv people and ancient Sumer to Medieval Ireland and modern-day America, he explores the ambivalent attitudes people have always had about debt: as obligation and sin, engine of economic growth and tool of oppression. Along the way, he tries to answer questions such as why so many people over the course of history have simultaneously believed that it is a matter of morality to repay debts and that those who lend money for a living are evil.
Occupy Wall Street: It’s Not a Hippie Thing – via Businessweek - As critics have noted, the protesters are not in complete agreement with each other, but the overall message is reasonably coherent. They want more and better jobs, more equal distribution of income, less profit (or no profit) for banks, lower compensation for bankers, and more strictures on banks with regard to negotiating consumer services such as mortgages and debit cards. They also want to reduce the influence that corporations—financial firms in particular—wield in politics, and they want a more populist set of government priorities: bailouts for student debtors and mortgage holders, not just for banks.
Wall Street Isn’t Winning It’s Cheating - via www.rollingstone.com - The answer is, it was never there. If anything, just the opposite has been true. Americans for the most part love the rich, even the obnoxious rich. And in recent years, the harder things got, the more we’ve obsessed over the wealth dream. As unemployment skyrocketed, people tuned in in droves to gawk at Evrémonde-heiresses like Paris Hilton, or watch bullies like Donald Trump fire people on TV. Moreover, the worse the economy got, the more being a millionaire or a billionaire somehow became a qualification for high office, as people flocked to voting booths to support politicians with names like Bloomberg and Rockefeller and Corzine, names that to voters symbolized success and expertise at a time when few people seemed to have answers. At last count, there were 245 millionaires in congress, including 66 in the Senate. And we hate the rich? Come on. Success is the national religion, and almost everyone is a believer. Americans love winners. But that’s just the problem. These guys on Wall Street are not winning – they’re cheating. And as much as we love the self-made success story, we hate the cheater that much more.
#OWS: one insider’s view on how banking lost its way (and what to do next) - via Fred Destin – Here’s what a trading room is full of: fascinating, fun and smart people. This one wanted to be a concert pianist, this one is a PhD in physics who consumes Mountain Dew, this one never leaves his trading jacket, recites entire passages from Wall Street and seems to have visual representation of risk in his head. It’s fun, it’s fast, it’s creative. One aspect that most people completely underestimate is that market divisions in investment banks are full of quirky interesting egos and creativity. They also train people amazingly well. I was quickly hooked. It’s like coke, except it’s your work: fast, action oriented, a bit too smart for its own good. Oh, and they train people REALLY well. In our world where the value of training is sometimes completely forgotten, it’s easy to underestimate. It was an amazing school for structured thinking and fast decision making. The 6 months training program in New York complete with 30th floor apartment above the Reebok gym was not bad either. It took me a while to wake up and smell the coffee.
Can Small Businesses Make America Prosperous? - via www.newyorker.com - These days, government regulation to keep prices high is less popular. But the fetishization of small business continues apace. Some of the support derives from real virtues that small companies offer—diversity of choice, connection to local communities. But much of it derives from the idea that the nation’s economic well-being depends on such companies. Given that the overwhelming number of American businesses are small, and that, as we’ve all heard, small businesses create most new jobs, this seems reasonable enough. But the truth is that, from the perspective of the economy as a whole, small companies are not the real drivers of growth. One can see this by looking at the track record of the world’s economies. The developed countries with the highest percentage of workers employed by small businesses include Greece, Portugal, Spain, and Italy—that is, the four countries whose economic woes are wreaking such havoc on financial markets. Meanwhile, the countries with the lowest percentage of workers employed by small businesses are Germany, Sweden, Denmark, and the U.S.—some of the strongest economies in the world. This correlation is not a coincidence. It reflects a simple reality: small businesses are, on the whole, less productive than big businesses, and though they do create most jobs, they also destroy most jobs, since, while starting a business is easy, keeping it going is hard.
What’s Happening in America? - via www.newyorker.com – CBS/New York Times poll shows two-thirds of Americans believe money and wealth is unfairly distributed and almost half support Occupy Wall Street.Same poll shows ninety per cent of Americans have no faith in the political system to make the right decisions.
The Second Gilded Age: Has America Become an Oligarchy? - via Der Spiegel- The Occupy Wall Street movement is just one example of the sudden outbreak of tension between America’s super-rich and the “other 99 percent.” Experts now say the US has entered a second Gilded Age, but one in which hedge fund managers have replaced oil barons — and are killing the American dream.
The Best Of The Week
Cash-Rich/Time-Poor: If you are cash-rich/time-poor, outsource everything you can. Hire people or services for every kind of drag work. Managing drag work is also drag work, so hire personal assistants to do it. Yes, it seems rather selfish to fill up others’ lives with drag work, but you can console yourself with two thoughts. First, there really are cases of “drag for me is thrust for you” types of work (though there is unfortunately a large “drag for everybody” category). Second, for many people the choice isn’t between thrust and drag. It is between destitution and drag. It can be a win-win at least in the short term. If somebody doing drag work for you discovers a thrust engine in their lives, be generous. Help them move to the 10x side.
Time-Rich/Cash-Poor: If you are time-rich/cash-poor, your options are more limited. Procrastinate, let the drag work pile up, and then batch process them whenever you find the energy. At least you’ll save on switching costs. You could also give up some luxuries in order to be able to afford to outsource some sorts of drag work.
Time-Poor/Cash-Poor: Our lives are structured so that we tend to progress from time-rich to cash-rich, via a horrible transition phase (usually mid thirties to mid forties) when you are time-poor and cash-poor. This is even worse if you have kids. There is really no good solution in this regime. I am in this situation now, and I chose to give up significant cash for significant time.
Time-Rich/Cash-Rich: If you are both time-rich and cash-rich, surprisingly, things may not all rosy. From meeting a few people who are “lucky” enough to be in this state, I’ve noticed that this state attracts significant anomie. If you suffer from the anomie of time+cash richness, I’ll think your situation through for you if you pay me.
A Huge List of Behavioral Biases - via PsyFi Blog - Over the hundreds of articles published on the Psy-Fi Blog we’ve generated a long list of examples of behavioral biases, which is now collated in The Big List of Behavioral Biases. It’s an extraordinary compendium of irrationality, an imperfect register of the various strange ways in which rational economics goes astray. Ultimately, though, what we have here is really just one long argument.
Behavioral Sciences/Decision Making/ Persuasion/ Psychology
Video: The Divided Brain – via comment.rsablogs.org.uk - Renowned psychiatrist and writer Iain McGilchrist explains how our ‘divided brain’ has profoundly altered human behaviour, culture and society.
Curiosity Doesn’t Kill The Student – via Association for Psychological Science - The researchers performed a meta-analysis, gathering the data from about 200 studies with a total of about 50,000 students. They found that curiosity did, indeed, influence academic performance. In fact, it had quite a large effect, about the same as conscientiousness. When put together, conscientiousness and curiosity had as big an effect on performance as intelligence.
New Book: I’ll Have What She’s Having – via The MIT Press – I’ll Have What She’s Having shows us how we use the brains of others to think for us and as storage space for knowledge about the world. The story zooms out from the individual to small groups to the complexities of populations. It describes, among other things, how buzzwords propagate and how ideas spread; how the swine flu scare became an epidemic; and how focused social learning by a few gets amplified as copying by the masses.It describes how ideas, behavior, and culture spread through the simple means of doing what others do.
Reinventing Discovery | Michael Nielsen – via michaelnielsen.org - The book is about networked science: the use of online tools to transform the way science is done. In the book I make the case that networked science has the potential to dramatically speed up the rate of scientific discovery, not just in one field, but across all of science. Furthermore, it won’t just speed up discovery, but will actually amplify our collective intelligence, expanding the range of scientific problems which can be attacked at all.
Podcast: The Varieties of Skepticism - via rationallyspeaking.blogspot.com – In this episode, Massimo and Julia take us trough the history of skepticism. From its roots in ancient Greece, to Descartes, the last rationalist, to David Hume, the father of modern skepticism, and to today’s skeptic movement. Also, is anything really knowable? How do we know that we really exist and are not residents of a cosmic holodeck?
Can > Will: Predictions of What Can Happen are Extreme, but Believed to be Probable - via Wiley Online Library – Predictions of uncertain events are often described in terms of what can or what will happen. How are such statements used by speakers, and what are they perceived to mean? Participants in four experiments were presented with distributions of variable product characteristics and were asked to generate natural, meaningful sentences containing either will or can. Will was typically associated with either low or intermediate numeric values, whereas can consistently suggested high (maximum) values. For instance, laptop batteries lasting from 1.5 to 3.5 hours will last for 1.5 hours or for 2.5 hours, but they can last for 3.5 hours. The same response patterns were found for positive and negative events. In will-statements, the most frequent scalar modifiers were at least and about, whereas in can-statements, the most frequent modifier included up to. A fifth experiment showed that will indicates an outcome that may be certain but more often simply probable. Can means possible, but even can-statements are perceived to imply probable outcomes. This could create a communication paradox because most speakers use can to describe outcomes that because of their extremity are at the same time quite unlikely.
Make study more effective, the easy way - via mindhacks.com – If you are a student the implication of this study and those like it is clear : don’t stress yourself with revision where you read and re-read textbooks and course notes. You’ll remember better (and understand much better) if you try and re-organise the material you’ve been given in your own way.
Business/ Entrepreneurship/ Finance/ Investing
World power swings back to America – via Telegraph - The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.
The Intelligent Investor: Dangerous Real-Estate Deals – via WSJ.com - So it goes with a once-hot real-estate investment that has left wreckage in its wake and a fresh reminder: When there’s a simple way and a complicated way to solve a problem, the middleman will almost always make more money off the complicated solution—but you might not.
Fear, Greed, and Financial Crises: A Cognitive Neurosciences Perspective by Andrew Lo : – via papers.ssrn.com - Historical accounts of financial crises suggest that fear and greed are the common denominators of these disruptive events: periods of unchecked greed eventually lead to excessive leverage and unsustainable asset-price levels, and the inevitable collapse results in unbridled fear, which must subside before any recovery is possible. The cognitive neurosciences may provide some new insights into this boom/bust pattern through a deeper understanding of the dynamics of emotion and human behavior. In this chapter, I describe some recent research from the neurosciences literature on fear and reward learning, mirror neurons, theory of mind, and the link between emotion and rational behavior. By exploring the neuroscientific basis of cognition and behavior, we may be able to identify more fundamental drivers of financial crises, and improve our models and methods for dealing with them.
Cargill: Inside the quiet giant that rules the food business – via CNN - But those numbers alone don’t begin to capture the scope of Cargill’s impact on our daily lives. You don’t have to love Egg McMuffins (McDonald’s (MCD, Fortune 500) buys many of its eggs in liquid form from Cargill) or hamburgers (Cargill’s facilities can slaughter more cattle than anyone else’s in the U.S.) or sub sandwiches (No. 8 in pork, No. 3 in turkey) to ingest Cargill products on a regular basis. Whatever you ate or drank today — a candy bar, pretzels, soup from a can, ice cream, yogurt, chewing gum, beer — chances are it included a little something from Cargill’s menu of food additives. Its $50 billion “ingredients” business touches pretty much anything salted, sweetened, preserved, fortified, emulsified, or texturized, or anything whose raw taste or smell had to be masked in order to make it palatable. Despite Cargill’s extraordinary size, strength, and breadth, it has long been remarkably successful at keeping out of the public eye. But the days when the company could get away with saying nothing and revealing less are over. “I think the world has curiosity about where its food comes from that is more earnest than it’s been in the past,” says Page, who earlier this year took the unprecedented step of allowing Oprah’s cameras inside a Cargill slaughterhouse. (No video of the actual slaughtering, however.)
Video: Eddie Lampert on Long Term Investing – via www.santangelsreview.com – Earlier this month, we linked to a Bloomberg clip of Edward Lampert making a rare appearance at a conference. The full video has surfaced and its an interesting watch. If you just want to hear what Lampert said, skip to these times: 4:13, 27:30, and 40:30.
Locking in the Profits or Putting It All on Black? An Empirical Investigation into the Risk-Taking Behavior of Hedge Fund Managers- via MoneyScience – The ideal fee structure aligns the incentives of the investor with those of the fund manager. Mutual funds typically only charge a management fee which is a proportion of the funds under management. Hedge funds on the other hand generally change an incentive fee which is a fraction of the fund’s return each year in excess of the high-water mark. The justification generally given for these incentive fees is that they provide the manager with the incentive to target absolute returns. As these incentive fees can be considered a call option on the performance of the fund (the fee structure gives the managers the positive fees with profits but no negative fees with losses), it is possible that the managers incentives might vary according to the delta of this option. A number of papers have examined the optimal investment strategies of money managers in the presence of incentive fees within a theoretical framework with seemingly conflicting results. In this paper, using a large database of hedge fund returns, we examine the risk taking behaviour of hedge fund managers in response to both their past returns relative to their high-water mark and their past returns relative to their peer group. We then attempt to reconcile these results with the theoretical frameworks proposed.
Professor Zipf goes to Wall Street (pdf) – MoneyScience’s bookmarks – via MoneyScience – The heavy-tailed distribution of firm sizes first discovered by Zipf (1949) is one of the best established empirical facts in economics. We show that it has strong implications for asset pricing. Due to the concentration of the market portfolio when the distribution of the capitalization of firms is sufficiently heavy-tailed, an additional risk factor generically appears even for very large economies. Our twofactor model is as successful empirically as the three-factor Fama-French model.
Jim Buckmaster:Craigslist’s Secretive CEO- via www.guardian.co.uk - “We run a profitable business and have always done, but we just don’t want to put the cart before the horse,” he reasons. “We have found trying to provide the best possible service over time is also the best business strategy, though it’s not always one followed [by other companies].”
Alaska’s Billion Dollar Mountain – via Businessweek - The story of one man who used a little persuasion—and a lot of luck—to win the rights to millions of tons of rare earths
How Russian Tycoon Yuri Milner Bought His Way Into Silicon Valley- via www.wired.com - The message seems clear: Milner may have invested in virtually every social media powerhouse, from Facebook to Twitter to Spotify. He might be the vanguard of an entirely new financial philosophy. He might be the most controversial money guy in Silicon Valley—sought after, feared, and derided in more or less equal measure. But at heart he is just a nice Jewish boy.
Commodity traders: The trillion dollar club | Longform.org – via longform.org – Who simultaneously did business with the U.S. government, the besieged Syrian regime, and the Libyan rebels last month? The group of 16 trading houses that collectively are “worth over a trillion dollars in annual revenue and control more than half the world’s freely traded commodities.”
The Severity Paradox: The More People You Harm The Less Punishment – via Cognition & Culture- Yet in a compelling paper published in Social Psychological and Personality Science in August 2010, Loran F. Nordgren and Mary-Hunter Morris McDonnell found that increasing the number of people victimized by a crime actually decreases the perceived severity of that crime and leads people to recommend less punishment.
Science publishing: The trouble with retractions - via www.nature.com – This week, some 27,000 freshly published research articles will pour into the Web of Science, Thomson Reuters’ vast online database of scientific publications. Almost all of these papers will stay there forever, a fixed contribution to the research literature. But 200 or so will eventually be flagged with a note of alteration such as a correction. And a handful — maybe five or six — will one day receive science’s ultimate post-publication punishment: retraction, the official declaration that a paper is so flawed that it must be withdrawn from the literature. It is reassuring that retractions are so rare, for behind at least half of them lies some shocking tale of scientific misconduct — plagiarism, altered images or faked data — and the other half are admissions of embarrassing mistakes. But retraction notices are increasing rapidly. In the early 2000s, only about 30 retraction notices appeared annually. This year, the Web of Science is on track to index more than 400 (see ‘Rise of the retractions’) — even though the total number of papers published has risen by only 44% over the past decade.
Shanghai Gets Supersized | Travel | Smithsonian Magazine – via www.smithsonianmag.com - Over the past decade or more, Shanghai has grown like no other city on the planet. Home to 13.3 million residents in 1990, the city now has some 23 million residents (to New York City’s 8.1 million), with half a million newcomers each year. To handle the influx, developers are planning to build, among other developments, seven satellite cities on the fringes of Shanghai’s 2,400 square miles. Shanghai opened its first subway line in 1995; today it has 11; by 2025, there will be 22. In 2004, the city also opened the world’s first commercial high-speed magnetic levitation train line. With more than 200 skyscrapers, Shanghai is a metroplex of terraced apartments separated by wide, tree-lined boulevards on which traffic zooms past in a cinematic blur. At the 1,381-foot-tall Jin Mao Tower, whose tiered, tapering segments recall a giant pagoda, there’s a hotel swimming pool on the 57th floor, and a deck on the 88th floor offers a view of scores of spires poking through the clouds. I had to look up from there to see the top of the 101-story World Financial Center, which tapers like the blade of a putty knife. The Bank of China’s glass-curtained tower seems to twist out of a metal sheath like a tube of lipstick.
Video: Al Jazerra On Modern Slavery & How It Works - via Global Sociology Blog