Weekly Roundup 72: A Curated Linkfest For The Smartest People On The Web
I spend 8 hours every Sunday putting this together. If you like this roundup or plan on linking to it kindly include a reference to SimoleonSense Thanks!
“This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.“
Most Important Reads
Shut up! Announcing your plans makes you less motivated to accomplish them. – via Derek Sivers – Shouldn’t you announce your goals, so friends can support you? Isn’t it good networking to tell people about your upcoming projects? Doesn’t the “law of attraction” mean you should state your intention, and visualize the goal as already yours? Nope. Tests done since 1933 show that people who talk about their intentions are less likely to make them happen. Announcing your plans to others satisfies your self-identity just enough that you’re less motivated to do the hard work needed.
John Kay’s new book Obliquity: Why our goals are best achieved indirectly – via Leigh Cadwell – (whose launch at the IPA was hosted last night by Rory Sutherland) follows in the tradition of a number of recent books about decision-making and rationality. Indeed, he mentions Predictably Irrational and Blink in the first ten pages. It goes beyond them in a couple of interesting ways, but leaves some questions – perhaps deliberately – unanswered.
Documentary Review: Dr. Albert C. Barnes: A Value Investor To Rival Buffet – via Michael Billings – Dr. Albert C. Barnes accomplished two things for which we must be grateful: He invented a treatment for VD, and he founded the Barnes Foundation in the Philadelphia suburb of Merion. The first paid for the second, so the wages of sin were invested wisely. In his imposing private structure, far from the power brokers of the city, Barnes created an oasis for serious students, who could learn from his collection without rubbing elbows with crowds of art tourists. Original Documentary Here
William James on Peace and War – via Britannica – One hundred years ago the philosopher and psychologist William James set down his thoughts on war and peace in an essay for McClure’s magazine titled “The Moral Equivalent of War.” In that essay he examined the role of the martial virtues in keeping a society vigorous and proud and explained why pacifism, in the merely negative sense of opposition to war, could not succeed.
A Virtual Tour of the Sistine Chapel – via OpenCulture – The Sistine Chapel in the Vatican. It’s one of the triumphs of Renaissance painting. The chapel’s walls were frescoed by Raphael, Bernini, and Sandro Botticelli. And then, between 1508 and 1512, Michelangelo painted the chapel ceiling, covering some 12,000 square feet, decorating it with 300 figures from nine Book of Genesis scenes. Thanks in part to Villanova University, you can now take a virtual, panoramic tour of the Chapel. Using buttons in the lower left screen, you can move around the room and zoom in on the paintings, including those on the ceiling. It’s been a while since I visited the Vatican. But, from what I remember, this virtual tour gives you a closer look than the average visitor gets.
Bypassing the Bust: The Stability of Upstate New York’s Housing Markets during the Recession – via Fed H/T Big Picture – Over the past decade, the United States has seen real estate activity swing from boom to bust. But upstate New York has been largely insulated from this volatility, with metropolitan areas such as Buffalo, Rochester, and Syracuse even registering home price increases during the recession. An analysis of upstate housing markets over the most recent residential real estate cycle indicates that the region’s relatively low incidence of nonprime mortgages and the better-than-average performance of these loans contributed to this stability.
Miguel’s Favorite Articles
How being selfless can be the best way to be selfish: – via Bakadesuyo- This study examines the relative contributions of giving versus receiving support to longevity in a sample of older married adults. Baseline indicators of giving and receiving support were used to predict mortality status over a 5-year period in the Changing Lives of Older Couples sample. Results from logistic regression analyses indicated that mortality was significantly reduced for individuals who reported providing instrumental support to friends, relatives, and neighbors, and individuals who reported providing emotional support to their spouse. Receiving support had no effect on mortality once giving support was taken into consideration This pattern of findings was obtained after controlling for demographic, personality, health, mental health, and marital-relationship variables. These results have implications for understanding how social contact influences health and longevity.
Why Are Fewer and Fewer U.S. Employees Satisfied With Their Jobs? – via HBS – Two items caught my eye this month. I’m wondering whether they have anything to do with one another. The first is a news release from The Conference Board reporting that its most recent periodic poll showed that only 45 percent of workers in the U.S. were satisfied with their jobs, the lowest level in the 23-year history of the poll—this in an era in which we are told that jobs are being enhanced by information technology.
Overcoming status quo bias in our brains – via Deric Bownds – Humans often accept the status quo when faced with conflicting choice alternatives. However, it is unknown how neural pathways connecting cognition with action modulate this status quo acceptance. Here we developed a visual detection task in which subjects tended to favor the default when making difficult, but not easy, decisions. This bias was suboptimal in that more errors were made when the default was accepted. A selective increase in subthalamic nucleus (STN) activity was found when the status quo was rejected in the face of heightened decision difficulty. Analysis of effective connectivity showed that inferior frontal cortex (rIFC), a region more active for difficult decisions, exerted an enhanced modulatory influence on the STN during switches away from the status quo. These data suggest that the neural circuits required to initiate controlled, nondefault actions are similar to those previously shown to mediate outright response suppression. We conclude that specific prefrontal-basal ganglia dynamics are involved in rejecting the default, a mechanism that may be important in a range of difficult choice scenarios.
When Expert fiddle with data – via Voxeu – Recent allegations that scientists at the Climate Research Unit have hidden and manipulated data has caused a media storm. This column argues that the practices alleged in “climategate” may be more common in academia than we think.
The Collapse of Complex Business Models – via Clay Shirky – I gave a talk last year to a group of TV executives gathered for an annual conference. From the Q&A after, it was clear that for them, the question wasn’t whether the internet was going to alter their business, but about the mode and tempo of that alteration. Against that background, though, they were worried about a much more practical matter: When, they asked, would online video generate enough money to cover their current costs?
Lie-detection biases among male police interrogators, prisoners, and laypersons – via Deception Blog – Beliefs of 28 male police interrogators, 30 male prisoners, and 30 male laypersons about their skill in detecting lies and truths told by others, and in telling lies and truths convincingly themselves, were compared. As predicted, police interrogators overestimated their lie-detection skills. In fact, they were affected by stereotypical beliefs about verbal and nonverbal cues to deception. Prisoners were similarly affected by stereotypical misconceptions about deceptive behaviors but were able to identify that lying is related to pupil dilation. They assessed their lie-detection skill as similar to that of laypersons, but less than that of police interrogators. In contrast to interrogators, prisoners tended to rate lower their lie-telling skill than did the other groups. Results were explained in terms of anchoring and self-assessment bias. Practical aspects of the results for criminal interrogation were discussed.
Why do people give to charity? So you’ll get out of their faces – via Modeled Behavior – Do people donate to charities because altruism makes them feel good about themselves, or because of social pressure to donate? It matters because altruistically motivated giving benefits both the giver and the charity, since the giver enjoys giving, while social pressure motivated giving benefits only the charity. A new study from Stefano DellaVigna, John List, and Ulrike Malmendier uses a randomized field experiment and a structural model to estimate the extent to which giving to door-to-door charities is motivated by each
Learning About Counterfeit Currency – via Book of Odds – When you picture the Secret Service you probably think of men wearing dark suits, ear pieces, and a worried look. The president’s life is in their hands, but when the Secret Service was first conceived in 1865 it was designed to spot counterfeit dollar bills, not would-be assassins.
Unpredictably Rational – via Psy-Fi Blog – As we go about our everyday lives we don’t spend a lot of time reflecting on the irrationality of the people around us. Certainly from time to time people do stupid things, but by and large most of us make it through most of our days without driving the wrong way up roads, roasting our dogs in microwaves or buying stocks in stupid companies. Even when we do odd things there’s usually some recognisably rational reason for us doing them.
Capital can’t be measured – via Interfluidity – Simon Johnson and James Kwak are absolutely right. Sure, “hard” capital and solvency constraints for big banks are better than mealy-mouthed technocratic flexibility. But absent much deeper reforms, totemic leverage restrictions will not meaningfully constrain bank behavior. Bank capital cannot be measured. Think about that until you really get it. “Large complex financial institutions” report leverage ratios and “tier one” capital and all kinds of aromatic stuff. But those numbers are meaningless. For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements.
Scary health messages can backfire – via Bps Research – A short while ago there was a shocking advert on British TV that used slow motion to illustrate the bloody, crunching effects of a car crash. The driver had been drinking. Using these kind of scare tactics for anti drink-driving and other health issues makes intuitive sense. The campaigners want to grab your attention and demonstrate the seriousness of the consequences if their message is not heeded. However, a new study makes the surprising finding that for a portion of the population, scare tactics can back-fire, actually undermining a message’s efficacy.
Documentary: Inside the brain of a 5 year old: educational neuroscience – via Geary Behavior Center – BBC Radio 4 recently broadcast an excellent documentary by Claudia Hammond on the emerging field of educational neuroscience: how insights from brain research can inform teaching practice. It also discusses various “neuro-myths” that teachers, like most people, may be susceptable to. The program can still be heard at the link below (but not for long, alas). However the web-links there provide useful introductions to this fascinating field.
The Loser’s Curse – via Priceless – Richard Thaler has an article in today’s New York Times on mispricing of NFL talent. In the NFL draft, losing teams trade away too much for “first pick” players, Thaler and Cade Massey argue in a recently updated paper.
Nobody Knows Anything, Socratic Edition: How My Expectations Did Not Align With Reality – via PrawfsBlawg – William Goldman (Butch Cassidy and the Sundance Kid, The Princess Bride, etc.) famously said of Hollywood that “Nobody Knows Anything.” I wouldn’t be surprised if Goldman was a fan of Socrates, who himself famously stated “I am wiser than this man; neither of us really knows anything worth knowing, but he thinks he knows something when in fact he does not, whereas I, knowing nothing at all, make no pretence of doing so.” I find this statement by Socrates appropriate to my guest posts over the course of this month, many of them questioning aspects of the Socratic Method, because those posts have revealed that I know nothing about the way that the majority of law professors conduct their classes (or at least a majority of the law professors responding to the polls on my posts). In other words, like Tom Hansen in (500) Days of Summer, my expectations did not align with reality.
A Tiny Defect That May Create Smaller, Faster Electronics – via NSF – Researchers at the University of South Florida have developed a technique to turn defects in graphene into tiny metallic wires: When most of us hear the word ‘defect’, we think of a problem that has to be solved. But a team of researchers at the University of South Florida (USF) created a new defect that just might be a solution to a growing challenge in the development of future electronic devices.
Can Clever Hackers Target Smart Phones? – via NSF – Smart phones are becoming a common part of everyday life. Millions of Americans are using these powerful devices whose impressive capabilities and features rival that of desktop computers from just a few years ago, including new tools that can help simplify everyday tasks such as finding a parking garage or the nearest drycleaner.
Algebra in Wonderland – via NYT – Since “Alice’s Adventures in Wonderland” was published, in 1865, scholars have noted how its characters are based on real people in the life of its author, Charles Dodgson, who wrote under the name Lewis Carroll. Alice is Alice Pleasance Liddell, the daughter of an Oxford dean; the Lory and Eaglet are Alice’s sisters Lorina and Edith; Dodgson himself, a stutterer, is the Dodo (“Do-Do-Dodgson”).
[Oil &]The green paradox – via Economic Logic -The fear that oil is running out has been replaced by the fear that oil will pollute the life on earth out of existence. In both cases, the countermeasure is to find alternative sources of energy. This alleviates the first fear as it allows to stretch the use of oil over a longer period, one would hope. But what about the second fear?
Novelty and Gadgetry – via Social Psych Eye – In a society saturated with technology individuals must find a reason (or not) to justify their purchase. Gadgets nowadays come in all shapes and sizes and with all sorts of features and applications. Indeed, the more novel the device the more press it receives, and if curiosity is aroused, then perhaps there will be more buyers as well. The topic of discussion is the iPad, and following the anticipation people have either settled on buying the device or not.
Narrative power & Investor Behavior – via Tom Brakke – What stories have you heard today?The investment world illustrates the power of narrative. Up and down the informational food chain, stories are used to enlighten and, sad to say, to deceive. The “tellers” are the sellers of ideas, themes, and securities that find their way into our portfolios.
US tycoon Wilbur Ross is to back Sir Richard Branson bank spree – via Times Online – Wilbur Ross, the billionaire Wall Street turnround expert, is backing Sir Richard Branson’s attempts to conquer British high street banking. Ross, 72, who made his name buying coal, steel and telecoms companies, is understood to be paying £100m for a 21% stake in Virgin Money, Branson’s finance operation. He has also pledged to back Virgin’s £2 billion bid for the network of 318 branches being sold by Royal Bank of Scotland
Finance & Investing
Video James Grant vs. David Rosenberg on Treasuries – via Paul Kedrosky – Good debate between James Grant and David Rosenberg on U.S. Treasuries. Click to watch/download, but biiiiig file.
Markopolos Says Madoff Was Like Heroin – via Corporate Crime Reporter – Bernie Madoff was paying one percent a month. Month after month. To his investors. Many of his investors suspected, or were told, that something was up with Madoff. But the investors didn’t listen. Why not?
When Warren Buffett looks safer than Uncle Sam – via Tribune – For many decades, U.S. government securities have been the epitome of safe, dull investments. If you wanted to be absolutely positive you’d get your money back and then some, Treasury bills were the way to go. Right now, lots of Americans who put their money into big mortgages or stocks a decade ago wish they had gone the more mundane route.
Jason Zweig: Time to Take Stock of the Recent Market Rallies – via Abnormal Returns – Has spring ever sprung quite so gloriously across the financial markets? In the first quarter, just about everything went up: U.S. stocks large and small; foreign stocks; gold; the dollar; corporate, high-yield and municipal bonds; even most Treasury bonds. Over the past year, every major stock index in the U.S., and many abroad, went up at least 45%. Real-estate investment trusts more than doubled. If you are alive, you made money.
Zero Hedge’s leveraged buy-out screen – via Greenbackd – Zero Hedge has another interesting post, A Quick And Dirty LBO Screen, on the potential for a wave of going private deals. Zero Hedge uses “a simplistic template from UBS” to identify the thirty companies that would “generate the highest stock return should they get acquired.”
Accounting inconsistencies – via Musings on Markets by Damodaran – In the next few posts, I plan to focus on the accounting inconsistencies that bedevil analysts. In particular, here are the items that I will highlight…
Time to rebalance: Special Report On US Economy -via Economist – America’s economy is set to shift away from consumption and debt and towards exports and saving. It will be its biggest transformation in decades,
Las Vegas’s $8.5bn gamble – via FT – But there has never been a development in Las Vegas quite as vast in scale or ambition as CityCenter. At 18m sq ft, it has almost twice the floor space of the proposed redevelopment of the World Trade Center site in New York. It has three hotels – the two buildings that form the Veer Towers lean into each other like a pair of 21st-century Pisa towers – as well as an Elvis Presley Cirque de Soleil show in a custom-built 1,800-seat auditorium and Libeskind’s shopping mall, which has a ruptured, jagged roof, a tree-house restaurant and gleaming, panelled walls that wouldn’t look out of place in a science-fiction movie.
Goodwill: Plug Variable or Real Asset? – via Damodaran – Of all the items on a conventional accounting balance sheet, none gives me more trouble than goodwill. It is not an insignificant item for some companies, amounting to a large percentage of overall assets, but it does not show up on the balance sheets of other companies. To anyone who encounters it, there are five questions that follow: What is it? Why it is there? What does it measure? Can it change over time? What do we do with it?
Sports Betting Hedge Fund At The Starting Gate – via Market Folly – Centaur Corporate will launch a new hedge fund investing in an odd asset class, if it can even be so called: sports betting. The firm’s new Galileo Fund won’t be buying shares in sports books or online betting exchanges, but will actually gamble on them.
Inflation: ‘Financial Death by a Thousand Cuts’ – via Wharton – According to Wharton insurance and risk management professor Kent Smetters, inflation “destroys the value [of investments] gradually by eroding real returns over time.” In the first installment of a new personal finance column for Knowledge@Wharton, Smetters discusses how investors can guard their portfolios against surges in inflation.
Consuelo Mack Interviews Charles Ellis and Jason Zweig – via Gurufocus – On this week’s Consuelo Mack WealthTrack, what are the most valuable lessons individuals can learn from the financial crisis? Consuelo talks to renowned financial consultant Charles Ellis and The Wall Street Journal’s highly respected personal finance columnist, Jason Zweig.
Media (videos, audio etc)
Charlie Rose & Lisa Randall– Via Charlie Rose – is a professor theoretical physics at Harvard University and a leading theoretical physicist and expert on particle physics, string theory and cosmology.
Markets, Religion, Community Size, and the Evolution of Fairness and Punishment – via Science Mag – Large-scale societies in which strangers regularly engage in mutually beneficial transactions are puzzling. The evolutionary mechanisms associated with kinship and reciprocity, which underpin much of primate sociality, do not readily extend to large unrelated groups. Theory suggests that the evolution of such societies may have required norms and institutions that sustain fairness in ephemeral exchanges. If that is true, then engagement in larger-scale institutions, such as markets and world religions, should be associated with greater fairness, and larger communities should punish unfairness more. Using three behavioral experiments administered across 15 diverse populations, we show that market integration (measured as the percentage of purchased calories) positively covaries with fairness while community size positively covaries with punishment. Participation in a world religion is associated with fairness, although not across all measures. These results suggest that modern prosociality is not solely the product of an innate psychology, but also reflects norms and institutions that have emerged over the course of human history.
Oligopoly, Disclosure, and Earnings Management – via HLS – We find that Cournot competitors bias their financial reports so as to create the impression that their costs of production are lower than they actually are. This bias leads to lower total production, a higher price and each competitor earning greater product market profits. These results obtain even though no firm is fooled by its rival’s disclosure. We also find that the magnitude of the bias (the amount of earnings management) is larger when firms compete in more profitable product markets but smaller when they can extract more information about their rival’s costs from their own. When the costs of misreporting are asymmetric, the lower cost firm engages in more earnings management than its rival, and it produces more and earns greater profits than it would in a full-information environment.
How the Disciple Became the Guru – via SSRN – This paper is based on detailed interviews with the CEOs, HR executives, R&D managers, and employees of 24 leading companies in rapidly growing sectors in India. We present an overview of their best practices in recruiting, training, managerial development, and employee retention. We conclude that out of necessity – because of educational weaknesses; skills shortages; competition for top talent; turnover; and rising salaries – leading businesses in India have developed highly advanced, innovative practices and that these are allowing industries in India to become globally competitive and grow rapidly.
Pursuing a Tax LLM – via SSRN – This Article and a related article, Pursuing a Tax LLM Degree: Where?, provide information and advice about Tax LLM programs to American law students and JD graduates who are thinking about pursuing a Tax LLM degree. This Article (1) discusses the costs and benefits of pursuing a Tax LLM degree, (2) explains the circumstances in which prospective Tax LLM students may be able to expand their employment options by pursuing a Tax LLM degree, and (3) compiles information and advice that tax law professors typically provide to prospective Tax LLM students in individual counseling sessions. This information includes a primer on tax practice employment opportunities, which vary based on (1) the nature of the work (i.e., transactional work or controversy work) (2) the type of tax subspecialty that is the focus of the tax practice and (3) the type of tax practice employer. The primer includes descriptions of various tax subspecialty areas, including business tax, international tax, estate planning, employee benefits, tax-exempt organizations, and tax controversies. This Article also offers advice to prospective Tax LLM students who are searching for tax positions with various types of employers, including (1) law firms (large, elite law firms, medium-size law firms, or smaller law firms), (2) accounting firms (Big Four accounting firms or smaller accounting firms), (3) the IRS, Treasury Department, or Department of Justice, (4) state taxing authorities, (5) corporations or other organizations, or (6) the U.S. Tax Court. For prospective Tax LLM students who hope to become full-time law professors, this Article also discusses the value of a Tax LLM degree in making the transition from tax practice to academia. In addition, this Article provides information regarding aspects of Tax LLM programs about which prospective Tax LLM students frequently inquire and addresses some common misconceptions about Tax LLM programs.
International Trade Statistics – via Policy Pointers – A press release containing international trade statistics for 2009, expert comment and forecasts for 2010
Other Fascinating Articles
Shopping & Moral Lessons, Down Aisle 9 – via NYT – Like Diogenes with his lamp, researchers have traversed the world looking for an honest man — or, more precisely, for people who act in the same fair, unselfish way toward everyone. If you wish to learn to follow this golden rule, which of these strategies is best?
Slightly Used How Humans Developed Tools – via NYT -In each episode of the fascinating BBC Radio 4 series “A History of the World in 100 Objects,” Neil MacGregor, the director of the British Museum, uses one item from that institution’s collection as a jumping-off point to discuss humanity’s long relationship with made things. The journey starts, as you would expect, with something useful: a “stone chopping tool,” believed to be about 1.8 million years old, suggests the dawning of a “relationship between humans and the things they create, which is both a love affair and a dependency,” MacGregor says. “From this point on, we can’t survive without the things we make.”
Bone wars: Why graves are moved – and what it says about our history – via Boston. com – When we want to say something is particularly dead — whether it’s a once-promising political candidacy, an unsalvageable sports season, or the three-martini lunch — we say it is dead and buried. To be dead in the water is to be stalled, to be good and dead is to have expired, but to be dead and buried is to have found one’s final resting place, with grass sprouting from the soil above.
Boost Creativity: 7 Unusual Psychological Techniques – via PsyBlog – Everyone is creative: we can all innovate given time, freedom, autonomy, experience to draw on, perhaps a role model to emulate and the motivation to get on with it. But there are times when even the most creative person gets bored, starts going round in circles, or hits a cul-de-sac. So here are 7 unusual creativity boosters that research has shown will increase creativity
Stress & Productivity During The Work Day – via Flickr –