Weekly Roundup 85: A Curated Linkfest For The Smartest People On The Web

I spend 8 hours every Sunday putting this together. If you link this roundup or plan on linking to it (or from it) kindly include a reference to SimoleonSense.com Thanks!

Weekly Cartoon

Dilbert.com

Weekly Joke (via Stta Consulting)

Einstein dies and goes to heaven only to be informed that his room is not yet ready. “I hope you will not mind waiting in a dormitory. We are very sorry, but it’s the best we can do and you will have to share the room with others” he is told by the doorman.

Einstein says that this is no problem at all and that there is no need to make such a great fuss. So the doorman leads him to the dorm. They enter and Albert is introduced to all of the present inhabitants. “See, Here is your first room mate. He has an IQ of 180!”

“Why that’s wonderful!” Says Albert. “We can discuss mathematics!”
“And here is your second room mate. His IQ is 150!”

“Why that’s wonderful!” Says Albert. “We can discuss physics!”
“And here is your third room mate. His IQ is 100!”

“That Wonderful! We can discuss the latest plays at the theater!”
Just then another man moves out to capture Albert’s hand and shake it. “I’m your last room mate and I’m sorry, but my IQ is only 80.”

Albert smiles back at him and says, “So, where do you think interest rates are headed?”

Must Read Articles For All Weekly Visitors!!!

What can you do to someone to make their lies easier to detect? - via Bakadesuyo – We present two lie detection approaches based on cognitive theory. The first approach, ‘measuring cognitive load’, assumes that the mere act of lying generates observable signs of cognitive load. This is the traditional cognitive lie detection approach formulated by Zuckerman, DePaulo, & Rosenthal (1981). The second approach, ‘imposing cognitive load’, was developed by us (Vrij, Fisher, Mann, & Leal, 2006) and goes one step further.

The Economists That  Did Their Homework (800 Years of It) - via NYT – THE advertisement warns of speculative financial bubbles. It mocks a group of gullible Frenchmen seduced into a silly, 18th-century investment scheme, noting that the modern shareholder, armed with superior information, can avoid the pitfalls of the past. “How different the position of the investor today!” the ad enthuses.

 

Government for Sale: How Lobbyists Shaped the Financial Reform Bill - via Time – Two weeks ago, along a marble corridor in the Rayburn House Office Building in Washington, I watched about 40 well-dressed men (and two women) delivering huge value for their employers. Except that we, the taxpayers, weren’t employing them. The nation’s banks, mortgage lenders, stockbrokers, private-equity funds and derivatives traders were.

Royal Society Neuroscience and Cognition Articles Free - via Neuroanthropology – For the month of July 2010, Royal Society Publishing is providing free access to all their neuroscience and cognition articles.

Video: Warning: Physics Envy May be Hazardous to Your Wealth - via MIT -  Andrew Lo compares economics to physics, with some surprising results. More details about the lecture coming soon.

Video: Jerry Wolman: The World’s Richest Man – via Fora.tv – Jerry Wolman: The World’s Richest Man is the never-been-told true story of Jerry Wolman, who came from the coal mining region of Pennsylvania and made it big. He became known as “The Boy Wonder” of real estate as a storybook “rags to riches” builder in the Washington, D.C. area in the mid-1950s through the 1960s, amassing a personal financial empire.

Why Protestant’s Can’t Pick Stocks : Having Faith in Your Trade: Mutual Fund Risk-Taking and Local Religious Beliefs- via PK – We examine the relations between mutual fund risk-taking behaviors and local religious beliefs. We find that funds located in regions with lower Protestant population or higher Catholic population tend to have higher volatilities of fund returns, consistent with Protestants (Catholics) being more (less) risk-averse compared to general population. The variation in systematic risk exposures explains only a small portion of this difference as we observe a similar pattern in idiosyncratic portfolio risks. We also find that intra-year increases in fund volatility associated with tournament-like competition exist only in mutual funds located in areas with lower Protestant or higher Catholic population. After controlling for exposures to common risk factors, we find little evidence that higher return volatility is rewarded with higher returns. Funds located in lower Protestant population areas also appear to trade more frequently and have more positive return gaps. Overall, our findings suggest that the level of risk-taking by mutual fund managers varies reliably with local religious beliefs.

Afghanistan’s first media mogul- via New Yorker – Every day in Kabul, politicians and journalists in search of information come to a barricaded dead-end street in the Wazir Akbar Khan district to see Saad Mohseni, the chairman of Moby Group, Afghanistan’s preëminent media company. At the last house on the right, burly men carrying AK-47s lead them up creaky stairs to a small second-floor office. Mohseni, a gregarious man with a politician’s habits, often stands up to greet visitors with a hug, then returns to his desk, where a BlackBerry, two cell phones, and a MacBook Air laptop are constantly lit up; fifteen small flat-screen TVs, set to mute, are mounted on the office walls.

Universities ranked by ROI - via Information Processing – MIT, Caltech and Harvard lead the pack. Berkeley is the top public school and beats out Brown, Columbia and Cornell. (Actually, for in-state students, the percentage ROI for Berkeley is the highest because tuition is low.) Full list and methodology discussion here. These results are using a sample of graduates who only obtained a bachelor’s degree and no higher degree. The ROI dollar amount is the *difference* in income between graduates and non-graduates. (See methodology note at link above.)

What happened to studying? - via Boston.com – They come with polished resumes and perfect SAT scores. Their grades are often impeccable. Some elite universities will deny thousands of high school seniors with 4.0 grade point averages in search of an elusive quality that one provost called “intellectual vitality.” The perception is that today’s over-achieving, college-driven kids have it — whatever it is. They’re not just groomed; they’re ready. There’s just one problem. Once on campus, the students aren’t studying.

You Have Superpowers: How to tap the strange power of being wrong – via Scientific American -False beliefs carry a bad reputation for bringing turmoil and misunderstanding. No less an enlightened thinker than Thomas Jefferson noted, “It is always better to have no ideas than false ones; to believe nothing, than to believe what is wrong.” Mistaken beliefs can mean the difference between war and peace in the case of conflicts such as the Cuban Missile Crisis or the more recent pursuit of weapons of mass destruction in Iraq. Even common, small mistaken beliefs come with severe consequences like misbeliefs about appointment times that result in missed flights, missed jobs, and missed opportunities.

Biases In The Interpretation & Use of Research Results – via Berkeley – The latter half of this century has seen an erosion in the perceived legitimacy of science as an impartial means of finding truth. Many research topics are the subject of highly politicized dispute; indeed, the objectivity of the entire discipline of psychology has been called into question. This essay examines attempts to use science to study science; specifically, bias in the interpretation and use of empirical research findings. I examine theory and research on a range of cognitive and motivational mechanisms for bias. Interestingly, not all biases are normatively proscribed; biased interpretations are defensible under some conditions so long as those conditions are made explicit. I consider a variety of potentially corrective mechanisms, evaluate prospects for collective rationality, and compare inquisitorial and adversarial models of science.

Miguel’s Weekly Favorites

Predicting soccer matches: A reassessment of the benefit of unconscious thinking – Via SJDM – We evaluate the benefit of unconscious thinking in predicting the outcomes of soccer matches. We conclude that the evidence that unconscious thinking
helps experts to make better predictions is tenuous both from theoretical and statistical perspectives.

Applied Behavioral Economics - via Gallup – Could your company outperform its competitors by 85% in sales growth and 25% gross margin? A group of Gallup clients achieved this competitive advantage by applying our behavioral economic principles.

Soccer & Irrational Goalies - via TrueSlant – Indeed, it felt lousy. Azar interviewed the goalies about their decisions in the net, and he found that their emotions played a major role in goaltending strategy. Despite the clear statistical advantage of staying put in the center, only about 6 percent of goalies actually choose to do this. Why? Because they feel worse if they fail standing still—worse than they feel if they fail diving. In other words, taking any action—even an action doomed to failure—is better than inaction, because doing nothing and still failing is emotionally unacceptable. That’s the heuristic mind that makes movement an emotional choice, and it takes a lot of effort to alter the impulse.

Lost in the Sauce: The Effects of Alcohol on Mind Wandering - Sagepub – The results suggest that alcohol increases mind wandering while simultaneously reducing the likelihood of noticing one’s mind wandering. Findings are discussed with regard to theories of alcohol and theories of consciousness.

Deliberate Practice Is Necessary but Not Sufficient to Explain Individual Differences in Piano Sight-Reading Skill
- via Sagepub – Deliberate practice—that is, engagement in activities specifically designed to improve performance in a domain—is strongly predictive of performance in domains such as music and sports. It has even been suggested that deliberate practice is sufficient to account for expert performance. Less clear is whether basic abilities, such as working memory capacity (WMC), add to the prediction of expert performance, above and beyond deliberate practice. In evaluating participants having a wide range of piano-playing skill (novice to expert), we found that deliberate practice accounted for nearly half of the total variance in piano sight-reading performance. However, there was an incremental positive effect of WMC, and there was no evidence that deliberate practice reduced this effect. Evidence indicates that WMC is highly general, stable, and heritable, and thus our results call into question the view that expert performance is solely a reflection of deliberate practice.

The Illusion of Courage in Social Predictions: Underestimating the Impact of Fear of Embarrassment on Other People - via SSRN -The results of two experiments support the thesis that emotional perspective taking entails two judgments: a prediction of one’s own preferences and decisions in a different emotional situation, and an adjustment of this prediction to accommodate perceived differences between self and others. Participants overestimated others’ willingness to engage in embarrassing public performances – miming (Experiment 1) and dancing (Experiment 2) – in exchange for money. Consistent with a dual judgment model, this overestimation was greater among participants facing a hypothetical rather than a real decision to perform. Further, participants’ predictions of others’ willingness to perform were more closely correlated with self-predictions than with participants’ estimates of others’ thoughts about the costs and benefits of performing.

Emotional reactions to losing explain gender differences in entering a risky lottery - via SJDM – A gender difference in risk preferences, with women being more averse to risky choices, is a robust experimental
finding. Speculating on the sources of this difference, Croson and Gneezy recently pointed to the tendency for women to experience emotions more strongly and suggested that feeling more strongly about negative outcomes would lead to greater risk-aversion. Here we test this hypothesis in an international survey with 424 respondents from India and 416 from US where we ask questions about a hypothetical lottery. In both countries we find that emotions about outcomes are stronger among women, and that this effect partially mediates gender difference in willingness to enter the lottery.

Inside A Psychopath’s Brain: The Sentencing Debate- Via NPR -Kent Kiehl has studied hundreds of psychopaths. Kiehl is one of the world’s leading investigators of psychopathy and a professor at the University of New Mexico. He says he can often see it in their eyes: There’s an intensity in their stare, as if they’re trying to pick up signals on how to respond. But the eyes are not an element of psychopathy, just a clue.


A Quest to Learn What Drives Consumer Decisions
- via NYT – AS Madison Avenue focuses more intently on trying to influence consumer behavior, one of the world’s largest agencies is starting a unit that will tap into research from academics in the field as well as the work of its own employees.

Ken Rogoff – Can Good Emerge From the BP Oil Spill?
– via Project syndicate – Perhaps it is a pipe dream, but it is just possible that the ongoing BP oil-spill catastrophe in the Gulf of Mexico will finally catalyze support for an American environmental policy with teeth. Yes, the culprits should be punished, both to maintain citizens’ belief that justice prevails, and to make other oil producers think twice about taking outsized risks. But if that is all that comes out of the BP calamity, it will be a tragic lost opportunity to restore some sanity to the United States’ national environmental and energy policy, which has increasingly gone off track in recent years.

A contagion of social symptoms: – via Mindhacks – There’s a fascinating study just published online by the journal Epidemiology that examines how many reports of chemical spills may in fact be ‘mass hysteria’ or ‘mass psychogenic illness’.


Behavioural Finance’s Smoking Gun
- via PsyFi – Here’s a classic demonstration of behavioural finance in action, proving the irrationality of humankind. It’s the (in)famous Linda problem:

Dan Ariely On Irrational Career Incentives
- via Psych Central – Beliefs about the labour market and irrationalities in how it really works. Ariely, an entertaining and charismatic behavioural economist, describes a number of psychology experiments in conditioning and motivation, and explains why workplace financial incentives aren’t effective beyond a certain point. Related: Daniel Pink talks about one of the same studies (an Indian workplace motivation experiment) in the animated RSA lecture Drive.

Exclusive Picks + Financial Topics

Middle class families face a triple whammy - via Telegraph.co.uk – Falling pensions, cuts and the banking crisis will impoverish many families, says Edmund Conway.You don’t usually expect radical neo-Marxism from the International Monetary Fund – the last great bastion of capitalism, spreading the gospel about the free market to the furthest reaches of the world. And yet, hidden away in an obscure IMF report a few years back is a short sentence that explains precisely the problems that Britain, and the rest of the Western world, have been sleepwalking towards for years.

Washington’s Odd Jobs Attitude Why high unemployment is terrible for the economy. – via Slate – The economy is now presenting a strange dichotomy. The corporate sector has returned to rude health, with improved balance sheets and tons of cash. It has helped lead the recovery. But without the mighty American consumer, who generates 70 percent of economic activity, participating to the fullest degree, the recovery will seem anemic. Without a healthy jobs market, the recession-shocked consumer won’t spend.

The Global Financial Crisis and Equity Markets in Middle East Oil Exporting Countries - via MPRA – This paper employs extreme downside risk measures to estimate the impact of the global financial crisis in 2008/2009 on equity markets in major oil producing Middle East countries. The results in the paper indicate the spillover effect of the global crisis varied from a country to another, but most hardly affected market among the group of six markets was Dubai financial market in which portfolio loss reached about 42 per cent. This indicates that Dubai debt crisis, which emerged on surface in 2009, exacerbated the impact of the global financial crisis and prolonged the recovery process in these markets.

Academic Research Worth Reading

How the Opinion of Others Affects Our Valuation of Objects – via Wisdom – “The opinions of others can easily affect how much we value things. We investigated what happens in our brain when we agree with others about the value of an object and whether or not there is evidence, at the neural level, for social conformity through which we change object valuation. Using functional magnetic resonance imaging we independently modeled (1) learning reviewer opinions about a piece of music, (2) reward value while receiving a token for that music, and (3) their interaction in 28 healthy adults. We show that agreement with two “expert” reviewers on music choice produces activity in a region of ventral striatum that also responds when receiving a valued object. It is known that the magnitude of activity in the ventral striatum reflects the value of reward-predicting stimuli. We show that social influence on the value of an object is associated with the magnitude of the ventral striatum response to receiving it. This finding provides clear evidence that social influence mediates very basic value signals in known reinforcement learning circuitry. Influence at such a low level could contribute to rapid learning and the swift spread of values throughout a population.”

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About Miguel Barbosa

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04. July 2004 by Miguel Barbosa
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