Author Archives: rdmyers75@hotmail.com

on leadership…

It seems to be out of fashion, but I always find it interesting when people try to draw social parallels between people and animals. This reminds me of E.O. Wilson’s Sociobiology, which spends hundreds of pages on ants and termites, and after I worked my way through it I actually feel more of an affinity for these creatures and the complex mini-civilizations they have built.

Leadership in Mammalian Societies: Emergence, Distribution, Power, and Payoff

Leadership is an active area of research in both the biological and social sciences. This review provides a transdisciplinary synthesis of biological and social-science views of leadership from an evolutionary perspective, and examines patterns of leadership in a set of small-scale human and non-human mammalian societies. We review empirical and theoretical work on leadership in four domains: movement, food acquisition, within-group conflict mediation, and between-group interactions. We categorize patterns of variation in leadership in five dimensions: distribution (across individuals), emergence (achieved versus inherited), power, relative payoff to leadership, and generality (across domains). We find that human leadership exhibits commonalities with and differences from the broader mammalian pattern, raising interesting theoretical and empirical issues.

 

how to think about human capital

Here is a Morningstar study on how to think about your personal human capital in investment and retirement planning decisions.

Financial assets such as stocks and bonds are only one component of an investor’s total economic worth. Other assets, such as human capital, real estate, and pensions (e.g., Social Security retirement benefits) often represent a significant portion of an investor’s total wealth. These assets, however, are frequently ignored by practitioners when building portfolios, despite the fact that they share common risks with financial assets. This paper provides evidence that industry-specific human capital, region-specific housing wealth, and pensions have statistically significant exposures to different asset classes and risk factors. Through a series of portfolio optimizations we determine that the optimal allocation for an investor’s financial assets varies materially for different compositions of total wealth. These findings suggest that narrowly focused portfolio optimization routines that ignore human capital and outside wealth are insufficient, and that a holistic definition of wealth is necessary to build truly efficient portfolios.

Richard Thaler

Here’s a Vanguard interview with Richard Thaler on what behavioral economics is all about.

Losses have about twice the emotional impact of an equivalent gain. Fear of losses (and a tendency toward short-term thinking—I’m sneaking in a third one here) can inhibit appropriate risk-taking.

For example, investing in the stock market has historically provided much higher returns than investing in bonds or savings accounts, but stock prices fluctuate more, producing a greater risk of losses. Loss aversion can prevent investors from taking advantage of the long-term opportunities in stocks.

The second bias that causes a lot of trouble is overconfidence. Most people think they are above-average investors, and as a result they trade too much and diversify too little. Overconfidence can also lead people to invest during what appears to be a bubble, thinking they will just get out faster than others. Research shows that the more individuals trade, the lower their returns. Not surprisingly, men suffer from this problem more than women.

package delivery robots

Here come the package delivery robots. I don’t know that this couldn’t work in a quieter urban residential neighborhood. This would work great on several narrow streets I have lived on in Philadelphia, where post office and UPS/FedEx trucks typically double park at the nearest intersection (often blocking crosswalks, fire hydrants, bike lanes, etc. because there aren’t other options) and then walk in. Urban areas can take a number of forms other than high rise towers and central business districts, which is what (most likely suburban living) authors of articles like this always seem to be picturing.

October 2015 in Review

What did I learn in October? Let’s start with the bad and then go to the good.

Negative stories (-15):

  • Events leading to the current war and refugee disaster in Syria may have been set in motion by the U.S. invasion of Iraq. (-2)
  • Drone strikes are not as surgical as we have been led to believe. Also, post-2001 CIA torture was a thing. (-2)
  • Herman Daly suggests that zero interest rates cause us to misprice (basically, ignore the costs of) environmental degradation. The only thing worse than zero interest rates is negative interest rates. I continue to puzzle over the links between the money supply, interest rates, natural capital and environmental degradation. I don’t have the puzzle figured out yet. I will let you know as soon as I do. (-1)
  • When trees die it makes people sad. (-1)
  • The Bank of England warns that ” once climate change becomes a defining issue for financial stability, it may already be too late.” (-3)
  • The IMF is warning of more slow growth ahead, especially in developing countries. The reasons? “low productivity growth since the crisis, crisis legacies in some advanced economies (high public and private debt, financial sector weakness, low investment), demographic transitions, ongoing adjustment in many emerging markets following the post crisis credit and investment boom, a growth realignment in China—with important cross-border repercussions—and a downturn in commodity prices triggered by weaker demand as well as higher production capacity.” (-2)
  • Stephen Hawking is worried about inequality and technological unemployment. Work sharing is one possible way to deal with it. (-1)
  • Corrupt Russian officials appear to be selling nuclear materials in Moldova. (-3)

Positive stories (+9):

    • Thanks to Pope Francis, Philadelphians got to experience a weekend with no cars, and it was awesome! Norway is a bit ahead of us on this. (+3)
    • There is some evidence that Uber is modestly reducing rates of car ownership. (+1)
    • Japan might have self-driving taxis as soon as next year. Self-driving shuttle buses are operating right now in a California office park (+1)
    • I learned that Norbert Wiener was one of the fathers of modern automation, artificial intelligence, and robotics. He was concerned that his ideas could be misuses, and refused to take corporate or military money to advance them. (+1)
    • Viktor Glushkov was a Soviet computer science who developed an idea for a cash-free, computer-controlled economic system. Seriously, it was an interesting idea even though in retrospect things didn’t work out so well for the USSR. There could be some elements we could consider today now that we actually have the computer technology he lacked back then. (+1)
    • Elephants seem to have very low rates of cancer. Maybe we could learn their secrets. (+1)
    • There may be some hope for a global carbon pricing agreement. (+1)

David Brooks ca. 2001

Here’s an enormously long 2001 rant by David Brooks on the ethics of college students he observed at the time.

There are a lot of things these future leaders no longer have time for. I was on campus at the height of the election season, and I saw not even one Bush or Gore poster. I asked around about this and was told that most students have no time to read newspapers, follow national politics, or get involved in crusades. One senior told me she had subscribed to The New York Times once, but the papers had just piled up unread in her dorm room. “It’s a basic question of hours in the day,” a student journalist told me. “People are too busy to get involved in larger issues. When I think of all that I have to keep up with, I’m relieved there are no bigger compelling causes.”

I find today’s new generation of young adults fascinating. On the one hand, they seem much more involved in community service than I or most people I know were at the same age. But they seem less interested in current affairs. They are extremely intelligent and well educated, and yet their intellectual engagement seems confined within fairly narrow boundaries. They seem to be about more than money and materialism, and yet they seem accepting of the existing order and willing to get ahead the best they can within the system, rather than interested in questioning the system itself. I don’t have them figured out yet. Not that I have myself completely figured out.

Most Dangerous

Here’s a new book on the Vietnam War…for kids ages 10 and up?

a trailer full of corpses, its floor “streaked with blood and brains.” Arms and legs were falling off the rotting trunks, which made it difficult to count how many bodies were in the trailer. The stench was unbearable. So the bodies were hosed down and the trailer tipped to its side, letting, as one witness put it, a “rivulet of blood-colored water” flow outside. A delegation of American military officers passed by, stepping over the blood “to avoid ruining the shine on their boots.”

Age 10, really? I think everyone at some point does need to know that this stuff happened. Not just know it intellectually, but internalize it, try to come to terms with it, and realize it can’t happen again. I remember being shown a movie of piles of Holocaust victims being moved by bulldozer around 7th grade. I don’t remember my emotions at the time but I remember the image vividly 25+ years later. Still, age 10? I’m not sure, maybe high school would be soon enough.

Anyway, should we assume this stuff only happened in the past? In Afghanistan we are hearing about “military age males” and “enemy killed in action”. Maybe not on the enormous scale of the Vietnam era, but it is the same rhetoric nonetheless. And I don’t think most of us are internalizing it, struggling to come to terms with it, or asking what we should be doing to stop it from happening.

go anywhere on Earth in four hours

That’s right, four hours. According to BBC:

the technology would allow the launch of satellites into space at a fraction of the current cost and allow passengers to fly anywhere in the world in four hours…

According to Reaction, an aircraft using such engines could take off from a runway and accelerate to more than five times the speed of sound, before switching to a rocket mode which would propel the aircraft into orbit.

 

the best and the brightest

The U.S. is sending “advisors” into Syria. This reminds me of David Halberstam’s The Best and the Brightest, where he describes the gradual escalation of the Vietnam war. A small force is sent. Then more are sent to protect the perimeter of that force. Then more are sent to patrol out from the perimeter. And so on until you have a president (Kennedy started it, Nixon ended it, but this book takes aim squarely at Lyndon Johnson) with an enormous amount of blood on his hands. Johnson has been judged kindly by history for his domestic programs and civil rights, but anybody who has read The Best and the Brightest might question that. Obama must have read The Best and the Brightest.

time to worry about the national debt?

While the Republican candidates are obsessing over the national debt, economists are thinking the opposite, that Keynesianism is back and a lot of borrowing and spending is going to be necessary to keep the economy going. Your average person on the street can follow the first argument, because it seems similar to his household finances, and because it has an undertone of morality (debt=bad). But very few people understand the theories behind fiscal or monetary policy. Because our education system hasn’t given us the mental tools to understand the nested complex systems we are all embedded in. How are we supposed to elect the right people to make the right choices then?

Finally, there is a fourth view, championed most prominently by Larry Summers and Paul Krugman. They argue that there is little evidence that monetary policy will ever restore full prosperity. In this view, Milton Friedman’s dream of using strategic monetary interventions to offset economic shocks remains just that: a dream. It was only the unique circumstance in Europe and the US over the last half-century – most notably rapid demographic and productivity growth – that made his ideas seem plausible. “If nobody believes that inflation will rise, it won’t,” is how Krugman put it. “The only way to be at all sure of raising inflation is to accompany a changed monetary regime with a burst of fiscal stimulus.”

I do not claim to know which of these views is the correct one. But I do think that this discussion is the most important debate in the field of macroeconomics since John Maynard Keynes wrestled with similar questions in the 1930s. For Keynes, the answer was clear, and it was something close to what is being argued by Summers and Krugman; indeed, his conclusions are what transformed him from a monetarist into a Keynesian.

“It seems unlikely that the influence of [monetary] policy on the rate of interest will be sufficient by itself,” Keynes wrote in 1936. “I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment.” Those are words worth considering the next time we find ourselves needing the courage to act.

Oh, even if monetary policy did work, the Republicans want to destroy the Federal Reserve.