Why I quote..

Let me attempt to clear the record (Since someone pointed out that I am constantly quoting others).

Foremost "I quote others only in order the better to express myself." -- Michel de Montaigne

or

"The next best thing [sigh!] to being clever is being able to quote someone who is." - Mary Poole

though Voltaire would have none of it observing that "A witty saying proves nothing."

Another wise man, George Santaya, noted "Almost every wise saying has an opposite one, no less wise, to balance it."

Somerset Maugham scathingly noted "She had a pretty gift for quotation, which is a serviceable substitute for wit."

And my favorite quote on quotations is Groucho Marx's "Quote me as saying I was mis-quoted."

I loved and still love reading quotes! "It is [such ] a joy to find thoughts one might have, beautifully expressed with much authority by someone recognizably wiser than oneself." - Marlene Dietrich

Cognitive Disabilities in Investment or why Wharton MBAs couldn't choose a low-cost index fund.

Very few people have the skill and the necessary time available to make intelligent choices about their retirement savings (i.e. 401(k)plan, IRAs, ROTH IRAs etc).

Unfortunately, the participants in the study inspire anything but confidence as individuals continue to take control of their retirement assets. Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds, a paper authored by professors from Yale, Harvard and the Wharton School, asks Wharton MBA and Harvard College students to allocate an imaginary pot of $10,000 across four S&P 500 index funds with varying expense ratios and commissions of more than a little significance. In the first experiment, the only related literature the students are given to make an informed decision is the prospectus for each fund. The result? To quote the study authors, "Over 95% of control group subjects fail to minimize fees." In other words, only 5% made the correct decision of choosing the lowest-cost index fund.


I'm not particularly worried that Wharton MBAs couldn't read a prospectus well-enough to determine which index funds had the lowest costs. I've always maintained that MBA school teaches you just about nothing (with the exception of Chicago & MIT), but is just a rite of passage that one has to complete.

I'm, however, concerned that many intelligent people don't understand retirement planning and are going to be woefully under-prepared when it comes time to retire.

The simplest savings advice would be:

1) Eliminate debt (especially credit-card debt)
2) Invest in a low cost index fund.
3) Don't worry about short-term market gyrations.

But just as everyone claims to be a better driver, everyone claims to have "superior" investing skills or the ability to "time" the market.


The age of self-managed retirement funds can be imagined as a wonderful world, one in which enlightened citizens invest their assets wisely over time so as to live out their golden years in comfort and style. Or so one could theorize. In practice, it may turn out to be something less. How much less depends on any number of factors, starting with the particular skills of the individual.


Part of me wants to say "tough" and part of me realizes that this will be a huge problem in the future.

Liberal media bias

Brad DeLong quotes Paul Krugman.

I'd like to say that there's a real dialogue taking place about the state of the U.S. economy, but the discussion leaves a lot to be desired. In general, the conversation sounds like this:

Bush supporter: "Why doesn't President Bush get credit for a great economy? I blame liberal media bias."

Informed economist: "But it's not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well."

Bush supporter: "Why doesn't President Bush get credit for a great economy? I blame liberal media bias."

The data strongly suggests that US median wages have declined since 2001, but I'm not sure why that's happened. Is it entirely because of the Bush tax-cuts? Or are there other factors? It's certainly a cause for concern that income is getting increasingly concentrated at the upper-end of the income distribution i.e. most of the benefits have flowed to folks in the top 5%.

Sabor Latino or Ecuadorian (I hope that's right) food in Minneapolis.



If there's one thing that I like almost as much as snuggling up in bed on a rainy night and reading myself silly, it's trying out new food and cuisines. I was driving about in Minneapolis when I saw what promised to be quite the treat; it was a storefront that proclaimed "Sabor Latino" and a sign helpfully pointed out "Ecuadorian Food." Ecuadorian food! Hmmm, I've never tried that before. As a matter of fact, I had NO idea about what to even expect from Ecuadorian food. So I pulled into the fenced parking lot and made my way into said establishment.

I have the bad habit of entering restaurants where it's painfully apparent that I'm not "one of them." You know the type where everyone stops eating/talking/yelling on the phone in an alien language and looks at you. But I've entered enough strange places to not care about it. So the waitress asks me if it's just me, and I say yes, and she then escorts me to a table for 6.

I open the menu and a lot of the items seem to be seafood; I just love seafood so I was very, very happy! I also noticed that the menu was predominantly in Spanish with just a couple of words in English. This made it all the more exciting.

I ordered something that had the English words "fried Bass" and "spicy salsa" against it, along with a freshly squeezed raspberry juice.



The food was delicious, the spicy salsa was really spicy (just the way I like it), and the raspberry juice was sweet enough to give me a sugar high.

My only regret is that I don't know any Spanish, beyond "Muchos Gracias" and a few numbers.

The key to wisdom...

...linked from MR.

A couple years ago, I was talking the Institute’s Bob Johansen about wisdom, and he explained that – to deal with an uncertain future and still move forward – they advise people to have “strong opinions, which are weakly held.” They've been giving this advice for years, and I understand that it was first developed by Instituite Director Paul Saffo. Bob explained that weak opinions are problematic because people aren’t inspired to develop the best arguments possible for them, or to put forth the energy required to test them. Bob explained that it was just as important, however, to not be too attached to what you believe because, otherwise, it undermines your ability to “see” and “hear” evidence that clashes with your opinions. This is what psychologists sometimes call the problem of “confirmation bias.”

How very true; one needs to strongly believe in one's arguments, but at the same time be open to evidence that goes contrary to one's opinions.

This reminds me of John Kenneth Galbraith and his thoughts on convential wisdom (also reproduced in a chapter in Freakonomics).

He noted "We associate truth with convenience, with what closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life. We find highly acceptable what contributes most to self-esteem"

Ideas are "complex, and to comprehend their character is mentally tiring. Therefore we adhere, as though to a raft, to those ideas which represent our understanding"

Thinking is hard-work, but surely that means that we try to think MORE, not less, right?

Sunset at Coons Rapid Dam (Minnesota, USA).

Just a few snaps from an evening at Coons Rapids Dam.

Accents.

I’m currently in Minneapolis and I do have to say that I LOVE the Minnesota accent. In fact, I tend to love all accents (especially when it’s a woman speaking). Go ahead, call me sexist, but a Southern USA accent on a man indicates mental slowness, but is just dynamite on a woman.

So here I am in Minnesota, feigning deafness and associated hearing impediments in order to make people (mostly women) repeat themselves. (Note to readers: I say this semi-facetiously).

But, I don’t think it’s only me who finds accents attractive; in fact, there’s a facebook.com group called “Accents make me Orgasm.” I haven’t reached that stage yet…

So why do I love accents? Is it the attractiveness of something different (and so exotic)? Is it because I'm bored and have nothing else to do (not quite true). What could be the reason for one to consider unfamiliar accents as attractive?

Joelle the pussycat.


I'm not the type of person who has a bumper-sticker on his car reading "My son/daugther is an honors student at smarty-pants high school," but I do want everyone to know that I have an ENORMOUSLY sweet, charming, gorgeous, did I say sweet pussycat.

I got her from one of the administrative assistants at work, and I'm so happy that I got her!



Joey presses her nose against the window as I walk from the car to the house and start rolling on her back and meowing as soon as I enter the house. She doesn't stop until I've picked her up and cuddled her and told her what a nice pussycat she is. Then, she gets all cat-like and runs away until I open a can of cat-food for her.

And she'll often jump on my bed when I'm reading and lie on my somach purring loudly. Oh, what bliss is a purring pussy-cat.

So, I do feel sad when I have to leave her at home (with only a visit from the pet-sitter to look forward to). But Joey decided to take matters into her own hands after I finished packing for my current trip.

The joy of shaving (is that a typo?)

If there's one thing that I hate more than getting up in the morning (I'm a nocturnal person and as Google Quotes reminds me "Early morning cheerfulness can be extremely obnoxious." ), it's going into the bathroom and running the cold steel of the razor down the morning stubble. Oh, how I hate that.

Then I discovered ye lost olde arte of shaving:

On Monday, I applied Lavender Shaving Cream made by Taylor of Old Bond Street on the brush and lathered-up.

On Tuesday, it was the turn of the Italian Proraso (con olio Eucalipto e Mentolo).

On Wednesday, it was Avocado shaving cream from my Old Bond Street friends.

On Thursday, it was Violet shaving cream from Geo Trumper of Mayfair, Londonh.

And I ended the week with the intoxicating Musgo Real from Portugal.

(Sorry, I don't shave on the weekends; though exeptions can be made).

I had NO idea that using a shaving brush and old-fashioned shaving cream would make such a difference. Make no mistake; shaving still feels like a chore, but I love the feeling as the shaving brush rubs again my face and the heady aromas of the shave-creams.

Actually, my dad used to shave the old-fashioned way, but part of my teenage rebellion was to instead use a can of shaving gel and apply it with my fingers as opposed to with a brush. I'm so glad that I've finally seen the way!

Another thought: Like most small boys, I used to watch with amazement as my dad lathered-up and shaved, and I couldn't wait for the time when I could take part in that grown-up ritual. When I actually shaved, it took me 5 minutes to realize that I HATED it!

Men do many incredible things for the woman they love (The Taj Mahal etc), but rare is the man who promises to dillegently shave for the rest of their union.

It was -- and is still -- possible, in India, to go to a barber-shop and get a very close shave followed by a refreshing head-massage with coconut oil; I wish I could do that here in the US. I'm really looking forward to going to Air-Cool in Bombay, in December and getting a shave and head-massage. I promise to post pictures!

That is all!

George W Bush Smackdown (not that it's terribly hard to do).

Brad DeLong cannot believe this and asks "Why are we ruled by this Moron?"

The Belgravia Dispatch: Putin To Bush: Thanks, But No Thanks: Well, this is just priceless:

During a joint news conference Saturday in St. Petersburg, Bush said he raised concerns about democracy in Russia during a frank discussion with the Russian leader. "I talked about my desire to promote institutional change in parts of the world, like Iraq where there's a free press and free religion, and I told him that a lot of people in our country would hope that Russia would do the same," Bush said. To that, Putin replied, "We certainly would not want to have the same kind of democracy that they have in Iraq, quite honestly."

[Transcript:

BUSH: I talked about my desire to promote institutional change in parts of the world, like Iraq, where there’s a free press and free religion. And I told him that a lot of people in our country would hope that Russia will do the same thing. I fully understand, however, that there will be a Russian-style democracy.

PUTIN: We certainly would not want to have same kind of democracy as they have in Iraq, quite honestly.

BUSH: Just wait.]

There were some interesting comments on Brad's blog that I'll reproduce over here:

1) just some good-natured ribbing between 2 elected dictators. Nothing to see here. Move along.

This is one of those statements at which you initially smile at and then relize that theres quite a bit of truth in.

2) It's not touching: its utterly embarrassing. There are many decent people in Russia who clearly want a more democratic government, but who nevertheless are forced to admit that Putin is a more intelligent and practical leader than Dick Cheney and his sock puppet, and that these were produced by US democracy after all.

How could so many million Americans vote for this insane charlatan?

How to make $12 million by doing nothing! (Seriously, this isn't a Ponzi scheme). And thoughts on gift-giving.

From Dan Gross:

A while ago, I wrote in Slate about how gift cards are generally bad news for consumers, good news for corporations, and somewhat inefficient means of giving gifts. Yesterday, Williams-Sonoma proved me right. In this filing (scroll down to the earnings guidance release), the company notes that it plans to record:

"a benefit of approximately $12 million before tax or $0.062 per diluted share associated with unredeemed certificates. During the second quarter of fiscal 2006, we completed an analysis of our historical gift certificate and gift card redemption patterns, which included an independent actuarial study. Based on this analysis, we concluded that the likelihood of our gift certificates and gift cards being redeemed beyond four years from the date of issuance is remote. As a result, we have changed our estimate of the elapsed time for recording income associated with unredeemed gift certificates and gift cards to four years from our prior estimate of seven years. This change in estimate will result in income recognition of approximately $12 million before tax in other income in the second quarter of fiscal 2006."

Translation: $12 million spent on Williams-Sonoma gift cards and gift certificates was utterly wasted because the recipients lost them or decided not to use them. What a great business!

I've always wondered why people don't give cash as gifts? I know it's considered rude etc, but I've never understood why people would rather give a gift-card than give cash. I know that cash is kinda impersonal, but it goes seem to be a very efficient method of gift-giving (given the variance in individual taste).

I understand that there's are some occasions when you wouldn't give cash (to a significant other, as a thank-you gift to a colleague etc), but why the blanket proscription on the giving of cash?

Here's another stray thought on gift-giving. In India, it's considered rude to open a gift in front of the person who gave it to you. You take it home and open at home. In the US, it's expected that you open the gift in front of the person who gave it you! Very interesting!

Interesting thoughts from Greg Mankiw's blog

The link between income and happiness is mainly an illusion.

Alan Krueger and Daniel Kahneman, two scholars at my alma mater, tell us that the "link between income and happiness is mainly an illusion."

So Shakespeare, The Russians, and almost everyone who has ever taken pen to paper are right!

How to beat the market:

These comparisons ignore taxes. On an after-tax basis, the superior performance of index funds would be even greater, because index funds are particularly good at deferring realization of capital gains.

According to Morningstar, over the past 10 years, Vanguard's S&P 500 Fund beat 74 percent of comparable funds on a before-tax basis and 86 percent on an after-tax basis. Even better is Vanguard's Tax-Managed Capital Appreciation Fund, which is essentially an index fund that keeps one eye on the tax system. It beat 90 percent of comparable funds on an after-tax basis

But human nature being what is it, expect looks of amazement from others when you tell them that you follow a mostly passive investment strategy.

Efficient-Market Hypothesis

Greg Mankiw offers a very good evaluation of the Efficient-Market Hypothesis.

“The efficient-market hypothesis is not strictly true, but it is close enough to true that most investors are better off believing in it nonetheless.”

Electronic Research Databases (once you leave school)

One of my frustrations with life in the “real world” was that I no longer had access to the plethora of on-line research databases that I was accustomed to using while at school. But it looks like getting a digital library card would once again give me access to on-line research databases as Alex Tabarrok found out!

In most states, you can get a library card from a public library outside of your county of residence -- as long as you can prove state residence (true for the San Francisco Public Library). Often you will have to go the actual state library in person to pick up your card, but once in hand, you can access the library from the web. Fanatical researchers are known to have a wallet full of library cards from numerous public library systems within their respective states. Some states, Ohio and Michigan being two of the better known, have statewide consortiums of private, corporate and public libraries, which allows you access to the combined services and databases licensing power of them all.

Sad Facts

Linked from Marginal Revolution.

"80% of US families did not buy or read a book last year."

"58% of the US adult population never reads another book after high school."

Further evidence that there are some things that I will never understand.

On Gambling

I’ve always believed that gambling is a tax that's incident on those who’re bad at math. I’ve never seen the point of gambling, and I can’t understand why people get so excited about visiting casinos. I’d rather watch the dust collect on magazines at my dentist’s office, thank you very much.

So I was quite thrilled to find out that during the time I was in Chicago, Economists Greg Mankiw, Brad DeLong and Tyler Cohen were blogging about gambling. Brad was a Clinton appointee, Greg was the head of GWB’s council of economic advisors (until he was marginalized) and Tyler is a libertarian at GMU. I’ve always been struck by the sterling quality of argument and debate that these three seemingly different economists engage in.

Anyway, Greg started off with a post called “ Why I hate gambling.”

My view is that there are three kinds of gamblers, all of which sadden me.

First, there is the compulsive gambler. When I was growing up, the husband of one of my mother’s coworkers lost all their money in a fit of compulsive gambling. This occurred just as their teenage daughter was getting ready to apply to college. The college savings, as well as all their other savings, were gone. Watching this experience has most likely colored my view of the activity more broadly.

Second, there is the recreational gambler. He spends, say, $20 a week on slot machines or lottery tickets. Some say this is a fun diversion. But given the availability of books, movies, plays, museums, checkers, chess, etc., it is an unfortunate reflection on a person’s imagination when a scratch lottery ticket is the best diversion he can find. (I'll go easy on the person who plays small-stakes poker among friends, because the socializing is a much bigger part of the activity than is the gambling.)

Third, there is the professional gambler, such as the one in the Slate article (or the boyfriend of blogger Jacqueline Passey). In some ways, this case is the saddest of all. I have no doubt that some people can, in fact, make a living gambling. But doing so requires a lot of intelligence and savvy. It is a shame that someone with so much inherent ability wastes it doing something of such little social value.

None of this has much implication for public policy. The libertarian in me says people can waste their lives if they want. The utilitarian points out that governmental attempts to suppress gambling are likely to be fruitless and would foster a large underground economy. But the moralist still makes me sad when I observe the phenomenon.

Okay, I got that off my chest. The libertarian and utilitarian will now put the moralist back in his cage.

I tend to be particularly saddened by two & three i.e the recreational gambler and the gambler who thinks he/she can make a ton of money out of gambling.

Tyler then writes:

More than anything I am baffled by gambling; to me it would be as fun as paying to count pennies. I genuinely cannot understand the adrenalin rush but I don't enjoy driving really fast either. If I let out my moralist (who is more than ten percent, I might add), I would disapprove of people who are usually late, people who smoke cigars in restaurants, people who play loud music late at night, and people who are not curious. Call me a prude if you want, but might these people be, in some fundamental sense, partly evil? Seriously.

Unlike Tyler, I enjoy fast driving, but I just can't make sense of people who gamble. I'm also not a fan of people who play loud music at night and people who are not curious.

Brad Observes:

On the other hand, Greg the Moralist slightly scares me: I buy the argument for the compulsive gambler and the professional gambler. Somebody good enough at calculating odds and reading situations to make money as a professional gambler should pick a segment that is positive-sum rather than zero-sum for the economy as a whole: he should go to Wall Street and become part of the global capital allocation mechanism.

I'd agree with Brad. Shouldn't those superpowers be directed at a positive-sum game rather than at a zero sum game?

Though I have to admit that Las Vegas is probably the best people-watching spot in the entire solar system.

What you all deserve!

I spent the last 4 days in Chicago with OFC, his lovely belle, and assorted friends. A detailed debrief and pictures will follow (or at least that's the plan).

A friend of mine forwarded me the following link. PLEASE click on it!

The Flatterer

It flows quite nicely from the previous topic that we discussed, though it may be a tad bit too sweet for daily consumption...but everyone deserves a hug!