BTW I HIGHLY recommend reading his book Drive.
Thursday, November 11, 2010
Drive: Daniel Pink on Motivation
Does pay for performance dull creativity? Slow progress? Thought provoking.
BTW I HIGHLY recommend reading his book Drive.
BTW I HIGHLY recommend reading his book Drive.
The Burden of Choice | Psychology Today
In my first PHD economics course I remember the teacher (who I could BARELY understand) say that more choices were often bad for the consumer. It was a new idea to me and I at first disagreed, but was persuaded.
This idea is why stores like Trader Joes or Stew Leonard's offer fewer choices (and get higher sales) as a result.
The Burden of Choice | Psychology Today:
* Offering more fund choices for 401K plans or insurance options may be detrimental.
* Keep it Simple Stupid
* Heuristics can make sense since they serve as filters to remove some choices.
* We can get overwhelmed by choices and procrastinate and end up doing nothing.
This idea is why stores like Trader Joes or Stew Leonard's offer fewer choices (and get higher sales) as a result.
The Burden of Choice | Psychology Today:
"In an experiment examining the effects of choice on happiness, Iyengar and Lepper randomized individuals to either a group in which they could choose from 30 types of chocolate or a group in which they could choose from six types of chocolate. While subjects initially reported liking having the choice of 30 chocolates, they ended up being more dissatisfied and regretful of the choices they made than those who only had the choice of six. Barry Schwartz, the author of The Paradox of Choice, elaborates on this phenomenon, emphasizing that regret avoidance and anticipated regret are some of the most detrimental effects of overchoice. He states, 'the more options there are, the more likely one will make a non-optimal choice, and this prospect undermines whatever pleasure one may get from one's actual choice.'"Financial Implications:
* Offering more fund choices for 401K plans or insurance options may be detrimental.
* Keep it Simple Stupid
* Heuristics can make sense since they serve as filters to remove some choices.
* We can get overwhelmed by choices and procrastinate and end up doing nothing.
Investor Psychology: Your Brain is Hardwired to 'Follow the Herd' | Steadfast Finances
Another great Steadfast Finances post (with some cool videos too!)
Investor Psychology: Your Brain is Hardwired to 'Follow the Herd' | Steadfast Finances:
Investor Psychology: Your Brain is Hardwired to 'Follow the Herd' | Steadfast Finances:
"This is because herding behavior is a result of not being in the know in any given situation. If you don’t know what’s going on, you begin to rely upon those around you who do. After all, there has to be someone out there who does, so why not follow along with him or her? If they screw up, then you can say it was their dumb idea and you’re not the only sucker who got fooled. Once again, you’re anxiety free since you’re back within the safety of the group a second time.Which is almost exactly what we have been saying in class. The more uncertainty and the more we are paid for relative performance, the more we are apt to follow the crowd.
So it’s fairly commonplace to witness the old adage “there is safety in numbers” rule most daily of our lives."
Visualizing How the Things You Own, End Up Owning You. | Steadfast Finances
A fascinating look from Steadfast Finances at where money goes by work days in calendar form:
Visualizing How the Things You Own, End Up Owning You. | Steadfast Finances:
Interestingly (and this may explain why I have such a boring life), I have done this basic idea for as long as i can remember: translate purchases into opportunity costs. For instance, is working an extra hour really worth that new shirt, etc. Now it gets a bit messy on a salary and without overtime, but the basic idea holds.
Visualizing How the Things You Own, End Up Owning You. | Steadfast Finances:
"I thought it would be beneficial if I documented exactly how I use a simple monthly calendar and a few personal finance metrics to visually represent how many hours, days, even weeks, I had to work in order to maintain “ownership” of my stuff when I first entered the workforce."
Interestingly (and this may explain why I have such a boring life), I have done this basic idea for as long as i can remember: translate purchases into opportunity costs. For instance, is working an extra hour really worth that new shirt, etc. Now it gets a bit messy on a salary and without overtime, but the basic idea holds.
Deep Rationality II: Conspicuous Consumption as Mating Display | Psychology Today
Deep Rationality II: Conspicuous Consumption as Mating Display | Psychology Today:
"By flashing its brilliant tail, a peacock increases his chances of becoming some predator’s dinner; it’s like he’s turning on a neon sign that says “eat here.” If nature selects those animals that are better at surviving, then how can such a display (what biologists now call a “costly signal”) evolve? The answer is that natural selection is not ultimately about survival, it is about reproduction. Every choice in nature involves a trade-off, and any peacock who wasn’t willing to risk a shorter life would not attract females, hence his careful genes would not get passed on"Something seemingly irrational (Conspicuous consumption) explained. What makes it even better is that this conspicous consumption in men is then tied to apparent willingness for a short-term fling.
Tuesday, November 09, 2010
Ian Ayres: Super Crunchers
I regularly get asked about good books to read, here is one for you that is a few years old, but excellent!
Ian Ayres' Super Crunchers
Ian Ayres' Super Crunchers
Southern Finance Association's Annual Meeting
Had a talk yesterday about Southerns whcih is next week. It looks good! Here is the program. If you can make it I am sure you will enjoy it and learn a great deal.
Inside Job Trailer
It looks remarkably (as in over the top-Michael Mooreish) biased, but as a fellow FinanceProfessor said in an email "a must see".
Friday, November 05, 2010
Prospect Theory and the Taxpayer Receipt | Mother Jones
Cool use of prospect theory to looking US politics: both sides are afraid of losing what they now "have".
Prospect Theory and the Taxpayer Receipt | Mother Jones:
BTW there is a nice (easy) description of prospect theory in the article.
Prospect Theory and the Taxpayer Receipt | Mother Jones:
"Budget allocations are a relatively zero-sum game in the short term, and both sides would have to believe that the odds of getting the other guy's goodies is overwhelmingly in their favor before they'd agree to anything that puts their existing goodies at risk. So it's not just a matter of both sides mistakenly thinking the taxpayer receipt is more likely to benefit the other side and therefore shying away. Even if both sides are modestly optimistic about their chances of outgunning the other side, the prospect of a loss is still too daunting. So they won't do it."
BTW there is a nice (easy) description of prospect theory in the article.
Thursday, November 04, 2010
Enjoy Today and Save More Tomorrow - Yahoo! News
Enjoy Today and Save More Tomorrow - Yahoo! News:
This is the article on the Save More Tomorrow program we talked about in class.
"In the program, which is designed to be offered by employers, people agree ahead of time to contribute to a retirement plan, and to have their contributions automatically increased regularly, corresponding with when they receive payraises. The first implementation of Thaler and Benartzi's system involved a midsized manufacturing company; over 28 months, the average saving rates of those in the program increased more than threefold, from 3.5% to 11.6%. Interestingly, the minority of employees who opted not to enroll in the plan had originally saved, on average, more than those who signed up -- 5.3% of their income, as opposed to 3.5%. But after the 28 months, the longtime savers only increased that rate to 7.5%, far less than the participants' 11.6%."
Switching the default rule for an AIDS test
In Behavioral Finance class we frequently mention the importance of defaults. For instance many of you probably have seen Dan Ariely discuss organ donations. If not, watch it, it is good.
Well here is more evidence from the Nudge blog · Switching the default rule for an AIDS test:
Again it is one of those things that should not matter, but ends up having huge consequences.
Well here is more evidence from the Nudge blog · Switching the default rule for an AIDS test:
"The change to opt-out helped Botswana increase acceptance of AIDS tests from 64 percent to 83 percent in just one year. Test rates in clinics in Zimbabwe went from 65 percent to 99 percent with a similar change."
Again it is one of those things that should not matter, but ends up having huge consequences.
Wednesday, November 03, 2010
Study Unmasks the Biology of Bluffing
Study Unmasks the Biology of Bluffing:
It does suggest telling the truth is easier, other than that I agree with Zak.
"Bhatt put it this way: 'We believe the areas indicate that the strategists -- bluffers -- are essentially thinking ahead. Specifically, they're keeping track of how their suggestions are changing their reputation in the seller's mind and are in turn improving or harming their chances at good payouts in the future.'
Paul J. Zak, director of the Center for Neuroeconomics Studies at Claremont Graduate University in Claremont, Calif., was skeptical about the study's worth since it doesn't reveal much that's new about bluffing. It's 'fun and amusing, very well-designed and executed, but of little value I think,' he said."
It does suggest telling the truth is easier, other than that I agree with Zak.
Tuesday, November 02, 2010
Catching up on some things...
Seems like I am always behind in everything in my life. (indeed I remember after being cut from the Basketball team my freshman year that my mom said that about me--"It always takes you longer than others." Uh, thanks Mom.) But anyways, here are a few things that have been accumulating in my inbox:
* Long time FinanceProfessor.com reader Phil Maybin has started Algorithmic Finance a new academic journal that looks fascinating. In his words; " Our aim is to bridge computer science and finance, with topics like high frequency finance, agent-based finance, issues of complexity, and some behavioral finance, to the extent it is research on the algorithms of individual investors."
* Phil also pointed me to a very interesting piece on the twitter paper I mentioned the other day. I think I took the twitter piece more as in interesting article that may not have all that much financial bite, but still interesting to the degree it suggests mood matters. Richard Warr gives a better (and much more rigorous) analysis of it on his Finance Clippings Blog.
* The use of credit cards by college students is a regularly discussed topic on many blogs. My take is that every student should have a credit card, but not that every student should use it. They should be paid off on a monthly basis. For a more thorough analysis of this see this interesting piece over at CollegeCrunch.
* At the FMA conference a couple of weeks ago had a nice talk with the Unknown Professor from Financial Rounds. He suggested I point out his videos. For instance here is one on the time value of money. Great review for those who need it!
* The Southern Finance Association's Annual meeting is coming up. If you have not reserved a place, You should soon! The SFA's are usually very good. I don't make it to them every year but plan on going this year.
* I am reading What Investors Really Want by Meir Statman. He will be interviewed on FinanceProfessor December 7th. It is an interesting look at some lessons from Behavioral Finance.
* The Money Management course that I oversee (can't really say teach since the leaders do so much of it themselves) is called SIMM--Students In Money Management.) The TV commercial has been in high play of late. Or at least it must be as I hear about it every time I go anywhere in town. The portfolio is now up to $186,000 and we just started a new twitter account. Follow us to see what we are up to!
* Long time FinanceProfessor.com reader Phil Maybin has started Algorithmic Finance a new academic journal that looks fascinating. In his words; " Our aim is to bridge computer science and finance, with topics like high frequency finance, agent-based finance, issues of complexity, and some behavioral finance, to the extent it is research on the algorithms of individual investors."
* Phil also pointed me to a very interesting piece on the twitter paper I mentioned the other day. I think I took the twitter piece more as in interesting article that may not have all that much financial bite, but still interesting to the degree it suggests mood matters. Richard Warr gives a better (and much more rigorous) analysis of it on his Finance Clippings Blog.
* The use of credit cards by college students is a regularly discussed topic on many blogs. My take is that every student should have a credit card, but not that every student should use it. They should be paid off on a monthly basis. For a more thorough analysis of this see this interesting piece over at CollegeCrunch.
* At the FMA conference a couple of weeks ago had a nice talk with the Unknown Professor from Financial Rounds. He suggested I point out his videos. For instance here is one on the time value of money. Great review for those who need it!
* The Southern Finance Association's Annual meeting is coming up. If you have not reserved a place, You should soon! The SFA's are usually very good. I don't make it to them every year but plan on going this year.
* I am reading What Investors Really Want by Meir Statman. He will be interviewed on FinanceProfessor December 7th. It is an interesting look at some lessons from Behavioral Finance.
* The Money Management course that I oversee (can't really say teach since the leaders do so much of it themselves) is called SIMM--Students In Money Management.) The TV commercial has been in high play of late. Or at least it must be as I hear about it every time I go anywhere in town. The portfolio is now up to $186,000 and we just started a new twitter account. Follow us to see what we are up to!
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