jerryking + human_frailties   7

Barack Obama and Me - The New York Times
By J. D. VANCEJAN. 2, 2017

The data shows that working-class families like mine face much higher rates of marital strife and domestic instability. Demons like Mr. Clinton’s had haunted my home and family for generations, and at an age when I first began to develop strong feelings about my future, I knew that I wanted to outrun them. I cared little for Mr. Clinton’s elite education, his economic success or even his ascendancy to the most powerful office in the world. I cared that he had managed to build the domestic tranquillity that he lacked as a child. But here, in one sex scandal, he had blown it all up. If a man of his abilities had done this, then what hope was there for me?..it is one of the great failures of recent political history that the Republican Party was too often unable to disconnect legitimate political disagreements from the fact that the president himself is an admirable man. Part of this opposition comes from this uniquely polarized moment in our politics, part of it comes from Mr. Obama’s leadership style — more disconnected and cerebral than personal and emotive — and part of it (though a smaller amount than many on the left suppose) comes from the color of his skin.
J.D._Vance  Obama  role_models  Bill_Clinton  marital_strife  working_class  human_frailties 
january 2017 by jerryking
The Biology of Risk - NYTimes.com
By JOHN COATES JUNE 7, 2014

What is it about risk taking that so eludes our understanding, and our control?

Part of the problem is that we tend to view financial risk taking as a purely intellectual activity. But this view is incomplete. Risk is more than an intellectual puzzle — it is a profoundly physical experience, and it involves your body...Risk by its very nature threatens to hurt you, so when confronted by it your body and brain, under the influence of the stress response, unite as a single functioning unit....The state of your body predicts your appetite for financial risk just as it predicts an athlete’s performance.

If we understand how a person’s body influences risk taking, we can learn how to better manage risk takers. We can also recognize that mistakes governments have made have contributed to excessive risk taking.

Consider the most important risk manager of them all — the Federal Reserve. ...Uncertainty over the timing of something unpleasant often causes a greater challenge response than the unpleasant thing itself. Sometimes it is more stressful not knowing when or if you are going to be fired than actually being fired. Why? Because the challenge response, like any good defense mechanism, anticipates; it is a metabolic preparation for the unknown....Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading. Humans are designed with shifting risk preferences. They are an integral part of our response to stress, or challenge....One such opportunity is a brief spike in market volatility, for this presents a chance to make money. But if volatility rises for a long period, the prolonged uncertainty leads us to subconsciously conclude that we no longer understand what is happening and then cortisol scales back our risk taking. In this way our risk taking calibrates to the amount of uncertainty and threat in the environment.

Continue reading the main story
Under conditions of extreme volatility, such as a crisis, traders, investors and indeed whole companies can freeze up in risk aversion, and this helps push a bear market into a crash. Unfortunately, this risk aversion occurs at just the wrong time, for these crises are precisely when markets offer the most attractive opportunities, and when the economy most needs people to take risks. The real challenge for Wall Street, I now believe, is not so much fear and greed as it is these silent and large shifts in risk appetite....As uncertainty in fed funds declined, one of the most powerful brakes on excessive risk taking in stocks was released....There are times when the Fed does need to calm the markets. After the credit crisis, it did just that. But when the economy and market are strong, as they were during the dot-com and housing bubbles, what, pray tell, is the point of calming the markets? Of raising rates in a predictable fashion? If you think the markets are complacent, then unnerve them. Over the past 20 years the Fed may have perfected the art of reassuring the markets, but it has lost the power to scare. And that means stock markets more easily overshoot, and then collapse.

CONTINUE READING THE MAIN STORY
120
COMMENTS
The Fed could dampen this cycle. It has, in interest rate policy, not one tool but two: the level of rates and the uncertainty of rates. Given the sensitivity of risk preferences to uncertainty, the Fed could use policy uncertainty and a higher volatility of funds to selectively target risk taking in the financial community....IT may seem counterintuitive to use uncertainty to quell volatility. But a small amount of uncertainty surrounding short-term interest rates may act much like a vaccine immunizing the stock market against bubbles. More generally, if we view humans as embodied brains instead of disembodied minds, we can see that the risk-taking pathologies found in traders also lead chief executives, trial lawyers, oil executives and others to swing from excessive and ill-conceived risks to petrified risk aversion. It will also teach us to manage these risk takers, much as sport physiologists manage athletes, to stabilize their risk taking and to lower stress.
Wall_Street  risks  risk-management  risk-taking  uncertainty  U.S._Federal_Reserve  bubbles  volatility  behavioural_economics  risk-preferences  risk-aversion  biology  psychology  interest_rates  emotions  human_experience  human_behavior  human_frailties  human_psyche  financial_risk  signaling  stress_response  market_crash  immobilize  paralyze  bear_markets  policy_tools  physiological_response  risk-appetite  unpredictability  physical_experiences  calibration 
june 2014 by jerryking
The Long, Sorry Tale of Pension Promises - WSJ.com
September 20, 2013 | WSJ | By ROGER LOWENSTEIN

The Long, Sorry Tale of Pension Promises
How did states and cities get into this mess? It's a simple case of human frailty; where to go from here

Pension benefits aren't paid out of thin air; sponsors are supposed to set aside a sum of money proportional to the benefits that will eventually come due. If the money is invested prudently, the fund will have enough assets to meet its obligations.

Here's the rub: While Studebaker was nominally increasing benefits, it hadn't the slightest hope of making the requisite contributions. The "increases" were a fiction, but when you have no cash, promising future benefits is the best you can do, whereas raising salaries is out of the question. The United Auto Workers was complicit in this fiction. Union officials reckoned that it was better to tell the members they had won an "increase" rather than to admit that their employer was going bust.....Public pensions—and here we come back to our current straits—replicated this behavior. Cops, firefighters and teachers had pensions well before most private-sector workers, but benefits weren't so high as to cause a problem, since government employers unilaterally set benefit levels (as well as salaries) without resorting to anything as unpleasant as collective bargaining....Before we get more Detroits, or more Studebakers, the federal government should enact an Erisa (with teeth) for public employers. More simply, it could announce that local governments that fail to make timely and adequate contributions to their pension plans would lose the right to sell bonds on a tax-free basis. That would get their attention.

The point isn't to punish public retirees. The point is that, when governments make contractual promises, they ought to fund them.
pension_funds  Roger_Lowenstein  liabilities  human_frailties  unions  public_sector  public_servants  public_pensions 
september 2013 by jerryking
Investing Ideas That Stand Test of Time
April 25, 2000 | WSJ | Jonathan Clements

These days I find I am left with just three core investment ideas:
(1) Financial Success is a Sense of Control
If you ask folks about their financial goals, they will likely offer a laundry list of goods they want to buy or announce they want to accumulate as much money as possible. But in reality,
both goals are a prescription for unhappiness.
Sure it might be nice to purchase everything that catches your fancy. But nobody has unlimited wealth, so a focus on endless consumption inevitably results not in happiness, but in frustration and financial stress. Yeah, it would also be great to have heaps of money. But if all you want is an even bigger pile of cash, you will never be satisfied, because you will never reach your goal. So what should you
shoot for? A far more worthy goal, I believe, is eliminating the anxiety that comes with managing money. You want to reach that sweet spot where you feel your finances are under control, no matter what your standard of living and level of wealth.

(2)Investing is Simple
No doubts about it, there are lots of investments and investment strategies that are mighty complicated. But complexity usually means investors are running the risk of rotten results and Wall Street is getting the chance to charge fat fees. Investing is best when it is simple. In fact, if you want to accumulate a healthy nest egg, there
isn’t much to it. First, you have to save a goodly amount, preferably at least ten percent of your pre-tax annual income. Second, you should consider investing at least half of your portfolio in stocks, even if you are approaching retirement. Third, you should diversify broadly, owning a decent mix of large, small and foreign stocks. Fourth, you should hold down investment costs, including
brokerage commissions, annual fund expenses and taxes. Finally, you should give it time. A little humility also helps. Don’t waste effort — and risk havoc — by trying to pick the next hot stock, identify the next superstar fund manager or guess the market’s next move. Instead, your best bet is to buy and hold a few well-run mutual funds.

(3) We are the enemy
If successful investing is so simple, why do so many people mess up? It isn’t the markets that are the problem, it is the investors.
We make all sorts of mistakes. We fret about the performance of each investment that we own, so we don’t enjoy the benefits of diversification. We are often overly self-confident, which
prompts us to trade too much and bet too heavily on a single stock or market sector. We
extrapolate recent results, leading to excessive exuberance when stocks are rising and unjustified
pessimism when markets decline. We lack self-control, so we don’t save enough.

[All the points made immediately above are analogous to Jason Zweig's article on personal finance & investing. From Benjamin Graham --investing is often portrayed as a battle between you and the markets. Instead, “the investor’s chief problem — and even his worst enemy — is likely to be himself.”

Similarly, Nobel Laureate Daniel Kahneman wrote in his book Thinking, Fast and Slow. [that]evaluating yourself honestly is at least as important as evaluating your investments accurately. If you don’t force yourself to learn your limits as an investor, then it doesn’t matter how much you learn about the markets: Your emotions will be your undoing.... ]

If you are going to truly be a successful and happy investor, it isn’t enough simply to devise
strategies that allow you to meet your investment goals. Your strategies also must give you a
sense of financial control and fit with your risk tolerance, so that you stick with them through the
inevitable market turmoil.
That may mean keeping more of your money in bonds and money-market funds. It could mean
paying for an investment advisor. It might mean scaling back your financial goals and accepting
that the kids won’t be heading to Harvard and that you won’t be able to retire early.
These sorts of choices aren’t foolish. What’s foolish is settling on investment strategies without
considering whether you can see them through.
personal_finance  investing  howto  ideas  goal-setting  Nobel_Prizes  money_management  Jonathan_Clements  financial_literacy  biases  humility  mistakes  self-awareness  self-control  proclivities  overconfidence  financial_planning  delusions  self-delusions  emotions  human_frailties  Jason_Zweig  extrapolations  risk-tolerance  recency  unhappiness  human_errors  bear_markets  sense_of_control  superstars  Daniel_Kahneman 
may 2012 by jerryking
Leadership Lessons From the Shackleton Expedition - NYTimes.com
By NANCY F. KOEHN
Published: December 24, 2011

Consider just a handful of recent events: the financial crisis of 2008; the gulf oil spill of 2010; and the Japanese nuclear disaster, the debt-ceiling debacle and euro crisis this year. Constant turbulence seems to be the new normal, and effective leadership is crucial in containing it.

Real leaders, wrote the novelist David Foster Wallace, are people who “help us overcome the limitations of our own individual laziness and selfishness and weakness and fear and get us to do better, harder things than we can get ourselves to do on our own.”

Shackleton exemplified this kind of leadership for almost two years on the ice. What can we learn from his actions?...Shackleton begun the voyage with a mission of exploration, but it quickly became a mission of survival.

This capacity is vital in our own time, when leaders must often change course midstream — jettisoning earlier standards of success and redefining their purposes and plans.
uncertainty  unpredictability  leadership  expeditions  explorers  historians  lessons_learned  pivots  turbulence  constant_change  leaders  human_frailties  course_correction  arduous  Antartica  South_Pole  Ernest_Shackleton  new_normal 
december 2011 by jerryking
Managing Yourself: How to Save Good Ideas
September 2010 | - Harvard Business Review | An Interview with
John P. Kotter by Jeff Kehoe. Why do so many good ideas generated by
well-intentioned, talented people fail? Because the audience is
comprised of human beings with anxieties, contrary opinions, and a
constant fear of losing face....large-scale organizational change
requires helping people to communicate, bringing them around to support
your vision, your strategy, your plan—and, in a smaller sense, just your
idea. It's an important element and we’re not very good at it. Getting
buy-in for good ideas is a basic human issue; it’s a life
skill....Kotter & Whitehead, suggest in their new book, Buy-In:
Saving Your Good Idea from Getting Shot Down, a counterintuitive
approach to gaining support: “inviting in the lions” to critique the
idea....anticipate being attacked when presenting a new idea, respond
with respectful using very short, simple, clear, communications filled
with common sense.
howto  HBR  John_Kotter  persuasion  pitches  Managing_Your_Career  Communicating_&_Connecting  large-scale  organizational_change  life_skills  implementation  failure  human_factor  human_frailties 
september 2010 by jerryking
Mark Cuban a change genius: Entrepreneur sees it as an opportunity waiting to happen
Nov 10, 2000 | National Post. pg. C.2 | by Ellie Rubin.
Discusses a WORTH magazine profile of entrepreneur Mark Cuban. Rubin is
struck by his approach to creating opportunity--his unique ability to
exploit change. Inefficiencies, opportunities and frailties: the only
thing you can depend on in business is change--embrace it! In doing so,
you will inevitably bump up against an opportunity waiting to happen.
Or, in "Cuban" terms, you will develop "a knack for spotting
inefficiencies, opportunities and frailties." The best way to scope out
inefficiencies within an industry is to create a product or service
that has a certain sense of urgency to it, or "high pain threshold"
opportunities. By focusing on an area of inefficiency that is creating
dramatic financial, human resource or market share pressure, one will
find that the decision makers who are managing this "pain" are eager to
invest in a sound and reliable solution--quickly.
creative_thinking  opportunistic  frictions  opportunities  constant_change  rainmaking  entrepreneur  Mark_Cuban  inspiration  inefficiencies  problem_solving  wealth_creation  urgency  pain_points  overlooked_opportunities  human_frailties 
october 2009 by jerryking

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