fredcy

“It ought to be plain how little you gain by getting excited and vexed. You’ll always be late for the previous train, and always in time for the next.” -Piet Hein

A Times Online interview with Nicholas Taleb includes this one-paragraph bit of investment advice: [T]he good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures. This insulates you from bad black swans and exposes you to the possibility of good ones. Your smallest investment could go “convex” – explode – and make you rich. High-tech companies are the best. The downside risk is low if you get in at the start and the upside very high. Banks are the worst – all the risk is downside. Don’t be tempted to play the stock market – “If people knew the risks they’d never invest.”

The spacing effect: it’s possible to dramatically improve learning by correctly spacing practice sessions. The idea is to rehearse (restudy) when the likelihood of recall drops to certain point. Repeating this flattens the “forgetting curve” (likelihood of successfull recall over time). Long-term memory, the Bjorks said, can be characterized by two components, which they named retrieval strength and storage strength. Retrieval strength measures how likely you are to recall something right now, how close it is to the surface of your mind. Storage strength measures how deeply the memory is rooted. Some memories may have high storage strength but low retrieval strength. Take an old address or phone number. Try to think of it; you may feel that it’s gone. But a single reminder could be enough to restore it for months or years. Conversely, some memories have high retrieval strength but low storage strength. Perhaps you’ve recently been told the names of the children of a new acquaintance. At this moment they may be easily accessible, but they are likely to be utterly forgotten in a few days, and a single repetition a month from now won’t do much to strengthen them at all.

Nicholas Humphrey writes about Questioning Consciousness and concludes with this. Concerning the purpose of consciousness, given that it seems not to be essential to anything we do (according to him), he says: I think the plain and simple fact is that consciousness—on various levels—makes life more worth living. We like being phenomenally conscious. We like the world in which we’re phenomenally conscious. We like ourselves for being phenomenally conscious. And the resulting joie de vivre, the enchantment with the world we live in, and the enhanced sense of our own metaphysical importance have, in the course of evolutionary history, turned our lives around.

Here is some good stuff from the closing section of the Mindsets book by Carol Dweck: “When people change to a growth mindset, they change from a judge-and-be-judged framework to a learn-and-help-learn framework. Every day presents you with ways to grow and to help the people you care about grow. How can you remember to look for these chances? Each morning, as you contemplate the day in front of you, try to ask yourself these questions.

The following appears in a blog entry about the bear market (emphasis mine): “People tend to ignore, reject or minimize any information that conflicts with their positive self-image,” their preconceived ideas and their ideological convictions, says John Nofsinger, Washington State professor of behavioral finance, in “Investment Madness.” “The avoidance of cognitive dissonance can affect the decision-making processes in two ways. First, you can fail to make important decisions because it’s too uncomfortable to contemplate the situation,” Nofsinger says. People hate conflicting data so much they get nervous when their preconceptions are threatened. Their brain freezes, they self-sabotage and do nothing–and their worst fears become a self-fulfilling prophecy. The second way we handle conflicting information: “Your brain will filter out or reduce negative information and fixate on positive information,” Nofsinger says. Unfortunately, “if you ignore negative information, how are you going to realize that an adjustment in your portfolio is necessary?” Plus, you miss lots of opportunities.

A recent article in Scientific American Mind, The Secret to Raising Smart Kids, discusses research suggesting that it is better to praise kids for their effort than to praise them for being smart. Here are some quotes: Hint: Don’t tell your kids that they are [smart]. More than three decades of research shows that a focus on effort—not on intelligence or ability—is key to success in school and in life teaching people to have a “growth mind-set,” which encourages a focus on effort rather than on intelligence or talent, helps make them into high achievers in school and in life.

Robert Shiller considers causes of the recent housing boom, and possible bust. In this paper, I will consider, from a broad perspective, the possible causes of this boom, with particular attention to speculative thinking among investors. I will argue that a significant factor in this boom was a widespread perception that houses are a great investment, and the boom psychology that helped spread such thinking. In arguing this, I will make some reliance on the emerging field of behavioral economics. This field has appeared in the last two decades as a reaction against the strong prejudice in the academic profession against those who interpret price behavior as having a psychological component. The profession had come to regard all markets as efficient, and to reject those who say otherwise. Now, however, behavioral economics is increasingly recognized, and has developed a substantial accumulation of literature that we can use to give new concreteness to ideas about psychology in economics.

Spinoza was a thoroughgoing determinist who held that absolutely everything that happens occurs through the operation of necessity. For him, even human behaviour is fully determined, with freedom being our capacity to know we are determined and to understand why we act as we do. So freedom is not the possibility to say “no” to what happens to us but the possibility to say “yes” and fully understand why things should necessarily happen that way. By forming more “adequate” ideas about what we do and our emotions or affections, we become the adequate cause of our effects (internal or external), which entails an increase in activity (versus passivity). This means that we become both more free and more like God, as Spinoza argues in the Scholium to Prop. 49, Part II. However, Spinoza also held that everything must necessarily happen the way that it does. Therefore, there is no free will.

As the plane begins its descent to LaGuardia, Trudeau remembers something interesting, something from his teens, when he had a summer job working at Time magazine. “As I was walking out the building one day on my lunch break, two-thirds of a block away this spectacularly beautiful young woman in a very short miniskirt was walking toward me . . .” Not sure where this is going, but I’m taking notes as fast as I can.