Welfare for grifters and marks

From Foreclosures Are Not the Problem. Those Who Build Financial Time Bombs, and Those Who Pick Them Up, Are the Problem on Angry Bear [emphasis added]:

But the real problem, the cause of this whole mess, is simple: every few decades, our economic system morphs into a structure that rewards making things less than it rewards creating financial time bombs with multi-year fuses. We’ve been rewarding the financial time bomb makers more and more since Reagan took office. And this is also the second time since Reagan took office we’ve been bailing out the financial time bomb makers at great cost to the rest of us – the previous time was during the S&L crisis.

Things have now evolved to the point where for some reason, when the market for time bombs disappears its considered some sort of a tragedy. This time around, we’ve already helped out the grifters, including many investment banks, commercial banks, derivatives traders, and now we’ve moved on to helping the marks. And rewarding any of them, the grifters or the marks, is a problem for several reasons. It rewards the bad behavior of the financial time bomb makers and reduces the incentives the rest of us have to watch out for the crooks. (And yes, I know, people living next to foreclosed homes suffer too. But externalities come in both positive and negative varieties, and folks who benefited from home prices rising for no reason don’t have a complaint when the home prices drop back in value because people found out the rise happened shouldn’t have happened in the first place.) It also keeps an unviable system going, and it does so at great cost.

But there’s one more thing. Since this whole thought process, this current iteration of the art of rewarding of the financial time bomb makers, dates back to Reagan, it pays to go back to Reagan… And when Reagan conjured up images of the Cadillac-driving welfare queen, it pissed people off not because there were people who needed help, but because supposedly many people who were getting help were, according Reagan, living better than the people being taxed to help them. And while I for one have never had a problem with seeing some of my tax money go toward helping the unfortunate, and I’ve never had a problem with welfare, at this moment in time, I know with absolute certainty that more most of the new-fangled welfare from the last six months is directed to helping people who are better off than I or have lived much better than I in recent years (investment banks, commercial banks, derivatives traders, and now homeowners) than the poor. I resent it. Does Obama really want a country where the folks who make and pick up time bombs are rewarded at the expense of those who are too honest to make time bombs or were smart enough (and in some cases, lucky enough) not to pick them up?

What DFW wanted his writing to do

Here is an excerpt from “Looking for a Garde of Which to be Avant: An Interview with David Foster Wallace” as it appeared in the Spring 1993 issue of Whiskey Island magazine published by Cleveland State University.

But there are a few books I have read that I’ve never been the same after, and I think all good writing somehow addresses the concern of and acts as an anodyne against loneliness. We’re all terribly, terribly lonely. And there’s a way, at least in prose fiction, that can allow you to be intimate with the world and with a mind and with characters that you just can’t be in the real world. I don’t know what you’re thinking. I don’t know that much about you as I don’t know that much about my parents or my lover or my sister, but a piece of fiction that’s really true allows you to be intimate with …. I don’t want to say people, but it allows you to be intimate with a world that resembles our own in enough emotional particulars so that the way different things must feel is carried out with us into the real world. I think what I would like my stuff to do is make people less lonely. Or really to affect people.

Trust depends on emotions

The emotional states inside us are very, very real and the product of biological evolution. They are helpful to us in our attempt to survive. Experimental economics and behavioral sciences have recently shown us how important they are to us as social creatures: To cooperate you have to trust the other party, even though a rational analysis will tell you that both the likelihood and the cost of being cheated is very high. When you trust, you experience a physiologically detectable inner glow of pleasure. So the inner emotional state says yes. However, if you rationally consider the objects in the outside world, the other parties, and consider their trade-offs and motives, you ought to choose not to cooperate. Analyzing the outside world makes you say no. Human cooperation is dependent on our giving weight to what we experience as the inner world compared to what we experience as the outer world.


“Least Common Denominator” should be Greatest Common Divisor

Many people use the phrase least common denominator to describe something as being base or common. It connotes something that appeals to most people, something that we all value. It is the intersection of what we all value, in the set-theory sense. But in arithmetic the LCD is the union of the prime factors of the denominators (including the multiplicity of those factors).

Perhaps greatest common divisor is a better metaphor for what is typically described as an LCD, the GCD being the intersection of prime factors.

Thoughts on a Station Platform

“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

Investment strategy by Nicholas Taleb

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 in Learning

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.

The Bjorks were not the first psychologists to make this distinction, but they and a series of collaborators used a broad range of experimental data to show how these laws of memory wreak havoc on students and teachers. One of the problems is that the amount of storage strength you gain from practice is inversely correlated with the current retrieval strength. In other words, the harder you have to work to get the right answer, the more the answer is sealed in memory. Precisely those things that seem to signal we’re learning well — easy performance on drills, fluency during a lesson, even the subjective feeling that we know something — are misleading when it comes to predicting whether we will remember it in the future. “The most motivated and innovative teachers, to the extent they take current performance as their guide, are going to do the wrong things,” Robert Bjork says. “It’s almost sinister.”

The best time to study something is at the moment you are about to forget it.

I find myself thinking of a checklist Wozniak wrote a few years ago describing how to become a genius. His advice was straightforward yet strangely terrible: You must clarify your goals, gain knowledge through spaced repetition, preserve health, work steadily, minimize stress, refuse interruption, and never resist sleep when tired.

Want to Remember Everything You’ll Ever Learn? Surrender to This Algorithm

Learn and Help Learn

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.

  • What are the opportunities for learning and growth today? For myself? For the people around me?

As you think of opportunities, form a plan, and ask:

  • When, where and how will I embark on my plan?

When, where, and how make the plan concrete.
As you encounter the inevitable obstacles and setbacks, form a new plan and ask yourself the question again:

  • When, where and how will I act on my new plan?

Regardless of how bad you may feel, do it!
And when you succeed, don’t forget to ask yourself:

  • What do I have to do to maintain and continue the growth?

Cognitive dissonance

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.

Focus on effort, not talent

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.

the most persistent students do not ruminate about their own failure much at all but instead think of mistakes as problems to be solved.

How do we transmit a growth mind-set to our children? One way is by telling stories about achievements that result from hard work.

students praised for their effort did not lose confidence when faced with the harder questions, and their performance improved markedly on the easier problems that followed.

parents and teachers can help children by providing explicit instruction regarding the mind as a learning machine.

Teaching children such information is not just a ploy to get them to study. People do differ in intelligence, talent and ability. And yet research is converging on the conclusion that great accomplishment, and even what we call genius, is typically the result of years of passion and dedication and not something that flows naturally from a gift. Mozart, Edison, Curie, Darwin and Cézanne were not simply born with talent; they cultivated it through tremendous and sustained effort. Similarly, hard work and discipline contribute much more to school achievement than IQ does.

Such lessons apply to almost every human endeavor. For instance, many young athletes value talent more than hard work and have consequently become unteachable. Similarly, many people accomplish little in their jobs without constant praise and encouragement to maintain their motivation. If we foster a growth mind-set in our homes and schools, however, we will give our children the tools to succeed in their pursuits and to become responsible employees and citizens.