Author: David Wright

From the department of unintended consequences:

We show the first evidence that one of the traits capturing childhood misbehavior, discussed in psychological literature as the externalizing trait (and linked, for example, to aggression), does indeed reduce educational attainment, but also increases earnings. This finding highlights a broader point: non-cognition is not well summarized as a single underlying trait that is either good or bad per se.

Not being good at school can be good for earnings.

Here’s a good friend of mine on confidence:

In a perfect world, ability and confidence would go hand-in-hand. Anyone who has managed people, however, knows that this is far from a universal truth. There is a whole body of literature on the ‘imposter syndrome’ that plagues even the most highly skilled among us, and no less than Roger Federer recently confessed to Sports Illustrated that he suffered a loss of confidence last year that lead to below average performances for him. This is something we see all the time in our own work with elite athletes and coaches.

I wonder about the channel that leads from confidence to performance. In sports, I think it’s about the athlete staying in a state of flow even while taking big competitive risks.

Business is much slower, though. The stakes can still be large but the increments are small. It’s more like practice than a game. And in this environment I praise skepticism as a starting place for confidence.

Skepticism of data. Skepticism of intuition. Many people have gotten very rich in insurance by exploiting others’ ignorance through moral hazard. It’s a messy business. And what’s more, we sell very complicated products where it’s more or less impossible to understand what a customer wants before they buy something.

If I’m training people, I teach them first to question everything. Then I teach them the tools to rebuild their understanding of the business. When you use a common set of tools, facts can be proven and confidence can be earned. When you have sold something to someone, you can say, with confidence, that “this is valuable”.

In this framing, confidence is a by-product of knowledge. If the sky is blue, it is blue, but look up first to make sure. With a culture of skepticism, we are insulated from impostors.

the rents earned by those companies stem from their preexisting intellectual property, rather than from their current managerial talents.

That’s Tyler Cowen discussing stock buybacks. Another way of saying that big companies are slow and built to maximize what they have rather than building what they’ll need.

It’s why I enjoy being the little guy. So much opportunity!

Here’s Michael Pettis:

I remember reading in the early 1990s for example a very interesting book about the US “long depression” of the 1880s and 1890s that began with the September 1873 crash in the NY Stock Exchange. The book explored the roots of the crisis in the railroad boom of the 1860s and wonderfully invoked the famous attempt by Jay Gould and James Fisk to corner the gold market in 1869. There was however almost no reference to events outside the US except in describing how the New York crisis subsequently affected British banks. It seemed that for the authors, events in the US pretty much explained everything that happened in the US economy before and after the 1873 crisis.

It wasn’t until a few years later when I read Charles Kindleberger’s brilliant book, A Financial History of Western Europe, that I realized that the 1873 crisis was a global crisis, and that it didn’t even originate in the US. It actually began in May, 1873, with the collapse of the Vienna stock market, which spread to Berlin and London before it hit New York. I also learned that the roots of financial instability included the 1866 collapse of Overend, Gurny, a major London bank, and that stock markets around the world had soared shortly after Barings had financed the huge French war indemnity forced upon France after the 1870 Franco-Prussian War. One of Kindleberger’s great insights was that the recycling of massive payments, such as the French indemnity, often leads to liquidity-driven speculative frenzies in stock, bond and real estate markets.

Given this history, how could anyone possibly write a serious book about the US crisis of 1873 without writing at least as much about events in Europe as about events in the US?

And yet they do.
Here’s a very important lesson: if you want to understand sone topic better (in my life it usually means learning more about the insurance industry) get outside. Learn about other only slightly related fields. It is on the comparison of different disciplines that real insight lives.

Here’s Robin Hanson in a short post suggesting that high school career counseling might work better if it were more like tarot card reading.

Contrast such life readings to school career counselors. Such counselors usually refer to statistics about the income or gradations rates of broad categories of people given certain types of careers, colleges, or majors. Such advice may be evidence based but it seems far less compelling to students. It is not connected to salient recent personal experiences or the subjects, or to outcomes in which they are very emotionally engaged. It is clear but uncertain, in contrast to the certainty and ambiguity of Tarot readings.

I remember taking one of those tests in high school that gave suggestions on what I should do for a living. I regiment thinking it was just confirming to me what I already knew about myself.

And that’s the point of tarot reading too. But maybe tarot card readers are better at that than those little tests? Career paths are arbitrary for most. If tarot card reading can give a sense of purpose and so enhance the dedication to succeed all the better.

I’ve never seen the word “actuaries” so much in print outside of trade publications. Here’s the NYT:

The National Football League, which for years disputed evidence that its players had a high rate of severe brain damage, has stated in federal court documents that it expects nearly a third of retired players to develop long-term cognitive problems and that the conditions are likely to emerge at “notably younger ages” than in the general population.

The findings are a result of data prepared by actuaries hired by the league and provided to the United States District Court judge presiding over the settlement between the N.F.L. and 5,000 former players who sued the league, alleging that it had hidden the dangers of concussions from them.

And for some very actuarial-sounding verbiage:

“Thus, our assumptions result in prevalence rates by age group that are materially higher than those expected in the general population,” said the report, prepared by the Segal Group for the N.F.L. “Furthermore, the model forecasts that players will develop these diagnoses at notably younger ages than the generation population.”

And finally:

“The actuaries are saying it because it’s true,” said Perfetto

Here’s Ross Douthat:

The point is that as a society changes, as what’s held sacred and who’s empowered shifts, so do the paths through which evil enters in, the prejudices and blind spots it exploits.

So don’t expect tomorrow’s predators to look like yesterday’s. Don’t expect them to look like the figures your ideology or philosophy or faith would lead you to associate with exploitation.

Expect them, instead, to look like the people whom you yourself would be most likely to respect, most afraid to challenge publicly, or least eager to vilify and hate.

Because your assumptions and pieties are evil’s best opportunity, and your conventional wisdom is what’s most likely to condemn victims to their fate.

From an interview with a (Yugoslavian) guard at Auschwitz:

SPIEGEL: Do you feel a something like a sense of moral guilt?

W.: No. I spoke to them in a friendly manner; I never hit, kicked or killed any. I do not feel like a criminal just because I had to guard them. Germany had invaded Yugoslavia and that was a crime against humanity and international law. Then the Nazis conscripted me and brought me to Auschwitz. And how was I supposed to get away from there? If I had deserted, they would have shot me.

So let’s be clear that this guy should definitely feel moral guilt.

And yet, I don’t know what your grandfather is like but most men I know from that generation express moral views I often find pretty shocking. In the context of his time, is this man’s lack of remorse as surprising even given that we judge it to be horrible?

The key idea, I think, isn’t that people from other eras are evil, it’s that evil takes on a form that is palatable to its time. It is evil all the same and we are just as capable of it today even though we might haughtily look down upon older, ‘backward’ generations.

First, there is no canonical term for the second person plural. Much odd the US, outside the Northeast, uses ‘Y’all’. This does the trick, but is low status. Even lower is an alternative, ‘Yous guys’, which still makes me shudder, and is annoyingly gender specific for a term that needs to be able to include females and males in the group.

Is it too weird for a Canadian to consciously drop the odd y’all in conversation? Do I need to feign an ironic self awareness even though I don’t mean it as a joke?

Second is the lack of a gender neural third person term. What if I don’t know or want to reveal if I’m talking about a ‘he’ our a ‘she’? We use ‘they’ but it is too imprecise when I might want to specify a single subject of the comment.

I don’t have a solution for that one.

When I was 14 years old, I went on location to film Mrs. Doubtfire for five months, and my high school was not happy. My job meant an increased workload for teachers, and they were not equipped to handle a “non-traditional” student. So, during filming, they kicked me out.
It’s devastating, at 14, to have your formal education terminated. I felt like a freak and a reject. When I arrived at work the next day, Robin noticed that I was upset and asked me what was wrong. I explained what had happened, and the next day, he handed me a letter that he wrote to my school. He explained that I was just trying to continue my education while pursuing my career. He wrote embarrassingly kind things about my character and my work, and requested that they reconsider and allow me to return to my classes.
When I told him I still didn’t think they would take me back, he said, “It’s kinda like Amnesty International. That school just needs to know that people know the truth.”
The school framed the letter. They hung it in the principal’s office. But they didn’t invite me to return to school.
But here’s what matters from that story. Robin stood up for me. He was in my corner. I was only 14, but I had already seen that I was in an industry that was full of back-stabbing. And it was entirely clear that Robin had my back.
I know I said thank you at the time and I’m sure I wrote one of those stiff thank you notes that 14-year-olds write with slanting lines and spelling mistakes. But that all seems so insufficient now.
Even though I had not spoken with Robin in a very long time, I always assumed there would be some future opportunity to tell him that his letter changed my life. It taught me that you stand up for the things that matter. And even if your attempts fail, you tried. You told the truth. You took care of your friends. You fought back.

That’d Lisa Jakob.

Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier Miranda write,

the typical young firm (as captured by the median) exhibits little or no growth even conditional on survival…however, among all the young firms, a few do exhibit very high rates of growth which yields a high mean growth rate.

Later,

the annual startup rate declined from an average of 12.0 percent in the late 1980s to an average of 10.6 percent just before the Great Recession, when it plummeted below 8 percent.

Still later,

firms aged five years or less made up about 47 percent of all firms in the late 1980s, but this number declined to 39 percent of all firms before the start of the Great Recession, and has declined further since then.

They point to one factor that I had thought of, which is that large retailers are reducing entrepreneurial activity in the “mom and pop” sector.

They also point to the possibility that startups now must spend more resources assembling a trained work force

That is from Arnold Kling. I’m not sure how to reconcile that with this story from a little while back.

Another more significant measure of fall from leadership position is provided by my old colleague and mentor, Dick Foster, who looked at the average lifespan of companies on the S&P 500. In 1937, at the height of the Great Depression and certainly a time of great turmoil, a company on the S&P 500 had an average lifespan of 75 years. By 2011, that lifespan had dropped to 18 years – a decline in lifespan of almost 75%

So we’re getting fewer new firms while at the same time more new firms at the large end of the spectrum.

So is it harder to start a company but also harder to maintain your edge? I like the explanation about small retail driving the start up rate decline.