Transcribing thoughts on things I'm thinking through. Follow me on twitter for updates on new blog posts @NOTdavidu
Thursday, December 27, 2012
Prayer and Altruism
Thursday, November 1, 2012
Sociology and Psychology on Wall Street
The ways in which financial analysts price assets like bonds are subject to social trends. They are now priced by the state-pricing model. Before that it was the capital-asset pricing model. Before that it was, i dunno, maybe a guy reading pig entrails or something. The point is that there is no reliable objective way to predict the future market value of an asset. "Experts" instead rely upon whatever theoretical foundation is currently the flavor of the week churned out by academia. Once you view financial market participants as a human society, a more accurate picture of how the market works emerges.
In the short run, market prices are explicitly what the society values an asset at. In the short run this has nothing to do with any fundamental value behind an asset, but rather what the society collectively values it at. All of those graphs tracking an asset's price over time are literally graphs tracking the equilibrium price at which the society values that security. As such, all of these prices are subject to human societal and cognitive biases. Socially, things like crowd psychology run rampant. Consider the recent string of IPO's by social tech companies. Ignoring the fact that the companies had little to no actual revenue streams, the trading society's conscience collective was ignited by the story of Mark Zuckerberg and the promise of riches from those companies. And how have they fared since their IPOs? At the time of this writing, Facebook (FB) has dropped from $45 to $21, Groupon (GRPN) dropped from $31 to $4, and Zynga (ZNGA) dropped from $10 to $2. I think LinkedIn (LNKD) is a bubble waiting to pop with a price to earnings ratio of over 900! This societal stampede towards easy riches can be seen in any market bubble.
Wall Street itself is set up in a manner that encourages a herd-like mentality of traders. People like professional analysts, Warren Buffet, Jim Cramer, etc. are all presumed to have knowledge that the layperson does not. As a result, the vast majority of market participants herd towards any stock they recommend, while they stampede away from any they don't. Similarly, beginning level traders are often expected to conform to the views and beliefs of their superiors. How else would they hope for promotion?
It's also interesting to see how the social market bubble also applies to other areas of finance like Venture Capital. I'm an aspiring entrepreneur, so I've done a lot of internet research on business opportunities. Every "Hot Start-Up" list for the past 5 years lists App company after App company, Social this and Social that. Venture Capitalists giving these entrepreneurs their funding are just as subject to societal movements as Wall Street Traders are. Which one of them wouldn't want to be the next Peter Thiel (an early investor in Facebook)?
Psychological effects are also important to note. Since they are in every human, they are bound to effect social markets on a large scale. There is a whole industry dedicated to predicting future stock prices based on past performance called technical analysis which relies heavily on analyzing stock charts. They talk a lot about moving averages and support levels. I think those are great examples of the anchoring and adjustment heuristic. Other things, like our tendency towards risk aversion, and hindsight bias also play important roles in how people trade.
Another interesting aspect of all of this is how regardless of irrationality, how we socially define reality essentially is reality on Wall Street. For example, it ultimately doesn't matter that technical analysis is ultimately a pseudoscience quackery. If enough people believed in it, the markets would behave exactly as the chartists predict because in this case the chartists are the market. I don't remember who said it or the exact phrasing, but a phrase I like goes something like this. Irregardless of reality, a thing is real if it is real in it's effects. God doesn't exist, but he has still influenced a couple thousand years of human history.
Now the question is, how do we make money from this? There are 4 ways to make money on Wall Street. 1- Cheat. Make a Ponzi Scheme, trade on insider knowledge, etc. 2- Get REALLY REALLY lucky (unlikely). 3- Invest in a passively managed index fund. This is a great strategy advocated by those of the efficient market hypothesis which you can read up on your own if you want to. It is, however, kind of boring. 4- Value investing. Buying stocks that have a high book to market ratio. This is usually pretty hard to stomach however, as it means betting against the prevailing wisdom/social forces on Wall Street. This is what Warren Buffet advocates.
Oh I almost forgot a fifth way. Make money selling your own bullshit advice (*cough* Motley Fool *cough* Jim Cramer *cough*). On that note, you should really look into buying some Tesla Motors Stock.
(Disclaimer: I am long Tesla. But you should really, really buy some too.)
Friday, August 31, 2012
The American Dream as Social Control
The American Dream- the belief that enough hard work will earn you a place in the upper echelons of society- is rooted in the Enlightenment ideals of the 1800's. Our society was one birthed in the denial of a formal class system, and it was this idea that spawned another, that surely with enough work, anyone could ascend to any height of economic or social prosperity. I have no idea if the Founding Fathers intended for this to happen, but this newly created American Dream became a method of exerting social control over the disadvantaged classes while simultaneously building America into an economic powerhouse.
It is the American dream that drives the huge influxes of immigrants from their homelands into the US. Immigrants like Albert Einstein and Andrew Carnegie who aded value to our society and built it into something great. It is the American dream that busses the lower classes to menial daily jobs, where they trade their lives for a daily wage in hopes of a better future. It is the industry of the lower classes, fueled by the American dream, that elevated the US to economic heights previously undreamt of. The problem with this whole thing, is how unfair it is in it's effects.
I'll start with an example. I've had several days when my stock portfolio has jumped a healthy percentage, netting me (lets say for example purposes) $1k. Thats a third of the money I made last summer working three jobs I made in one afternoon. A glaring problem with the American dream is that hard work does not translate into wealth. That work has to be focused in a certain way. It is only the hard work of the capitalist, the entrepreneur that may result in wealth, not the sweat of the day-laborer. This may seem obvious to you or I, but rest assured the vast majority of people out there don't understand this key point.
The few society members that understand this point rise to the upper echelons of society and pass down their wealth from generation to generation. Those that don't remain in their destitution and squalor.
The effect of the American Dream on our society is to pacify the lower classes. Have you no money? Then surely you have not worked hard enough, for America rewards the hard workers. In fact, you are a lazy parasite on our society if your hard work has not made you rich, and you need assistance from the government to survive.
Because of the American dream, the lower classes can only think to blame themselves for their poor living conditions, not the upper classes that constantly use their institutional advantages to maintain their power over the plebeians. And so, they are pacified. They plot no revolutions or coups- they turn to religion in hopes of claiming their justly deserved but nonexistent rewards in the afterlife. If I haven't previously covered how religion is a system of social pacification, I may do so in the future. For now, suffice to say that it functions in a manner very similar to that of the American Dream.
Sunday, April 1, 2012
Announcement
Monday, March 19, 2012
Our Collective ADD
Emile Durkheim argued for the existence of a “conscience collective” (when you read that phrase, do it with a French accent), a collective representation each society has of it’s shared beliefs and values that exists exogenously from it’s component human members. Once it’s created by the humans of a society, it exerts an external pressure (usually moral in nature) upon them apart from their own thoughts and actions.
I think our conscience collective has been radically changed by our rapid pace of technological advancement. In this day and age, our conscience collective has the attention span of a 4-year-old at a church sermon. Everything has become a meme.
The proliferation of internet-based technology combined with the 24-hour news cycle has seriously impeded our ability to focus on any one thing as a society for more than a minute.
We jump from celebrity story to celebrity story, from viral video to viral video, often reacting viscerally initially, but soon losing interest. The 24-hour news cycle seeks news to report news 24 hours a day (no shit) even when there is no news to report. This results in stupid meaningless stories being reported as news in an attempt to drive up ratings (Casey Anthony, Snooki’s pregnancy, etc.). Even when the story has important things in or surrounding it, it becomes an only once-thought-about meme. Remember those Jesus hates religion but loves god videos? Kony 2012? Those were reported by CNN as actual news and could have sparked nationwide debate about serious topics, but they haven’t. Even with massive events like the Iraq and Afghanistan wars. Initially the whole country had a lazer-like focus on them. Over time however, people simply stopped caring.
In previous epochs without the technology we currently have, entire populaces were more able to concentrate because of the lack of information. Only the most important issues or news could be spread by word of mouth or by the headlines of a daily newspaper. That ensured the focus of the conscience collective.
Nations can only be mobilized to great achievement when the entire populace is focused on a goal. Germany in the 1930’s, America, Britain, and Russia in the 1940’s, Athens in the (albeit failed) conquest of Sicily, Rome in the conquest of Gaul, etc. etc. Unity and a clear focus on a goal are required. Both are being retarded by our current level of technology.
Sunday, March 18, 2012
On the Nature of Politics
Thursday, March 8, 2012
Kony 2012
Sunday, February 19, 2012
Lower the Drinking Age!
Wednesday, February 15, 2012
Gender Norms of Altruism
Sunday, January 1, 2012
The Linguistics of Female Mate Selection
The process of using the linguistics of a culture or social group to analyze the inner mechanics of the social fabric is not a new methodology. Here, I attempt to apply it to the modern woman’s mating strategies. Maybe what I’m writing about is not news to anyone, but I think it’s interesting and still worth discussing.
Two of the colloquialisms I’ve heard exclusively used by women (meaning men don’t use them) in relationship (c wut i did thur?) to the males they are interacting with is describing them as “good (or bad) catches” and thinking about select males as “the one that got away”. Now these phrases I’m sure aren’t used by every woman, but they are used by at least a significant portion of the population, as evidenced by the recent success of the Katy Perry song. Similarly the conclusions I draw from these phrases I’m sure don’t apply to every woman, so please don’t think I’m over generalizing. This is food for thought, not some proclamation of transcendent truth.
Both of those phrases, to me, brought into mind the functioning of fishermen (fisherwomen?). Good or bad “catches”, and that “one that got away” all are obliquely referencing how a fisherman might feel about the fish that he catches. I think this is incredibly revealing (unless you knew all of this already. Remember that I am male, and as such will be forever doomed to an eternity of attempting to understand the female, but never quite getting there).
Women fish for men. They dangle their good looks, flirtatiousness, and attention into the water as a lure hoping to snag a target male. This is interesting for several reasons. First, it explains a bit of the general confusion in mate selection. Remember that lures are designed to catch fish in general, not one specific fish. Same goes for men and women. Women dangling lures in the water will often encounter unwanted advances from men they are not targeting. Furthermore men, targets or not, often have difficulty determining whether a lure is therefore actually meant for them or not. Some men respond by not biting on lures meant for them out of uncertainty, others bite on all of them, either out desperation, or out of an overriding confidence and inflated picture of themselves.
Is there a way out of this confusion? Probably not. One solution may be if women changed their strategy to be more like that of the typical male’s. If I were to continue with the fishing metaphor, (other then being the fish the fisherwomen catch) I’d describe males as more like the hill-billy hand fishers. Also note that I haven’t actually seen the show, I’m just going off of the caricature in my head based off of the title. I’m not saying this strategy is superior to the female strategy, but it is typically more efficient in determining intentions, though I’m sure many a frustrated female would disagree. If females behaved in the male way, people would be constantly reaching out and either hitting or missing each other without much in between-ness. Such bluntness, I think, would create a lot more heartache but a lot more successes as well. Overall not necessarily “better”, but perhaps a world with less confusion and mistaken intentions.
At any rate, it doesn’t really matter what possible solutions there are. We’re all evolutionarily programmed to pursue certain mating strategies to the exclusion of others. Two more notes to conclude:
-I appreciate that these assertions are gross generalizations. As i said before these are not definitive statements but rather food for thought.
-In the future I think it’d be fun to pick up on more phrases from both genders to delve into this further. Unfortunately for any female readers, In my experience male colloquialisms are generally variations along the theme of “dude, she’s so hot”. I’m not sure any exciting insights reside within that kind of dialogue.