Two interesting videos:
Daniel Kahneman is interviewed by Michael Mauboussin. The whole video is 90 min. but the first 56 min. are the most interesting if you care about decision-making processes and risk management. You will learn about disciplined and delayed intuition, systematic and independent analysis, things I have done all my life without knowing. Kahneman also goes my way when he says that people take risk because they don’t know the odds. This is what Bearnobull is about.
He also says that it is best to be optimistic in life but “I certainly don’t want my financial adviser to be an optimist”. Quite right!
Prof. Kahneman talks about Philip Tetlock. I posted about him on Sept. 28.
The Trick to Making Better Forecasts
…and better investments. Professor Tetlock’s thesis touches on Bearnobull’s approach: this is a game of probabilities, not a forecasting game. Always consider the more improbable scenarios since they are generally overlooked. Test the consensus against them seeking what the crowd (analysts, strategists and media) is overlooking, intentionally or not. Keep your mind open and your “convictions” flexible. (My emphasis in Jason Zweig’s piece).
Three-quarters of all U.S. stock mutual funds have failed to beat the market over the past decade. Last year, 98% of economists expected interest rates to rise; they fell instead. Most energy analysts didn’t foresee oil’s collapse from $145 a barrel in 2008 to $38 this summer—or its 15% rebound since.
A new book suggests that amateurs might well be less-hapless forecasters than the experts—so long as they go about it the right way.
I think Philip Tetlock’s “Superforecasting: The Art and Science of Prediction,” co-written with the journalist Dan Gardner, is the most important book on decision making since Daniel Kahneman’s “Thinking, Fast and Slow.” (…)
The book is so powerful because Prof. Tetlock, a psychologist and professor of management at the University of Pennsylvania’s Wharton School, has a remarkable trove of data. He has just concluded the first stage of what he calls the Good Judgment Project, which pitted some 20,000 amateur forecasters against some of the most knowledgeable experts in the world.
The amateurs won—hands down. Their forecasts were more accurate more often, and the confidence they had in their forecasts—as measured by the odds they set on being right—was more accurately tuned. (…)
The most careful, curious, open-minded, persistent and self-critical—as measured by a battery of psychological tests—did the best.
“What you think is much less important than how you think,” says Prof. Tetlock; superforecasters regard their views “as hypotheses to be tested, not treasures to be guarded.”
Most experts—like most people—“are too quick to make up their minds and too slow to change them,” he says. And experts are paid not just to be right, but to sound right: cocksure even when the evidence is sparse or ambiguous. (…)
Joshua Frankel, a filmmaker and opera director in Brooklyn, N.Y., says the tournament taught him to “look at the world in a less binary way, to think much more in terms of probabilities.” (…)
Elon Musk is a truly unique and remarkable person. I just love the man for what he is, what he does and how he does it.
Living in an “uber-ified” service economy by Leah Grace
FRANCE UNDER ATTACK
This is by Louis-Vincent Gave, GaveKal via Evergreen Virtual Advisor
(…) For the past few years, the Middle East has been gripped by a civil war (broadly pitting Sunnis against Shias, but also secularist Sunnis versus fundamentalists, as well as Kurds against Turks) that is more complicated than the Spanish Civil War (where communists liquidated anarchists, before being in turn put to the sword by Franquists, themselves divided between fascists and catholic traditionalists). Still, if for Spain the broader arch of the civil war was Franquists (supported by fascist Germany and Italy) against the popular front (very loosely supported by Britain, France and then the Soviet union), the broader arch of the Middle Eastern civil war has been Shias led by Iran, and supported by Russia, against Sunnis which are supported by Saudi Arabia and Qatar. And this is where it gets complicated because of all the Western powers, France has undeniably been the one leaning the most aggressively against the Shias in favor of the Sunni side of the ledger (the side of the civil war ledger that ISIS itself emanates from). It was France which revealed that Assad had crossed the “red line” of using chemical weapons, and it was France that agitated to intervene against Assad’s regime before President Obama and the British Parliament decided that letting the Russians handle the situation was a better course of action.
And so today, as the Middle Eastern civil war leaks over into Europe, one is forced to confront the question of ISIS’s political goals in attacking France. Clearly, ISIS does not subscribe to the old “the enemy of my enemy is my friend” mantra. And so the only possible answer to the question of what ISIS is trying to achieve by attacking France is “nothing”. The Islamists simply attack us because they hate us. And the only goal to be achieved with these killings is to cower an entire population into changing its way of life, whether that be imposing restrictions on free speech (depicting the prophet Mohammed, or even discussing the more disturbing part of the prophet’s biography), or now, simply going out and letting loose on a Friday night. In that respect, the choice of entertainment venues as attack points is surely not co-incidental.
Like the Taliban which banned sports events, music, and celebrations, the ISIS nihilists offer a vision of the world so foreign to any of us as to be incomprehensible. And this nihilist vision now presents the French government with a genuine “how to respond” challenge. With the obvious answer being that the terrorist safe-haven that is the ISIS “state” in Syria and Iraq, and the source of much of the destabilization currently unfolding in Europe, must now be taken out. Conceptually, could the scale of these attacks mean that France would be able to request the help of its NATO allies in an “Article 5” retaliation against ISIS? After all, if Churchill could do a deal with Stalin against the Nazi nihilists (and state in the House of Commons: “If Hitler invaded hell, I would, at the very least, make a favorable reference to the devil in this house”), then surely the Quai d’Orsay now has to hold its nose and switch its focus from removing Assad to wiping out ISIS?
With that in mind, and in the context of the broader Middle Eastern civil war, this weekend’s tragedy is good news for Russia and Iran, and bad news for the Gulf states as attention will increasingly shift to neutralizing the source of the fundamentalist ideology. One immediate result of the Paris attacks was to win support for accelerated US-Russian backed talks between all the main regional powers that aim for a resolution to the Syrian civil war. Last weekend’s military-style terrorist act in Paris will hopefully turn out to be ISIS’s “Operation Barabarossa”*, not an action marking the apex of its powers, but one which sparks a coordinated response leading to its eventual liquidation.
The Times They Are A-Changin: Nov 20 (WSJ) — For the first time since the 1940s, more Mexicans have been leaving the U.S. to return home than arriving.
Come mothers and fathers
Throughout the land
And don’t criticize
What you can’t understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin’
Please get out of the new one
If you can’t lend your hand
For the times they are a-changin’.
Why Your Thanksgiving Dinner Weighs More
(…) In 1960, the average commercial turkey—the kind many of us will serve for Thanksgiving—weighed 16.83 pounds. Today, the average turkey is 81% larger, weighing in at more than 30 pounds.
To put that into perspective, in 1960, the average man weighed 166.3 pounds. If that figure had ballooned by 81%, he would now weigh 301 pounds. (According to the Centers for Disease Control and Prevention, today’s average man weighs 195.5 pounds, an increase of 18%.) (…)
Heavy hens are smaller and don’t lay eggs. They are raised 15 to 16 weeks, weigh 22 to 24 pounds and are sold whole, as deli cuts or breast rolls.
At 14 to 20 pounds, young hens, which are raised 12 to 14 weeks, are the smallest of the commercially raised turkeys. Dressed turkeys weigh about 80% of their live weight, and these birds are sold as 11- to 16-pound whole birds.
Most Thanksgiving turkeys are heavy or young hens.
It’s no accident that commercial turkeys are larger than ever and produce lots of white meat. Americans prefer white breast meat over the dark meat found on turkey legs and thighs, and selective breeding allows the industry to control for size. (…)
In 1996, the industry provided more than 293 million turkeys with an average weight of 23.65 pounds, according to the U.S. Department of Agriculture. Last year, fewer than 237 million turkeys came to market, but their average weight was 30.39 pounds. Fewer birds, more meat. (…)
As we can see, the LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession. The latest reading of this smoothed rate-of-change suggests no near-term recession risk.
A divergence between the Markit and ISM surveys in recent months sends strikingly different signals to policymakers mulling over whether the US economy is ready for interest rates to start rising. While both the Markit PMI and official data signal a strong start to the fourth quarter for US manufacturing, the ISM survey data signalled one of the weakest increases in manufacturing output since the recession. The ISM Output Index registered 52.9, well below the past six years’ survey average of 57.5. 
