Monday, December 26, 2011

TED Stuff to Remember

I've been a big fan of TED for several years, because it offers insight into what "the intellectual elite" consider important. Most of these people wouldn't give me the time of day, but occasionally, a few of them make some good points. I had some notes written on the back of an envelope that I wanted to throw away... ah... I meant recycle... so I figured I better blog them so I could find them later.

On Being Wrong
This presentation has a cute graphic of what it looks like to "realize you are wrong". I didn't care for the speaker, but the take away was what she called the "Unfortunate Assumptions of Wrongness":
There are three reasons someone might think you are wrong:
1. Ignorance- They don't understand the facts, so perhaps you can educate them.
2. Idiocy- You've explained it to them, so they must be too stupid to be to understand.
3. Evil- Maybe they do understand, but are trying to undermine your brilliant plan.
In my case, its always number three.

The Moral Mind
Very politically slanted, but not wrong. The speaker states that there five moral values, of which "Conservatives" acknowledge the importance of all five, but "Liberals" acknowledge only two.
1. Harm/Care - protection
2. Fairness/Reciprocity - don't lie, cheat, steal
3. Ingroup/Loyalty - community, tribalism
4. Authority/Respect - patriotism
5. Purity/Sactity - sexuality
The research seems to indicate that everyone agrees on 1 & 2, but that the divide is the "Conservative" insistence on the importance of 3, 4, and 5.

Self Deception

This presentation has a good explanation of the difference between a false positive and false negative, and how it relates to decision models.
Finding order in chaos which does not exist, is patternicity.
* More patterns are percieved by the left eye.
If the pattern (or model) is wrong, we have made either:
  Type I Error (false positive): believing something that is not real.
  Type II Error (false negative): not believing what is real.
When evaluating the outcome of a decision where the threat could be inanimate versus a predator, we naturally err on the side of the entity. This is called agenticity.
Agenticity is a difficult concept, especially since the speaker wraps it around religion, but the base of it is the belief that others can control chaos that we can't. If you're walking through the jungle and there is a rustle in the grass, it could be the wind or a lioness. If you assume it is the wind, and it is a predator, you get eaten. If you assume it is a predator, and that the predator has heightened senses, is faster and stronger, than you become over-cautious. If it is not a lioness ready to attack, its a "false positive", because you attributed agenticity to a sound without investigation. But you survive! Thus, we are wired for false positives.

Tuesday, December 06, 2011

Merrill *not* Lynch Retirement Calculator

For those of you from outer space, the American economy has been having a hard time recently. One shining example is the paragon of Wall Street, Merrill Lynch, which imploded nicely several years ago, but was too big to fail, so it was "bailed out". It now survives as a subsidiary of Bank of America, who was also too big to fail.

We'll I stumbled upon web based retirement calculator (click the Find Out button to the right) and decided to have some fun. I learned something interesting.

First the rules of the game: The calculator asks questions and determines a magic dollar value that you have to achieve. Four factors drive the calculator:
Current age
Current retirement contributions
Current income
Projected retirement age
Obviously the last variable is stupid, since everyone knows that retirement age is 65.

Given my actual age, a reasonable estimate of the value of my retirement accounts, and a reasonable estimate of my current salary, the calculator yielded a pass/fail rating. Pass was defined as having enough money to maintain my current lifestyle, and fail was defined as running out of money before I died... Which is apparently at age 91.

I had control over two factors, which determined if I passed or failed: First, the amount of money I contribute each month for retirement. Second, my investment style, defined by my degree of risk exposure. What I did not have control over was market performance, so I was presented output based on average market performance and below average market performance, which I guess means Merrill and Bank of America do not expect above average market performance over the next 45 years.

And what I learned was I get a passing grade if I save X dollars a month, using Y investment strategy:
$10,000 Conservative
$9,200  Moderately Conservative
$8,700  Moderate Risk
$8,500  Moderately Aggressive
$8,200  Aggressive

Needless to say, my New Year's resolution will not be to save $10,000 a month. So, I guess I "lose". But here's what I see as the moral of the story: The difference between playing it safe and taking the biggest gambles is less than 20%. If I put in a more realistic monthly contribution of $1,500 per month and act conservatively, I retire at 65 and run out of money at 67. If I'm aggressive, I run out of money at 68.

So, I guess I'll go aggressive. Let's be optimistic! What's the worse thing that could happen. After all, what's the likelihood that Wall Street will screw up again in the next 20 years?