Weekend Reads for Advisers: Psychophaths, Bubbles, and Black Holes
Most Americans of a certain generation (and I suspect other nationalities, too) recall 22 November 1963, and exactly where they were and what they were doing when they heard President John F. Kennedy had been shot. As a South African, I experienced that moment on 5 December, when I saw a tweet that Nelson Mandela, 95, had died. Disbelieving, given the rumors swirling his health in recent months, I frantically scrolled through my Twitter feed to find an official source. I grew up in Apartheid South Africa during a time of great injustice, of police in riot gear chasing people with guns, tear gas, and sjamboks (whips). There were acts of heroism and treachery. And so many searing images of unspeakable cruelty and sadness that it is impossible to recount them. But above it all was Nelson Mandela. There have been so many images of Madiba, and so many words of tribute, that it is hard to single out the best. But several passages of Bill Keller’s obituary in The New York Times stood out for what they revealed about his grace and leadership:
“When the question was put to Mr. Mandela in an interview for this obituary in 2007 — after such barbarous torment, how do you keep hatred in check? — his answer was almost dismissive: Hating clouds the mind. It gets in the way of strategy. Leaders cannot afford to hate.”
“In his autobiography, Mr. Mandela recalled eavesdropping on the endless consensus-seeking deliberations of the tribal council and noticing that the chief worked ‘like a shepherd’. ‘He stays behind the flock,’ he continued, ‘letting the most nimble go out ahead, whereupon the others follow, not realizing that all along they are being directed from behind.’ That would often be his own style as leader and president.”
“Still, Mr. Mandela said he regarded his prison experience as a major factor in his nonracial outlook. . . . Above all, prison taught him to be a master negotiator.”
“Mr. Mandela was sworn in as president on May 10, and he accepted office with a speech of shared patriotism, summoning South Africans’ communal exhilaration in their land and their common relief at being freed from the world’s disapproval. ‘Never again shall it be that this beautiful land will again experience the oppression of one by another and suffer the indignity of being the skunk of the world,’ he declared.”
Now on to the roundup of weekend reads. If you are a regular reader of these posts, you won’t be surprised by this week’s headline and range of articles. But if this is your first time, and you’re wondering what psychopaths, bubbles, and black holes have to do with being a professional investor and/or financial adviser, the answer is simple: “Investing demands that you be a polymath — knowing a lot about many things (including nonfinancial topics) and how those things interconnect into an organic whole.” Or as Haruki Murakami said: “If you only read the books that everyone else is reading, you can only think what everyone else is thinking.”
Firm Culture
- From “Corporate Psychopathy: Talking the Walk“: “Psychopathy was positively associated with in-house ratings of charisma/presentation style (creativity, good strategic thinking and communication skills) but negatively associated with ratings of responsibility/performance (being a team player, management skills, and overall accomplishments).” (Behavioral Sciences & the Law)
"Study showed elite executives had about four times concentration of full-blown psychopaths as population at large." http://t.co/jhwtXxdCJz
— WPWAM (@WillauerProsky) December 4, 2013
- “The Neuroscientist Who Discovered He Was a Psychopath” (Smithsonian Magazine)
- Empty suits can be toxic. “Avoiding them should be a priority.” (Farnam Street)
- “The Psychology of Self-Control” (Brain Pickings)
- “SEC Loudens Drumbeat On FA Conflict Of Interest, Fee Warnings” (Financial Advisor)
- “Risking Other People’s Money: Experimental Evidence on Bonus Schemes, Competition, and Altruism” (Research Institute of Industrial Economics, PDF)
Behavioral Finance/Economics
- Whether or not you have read Daniel Kahneman’s best-selling tome Thinking, Fast and Slow, or had the pleasure of hearing him speak, this hour-long conversation between WSJ columnist and author Jason Zweig and Kahneman is well worth your time. And, of course, if you haven’t done either, then it’s is a perfect primer on Kahneman’s work. (100 Women in Hedge Funds, video)
- “Beware of Recency Bias Following an Outlier Year” (WealthManagement.com)
- “Holiday Shopping Tips from Behavioral Economists” (Bloomberg View)
- “Hope for the Future” (Above the Market)
RT @R_Thaler: Excellent and predictably rational @JamesLKimmel: Killing 3 misconceptions about Behavioral Economics http://t.co/FBKgUilqYX
— Lauren Foster (@laurenfosternyc) December 1, 2013
Math
- In his article, “Standardized Tests Discriminate against the Next Einsteins and Teslas,” Joanthan Wai writes: “Einstein imagined with his mind. Tesla imagined with his mind and built with his hands. Edison imagined with both. They all had extraordinary spatial talent — ‘the ability to generate, retain, retrieve, and transform well-structured visual images.’ . . . But despite the value of these kinds of skills, spatially-talented students are, by and large, neglected.” (Quartz)
- “What’s the Smartest Country In the World?” (Psychology Today)
- “The Math Trick Behind MP3s, JPEGs, and Homer Simpson’s Face” (Nautilus)
- In my last roundup, I included two reviews of Edward Frenkel’s new book Love and Math: The Heart of Hidden Reality. Here’s the latest: “A Mathematical Romance” (The New York Review of Books)
Retirement
Investing
- Phil Pearlman (@ppearlman) had a great line in his article, “Here’s Why Everyone Is Warning about Bubbles“: “My gut is that we have less bubbles relative to the bubble mongering but that is just a guess too.” (phil pearlman’s tumblr)
- A tweet about the post prompted @behaviorgap, aka The Sketch Guy, to point out his sketch on exactly this phenomenon of “bubble spotting”:
@laurenfosternyc @abnormalreturns @ppearlman Bubble spotting. It is a bit like bird watching…only different. http://t.co/BfnhLsUSf3
— Carl Richards (@behaviorgap) December 3, 2013
- “The Bear Inverse Bubble” (Seeking Alpha)
- “Pros and Cons of Investing in Family-Owned Businesses” (Financial Times)
- “Can You Outperform the Market? It’s Expensive to Find Out” (Inside Investing)
- “You Can Invest Just Like Warren Buffett, If You’re a Quant Hedge Fund” (Bloomberg View)
Roll Call of the Wretched: Mutual Fund Observer's annual list of worst funds, on cue to harvest your tax losses http://t.co/RcW8apAOGo #WSJ
— Jason Zweig (@jasonzweigwsj) December 2, 2013
RT @abnormalreturns: Is investment experience additive? (via @researchpuzzler) http://t.co/zdy869zBs9 $STUDY
— Lauren Foster (@laurenfosternyc) December 3, 2013
Philanthropy
- Study finds advisors aren’t providing wealthy clients with the kind of information about philanthropy that they want. (Baltimore Community Foundation)
And Now For Something Completely Different
- Vaclav Smil (Who?) is the author Bill Gates thinks you absolutely should be reading. Smil is professor emeritus of environment and geography at the University of Manitoba and, as I learned, “an ambitious and astonishing polymath who swings for fences. His nearly three dozen books have analyzed the world’s biggest challenges — the future of energy, food production, and manufacturing — with nuance and detail.” (Wired Science)
- “Mandela, My Countryman” (The New Yorker)
- If you have ever grieved over the loss of a loved one, then this beautiful essay will be worth a read: “The Secret Life of Grief: My Mom’s Cancer and the Science of Resilence” (The Atlantic)
- Fascinating, visually arresting tableaux: “21 Images of Where Children Sleep Around the World Paints a Powerful Picture of Inequality” (PolicyMic)
- “12 Real Life Inventions That Science Fiction is Neglecting at its Peril” (iO9)
- “The Most Astonishing Pictures of 2013: Reuters Releases Its Best Photographs of the Year” (MailOnline)
- This black hole’s behavior totally defies the rules of astrophysics. (Discover)
Note to self: writing tips pic.twitter.com/e2SU8h7RGI
— Lauren Foster (@laurenfosternyc) November 26, 2013
Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.
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