Weekend Reads for Advisers: Retirement, Poker, and Prime Numbers

While the world has been focused on Syria, I’ve had my head buried in research on mandatory retirement savings programs for an upcoming Branch.com discussion that we plan to host in October. (Stay tuned!) So this week’s roundup has more articles than usual on that topic, along with some other interesting reads from the past couple of weeks.

Retirement

• In a recent article in Financial Analysts Journal, Meir Statman makes the case for a mandatory US retirement savings program. And he explains his ideas in this podcast. (CFA Institute)
• Australia already has a mandatory savings program. In this post from May, the Squared Away Blog discusses “Aussie Employer Mandate Fuels Saving.” (Squared Away Blog)
• Also from the archives: In an interview with Pensions & Investments, Teresa Ghilarducci, chair of the economics department and director of the Schwartz Center for Economic Policy Analysis, New School for Social Research, discusses her views on pension security and reform. “Like the advice about eating well — ‘eat less, mostly plants’ — my advice for comprehensive retirement income security policy is, ‘mandate pensions, mostly annuities,'” she says. (Pensions & Investments)
• Similarly, Alicia Munnell, director of The Center for Retirement Research, says the United States “requires a new, mandatory tier of retirement accounts — initiated by the federal government but managed by the private sector — that will replace about 20 percent of preretirement earnings.” (Bloomberg)
• How fast should you trade your 401(k)? (The Wall Street Journal, subscription required)
• “How High 401(k) Fees Can Doom Your Retirement Plans” (Slate)
• “Move over, 401(k): IRA Fees Are What Really Hurt” (CNBC)
• The devastating impact of zero interest rates on retirement. (Forbes)
• “Addressing America’s Retirement Needs: Longevity Challenge Requires Action” (BlackRock, PDF)

Financial History

• A brief history of Tulip Mania. (Liberty Street Economics)

Social Media and Wealth Management

• The rise of digital and social advice in wealth management. (PwC, PDF)

Women in the Workplace

• “The Real Reason Women Are Leaving Wall Street” (Quartz)
• “Harvard Business School Case Study: Gender Equity” (The New York Times)
• “Why Women (Like Me) Choose Lower-Paying Jobs” (NPR)

Behavioral Economics / Risk

• Cass Sunstein has written a fascinating article on the new book Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan and Eldar Shafir. While economists focus on the problem of scarcity — that is, how people allocate their resources amid competing demands — the authors “explore something quite different, which is the feeling of scarcity, and the psychological and behavioral consequences of that feeling,” Sunstein writes. “They know that the feeling of scarcity differs across various kinds of experiences and that people can feel ‘poor’ with respect to money, time, or relationships with others.” He adds that the book’s “striking claim” is “that across all of those categories, the feeling of scarcity has quite similar effects. It puts people in a kind of cognitive tunnel, limiting what they are able to see.” (The New York Review of Books)
• “People Make the Same Basic Investment Decisions as Monkeys, Scientists Find” (Quartz)
• “Getting Schooled in Risk: The Lessons of Poker” (Inside Investing)
• With the anniversary this week of 9/11, I was reminded of @RPSeawright‘s post from a couple of years ago — “9.11 and the Narrative Fallacy” — based on a photograph taken on the day the towers came down. In the foreground is a group of five people, while in background, smoke billows into the air. Seemingly relaxed, were they casually indifferent to what had just happened? That’s what one reporter concluded based only on the image. But soon it emerged that that was a false interpretation. “We like to think that we carefully gather and evaluate facts and data before coming to a conclusion,” writes Seawright. “Instead, we tend to suffer from confirmation bias and thus reach a conclusion first. Only thereafter do we gather facts and see those facts in such a way as to support our pre-conceived conclusion.” (Above the Market)

"nudges" from behavioral science are beginning to reshape daily life http://t.co/7y30dDeRX4 #WSJ

— Jason Zweig (@jasonzweigwsj) September 12, 2013

Ronald Coase R.I.P.

• “Learning and Forgetting the Wisdom of Coase” (The Energy Collective)
• “Ronald Coase and the Misuse of Economics” (The New Yorker)

And Now For Something Completely Different

• In this wonderful, funny TED talk, radio show host (and mathematician) Adam Spencer, explains why he fell in love with monster prime numbers. (TED, video)

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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