Monday, February 13, 2017

Paul Krugman's myopic market prediction

I'm not a fan of Paul Krugman. His political bias keeps him from making objective economic analysis but in truth, it's his arrogance and smug attitude that makes me really dislike the guy. As such, I've really enjoyed seeing him eat a little crow regarding his 11/09/16 New York Times blog post. Written the day after Trump was elected president, with the Dow closing at 18,332.74, he says:
"If the question is when markets will recover, a first-pass answer is never...So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened."
It didn't take long for Krugman to be proven wrong as the very next day the Dow closed at 18,589.69. Two weeks after the election it closed above 19,000 for the first time in its 120 year history. Then on January 25th it broke above 20,000. As of right now it is at 20,380.81.

I have no idea whether or not the market will remain strong. Given Trump's somewhat anti-free trade noise I'm a little skeptical. Regardless, it's nice to see Krugman quickly proven so completely wrong.

Wednesday, February 1, 2017

Anchoring

Anchoring is a cognitive bias that describes the common human tendency to rely too heavily on the initial piece of information offered (the "anchor") when making decisions.

When making a decision, it is believed that people often make "estimates by starting from an initial value which is adjusted to yield the final answer. The initial value, or starting point, may be suggested by the formulation of the problem, or else it may be the result of a partial computation. Whatever the source of the initial value, adjustments are typically insufficient. That is, different starting points yield different estimates, which are biased towards the initial values."(1)


Judgement Under Uncertainty Study
Amos Tversky and Daniel Kahneman published a famous study on anchoring in the early 1970's. They had participants spin a wheel marked 1 to 100 which unknown to them was rigged to always stop on 10 or 65. They then asked if the percentage of African nations in the United Nations was higher or lower than the number the wheel had landed on. Finally, they asked the participants to estimate the actual percentage.

Tversky and Kahneman found that the number the wheel had landed on had a pronounced effect on the answers the subjects provided. When the wheel landed on 10, the average estimate given by the subjects was 25%. When the wheel landed on 60, the average estimate was 45%.(1)


Real World Example of Anchoring
Sales Negotiations - In a negotiation, the initial price offered can act as an anchor, setting the standard in the mind of the potential buyer.

For example, imagine a negotiation for a used car. In scenario one, the salesman asks for $15,000. The buyer haggles with him and they end up agreeing on $14,500. In scenario two, the salesman asks for $18,000. The two negotiate until settling on a price of $15,500.

In both examples, the sales person anchored the price from which to negotiate in the mind of the buyer. Interestingly, even though the buyer in the first scenario paid less, the buyer in the second scenario is likely to feel he got the better deal as he had negotiated a 'deep discount.'


Prevalence and Susceptibility 
The anchoring bias has been well documented and demonstrated in a variety of domains.(2)  Findings suggest that it is a robust psychological phenomenon and can be difficult to avoid even among those aware of its influence.(3)

Though research findings are somewhat mixed, generally speaking it seems that knowledgeable people are less affected by anchoring. Hence, the more unfamiliar the decision maker is with the problem, the higher the anchoring effect.(2) This seems intuitively true in that a knowledgeable person has access to information with which to judge the plausibility of the anchor.



(1) Judgement Under Uncertainty: Heuristics and Biases: Tversky & Kahneman

(2) A literature review of the anchoring effect

(3) A New Look at Anchoring Effects: Basic Anchoring and Its Anteceents

CIA: Biases in Estimating Probabilities

Anchoring: Wikipedia


Thursday, January 26, 2017

Social Intuitionism

In moral psychology, social intuitionism is a model that proposes that moral positions and judgments are generally first the result of quick, automatic evaluations (intuitions) and that reasoning is a post hoc attempt to justify our intuitions.

Psychologist Jonathon Haidt first introduced the social intuitionist model (SIM) in his paper "The Emotional Dog and its Rational Tail" where he contrasts it against the common rationalist belief that humans make moral judgements as rational decision makers. In other words, rationalist believe that moral judgement is the result of deliberative moral reasoning, much like a judge in a court room listening to and weighing the evidence before reaching a decision.

Essentially, the SIM flips the rationalist view around believing that moral judgements typically come first through our intuitions and moral reasoning follows as a post hoc justification. Haidt believes that this after the fact rationalization is mainly to influence other people.

The model lays out six basic links: 1) intuitive judgment, 2) post hoc reasoning, 3) reasoned persuasion, 4) social persuasion, 5) reasoned judgment and 6) private reflection.




The Social Intuitionist Model 
The SIM proposes that when faced with a moral dilemma a person has an immediate intuitive sense of the rightness or wrongness of the action which is the basis of their judgement. This intuitive judgment (Link 1) appears in consciousness automatically and effortlessly as the result of moral intuitions.

Next, conscious post-hoc reasoning (Link 2) is employed to find justifications for their decision. This reasoning is heavily biased as it searches for explanations and evidence which support the person's judgement and disregards or undervalue evidence which contradicts it. This is generally referred to as 'confirmation bias'.

Reasoned Persuasion (Link 3) is employed to communicate justification for their judgements and as an attempt to persuade others. Though rational reasons may be part of their attempt to convince others, Haidt believes that this link is more about triggering new affectations in the listener. In other words, arguments are really attempts "to frame the issue so as to push an emotional button."

People can also influence and be influenced through social persuasion (Link 4) even when reasons are not given to justify moral positions. The idea is simply that we are influenced by our social groups. "Because people are highly attuned to the emergence of group norms, the model proposes that the mere fact that friends, allies, and acquaintances have made a moral judgment exerts a direct influence on others, even if no reasoned persuasion is used. Such social forces may elicit only outward conformity, but in many cases people’s privately held judgments are directly shaped by the judgments of others "

Although Haidt believes that people rarely change their initial intuitive judgement on moral matters without the influence of other people, he does concede that at times some people can change their minds just from mulling a matter over by themselves.

Reasoned judgment (Link 5) are for those times when people may "reason their way to a judgment by sheer force of logic, overriding their initial intuition. However such reasoning is hypothesized to be rare, occurring primarily in cases in which the initial intuition is weak and processing capacity is high. In cases where the reasoned judgment conflicts with a strong intuitive judgment a person will have a 'dual attitude' in which the reasoned judgment may be expressed verbally, yet the intuitive judgment continues to exist under the surface."

Private reflection (Link 6) accounts for times when, in the course of thinking about a situation, a person spontaneously arrives at a new intuition which overrides the initial intuitive judgement.

Moral Intuitions
The SIM proposes that morality, like language, is a major evolutionary adaptation for an intensely social species, built into multiple regions of the brain and body, which is better described as emergent than as learned, yet which requires input and shaping from a particular culture. Moral intuitions are therefore both innate and enculturated.

Dual Processing
The SIM is similar to other "dual process" theories in that it posits the intuitive process to be an automatic, effortless, default process (system 1) and moral reasoning to be controlled, effortful and slow (system 2).

Moral Dumbfounding
Haidt's evidence in support of the idea that 'intuitions come first, moral reasoning second' comes from studies of "moral dumbfounding" where people have strong moral reactions but fail to provide rational explanations to support their belief. For example, a researcher would ask a question such as:
Julie and Mark are brother and sister. They are traveling together in France on summer vacation from college. One night they are staying alone in a cabin near the beach. They decide that it would be interesting and fun if they tried making love. At the very least it would be a new experience for each of them. Julie was already taking birth control pills, but Mark uses a condom too, just to be safe. They both enjoy making love, but they decide not to do it again. They keep that night as a special secret, which makes them feel even closer to each other. What do you think about that? Was it OK for them to make love?
Most people immediately said it was wrong for the siblings to have sex, yet could not explain why. They searched for reasons such as the harm of inbreeding, or that they will be hurt emotionally but were reminded that they used birth control and that no emotional harm befell them. Eventually, many people would give up looking for reasons and say something like “I don’t know, I can’t explain it, I just know it’s wrong.”



The Emotional Dog and its Rational Tail
Wikipedia: Social Intuitionism
Reason, Society, and the Social Intuitionist Model
Social Intuitionists Answer Six Questions about Moral Psychology
http://www.believermag.com/issues/200508/?read=interview_haidt

Thursday, January 19, 2017

SubTropolis


Sub Tropolis is a 55,000,000 square-foot underground business complex located in Kansas City, Missouri. It currently rents space to 55 local, national and international businesses with more than 1,600 employees working at the facility.

In the late 1800s and early 1900s, limestone mining left millions of square feet of caves in Kansas City. After mining slowed down, late Kansas City Chiefs owner Lamar Hunt converted the caves into industrial space for lease.





Paris Brothers specialty foods


United States Postal Service


LightEdge data center

Behold SubTropolis: The Underground City Located In An Excavated Kansas Mine

Kansas City has a massive network of underground caves that houses over 400 businesses, including a paintball facility and a post office

Doing business 100 feet underground

Tuesday, January 17, 2017

Ice Shove

Some amazing videos of what I believe are all different types of ice shoves.









According to Wikipedia, an ice shove, ice surge, ice heave, ivu, or shoreline ice pileup is a surge of ice from an ocean or large lake onto the shore. Ice shoves are caused by ocean currents, strong winds, or temperature differences pushing ice onto the shore, creating piles up to 12 metres (40 feet) high. Some have described them as 'ice tsunamis', but the phenomenon works like an iceberg. Witnesses have described the shove's sound as being like that of a train or thunder. Ice shoves can damage buildings and plants that are near to the body of water.