Misbehaving

Almost six years ago, I wrote about my interest in the behavioral sciences, especially behavioral economics and finance.  I further mentioned books I'd read on the topic, notably a book titled Thinking, Fast and Slow by Nobel prize winner Daniel Kahneman.

Since then, I've read many other books related to behavior, including three by former poker player Annie Duke (Thinking In Bets, How To Decide, and Quit), and another by a journalist who became a poker player for a year, Maria Konnikova (The Biggest Bluff).  On the more data driven / less fuzzy side were books by Robert Cialdini (Influence) and another co-authored by Kahneman (Noise).

Now I've just finished a book on this topic that I've enjoyed probably only less than Thinking, Fast and Slow.  It's not a particularly new book (2015) by another Nobel prize winner, Richard Thaler, titled Misbehaving.

Thaler was an early collaborator with Kahneman and his longtime research partner, Amos Tversky.  Misbehaving reviews the early, largely ignored stages of behavioral science, and how it eventually grew to become accepted by all but the most hardcore intellectuals.  

Thaler is more widely known now for a later book he co-authored with Cass Sunstein, called Nudge.  While I also enjoyed reading Nudge (to the point I gifted it to clients), Misbehaving provides many more examples of how people will respond differently to a given set of facts, depending on how those facts are phrased.  This was a prime writing / teaching method of Thinking, Fast and Slow.

Here's one example:

600 people are sick from a disease, and a choice has to be made between two policies:

Would you rather take

A) policy will save 200 people for sure

B) policy will offer a 1/3 chance at saving everyone, but a 2/3 chance of killing everyone

Alternatively, would you rather take

C) policy where 400 people will die for sure

D) policy where there's a 1/3 chance of killing no one but a 2/3 chance of killing everyone

Logic demands that we take either A and C, or B and D, because they are effectively the same thing. But in group tests of this, we don't always do that, because we are not always rational beings.  We also care about things like what seems right, instead of just the logical.

The book reviews the decades-long conflict between the data-only 'econs' and the non-conforming behaviorist 'humans'.  Knowing about this conflict, and the sometimes illogical 'misbehavior' that humans follow, can be a very important advantage to those in a particular field.

Misbehaving has a large section on how this applies within the investing world, so if you're interested in that sort of thing (like me), read it!  Or as I said six years ago, don't read it, and I'll use it to my advantage.

Berky Meeting Nuggets 2023

This year's Berkshire Hathaway annual shareholders meeting in Omaha, was very similar in structure to last year, when the event returned in-person post-pandemic.  A crowd said to approach 40,000, including corporate celebrities like Bill Gates and Tim Cook, gathered to listen to Warren Buffett (age 92) and Charlie Munger (age 99) answer questions again for about five hours.  Vice-Chairs Greg Abel (future CEO) and Ajit Jain were also on stage to answer questions in the morning session.

A summary of some items that stuck with me:

• While the 2022 crowd seemed smaller, perhaps due to people getting used to streaming the meeting post-pandemic, the 2023 was as large as I've ever seen it.

• Early on, when discussing the quarterly results that had been released that morning, Buffett showed a chart showing that over the past 5-10 years, Berky has held about $125 billion in short-term U.S. Treasury bills (cash).  Until last year paid at little as 0.04% interest, generating about $50 million a year.  Due to last year's interest rate increases, that same amount of cash this year is projected to generate about $5 billion a year!

• Buffett noted the recent regional bank failures, and said that while the law says the FDIC insurance limit is $250,000 for accounts, that isn’t how America is going to behave in a banking crisis.  If the contagion would be too great, the federal government would bail them out.  So as a practical matter, there is no FDIC insurance limit for depositors, especially in larger banks.

• Jain took a few insurance operations questions, and mentioned how GEICO is doing better, but still has a long way to go to catch up to Progressive in telematics technology.  Abel took a few utility and railroad questions, and is clearly ready to become the next CEO.  In fact, the company movie included videos from prior meetings where the question about succession was asked -- a question no longer asked.

• Both Buffett and Munger saw the enormous potential in artificial intelligence, but didn’t see it ultimately replacing human intelligence.

• Buffett quote of the day:  "What gives you opportunities is other people doing dumb things."

• Just before the lunch break, some too-smart-by-half dude quoted Munger from prior meetings / interviews to question whether he still believed it was 'stupid' and 'ignorant' for people to not get the "untested mRNA" COVID vaccine.  He simply replied, "Yeah, sure."

• Munger had lots of other memorable quotes as usual, but it was his term 'diworsification' that most won't remember.  He used it to refer to those who preach investing 'diversification' at all costs.  Munger and Buffett have long stated that if you only have a few good ideas, you should concentrate on those instead of hedging your bets on a bunch of other things that aren't as good.

As usual, there was so much more.  Here's a link to this meeting and others.

Meet Me At (Bud &) Mary's Place

It turns out April 20th on the calendar is a day of infamy in many ways.  In 2010 it marked the day of an explosion on the Deepwater Horizon oil rig that led to the largest oil spill in history.  In 1999 it was the day two stupid and heavily armed students murdered 13 people at Columbine high school -- one of the first notorious school shootings, which have since become almost commonplace.  And if you really want to go down a hole, apparently April 20th was also the day Hitler was born.

But let’s face it, April 20th is really a national day to celebrate marijuana.  You know, that federally illegal substance which is less addictive and probably less mind-altering than federally legal alcohol or prescription drugs.  Because America is repressed like that.

More states continue to authorize regulated, recreational cannabis use. Recent ones include the more liberal state of New York and the more conservative state of Missouri.  That latter one means Iowa now has neighbors bordering on two sides (Illinois being the other) that will suck up tax money for recreational sales.

Iowa still remains in the dark ages with only a limited medical marijuana program. Recently, however, I looked more closely at Iowa’s medical marijuana program, and I’m glad to say it isn't quite as draconian as I thought.  

Iowa's main retailer of medical cannabis has recently changed its name to Bud & Mary‘s, and has started a subtle yet effective marketing campaign to make sure people are aware of its availability. They even had a booth at last year’s state fair.

Based on direct knowledge I have from someone with an Iowa medical cannabis card, they aren't that difficult to get, thanks to willing physicians who sign off, many of whom are recommended by Bud & Mary's.  And while the maximum amount that can be obtained in a 90-day period is limited, one would have to be daily user to be affected by it.

Knowing that Iowa's conservative Republican legislative majority and governor have gone out of their way for years to keep recreational sales illegal, and minimize that availability of medical marijuana, it gives me great pleasure to hear that out more informed Iowa citizens have done what they can to 'stick it to the man' when it comes to access.

Now that's something to celebrate.

Blogging With Artificial Intelligence

Technology innovations come and go.  Most turn out to be nothing, but some turn out to change the world -- things like the internet / web, or cellular / smart phones.

The current most-talked-about tech innovation is artificial intelligence (AI), more specifically, ChatGPT.  It's an AI chatbot developed by a company called OpenAI.  In the vernacular, when asked for information, it can scour the web and give detailed responses for practically any topic.

Of course, the technology is still new, and it can give some strange, even inaccurate responses.  But one can certainly see how it could be a game-changer, for better or (gulp) for worse.

I signed up for the 'free' version being used for testing, and today I asked it for "A blog entry on the topic of Spring Break."  Below is the result, which I have not edited:

As the weather starts to warm up and the end of the school year approaches, students everywhere begin to eagerly anticipate spring break. This much-needed vacation is a chance for students to relax and recharge before the final stretch of the school year. In this blog entry, we'll explore the history and significance of spring break, as well as some popular destinations and activities.

History and Significance of Spring Break

The origins of spring break can be traced back to ancient civilizations, who celebrated the arrival of spring with festivals and other festivities. In the United States, the modern concept of spring break began in the 1930s, when college swim teams began traveling to Florida for training camps. Over time, other colleges and universities began scheduling their own spring breaks around the same time, and the tradition grew.

Today, spring break is an important part of the American academic calendar, and students use it as an opportunity to unwind, spend time with friends and family, and explore new places. For many students, spring break is also a chance to engage in activities that they may not have time for during the school year, such as traveling, volunteering, or pursuing hobbies.

Popular Destinations for Spring Break

One of the most popular spring break destinations in the United States is Florida, particularly cities like Miami, Panama City Beach, and Key West. These destinations offer warm weather, beautiful beaches, and a range of activities, from water sports to nightlife.

Other popular domestic destinations for spring break include Las Vegas, Nevada; Cancun, Mexico; and Puerto Rico. These destinations offer a mix of adventure, culture, and relaxation, and are popular with students looking for a more unique spring break experience.

For those looking to travel further afield, Europe is a popular destination for spring break, particularly cities like Amsterdam, Paris, and Barcelona. These destinations offer a mix of culture, history, and nightlife, and are a great way for students to broaden their horizons and experience new cultures.

Activities for Spring Break

While some students choose to spend their spring break relaxing on the beach, others prefer more adventurous activities. Popular activities for spring break include hiking, camping, skiing, and snowboarding. Students may also choose to volunteer during their spring break, whether by participating in a service trip or working with a local organization to give back to the community.

Whatever your preferences, spring break is a great opportunity to explore new places, try new things, and recharge before the end of the school year. So whether you're planning a beach getaway or an adventure in the great outdoors, make the most of your spring break and enjoy this much-needed break from the rigors of academic life.

Not bad, huh?  You can certainly see how it can be used as a way of generating a first draft for something like a term paper, or news article.  Let's just hope this isn't the beginning of a takeover by our AI overlords.

What's The Harm

Have you ever wondered why so many people care so much about things that do no harm to anyone?  I have, and it’s recently been a recurring theme politically, professionally, and personally.

Starting with that former one, in Iowa and other republican-led states, politicians and their activist buddies are primarily focused on passing laws that hurt the LGBTQ community.  Why?  How are they or anyone else being harmed by library books, drag shows, or gender-identity causes?

The answer is they aren't harmed, but they're scared -- not only about change, but about losing money, power (same thing), and religion (also the same thing!).  Fake conservatives want no threats to their straight white Christian world.

Moving on the the professional front, I work with vendors who need authorization forms.  That's no problem, until they start requiring a specific manner of delivery.  We've long ago entered the digital age, and the COVID-19 pandemic made it even more common, but I still work with vendors who require original documents.

Who is harmed by accepting verifiable electronic signatures?  I guarantee these companies are going to digitize the document anyway!  I suppose the answer here is, some companies will only do things the way they've always done them.

Finally on the personal level, I've experienced an increase in the already-high number of people who want to make everything about themselves.  No conversation can be had without them taking it over, for nothing can be more important than what they or their loved ones do.

They'll even complain when told good news, if it isn't given at the time and place or their choosing.  A family / friend getting more attention harms no one; it only interrupts the desire of some for affirmation from others.  (Thanks, Facebook!)  Those who represent the 'some' should be avoided.

My conclusion in all of these items is pretty libertarian: If it harms no one else, why do you care?

The NASCAR Noncompete Clause

Another new season for NASCAR began last week, with the running of its most famous race, the Daytona 500.  Why they start their season with their biggest race is a mystery decades in the making.  To say the least, it's unique; to say the most, it's the dumbest thing a spectator 'sport' could do.

I'm not a car racing fan, I don't watch and I don't really care.  But I still can't get over how, inside every NASCAR race, are two dumber ideas that have come to fruition.  I submit to you 1) stage racing, and 2) overtime a/k/a the green-white-checkered ending.

With stage racing, each race has 2 or 3 'segments' to it, basically a prescribed number of laps.  At the end of each segment, the yellow flag comes out to pause the race, and the top finishers for each segment receive 'points' to be used in a season-long competition.

One of the outcomes of these stages is a re-bunching of the field.  So, if the driver leading the race was ahead by a lot, now his lead is gone.  In other words, it takes the strongest cars / drivers and evens them up with everyone else throughout the race.  Huh?

Imagine that happening in any other competition.  A team takes a big lead into halftime?  Reset the score for the second half.  A golfer has a big lead after two rounds?  Give the other golfers strokes to even things up.  It's unimaginably stupid.

However, when it comes to stage racing, NASCAR's overtime rules say, "Hold my beer."  The overtime rules were established years ago, after many races were being decided while the field wasn't actually racing, but proceeding 'under caution' due to a crash near the end of the race. While that type of ending was very much a buzz-kill for fans, the overtime rules don't help.

Now, instead of the race ending like that, extra laps are added, so that at least two laps can be run full-tilt to the end.  This sounds better, except it isn't.  Again, it hurts the race leader.  Plus, it often doesn't work.

Consider this year's Daytona 500, which went to overtime not once, but three separate times, because crashes just kept happening after re-starts.  In the end, NASCAR basically put the race out of its misery by declaring the race over, and naming the winner to be the car in first place at the last crash.

So after an extra 30 miles / one hour of boring caution laps, there was still no racing to the finish line.  The winner wasn't the best car / driver, it was more a matter of who was lucky enough to avoid the crashes.  Again, unimaginably stupid.

NASCAR has long fought the stereotype of being a good 'ol white boys 'sport' with fans that aren't the sharpest tools in the shed.  In the case of these rules, it takes one to know one.  If they were looking for ways to make races more boring and non-competitive, you could say they're the big winners.

We Care How You Care

Many years ago, my late mother became a resident of a long-term care facility.  While it was hours away from where I lived, over three years I still spent dozens of hours visiting her.

More recently, my wife's parents have also been, let's say, voluntarily relegated to a similar long-term care facility.  This time, it's quite near where I live, and in a short time I've already spent many hours there.

These care facility visits have made me, in my own mind, enough of an expert to know a few things that work and don't work -- not for the residents, but for the loved ones who visit them.

First, we want to have enough caretakers there to help.  Finding employees to work at these facilities wasn't easy before the COVID-19 pandemic, and it's even harder now.  But figure it out -- no resident should have to wait too long for help the basic activities of daily living.

Next, we want everyone to show kindness.  Of course, there will be days that workers there are stressed, and short of time, and basically don't want to be there.  Let's just keep that to a minimum, and be as pleasant as possible to those who have no choice but to be there.

Finally, an overlooked on one for a financial-focused person like me -- let's have staff that understands the health care provider / insurance administrative labyrinth.  By this I mean a staff that can understand and explain it, and doesn't allow it (or them) to make obscene profits off of the elderly.

I have more knowledge about how medical providers and insurers operate than most, and I still struggle to understand the rules and costs.  The residents of care facilities are already losing their independence, let's not let them unnecessarily lose their money.