And another goes down?

To the extent that misery loves company (fn1), this speculation from a blogger at Portfolio (fn2) that Berkshire Hathaway could potentially face a ratings downgrade in sort of a cascade of self-fulfilling prophecies is excellent news for AIG. (fn3)

There's this interesting bit at the end:

On the other hand, I'm not comfortable with any company -- not even Berkshire Hathaway -- having a business model which requires a triple-A rating. Triple-A ratings should be the consequence of a company's profitability, not a cause of it. If Berkshire lost its triple-A and started playing on a level playing field with everybody else, that might be more sustainable, in the long term, than an attempt to shore up the triple-A at all costs. Certainly there's something very weird going on when CDSs are at 450bp and the credit is still triple-A: one or the other has to be wrong.

The last line is indisputably true: if two indicators are giving you radically different information, one of them is wrong. I could see arguments being made for either (briefly: irrationality in the market for CDS's mean they're wrong verses slowness of updates by the ratings agencies mean that they haven't reflected the most up-to-date information thus they're wrong).

But his overall point about not trusting business plans that rely on a AAA rating seems less obvious to me. I'm not sure it's wrong but it seems suspect. I'd have to think it through. Sadly, I don't have time to do that just now. But someday, someday...


(fn1) Not actually all that great an extent, in my experience. Though that could just be me, I'm not much of a people person at the best of times.

(fn2) Portfolio magazine, which I was only very dimly aware of just a couple of months ago, has crossed my radar many times recently. First, I saw their notice that they were cutting back and thought, "there's another magazine I don't read and never will". But then a friend called my attention to Michael Lewis's excellent piece on the Great Collapse, mere days after that I ran across this older but interesting piece on the troubles facing the traditionally technologically savvy and recession proof(ish) porn industry, and now this fun-filled guess at a potential calamity falling on Berkshire. They're on a roll!

(fn3) As you'll recall from previous posts (if, that is, you like long, rambling discourses...) it was a ratings downgrade that felled AIG.

A Winner!

Sorry for the light posting, I've been up to my eyeballs with work and packing and the like.

But I did want to call attention to the fact that today's 3:00 Dive left the Dow closed below 8,000 for the first time in five years.

Whoever had "Nov. 19" in the "when will the Dow close below 8,000" pool, you can collect your winnings from the man selling pencils on the corner.

Stupid is as stupid does?

I got my lunch today, as I often do, from Lenny's, an NYC chain of sandwich shops. They make your basic made-to-order sandwiches and do a good job. I like Lenny's.

The one downtown, which is to say the one I frequent when at work, is a mob-scene during the lunch rush, from about 11:30 to 1:30, as are most food places around here. The ones that are not mobbed are not long for this world.

As most of the successful places have, Lenny's has got their ordering system down to something of a science to deal with the crush. You order at one place, take your slip, grab your drink, chips, fruit salad or whatever, and head to the register to pay. The cashier gives you the number to listen for when your sandwich is ready and then you stand milling around with the others waiting for your number and, if you're like me, grumbling when numbers after yours get called before you.

Today I got wrapped up in some stuff and didn't actually head over until about 2:00. When I hit Lenny's it was empty, though the full lunch staff was still working, so you had two cashiers and a multitude of sandwich makers. Having established a routine, of course, they stick to it, so I went through the usual steps: ordered, got slip, grabbed lemonade and chips, paid, got number.

But, again, I was the only customer in the place. Just me and the staff.

So when my sandwich was ready and I was over perusing the selection of ready-made pastas thinking they might be good for a future lunch do you think the lady calling out the number took note that there was only one person in the place?

Of course not.

No, she called it and then paused for approximately 3 seconds -- and did not use those 3 seconds to realize there was not a crowd in front of her, but rather an empty store with one person over by the refrigerated section -- and then called it again and then, pausing for 3 seconds again, read the order. As if someone might have forgotten their number but would recognize their order.

As it happens I had not forgotten my number but it took me longer than 6 seconds to traverse the store. I must say, though, that the level of lack of awareness was somewhat startling.

I think of these kinds of encounters when people make the argument that we need to get dramatically higher percentages of our population through higher education. That this would somehow benefit our economy or our population.

This lady would not benefit in the slightest from college, though I am sure she would enjoy the parties. And she is not alone. In point of fact, I'd say we're already a good bit past the point of diminishing returns in terms of who goes through higher education today. Many of today's "students" would benefit far more from an apprenticeship or other on-the-job training. They have no capacity or use for abstract thought and forcing it on them is much like teaching a pig to dance: ultimately futile and annoying to the pig.

The way people fall into this thinking is, I believe, a classic sort of false logic. They see that people who graduate from college are more productive than people who don't and then make the inference that college must have made the difference. But this is selection bias: smart people are more productive and more likely to go to college, but they would be smart and thus more productive even without the input of college.

There's also a bit of selection bias in that the kind of people who think about these kinds of issues are smart themselves. Smart people tend to cluster, so odds are most of their friends and acquaintances are likewise smart. So, unless they are particularly observant (as is your humble blogger), they have limited encounters with people who would not benefit from college. Combining that with the noble impulse to believe, contrary to all evidence, that everyone is roughly equally capable, you have people who almost literally cannot conceive of stupid people. They just zone them out.

Of course, if there were no stupid people then more college would be great. But that is not reality.

Larry Sechrest, an economist who died recently, wrote a fun little essay on the subject called "A Strange Little Town in Texas". He made his home in a little college in rural Texas where he believe the entire college -- professors, students and all -- functioned roughly at the level of a decent high-school.

"Not now, Mr. Obama, I'm concentrating on walking..."

I've noticed this tendency before but isn't it striking that when Bush is shown in a candid moment with other world leaders it very nearly always looks like a not-so-bright schoolboy getting a lecture?

I recall a great one of Gordon Brown just after he became Prime Minister in which he appeared to be using his fingers to show Bush how many ten was.

I'm not a psychopath, I just don't care...

Interesting article in the New Yorker on psychopaths.

Psychopaths are scary but the article does raise the interesting point that at least part of the reason it's difficult to come up with a solid definition of psychopathy is that pretty much everyone is capable of displaying psychopathic traits at one time or another. Who among us has never shaded the truth to get their way? Who among us can honestly say they always take full account of others? Indeed, the author has the following exchange with the researcher he is interviewing:

As I sped along Wolf Road, a traffic light ahead turned yellow. I momentarily thought about flooring it, and probably would have, if not for my passenger; instead, I slowed down and stopped. But the car on my left went flying by, through what was now a red light.
“Wow, look at that,” Hare said. “Now, that man might be a psychopath. That was psychopathic behavior, certainly—to put others in the intersection in danger in order to realize your own goals.”

The difference is one of degree: your extreme psychopath never cares and is capable of going to lengths that the normal person never would. (fn1)



This quote on the first page put in me in mind of the difficulties in teasing out genetic vs. environmental factors in human development:

"Considerable evidence, including several large-scale studies of twins, points toward a genetic component. Yet psychopaths are more likely to come from neglectful families than from loving, nurturing ones."

Of course, this is just what we might expect to see even if psychopathy was entirely genetic: psychopaths would have psychopathic children. Because psychopaths lack normal emotional responses, the homes they create in which to raise those children would likely be neglectful. They would be very unlikely to be "loving" since psychopaths are largely incapable of love.

This difficulty is why twin studies are the gold-standard for genetic vs. environment determinations. Of course, twins being somewhat rare, assembling large groups of them to participate in whatever nature vs. nurture study you've concocted can be difficult (read: expensive), thus the debate rages on. The rapid advance in genetics may soon (fn2) start to end the nature vs. nurture debate in a variety of fields but then again it may not.

(fn1) Note that I don't think running a yellow is beyond the pale, but then I've not spent years analyzing psychopaths. That's got to do bad things to your sense of proportion and normalcy. One of the dangers sited by a researcher is being sucked in by a psychopathic research subject's charisma and heading towards the psychopathic side yourself. I'd say that this researcher is displaying the opposite tendency: he's so attuned to and disturbed by psychopathy that he overcompensates and rates ordinary behavior as far more anti-social than it actually is.

(fn2) Where "soon" is defined as within the next couple of decades.

Wasted Opportunity

One real shame about Obama's win last night is that it ruins the punch of this fun fact: on election day 2032 Barack Obama will be slightly younger than John McCain is today.

2032.

Historic

Congratulations to President-elect Obama.  He waged a good campaign and deserves his victory.

And it is undeniably historic that Americans have elected our first black president.  I do wish it were someone slightly less a man of the left, though.

I sincerely hope that he is a successful president and that his policies are not the unmitigated disaster I fear they will be.

I have the distinct feeling that I will have lots of opportunity to write about misguided, counterproductive government policies over the next few years.  But then, I was going to have that opportunity no matter who won last night.  It's the nature of the beast.

The primary reason I need another room...

From the New Yorker.

Busy...

Been a busy week. So light posting, sorry.

Here's a quick fun fact for today:
If When Barack Obama finishes serving out his first term as president it will be the longest period of time that he has ever held one job without seeking a higher office.

That is, unless he figures out some higher office to go for. Most people would hold that President of the United States is about as high as offices get but maybe we could come up with a new one for him. Supreme Leader of the Americas? President of the World? Savior of Mankind?

Zombies Beware

Study shows that teens who watch shows with sex in them are more likely to be involved in teen pregnancy.

If this finding is generalizable, then, given the number of zombies I killed on my tv set this weekend, I would have to advise any undead creatures that may be contemplating hanging around me to make other plans.