risk tolerance

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pages: 302 words: 84,428

Mastering the Market Cycle: Getting the Odds on Your Side by Howard Marks

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, behavioural economics, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, Glass-Steagall Act, if you build it, they will come, income inequality, Isaac Newton, job automation, junk bonds, Long Term Capital Management, low interest rates, margin call, Michael Milken, money market fund, moral hazard, new economy, profit motive, quantitative easing, race to the bottom, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, secular stagnation, short selling, South Sea Bubble, stocks for the long run, superstar cities, The Chicago School, The Great Moderation, transaction costs, uptick rule, VA Linux, Y2K, yield curve

Here’s a partial list: Government policies supported an expansion of home ownership—which by definition meant the inclusion of people who historically couldn’t afford to buy homes—at a time when home prices were soaring; The Fed pushed interest rates down, causing the demand for higher-yielding instruments such as structured/levered mortgage securities to increase; There was a rising trend among banks to make mortgage loans, package them and sell them onward (as opposed to retaining them); Decisions to lend, structure, assign credit ratings and invest were made on the basis of unquestioning extrapolation of low historic mortgage default rates; The above four points resulted in an increased eagerness to extend mortgage loans, with an accompanying decline in lending standards; Novel and untested mortgage backed securities were developed that promised high returns with low risk, something that has great appeal in non-skeptical times; Protective laws and regulations were relaxed, such as the Glass-Steagall Act (which prohibited the creation of financial conglomerates), the uptick rule (which prevented traders who had bet against stocks from forcing them down through non-stop short selling), and the rules that limited banks’ leverage, permitting it to nearly triple; Finally, the media ran articles stating that risk had been eliminated by the combination of: the adroit Fed, which could be counted on to inject stimulus whenever economic sluggishness developed, confidence that the excess liquidity flowing to China for its exports and to oil producers would never fail to be recycled back into our markets, buoying asset prices, and the new Wall Street innovations, which “sliced and diced” risk so finely, spread it so widely and placed it with those best suited to bear it. The existence of all the above elements indicated the presence of risk tolerance. In fact, they couldn’t have arisen if risk tolerance hadn’t dominated the psyches of investors, lenders, borrowers and regulators. The existence of risk tolerance like that seen in the years immediately preceding the Crisis should be very worrisome, as it implies an absence of worry, caution and skepticism. It is inescapable that these developments—and the risk tolerance or risk obliviousness that was behind them—ultimately would lead to unsafe financial behavior, particularly via the issuance of financial instruments that were unsound and likely to fail.

In times of obliviousness toward risk—or high risk tolerance—the reduced demand in terms of risk premiums causes the slope of the line to flatten and the amount of risk compensation to shrink. The lower slope of the capital market line means, by definition, that the there’s less of a return increment per unit increase in risk. In simpler terms, the payoff for risk-bearing is sub-par. In my opinion, all of the above follows logically from direct observation. The process is as follows: positive events lead to increased optimism, increased optimism makes people more risk-tolerant, an increase in risk tolerance causes lower risk premiums to be demanded, a reduction in demanded risk premiums equates to lower demanded returns on risky assets, a reduction of demanded returns on risky assets causes their prices to rise, and higher prices make assets even riskier (but also attract buying on the part of “momentum investors” who chase rising stocks).

Everyone feels the same, meaning little risk aversion is incorporated in prices, and thus they’re precarious. Investors become risk-tolerant just when they should increase their risk aversion. And when events are down, so are investors. They think of the markets as a place to lose money, risk as something to be avoided at all cost, and losses as depressingly likely. As I described at the end of the last chapter, under the excess of caution that prevails, (a) no one will accept possibilities that incorporate any optimism at all and (b) they likewise cannot countenance the possibility that an assumption could be “too bad to be true.” Just as risk tolerance is unlimited at the top, it is non-existent at the bottom.


All About Asset Allocation, Second Edition by Richard Ferri

activist fund / activist shareholder / activist investor, Alan Greenspan, asset allocation, asset-backed security, barriers to entry, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, book value, buy and hold, capital controls, commoditize, commodity trading advisor, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, inverted yield curve, John Bogle, junk bonds, Long Term Capital Management, low interest rates, managed futures, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, selection bias, Sharpe ratio, stock buybacks, stocks for the long run, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

The advisor asks the woman to complete a risk tolerance questionnaire to find the maximum level of risk she can deal with. The woman completes the risk tolerance questionnaire, and the financial planner calculates the results. He concludes that the woman has the risk tolerance to handle an aggressive portfolio. The advisor suggests an asset allocation of 70 percent in stocks and 30 percent in bonds. Before recommending individual investments, the planner wishes to ensure that a 70 percent stock and 30 percent bond portfolio is not above the woman’s risk tolerance. Therefore, he asks her to take an asset allocation stress test.

Being consistent with rebalancing is also a good test of risk tolerance. Investors will rebalance at the appropriate time without hesitation if their portfolio is within their risk tolerance. A portfolio’s asset allocation may be too aggressive if an investor hesitates on rebalancing in a bear market. If you are hesitant when stocks are suffering, it may be time to rethink your plan and make a permanent adjustment to the stock and bond mix. WHEN TO USE RISK AVOIDANCE Risk avoidance is a different concept from risk tolerance. Risk avoidance is a conscious decision not to invest up to your known risk tolerance level. This is a risk control measure.

Only those investors who have an asset allocation at or below their tolerance for risk survive deep bear market. Finding an investment allocation that will survive during all market cycles is not easy, but it is worth the effort. RISK TOLERANCE QUESTIONNAIRES Risk tolerance questionnaires are common in the investment industry. Questionnaires are available through all mutual fund companies, brokerage firms, and private investment advisors. In addition, you can find them in financial planning books and in some investment-related magazines. The goal of risk tolerance questionnaires is to find the maximum level of risk that an investor is capable of handling. In doing so, they ask various questions about your investment experience and try to model your risk-and-return profile.


pages: 367 words: 97,136

Beyond Diversification: What Every Investor Needs to Know About Asset Allocation by Sebastien Page

Andrei Shleifer, asset allocation, backtesting, Bernie Madoff, bitcoin, Black Swan, Bob Litterman, book value, business cycle, buy and hold, Cal Newport, capital asset pricing model, commodity super cycle, coronavirus, corporate governance, COVID-19, cryptocurrency, currency risk, discounted cash flows, diversification, diversified portfolio, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, fixed income, future of work, Future Shock, G4S, global macro, implied volatility, index fund, information asymmetry, iterative process, loss aversion, low interest rates, market friction, mental accounting, merger arbitrage, oil shock, passive investing, prediction markets, publication bias, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Feynman, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, robo advisor, seminal paper, shareholder value, Sharpe ratio, sovereign wealth fund, stochastic process, stochastic volatility, stocks for the long run, systematic bias, systematic trading, tail risk, transaction costs, TSMC, value at risk, yield curve, zero-coupon bond, zero-sum game

Financial advisors, investment managers, consultants, individual investors, and everybody else involved in investment management must at some point determine their (or their end investor’s) risk tolerance and align the portfolio’s risk accordingly. If we ignore fat tails, we underestimate exposure to loss and take too much risk relative to the investor’s risk tolerance. Of course, risk tolerance itself is a fuzzy concept. Several years ago, a client asked Mark Kritzman and me how we calibrate risk tolerance. As usual, Mark had an interesting, tongue-in-cheek answer: There’s some research that was done at MIT to estimate people’s risk tolerance based on neurochemical science. For example, individuals with higher levels of specific enzymes may have higher risk tolerance. However, our clients have found the idea of a blood test a bit too invasive.

They’re the engine of growth in investor portfolios. Clearly, the question is not as simple as one versus the other. There’s a role for both stocks and bonds in balanced portfolios. Investors must calibrate their stock-bond allocation based on their risk tolerance. But how do we determine the appropriate mix, given an investor’s risk tolerance? Or an even more difficult question: How do we estimate an investor’s risk tolerance? The so-called glide paths used in target-date funds (TDFs) provide a useful guide to adjust the stock-bond mix as a function of when an investor expects to retire. In a 2016 InvestmentNews editorial, I officially turned my coat on my PIMCO days.

Consider risk premiums as possible small stand-alone investments, but beware of backtest results. 4. Solve this question first: What stock-bond mix matches the investor’s goals and risk tolerance? 5. Use portfolio optimization models, judgment, and experience to populate the stock-bond mix. 6. Consider alternatives as diversifiers, but beware of inflated returns and underreported risks. 7. Allocate between active and passive strategies as a function of active risk tolerance and fees. Notes 1. Robin Wigglesworth, “ETFs Are Eating the U.S. Stock Market,” Financial Times (January 24, 2017). Volume data are from Credit Suisse, as of 2016.


pages: 250 words: 77,544

Personal Investing: The Missing Manual by Bonnie Biafore, Amy E. Buttell, Carol Fabbri

asset allocation, asset-backed security, book value, business cycle, buy and hold, currency risk, diversification, diversified portfolio, Donald Trump, employer provided health coverage, estate planning, fixed income, Home mortgage interest deduction, index fund, John Bogle, Kickstarter, low interest rates, money market fund, mortgage tax deduction, risk tolerance, risk-adjusted returns, Rubik’s Cube, Sharpe ratio, stocks for the long run, Vanguard fund, Yogi Berra, zero-coupon bond

A one-two punch of stock investments and time defeats inflation risk and equity risk. Up to Speed What’s Your Risk Tolerance? Balancing return and risk is essential, because greed and fear can mess up the best financial plans. (See page 45 to learn about psychological mistakes many people make when investing.) By matching your portfolio risk to your personal risk tolerance, you can sleep soundly while your investments are hard at work. Figuring out your true risk tolerance is more complicated than the approaches taken by most online tools. But you can get a sense of your tolerance with any of the following tests: • MSN Money offers a risk tolerance quiz (http://tinyurl.com/msnmoney-risk) that tells you two things: how comfortable you are taking risks and whether your personal circumstances are such that you can afford to take risks. • The Rutgers University website offers a risk tolerance quiz (http://tinyurl.com/ rutgers-risk) that identifies how comfortable you are with risk. • CalcXML.com (http://www.calcxml.com/do/inv08) determines your tolerance for risk by asking 10 questions about you, your financial situation, and how you would respond to several situations.

But you can get a sense of your tolerance with any of the following tests: • MSN Money offers a risk tolerance quiz (http://tinyurl.com/msnmoney-risk) that tells you two things: how comfortable you are taking risks and whether your personal circumstances are such that you can afford to take risks. • The Rutgers University website offers a risk tolerance quiz (http://tinyurl.com/ rutgers-risk) that identifies how comfortable you are with risk. • CalcXML.com (http://www.calcxml.com/do/inv08) determines your tolerance for risk by asking 10 questions about you, your financial situation, and how you would respond to several situations. Your brokerage may also offer a tool for determining risk tolerance. For example, the Charles Schwab website has a risk profile questionnaire (http://tinyurl.com/ schwabriskprofile) that analyzes your risk tolerance and investment timeframe to determine what type of investor you are. 160 Chapter 9 But because your stocks need time to recover from the bottom of a business cycle or bad news about a company, you also need other types of investments.

Most people see a little bit of themselves in a couple of the categories. This overlap is normal, so read all the descriptions and develop a plan that works for your personality. Insecure Confident Lower risk Protectors have low risk tolerance and are very insecure about money. They want to keep every nickel, even if it’ll be worth a penny in a few years. They’re emotional about their money, so rational arguments don’t persuade them. Higher risk Followers have a slightly higher risk tolerance, but are frightened by money. They don’t want to make bad decisions and they regret past decisions, so they want someone else to make decisions for them. Leaders are confident and willing to take risks to obtain higher returns.


pages: 320 words: 33,385

Market Risk Analysis, Quantitative Methods in Finance by Carol Alexander

asset allocation, backtesting, barriers to entry, Brownian motion, capital asset pricing model, constrained optimization, credit crunch, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, en.wikipedia.org, financial engineering, fixed income, implied volatility, interest rate swap, low interest rates, market friction, market microstructure, p-value, performance metric, power law, proprietary trading, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, seminal paper, Sharpe ratio, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic bias, Thomas Bayes, transaction costs, two and twenty, value at risk, volatility smile, Wiener process, yield curve, zero-sum game

Example I.6.4: Higher moment criterion for an exponential investor Two portfolios have the returns characteristics shown in Table I.6.3. An investor with an exponential utility has 1 million to invest. Determine which portfolio he prefers when he invests: $ $ $ $ $ $ $ (i) 1 million and his absolute risk tolerance coefficient is 200,000; (ii) 1 million and his absolute risk tolerance coefficient is 400,000; (iii) 1 million and his absolute risk tolerance coefficient is 100,000; (iv) only 0.5 million and his absolute risk tolerance coefficient is 100,000. $ 11 $ This approximation only holds when x is small. It follows from the expansion of ln1 + x given in Section I.1.2.5. Introduction to Portfolio Theory 237 Table I.6.3 Returns characteristics for two portfolios Portfolio Mean A B 10% 15% Standard deviation Skewness Excess kurtosis −05 −075 2.5 1.5 12% 20% Solution (i) The absolute risk aversion coefficient, as a proportion of the amount invested, is = $1000000 = 5 $200000 In the spreadsheet for this example the certain equivalent is calculated using the approximation (I.6.23) with this value for and with the moments for each portfolio shown in Table I.6.3.

Then your coefficient of absolute risk tolerance is 106 (measured in ) and your absolute risk aversion coefficient is 10−6 (measured in −1 ). Similarly, to determine the relative risk tolerance of a risk averse investor, which is the reciprocal of his relative risk aversion coefficient, we should present him with the following question. Suppose you can gamble a certain proportion x of your wealth W on a lottery where you receive either 2(xW) or 21 xW with equal chances. What is maximum proportion x that you are willing to bet? The answer is his relative risk tolerance. For instance, suppose you are willing to bet 20% of your total net wealth on a gamble where you are returned either double your net wealth or one half of it with equal chances, but you are not willing to bet more than this for a ‘double-or-half’ gamble.

Portfolio A has a certain equivalent of 57,700 and portfolio B has a certain equivalent of 12,500, hence portfolio A is preferred. (ii) If the risk tolerance were 400,000 instead of 200,000 then would be only 2.5 and portfolio B would be the preferred investment, with a certain equivalent of 92,188 compared with 80,763 for portfolio A. Hence, portfolio B is more attractive to a less risk averse investor. (iii) When the risk tolerance is small, i.e. the investor is very risk averse, becomes very large and then both portfolios are considered too risky. In fact, if the risk tolerance is only 100,000 then = 10 and the approximation (I.6.23) gives a negative certain equivalent for both investments.


pages: 368 words: 145,841

Financial Independence by John J. Vento

Affordable Care Act / Obamacare, Albert Einstein, asset allocation, diversification, diversified portfolio, estate planning, financial independence, fixed income, high net worth, Home mortgage interest deduction, low interest rates, money market fund, mortgage debt, mortgage tax deduction, oil shock, Own Your Own Home, passive income, retail therapy, risk tolerance, the rule of 72, time value of money, transaction costs, young professional, zero day

For example, an 18-year-old investor who has 49 years ahead of her before retirement can generally tolerate a much greater level of risk than a 60-year-old who is only 7 years away from retirement. Because the question of your own personal risk tolerance revolves around human behavior and emotions, it is important to understand your own investment psychology. I consider this the investor’s psychological evaluation of his or her risk tolerance. There are many ways to measure your risk tolerance and numerous questionnaires are provided at many investment websites. You can also find one at http://finance.yahoo.com/calculator; scroll down to “Career & Education” and click on “What is my risk tolerance?” You will find 10 risk tolerance questions to help identify your comfort level with investment risk.

The information and guidance on investments that I provide in this chapter is designed to help you stay the course toward financial independence and your point X. Analyzing Your Risk Tolerance Every investor has his own unique view on risk and can only tolerate a certain amount of losses before he or she becomes emotional. This ultimately leads to bad investment decisions. Of course, a higher level of risk corresponds to the potential for a higher rate of return on your investments. If your investing risk tolerance were as simple as stating you want the highest rate of return in the long run, then you would simply invest in the most speculative types of investments.

The appropriate investment plan for you should be the one that provides you with the highest potential rate of return in the long run that is within your risk tolerance. Part of determining your risk tolerance goes back to analyzing your personal behavior and how you deal with your other life issues. For example, if you typically are a nervous individual and tend to go down the straight-and-narrow path in life, then you most likely will choose a more conservative investment risk model. On the other hand, if you are fearless and like to live life in the fast lane, then you would most likely choose a more aggressive investment risk model. In evaluating your risk tolerance, you must also take into consideration what your ultimate financial goals will be.


pages: 332 words: 81,289

Smarter Investing by Tim Hale

Albert Einstein, asset allocation, buy and hold, buy low sell high, capital asset pricing model, classic study, collapse of Lehman Brothers, corporate governance, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, fiat currency, financial engineering, financial independence, financial innovation, fixed income, full employment, Future Shock, implied volatility, index fund, information asymmetry, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, managed futures, Northern Rock, passive investing, Ponzi scheme, purchasing power parity, quantitative easing, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, South Sea Bubble, technology bubble, the rule of 72, time value of money, transaction costs, Vanguard fund, women in the workforce, zero-sum game

Risk capacity is the amount of money you could lose without putting your important short and long term goals at risk. Risk tolerance is best understood as the amount of financial risk you would naturally be comfortable with taking, all else being equal. Risk required and risk capacity vary with individual circumstances over time whereas risk tolerance is an enduring and generally persistent personal trait. So here’s the rub. Rarely do all three line up. More often than not the risk you need to take (risk required) is more than you could afford to take (risk capacity) and more than you normally prefer to take (risk tolerance). Which is the dominant one for you? What is the right mix?

It illustrates some research work that was undertaken using the period between May 1999 and December 2008 (Davey, 2009), which captures the last desperate moments of the technology boom and subsequent bust, the rise in the markets from 2003 to 2007 and the slump from the end of 2007. The global equity markets are overlaid on top of the average risk profile from the UK, USA, Australia and New Zealand. The conclusion is obvious: risk tolerance is a pretty stable trait. Figure A1.1 Risk tolerance appears to be stable despite market crashes Source: Risk tolerance – data from UK, US, Australia and New Zealand FinaMetrica © Copyright all rights reserved 2009. Global equities – MSCI (www.msci.com) Ascertaining your risk profile If you have ever used an adviser then you will no doubt have been subjected to some form of questionnaire or discussion about your ‘attitude to risk’.

Ideally, you would own shorter-dated inflation-linked bonds and shorter dated conventional bonds, again hedged back to sterling if you go global (e.g. five years) as they have lower price sensitivity to changes in yields and therefore have a low level of volatility and thus short-term risk to capital. In practice your implementation options are somewhat limited by availability of suitable products, although that is slowly changing. This is discussed in more detail in Chapter 11. The more risk tolerant long-term investor At the other end of the risk spectrum, imagine that you are a pretty risk tolerant investor comfortable with suffering interim losses in pursuit of more aggressive goals. As a consequence you own a pretty high allocation of equities/risky assets, let us say 80%. Unlike the cautious investor, you are protected reasonably well from inflation by owning equities and global commercial property in your growth-oriented mix.


pages: 77 words: 18,414

How to Kick Ass on Wall Street by Andy Kessler

Andy Kessler, Bear Stearns, Bernie Madoff, buttonwood tree, call centre, collateralized debt obligation, eat what you kill, family office, fixed income, hiring and firing, invention of the wheel, invisible hand, London Whale, low interest rates, margin call, NetJets, Nick Leeson, pets.com, risk tolerance, Silicon Valley, sovereign wealth fund, time value of money, too big to fail, value at risk

Again, risk is matched with risk tolerance. The buyer of the shares takes on the risk of future profits in exchange for their hard earned capital. It’s a decent deal, hopefully better than the short term interest rate a bank pays – a less risky return. Company shares trade every day, meaning individuals or funds of individuals can raise or lower their risk tolerance by owning shares of future profits in different industries. Getting a little old and not feeling so risky? You might buy shares in Kraft because everyone eats processed cheese. Maybe you have a higher risk tolerance? You buy shares of the future profits of Social Solar Mobility Nanoparticle Networks, hoping it becomes the next big thing.

HOW WALL STREET IS REALLY SUPPOSED TO WORK This is a little bonus (don’t roll your eyes) on the future of Wall Street. Cocktail party conversation stuff. Enjoy: It’s easy to forget how Wall Street and banks and finance are really supposed to work. Home loans and stock trading and IPOs all exist to serve the economy, it’s ALL about the best way of allocating capital, by matching risk with risk tolerance. The rest is just expensive noise. Credit crises and panics happen. Capital gets misallocated. Markets aren’t all knowing. Banks make bad loans. All the time. It used to happen more often, but the Federal Reserve and the FDIC now smooth out these cycles, often pushing problems down the road until they blow up into a full blown panic.

So banks found that longer term profit center of their own, lending you the money to buy a home, or a business the money to buy equipment, in exchange for monthly payments, a piece of the human profits you create or a piece of business profits. A pretty fair bargain – the bank takes on the risk of owning these fixed assets (if you fail to make payments) in exchange for a piece of your output. Risk tolerances are matched. Workers lower their take in exchange for ownership of a fixed asset they don’t really own outright. In fact, it’s a societal bargain as well. You gotta keep working. As Popeye’s pal Whimpie said, I’ll gladly pay you Tuesday for a hamburger today, but it meant Whimpie had to work the rest of the week to make enough money to pay off the burger if he ever wanted another one.


Bulletproof Problem Solving by Charles Conn, Robert McLean

active transport: walking or cycling, Airbnb, Amazon Mechanical Turk, asset allocation, availability heuristic, Bayesian statistics, behavioural economics, Big Tech, Black Swan, blockchain, book value, business logic, business process, call centre, carbon footprint, cloud computing, correlation does not imply causation, Credit Default Swap, crowdsourcing, David Brooks, deep learning, Donald Trump, driverless car, drop ship, Elon Musk, endowment effect, fail fast, fake news, future of work, Garrett Hardin, Hyperloop, Innovator's Dilemma, inventory management, iterative process, loss aversion, megaproject, meta-analysis, Nate Silver, nudge unit, Occam's razor, pattern recognition, pets.com, prediction markets, principal–agent problem, RAND corporation, randomized controlled trial, risk tolerance, Silicon Valley, SimCity, smart contracts, stem cell, sunk-cost fallacy, the rule of 72, the scientific method, The Signal and the Noise by Nate Silver, time value of money, Tragedy of the Commons, transfer pricing, Vilfredo Pareto, walkable city, WikiLeaks

If you live in a town with high environmental quality, it reduces respiratory and cardiovascular illnesses and other diseases. If your runway has all the positives, you need to be planning to live longer. Consider Your Risk Tolerance Volatility around investment returns for your retirement account movements creates income uncertainty. Different individuals will have different risk tolerance for how to handle this uncertainty. If you believe you will have high longevity and you have low risk tolerance for depleting your savings, then you could consider buying an annuity that covers your lifetime and making adjustments to your budget to balance spending to income.

It shows clearly that the employment share of non‐routine cognitive jobs is growing, as are non‐routine manual jobs, while routine cognitive and routine manual job shares are shrinking in share of employment. EXHIBIT 8.3 Source: St. Louis Fed, Jobs Involving Routine Tasks Aren't Growing (2016); Jaimovich & Siu, The Trend Is the Cycle: Job Polarization + Jobless Recoveries. You can use your inside knowledge about your personal level of ability, interests, and risk tolerance to guide your education and career choice decisions. Jeff Wald, the cofounder and president of WorkMarket asks, “What are you passionate about? Does that map to what skill sets are needed?”11 To do this, we begin with a simple chart to fill in. Each horizontal row in the chart represents a broad potential field or sector in which you may end up working; there are four vertical columns: The first is the current economic predictions for the field, the next are your personal assessments of your ability, interest, and ability to take risks.

Each horizontal row in the chart represents a broad potential field or sector in which you may end up working; there are four vertical columns: The first is the current economic predictions for the field, the next are your personal assessments of your ability, interest, and ability to take risks. The first column can be completed and updated using economic predictions. For each potential field, subject area, or employment sector, you fill in your self‐assessed strength, interest, and risk‐tolerance levels in the second, third, and fourth columns. You can choose low, medium, or high, to rank your preferences. Exhibit 8.4 shows a filled‐in matrix for one of our research team members. EXHIBIT 8.4 Now how does this information help lead you to a decision? You can start by eliminating or pruning sectors in which you have low strength or abilities and low interest.


pages: 232 words: 70,835

A Wealth of Common Sense: Why Simplicity Trumps Complexity in Any Investment Plan by Ben Carlson

Albert Einstein, asset allocation, backtesting, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, book value, business cycle, buy and hold, buy low sell high, commodity super cycle, corporate governance, delayed gratification, discounted cash flows, diversification, diversified portfolio, do what you love, endowment effect, family office, financial independence, fixed income, Gordon Gekko, high net worth, index fund, John Bogle, junk bonds, loss aversion, market bubble, medical residency, Occam's razor, paper trading, passive investing, Ponzi scheme, price anchoring, Reminiscences of a Stock Operator, Richard Thaler, risk tolerance, Robert Shiller, robo advisor, South Sea Bubble, sovereign wealth fund, stocks for the long run, technology bubble, Ted Nelson, transaction costs, Vanguard fund, Vilfredo Pareto

Of course, this means you have to have a handle on your risk profile and time horizon so you're able to assess how much money is reasonable to put at risk in stocks based on your personal situation. The Risk Tolerance Questionnaire Building a portfolio always comes down to determining your ability, willingness, and need to take risk. This is true for institutional and individual investors alike. If I had to boil down a risk tolerance questionnaire into two simple questions, here's what I would ask: When do I need the money? How much can I afford to lose in the meantime, both mentally and financially? Every other decision more or less branches off from these two questions.

Notes CHAPTER 1 The Individual Investor versus the Institutional Investor Institutional versus Individual Investors We're All Human Extra Zeroes Long-Term Thinking Key Takeaways from Chapter 1 Notes CHAPTER 2 Negative Knowledge and the Traits Required to Be a Successful Investor The Biggest Problem of All Traits of a Successful Investor Standing on the Shoulders of Giants Key Takeaways from Chapter 2 Notes CHAPTER 3 Defining Market and Portfolio Risk Volatility: Risk or Opportunity? Understanding Rule Number 1 of Investing The Risk Tolerance Questionnaire Risk versus Uncertainty Risk Aversion The Cycle of Fear and Greed Key Takeaways from Chapter 3 Notes CHAPTER 4 Market Myths and Market History Myth 1: You Have to Time the Market to Earn Respectable Returns Myth 2: You Have to Wait until Things Get Better Before You Invest Myth 3: If Only You Can Time the Next Recession, You Can Time the Stock Market Myth 4: There's a Precise Pattern in Historical Market Cycles Myth 5: Stocks and Bonds Always Move in Different Directions Myth 6: You Need to Use Fancy Black Swan Hedges in a Time of Crisis Myth 7: Stocks Are Riskier Than Bonds Myth 7a: Bonds Are Riskier Than Stocks Myth 8: The 2000s Were a Lost Decade for the Stock Market Myth 9: New All-Time Highs in the Stock Market Mean It's Going to Crash Myth 10: A Yield on an Investment Makes It Safer Myth 11: Commodities Are a Good Long-Term Investment Myth 12: Housing Is a Good Long-Term Investment Myth 13: Investing in the Stock Market Is Like Gambling at a Casino Key Takeaways from Chapter 4 Notes CHAPTER 5 Defining Your Investment Philosophy Degrees of Active and Passive Management The Benefits of Doing Nothing Exercising Your Willpower Simplicity Leads to Purity Defining Yourself as an Investor Key Takeaways from Chapter 5 Notes CHAPTER 6 Behavior on Wall Street Threading the Needle So Never Invest in Active Funds?

Table 4.11 Income Investments During a Market Crash (October 2007 to February 2009) Asset Gain/Loss High-Quality Bonds (BND) 6.8% Junk Bonds (JNK) –32.8% Corporate Bonds (LQD) –5.6% Dividend Stocks (SDY) –47.0% Preferred Stocks (PFF) –53.7% REITs (VNG) –64.1% Source: Yahoo! Finance. You can see the risks involved in those income-producing assets outside of high quality bonds. How far out you want to go on the risk spectrum depends on your risk tolerance, time horizon, and the amount of psychological pain you're able to withstand during a correction or crash situation. There's nothing wrong with allocating to a riskier portion of the fixed income universe of investments. Just understand the risks ahead of time. For some, the added risk will outweigh the rewards.


pages: 335 words: 94,657

The Bogleheads' Guide to Investing by Taylor Larimore, Michael Leboeuf, Mel Lindauer

asset allocation, behavioural economics, book value, buy and hold, buy low sell high, corporate governance, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, endowment effect, estate planning, financial engineering, financial independence, financial innovation, high net worth, index fund, John Bogle, junk bonds, late fees, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, margin call, market bubble, mental accounting, money market fund, passive investing, Paul Samuelson, random walk, risk tolerance, risk/return, Sharpe ratio, statistical model, stocks for the long run, survivorship bias, the rule of 72, transaction costs, Vanguard fund, yield curve, zero-sum game

Over a 70-year period from 1935 to 2004, we can clearly see that an investor in stocks for only one year could have lost 43 percent. However, the most unlucky investor who stayed in stocks for 10 years would have only lost 1 percent. Stocks are desirable as part of a portfolio for longterm goals due to their higher expected return. What Is Your Risk Tolerance? The first thing to do when developing an allocation is to come up with a risk profile. -Errold E Moody Knowing your risk tolerance is a very important aspect of investing and one that the academics have studied extensively. Their experiments prove that most investors are more fearful of a loss than they are happy with a gain. We all know people who are afraid of investing in the stock market because they know they might lose money.

Risk-averse savers keep billions of dollars in CDs and bank savings accounts, despite their low yields. At the other extreme, we know of investors like Donald Trump who think nothing of investing hundreds of millions of dollars in speculative investments-and are seemingly unworried even when bankruptcy looms. Most of us have a risk tolerance that lies somewhere between these extremes. In order to help determine if your portfolio is suitable for your risk tolerance, you need to be brutally honest with yourself as you try to answer the question, "Will I sell during the next bear market?" Here are some stats that might help you answer that question. On March 10, 2000, the Nasdaq Composite Index reached an alltime closing high of 5,049.

Over time, the longer-term bonds become intermediate-term bonds, the intermediate-term bonds become short-term bonds, and the short-term bonds eventually mature and are replaced with new bonds. Even though bond funds don't have a maturity date, they do have a measure to help bond fund investors determine if a particular bond fund might be appropriate for them, considering their time horizon and risk tolerance level. The term for that measure is duration. Duration is stated in whole and partial years, such as 4.3 years. Most nontechnical bond and bond fund investors simply use the duration figure to predict a bond or bond fund's price volatility in a rising or falling interest rate environment. The higher the duration figure, the more volatile the bond or bond fund would be in a changing interest rate environment.


pages: 317 words: 106,130

The New Science of Asset Allocation: Risk Management in a Multi-Asset World by Thomas Schneeweis, Garry B. Crowder, Hossein Kazemi

asset allocation, backtesting, Bear Stearns, behavioural economics, Bernie Madoff, Black Swan, book value, business cycle, buy and hold, capital asset pricing model, collateralized debt obligation, commodity trading advisor, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, diversification, diversified portfolio, financial engineering, fixed income, global macro, high net worth, implied volatility, index fund, interest rate swap, invisible hand, managed futures, market microstructure, merger arbitrage, moral hazard, Myron Scholes, passive investing, Richard Feynman, Richard Feynman: Challenger O-ring, risk free rate, risk tolerance, risk-adjusted returns, risk/return, search costs, selection bias, Sharpe ratio, short selling, statistical model, stocks for the long run, survivorship bias, systematic trading, technology bubble, the market place, Thomas Kuhn: the structure of scientific revolutions, transaction costs, value at risk, yield curve, zero-sum game

Satellite I portfolios as indicated in Exhibit 6.5 have correlations with the benchmark indices and with the core such that their use should not fundamentally change the market risk characteristics of the benchmark and/or investable core portfolio. SAMPLE ALLOCATIONS The decision that drives the asset allocation process is the underlying risk tolerance of the investor. As discussed in Chapter 4, an investor’s risk tolerance may cover a range of desired risk exposures.2 Typically those ranges have included conservative, moderate, and aggressive risk based portfolios. Within each of these risk tolerance classifications, investors may decide to invest primarily in traditional security investments or they may decide to place additional investments in the alternative investment area without dramatically changing volatility characteristics.

This step begins by a description of the investor’s financial condition (assets, liabilities, financial goals, taxes, etc.) and then proceeds with an estimation of the client’s risk capacity and risk tolerance. 3. Optimal asset mix. In this final stage the above information is employed to develop an investment policy statement and to recommend a strategic optimal asset mix. If alternative investments such as private equity and hedge funds are to be included in an investor’s optimal portfolio allocation, investors need to determine: ■ ■ ■ If alternative investments such as private equity and hedge funds represent a distinct asset class and therefore should be included in the analysis taken place in Step 1. If individuals’ risk tolerance makes a compelling case for the inclusion of alternative investments in the optimal asset mix as determined from Step 2.

For many portfolios, it is necessary to back into the asset allocation decision by first determining a reasonable set of investment vehicles with the desired liquidity and return characteristics. For most, xvi PREFACE traditional asset allocation remains the simple choice of mixing various asset classes to provide a mix of assets that offers increased expected return for a particular level of risk tolerance. However, as discussed previously there is no one definition of risk. Before risk can be managed, the fundamental risks impacting a particular investor must be understood. Chapter 9 reviews some of the major risks facing an investor as well as some common methods of managing them. Finally, we provide several examples of how simple approaches to risk management based on futures markets, options markets, and other basic forms of dynamic asset allocation can fundamentally transform the risk exposure of various investment vehicles.


No Slack: The Financial Lives of Low-Income Americans by Michael S. Barr

active measures, asset allocation, Bayesian statistics, behavioural economics, business cycle, Cass Sunstein, cognitive load, conceptual framework, Daniel Kahneman / Amos Tversky, financial exclusion, financial innovation, Home mortgage interest deduction, income inequality, information asymmetry, it's over 9,000, labor-force participation, late fees, London Interbank Offered Rate, loss aversion, low interest rates, machine readable, market friction, mental accounting, Milgram experiment, mobile money, money market fund, mortgage debt, mortgage tax deduction, New Urbanism, p-value, payday loans, race to the bottom, regulatory arbitrage, Richard Thaler, risk tolerance, Robert Shiller, search costs, subprime mortgage crisis, the payments system, transaction costs, unbanked and underbanked, underbanked

While jewelry, gold, appliances, electronics, and the contents of a bank safe deposit box may not be equally liquid in the sense that there are different transaction costs associated with converting them to cash, the wording of these questions does not permit further refinement. 12864-10_CH10_3rdPgs.indd 225 3/23/12 11:57 AM 226 michael s. barr and jane k. dokko respondent’s month-to-month income fluctuated during the year preceding the survey.9 The risk tolerance and time preference questions are similar to those in the Health and Retirement Survey and discussed by Robert Barsky and his colleagues (1997). Risk tolerance measures the probabilities at which a respondent is willing to choose a gamble with lifetime income over the certainty of his or her lifetime income. The time preference variables measure whether a respondent would rather pay for a $300 appliance today or a series of higher amounts one year in the future. Barsky and others (1997) provide evidence that the survey measure of risk tolerance identifies individuals in the Health and Retirement Survey who are more likely to engage in risky behaviors.

This point estimate, however, is similar in magnitude to the one in column 1. 15. In addition, controlling for risk tolerance and time preference suggests that portfolio allocation is correlated with wanting to overwithhold above and beyond what is implied by the permanent-income hypothesis. If, for instance, illiquid assets are riskier, then the standard portfoliochoice paradigm suggests that the relationship between asset allocation and withholding preference is driven by risk tolerance, with more-risk-tolerant (that is, less-risk-averse) individuals holding more illiquid assets and wanting to hold more illiquid assets. 12864-10_CH10_3rdPgs.indd 232 3/23/12 11:57 AM paying to save 233 We argue that the relationship between an individual’s portfolio allocation and withholding preference is consistent with models with present-biased preferences but not with standard explanations.

Income is highly correlated with the number and type of assets a tax filer holds; however, a statistically significant relationship between asset allocation and wanting to overwithhold remains. Beginning in column 6, measures of risk tolerance and time preference are included as controls. The inclusion of these control variables sheds light on whether the heterogeneity in wanting to overwithhold across the portfolio allocation groups proxies for their differences in risk tolerance and time preference. If, for instance, those with mainly illiquid assets are more risk averse, then they may have a stronger preference for overwithholding to avoid owing taxes and penalties.


pages: 407 words: 114,478

The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William J. Bernstein

Alan Greenspan, asset allocation, behavioural economics, book value, Bretton Woods, British Empire, business cycle, butter production in bangladesh, buy and hold, buy low sell high, carried interest, corporate governance, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, diversification, diversified portfolio, Edmond Halley, equity premium, estate planning, Eugene Fama: efficient market hypothesis, financial engineering, financial independence, financial innovation, fixed income, George Santayana, German hyperinflation, Glass-Steagall Act, high net worth, hindsight bias, Hyman Minsky, index fund, invention of the telegraph, Isaac Newton, John Bogle, John Harrison: Longitude, junk bonds, Long Term Capital Management, loss aversion, low interest rates, market bubble, mental accounting, money market fund, mortgage debt, new economy, pattern recognition, Paul Samuelson, Performance of Mutual Funds in the Period, quantitative easing, railway mania, random walk, Richard Thaler, risk tolerance, risk/return, Robert Shiller, Savings and loan crisis, South Sea Bubble, stock buybacks, stocks for the long run, stocks for the long term, survivorship bias, Teledyne, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the rule of 72, transaction costs, Vanguard fund, yield curve, zero-sum game

The key point is this: the choice between stocks and bonds is not an either/or problem. Instead, the vital first step in portfolio strategy is to assess your risk tolerance. This will, in turn, determine your overall balance between risky and riskless assets—that is, between stocks and short-term bonds and bills. Many investors start at the opposite end of the problem—by deciding upon the amount of return they require to meet their retirement, educational, life style, or housing goals. This is a mistake. If your portfolio risk exceeds your tolerance for loss, there is a high likelihood that you will abandon your plan when the going gets rough. That is not to say that your return requirements are immaterial.

First he takes a look at Figures 4-1 through 4-5. Being an analytical type, he comes up with a table that relates his risk tolerance to his overall stock allocation. This is shown in Table 13-7. Take a good look at it. Realize that this is only a starting point. Have you ever actually lost 25% of your assets? It is one thing to think about it, and quite another to actually have it happen to you. (Remember the aircraft-simulator crash versus real-aircraft crash analogy mentioned earlier.) The classic beginner’s mistake is to overestimate his risk tolerance, then decamp forever from stocks when the inevitable loss hurts more than he had ever expected.

The major stock asset classes you should own are domestic, foreign, and REITs. You may further break the domestic portion into the “four corners”: large market, small market, large value, and small value. 2. Your overall stock/bond allocation is determined by your time horizon, risk tolerance, and tax structure. Since stock and bond returns may be quite similar in the future, you should hold at least 20% in bonds, no matter how risk tolerant you think you are. 3. The stock and bond asset classes you employ are primarily dictated by the percentage of your portfolio that is tax-sheltered. 4. The easiest asset structures to design are those where more than half of assets are tax-sheltered. 5.


pages: 200 words: 63,266

Die With Zero: Getting All You Can From Your Money and Your Life by Bill Perkins

delayed gratification, Downton Abbey, financial independence, follow your passion, Google Earth, Gordon Gekko, Kickstarter, lateral thinking, Own Your Own Home, passive income, rent control, Richard Thaler, risk tolerance, Stanford marshmallow experiment, time value of money, Walter Mischel

But if you don’t want to have wasted five years’ worth of savings in case you do die as expected at 85, you can eliminate that waste (and live a little better between now and then) by saving a little less—as long as you’re okay with the risk. I am not telling you which way is right: Risk tolerance is a singular and personal preference. But I do want you to know that there is a big difference between thinking about your risk tolerance and acting out of blind fear. So it’s fine to look at your life expectancy, to consider your risk tolerance, and to do the math to figure out how many years you need to save for. But that’s not the same as being so frightened of outliving your money—or of the thought of death—that you avoid even looking at the numbers.

But what I am saying is that there exist solutions to the problem of how to die with zero without running out of money, and you’d be doing yourself a disservice if you didn’t at least look into them. Again, remember that the goal is to eliminate as much waste as possible. How close you get to that goal depends on your own risk tolerance. If you have a very low tolerance for risk—meaning you will not accept even a tiny chance of outliving your money—you will either buy an annuity or you will self-insure by leaving a huge cushion. The odds that you will live to be 123 are currently very low. (The oldest person on record died when she was 122 years and 164 days.)

In fact, her mother—my grandmother—was even more fearful. I’ll never forget what my mom said to me when I made my first million dollars. “Don’t tell your grandmother,” she told me, “because all she’s going to do is worry about you losing it.” So I get how your upbringing can make you want to play it safe. People naturally vary in their risk tolerance, and that’s okay. I’m not going to tell you how much risk you should take on. But I will add this: First, whatever level of risk you’re comfortable with, whatever bold moves you might contemplate for your life, you’re generally better off making those moves earlier in your life. Again, that’s when you have a higher upside and a lower downside.


pages: 719 words: 181,090

Site Reliability Engineering: How Google Runs Production Systems by Betsy Beyer, Chris Jones, Jennifer Petoff, Niall Richard Murphy

"Margaret Hamilton" Apollo, Abraham Maslow, Air France Flight 447, anti-pattern, barriers to entry, business intelligence, business logic, business process, Checklist Manifesto, cloud computing, cognitive load, combinatorial explosion, continuous integration, correlation does not imply causation, crowdsourcing, database schema, defense in depth, DevOps, en.wikipedia.org, exponential backoff, fail fast, fault tolerance, Flash crash, George Santayana, Google Chrome, Google Earth, if you see hoof prints, think horses—not zebras, information asymmetry, job automation, job satisfaction, Kubernetes, linear programming, load shedding, loose coupling, machine readable, meta-analysis, microservices, minimum viable product, MVC pattern, no silver bullet, OSI model, performance metric, platform as a service, proprietary trading, reproducible builds, revision control, risk tolerance, side project, six sigma, the long tail, the scientific method, Toyota Production System, trickle-down economics, warehouse automation, web application, zero day

This strategy lets us manage the service to a high-level availability objective by looking for, tracking down, and fixing meaningful deviations as they inevitably arise. See Chapter 4 for more details. Risk Tolerance of Services What does it mean to identify the risk tolerance of a service? In a formal environment or in the case of safety-critical systems, the risk tolerance of services is typically built directly into the basic product or service definition. At Google, services’ risk tolerance tends to be less clearly defined. To identify the risk tolerance of a service, SREs must work with the product owners to turn a set of business goals into explicit objectives to which we can engineer.

Diskerase example, Recommendations focus on reliability, Reliability Is the Fundamental Feature Google's approach to, The Value for Google SRE hierarchy of automation classes, A Hierarchy of Automation Classes recommendations for enacting, Recommendations specialized application of, The Inclination to Specialize use cases for, The Use Cases for Automation-A Hierarchy of Automation Classes automation tools, Testing Scalable Tools autonomous systems, The Evolution of Automation at Google Auxon case study, Auxon Case Study: Project Background and Problem Space-Our Solution: Intent-Based Capacity Planning, Introduction to Auxon-Introduction to Auxon availability, Indicators, Choosing a Strategy for Superior Data Integrity(see also service availability) availability table, Availability Table B B4 network, Hardware backend servers, Our Software Infrastructure, Load Balancing in the Datacenter backends, fake, Production Probes backups (see data integrity) Bandwidth Enforcer (BwE), Networking barrier tools, Testing Scalable Tools, Testing Disaster, Distributed Coordination and Locking Services batch processing pipelines, First Layer: Soft Deletion batching, Eliminate Batch Load, Batching, Drawbacks of Periodic Pipelines in Distributed Environments Bazel, Building best practicescapacity planning, Capacity Planning for change management, Change Management error budgets, Error Budgets failures, Fail Sanely feedback, Introducing a Postmortem Culture for incident management, In Summary monitoring, Monitoring overloads and failure, Overloads and Failure postmortems, Google’s Postmortem Philosophy-Collaborate and Share Knowledge, Postmortems reward systems, Introducing a Postmortem Culture role of release engineers in, The Role of a Release Engineer rollouts, Progressive Rollouts service level objectives, Define SLOs Like a User team building, SRE Teams bibliography, Bibliography Big Data, Origin of the Pipeline Design Pattern Bigtable, Storage, Target level of availability, Bigtable SRE: A Tale of Over-Alerting bimodal latency, Bimodal latency black-box monitoring, Definitions, Black-Box Versus White-Box, Black-Box Monitoring blameless cultures, Google’s Postmortem Philosophy Blaze build tool, Building Blobstore, Storage, Choosing a Strategy for Superior Data Integrity Borg, Hardware-Managing Machines, Borg: Birth of the Warehouse-Scale Computer-Borg: Birth of the Warehouse-Scale Computer, Drawbacks of Periodic Pipelines in Distributed Environments Borg Naming Service (BNS), Managing Machines Borgmon, The Rise of Borgmon-Ten Years On…(see also time-series monitoring) alerting, Monitoring and Alerting, Alerting configuration, Maintaining the Configuration rate() function, Rule Evaluation rules, Rule Evaluation-Rule Evaluation sharding, Sharding the Monitoring Topology timeseries arena, Storage in the Time-Series Arena vectors, Labels and Vectors-Labels and Vectors break-glass mechanisms, Expect Testing Fail build environments, Creating a Test and Build Environment business continuity, Ensuring Business Continuity Byzantine failures, How Distributed Consensus Works, Number of Replicas C campuses, Hardware canarying, Motivation for Error Budgets, What we learned, Canary test, Gradual and Staged Rollouts CAP theorem, Managing Critical State: Distributed Consensus for Reliability CAPA (corrective and preventative action), Postmortem Culture capacity planningapproaches to, Practices best practices for, Capacity Planning Diskerase example, Recommendations distributed consensus systems and, Capacity and Load Balancing drawbacks of "queries per second", The Pitfalls of “Queries per Second” drawbacks of traditional plans, Brittle by nature further reading on, Practices intent-based (see intent-based capacity planning) mandatory steps for, Demand Forecasting and Capacity Planning preventing server overload with, Preventing Server Overload product launches and, Capacity Planning traditional approach to, Traditional Capacity Planning cascading failuresaddressing, Immediate Steps to Address Cascading Failures-Eliminate Bad Traffic causes of, Causes of Cascading Failures and Designing to Avoid Them-Service Unavailability defined, Addressing Cascading Failures, Capacity and Load Balancing factors triggering, Triggering Conditions for Cascading Failures overview of, Closing Remarks preventing server overload, Preventing Server Overload-Always Go Downward in the Stack testing for, Testing for Cascading Failures-Test Noncritical Backends(see also overload handling) change management, Change Management(see also automation) change-induced emergencies, Change-Induced Emergency-What we learned changelists (CLs), Our Development Environment Chaos Monkey, Testing Disaster checkpoint state, Testing Disaster cherry picking tactic, Hermetic Builds Chubby lock service, Lock Service, System Architecture Patterns for Distributed Consensusplanned outage, Objectives, SLOs Set Expectations client tasks, Load Balancing in the Datacenter client-side throttling, Client-Side Throttling clients, Our Software Infrastructure clock drift, Managing Critical State: Distributed Consensus for Reliability Clos network fabric, Hardware cloud environmentdata integrity strategies, Choosing a Strategy for Superior Data Integrity, Challenges faced by cloud developers definition of data integrity in, Data Integrity’s Strict Requirements evolution of applications in, Choosing a Strategy for Superior Data Integrity technical challenges of, Requirements of the Cloud Environment in Perspective clustersapplying automation to turnups, Soothing the Pain: Applying Automation to Cluster Turnups-Service-Oriented Cluster-Turnup cluster management solution, Drawbacks of Periodic Pipelines in Distributed Environments defined, Hardware code samples, Using Code Examples cognitive flow state, Cognitive Flow State cold caching, Slow Startup and Cold Caching colocation facilities (colos), Recommendations Colossus, Storage command posts, A Recognized Command Post communication and collaborationblameless postmortems, Collaborate and Share Knowledge case studies, Case Study of Collaboration in SRE: Viceroy-Case Study: Migrating DFP to F1 importance of, Conclusion with Outalator, Reporting and communication outside SRE team, Collaboration Outside SRE position of SRE in Google, Communication and Collaboration in SRE production meetings (see production meetings) within SRE team, Collaboration within SRE company-wide resilience testing, Practices compensation structure, Compensation computational optimization, Our Solution: Intent-Based Capacity Planning configuration management, Configuration Management, Change-Induced Emergency, Integration, Process Updates configuration tests, Configuration test consensus algorithmsEgalitarian Paxos, Stable Leaders Fast Paxos, Reasoning About Performance: Fast Paxos, The Use of Paxos improving performance of, Distributed Consensus Performance Multi-Paxos, Disk Access Paxos, How Distributed Consensus Works, Disk Access Raft, Multi-Paxos: Detailed Message Flow, Stable Leaders Zab, Stable Leaders(see also distributed consensus systems) consistencyeventual, Managing Critical State: Distributed Consensus for Reliability through automation, Consistency consistent hashing, Load Balancing at the Virtual IP Address constraints, Laborious and imprecise Consul, System Architecture Patterns for Distributed Consensus consumer services, identifying risk tolerance of, Identifying the Risk Tolerance of Consumer Services-Other service metrics continuous build and deploymentBlaze build tool, Building branching, Branching build targets, Building configuration management, Configuration Management deployment, Deployment packaging, Packaging Rapid release system, Continuous Build and Deployment, Rapid testing, Testing typical release process, Rapid contributors, Acknowledgments-Acknowledgments coroutines, Origin of the Pipeline Design Pattern corporate network security, Practices correctness guarantees, Workflow Correctness Guarantees correlation vs. causation, Theory costsavailability targets and, Cost, Cost direct, The Sysadmin Approach to Service Management of failing to embrace risk, Managing Risk indirect, The Sysadmin Approach to Service Management of sysadmin management approach, The Sysadmin Approach to Service Management CPU consumption, The Pitfalls of “Queries per Second”, CPU, Overload Behavior and Load Tests crash-fail vs. crash-recover algorithms, How Distributed Consensus Works cronat large scale, Running Large Cron building at Google, Building Cron at Google-Running Large Cron idempotency, Cron Jobs and Idempotency large-scale deployment of, Cron at Large Scale leader and followers, The leader overview of, Summary Paxos algorithm and, The Use of Paxos-Storing the State purpose of, Distributed Periodic Scheduling with Cron reliability applications of, Reliability Perspective resolving partial failures, Resolving partial failures storing state, Storing the State tracking cron job state, Tracking the State of Cron Jobs uses for, Cron cross-industry lessonsApollo 8, Preface comparative questions presented, Lessons Learned from Other Industries decision-making skills, Structured and Rational Decision Making-Structured and Rational Decision Making Google's application of, Conclusions industry leaders contributing, Meet Our Industry Veterans key themes addressed, Lessons Learned from Other Industries postmortem culture, Postmortem Culture-Postmortem Culture preparedness and disaster testing, Preparedness and Disaster Testing-Defense in Depth and Breadth repetitive work/operational overhead, Automating Away Repetitive Work and Operational Overhead current state, exposing, Examine D D storage layer, Storage dashboardsbenefits of, Why Monitor?

decision-making skills, Structured and Rational Decision Making defense in depth, for data integrity, The 24 Combinations of Data Integrity Failure Modes, Sunday, February 27, 2011, late in the evening, Defense in Depth demand forecasting, Demand Forecasting and Capacity Planning dependency hierarchies, Setting Reasonable Expectations for Monitoring, Dependencies among resources deployment, Deployment(see also continuous build and deployment) development environment, Our Development Environment development/ops split, The Sysadmin Approach to Service Management DevOps, Google’s Approach to Service Management: Site Reliability Engineering Direct Server Response (DSR), Load Balancing at the Virtual IP Address disaster recovery tools, Testing Disaster disaster role playing, Disaster Role Playing disaster testing, Preparedness and Disaster Testing-Defense in Depth and BreadthDisaster and Recovery Testing (DiRT), Preparedness and Disaster Testing disk access, Disk Access Diskerase process, Recommendations distractibility, Distractibility distributed consensus systemsbenefits of, Managing Critical State: Distributed Consensus for Reliability coordination, use in, Distributed Coordination and Locking Services deploying, Deploying Distributed Consensus-Based Systems-Quorum composition locking, use in, Managing Critical State: Distributed Consensus for Reliability monitoring, Monitoring Distributed Consensus Systems need for, Managing Critical State: Distributed Consensus for Reliability overview of, Conclusion patterns for, System Architecture Patterns for Distributed Consensus-Reliable Distributed Queuing and Messaging performance of, Distributed Consensus Performance-Disk Access principles, How Distributed Consensus Works quorum composition, Quorum composition quorum leasing technique, Quorum Leases(see also consensus algorithms) distributed periodic scheduling (see cron) DNS (Domain Name System)EDNS0 extension, Load Balancing Using DNS load balancing using, Load Balancing Using DNS-Load Balancing Using DNS DoubleClick for Publishers (DFP), Case Study: Migrating DFP to F1-Case Study: Migrating DFP to F1 drains, Planned Changes, Drains, or Turndowns DTSS communication files, Origin of the Pipeline Design Pattern dueling proposers situation, Multi-Paxos: Detailed Message Flow durability, Indicators E early detection for data integrity, Third Layer: Early Detection(see also data integrity) Early Engagement Model, Evolving the Simple PRR Model: Early Engagement-Disengaging from a service “embarrassingly parallel” algorithms, Trouble Caused By Uneven Work Distribution embedded engineers, Embedding an SRE to Recover from Operational Overload-Conclusion emergency preparedness, Sunday, February 27, 2011, late in the eveningcross-industry lessons, Preparedness and Disaster Testing emergency responsechange-induced emergencies, Change-Induced Emergency-What we learned essential elements of, Emergency Response Five Whys, Ask “what,” “where,” and “why”, Example Postmortem guidelines for, Emergency Response initial response, What to Do When Systems Break lessons learned, Keep a History of Outages overview of, Conclusion process-induced emergencies, Process-Induced Emergency solution availability, All Problems Have Solutions test-induced emergencies, Test-Induced Emergency encapsulation, Load Balancing at the Virtual IP Address endpoints, in debugging, Examine engagements (see SRE engagement model) error budgetsbenefits of, Benefits best practices for, Error Budgets forming, Forming Your Error Budget guidelines for, Pursuing Maximum Change Velocity Without Violating a Service’s SLO motivation for, Motivation for Error Budgets error rates, Indicators, The Four Golden Signals Escalator, Escalator ETL pipelines, Origin of the Pipeline Design Pattern eventual consistency, Managing Critical State: Distributed Consensus for Reliability executor load average, Utilization Signals F failures, best practices for, Fail Sanely(see also cascading failures) fake backends, Production Probes false-positive alerts, Tagging feature flag frameworks, Feature Flag Frameworks file descriptors, File descriptors Five Whys, Ask “what,” “where,” and “why”, Example Postmortem flow control, A Simple Approach to Unhealthy Tasks: Flow Control FLP impossibility result, How Distributed Consensus Works Flume, Challenges with the Periodic Pipeline Pattern fragmentation, Load Balancing at the Virtual IP Address G gated operations, Enforcement of Policies and Procedures Generic Routing Encapsulation (GRE), Load Balancing at the Virtual IP Address GFE (Google Frontend), Life of a Request, Load Balancing in the Datacenter GFS (Google File System), Detecting Inconsistencies with Prodtest, Highly Available Processing Using Leader Election, Extended Infrastructure-Tracking the State of Cron Jobs, Overarching Layer: Replication global overload, Per-Customer Limits Global Software Load Balancer (GSLB), Networking Gmail, Gmail: Predictable, Scriptable Responses from Humans, Gmail—February, 2011: Restore from GTape Google Apps for Work, Target level of availability Google Compute Engine, Indicators Google production environmentbest practices for, Fail Sanely-SRE Teams complexity of, Software Engineering in SRE datacenter topology, Hardware development environment, Our Development Environment hardware, Hardware Shakespeare search service, Shakespeare: A Sample Service-Job and Data Organization software infrastructure, Our Software Infrastructure system software, System Software That “Organizes” the Hardware-Monitoring and Alerting Google Workflow systemas model-view-controller pattern, Workflow as Model-View-Controller Pattern business continuity and, Ensuring Business Continuity correctness guarantees, Workflow Correctness Guarantees development of, Introduction to Google Workflow stages of execution in, Stages of Execution in Workflow graceful degradation, Load Shedding and Graceful Degradation GTape, Gmail—February, 2011: Restore from GTape H Hadoop Distributed File System (HDFS), Storage handoffs, Clear, Live Handoff “hanging chunk” problem, Trouble Caused By Uneven Work Distribution hardwaremanaging failures, System Software That “Organizes” the Hardware software that “organizes”, System Software That “Organizes” the Hardware-Monitoring and Alerting terminology used for, Hardware health checks, Stop Health Check Failures/Deaths healthcare.gov, Practices hermetic builds, Hermetic Builds hierarchical quorums, Quorum composition high-velocity approach, Principles, High Velocity hotspotting, Picking the Right Subset I idempotent operations, Resolving Inconsistencies Idempotently, Cron Jobs and Idempotency incident managementbest practices for, In Summary effective, Managing Incidents formal protocols for, Feeling Safe incident management process, What we learned, Elements of Incident Management Process incident response, Practices managed incident example, A Managed Incident roles, Recursive Separation of Responsibilities template for, Example Incident State Document unmanaged incident example, Unmanaged Incidents when to declare an incident, When to Declare an Incident infrastructure servicesidentifying risk tolerance of, Identifying the Risk Tolerance of Infrastructure Services improved SRE through automation, Faster Action integration proposals, Enforcement of Policies and Procedures integration tests, Integration tests, Integration intent-based capacity planningAuxon implementation, Introduction to Auxon-Introduction to Auxon basic premise of, Our Solution: Intent-Based Capacity Planning benefits of, Our Solution: Intent-Based Capacity Planning defined, Intent-Based Capacity Planning deploying approximation, Approximation driving adoption of, Raising Awareness and Driving Adoption-Designing at the right level precursors to intent, Precursors to Intent requirements and implementation, Requirements and Implementation: Successes and Lessons Learned selecting intent level, Intent-Based Capacity Planning team dynamics, Team Dynamics interruptscognitive flow state and, Cognitive Flow State dealing with, Dealing with Interrupts dealing with high volumes, General suggestions determining approach to handling, Factors in Determining How Interrupts Are Handled distractibility and, Distractibility managing operational load, Managing Operational Load on-call engineers and, On-call ongoing responsibilities, Ongoing responsibilities polarizing time, Polarizing time reducing, Reducing Interrupts ticket assignments, Tickets IRC (Internet Relay Chat), A Recognized Command Post J jobs, Managing Machines Jupiter network fabric, Hardware L labelsets, Labels and Vectors lame duck state, A Robust Approach to Unhealthy Tasks: Lame Duck State latencydefined, Choosing a Strategy for Superior Data Integrity measuring, Indicators monitoring for, The Four Golden Signals launch coordinationchecklist, The Launch Checklist-Example action items, Launch Coordination Checklist engineering (LCE), Launch Coordination Engineering, Development of LCE-Infrastructure churn(see also product launches) lazy deletion, The 24 Combinations of Data Integrity Failure Modes leader election, Managing Critical State: Distributed Consensus for Reliability, Highly Available Processing Using Leader Election lease systems, Reliable Distributed Queuing and Messaging Least-Loaded Round Robin policy, Least-Loaded Round Robin level of service, Service Level Objectives(see also service level objectives (SLOs)) living incident documents, Live Incident State Document load balancingdatacenterdatacenter services and tasks, Load Balancing in the Datacenter flow control, A Simple Approach to Unhealthy Tasks: Flow Control Google's application of, Load Balancing in the Datacenter handling overload, Handling Overload ideal CPU usage, The Ideal Case, The Pitfalls of “Queries per Second” lame duck state, A Robust Approach to Unhealthy Tasks: Lame Duck State limiting connections pools, Limiting the Connections Pool with Subsetting-A Subset Selection Algorithm: Deterministic Subsetting packet encapsulation, Load Balancing at the Virtual IP Address policies for, Load Balancing Policies-Weighted Round Robin SRE software engineering dynamics, Team Dynamics distributed consensus systems and, Capacity and Load Balancing frontendoptimal solutions for, Power Isn’t the Answer using DNS, Load Balancing Using DNS-Load Balancing Using DNS virtual IP addresses (VIPs), Load Balancing at the Virtual IP Address policyLeast-Loaded Round Robin, Least-Loaded Round Robin Round Robin, Simple Round Robin Weighted Round Robin, Weighted Round Robin load shedding, Load Shedding and Graceful Degradation load tests, Overload Behavior and Load Tests lock services, Lock Service, Distributed Coordination and Locking Services logging, Examine Lustre, Storage M machinesdefined, Hardware, Definitions managing with software, Managing Machines majority quorums, Number of Replicas MapReduce, Challenges with the Periodic Pipeline Pattern mean timebetween failures (MTBF), Testing for Reliability, Expect Testing Fail to failure (MTTF), Emergency Response to repair (MTTR), Emergency Response, Faster Repairs, Testing for Reliability memory exhaustion, Memory Mencius algorithm, Stable Leaders meta-software, The Use Cases for Automation Midas Package Manager (MPM), Packaging model-view-controller pattern, Workflow as Model-View-Controller Pattern modularity, Modularity Moiré load pattern in pipelines, Moiré Load Pattern monitoring distributed systemsavoiding complexity in, As Simple as Possible, No Simpler benefits of monitoring, Why Monitor?


pages: 261 words: 70,584

Retirementology: Rethinking the American Dream in a New Economy by Gregory Brandon Salsbury

Alan Greenspan, Albert Einstein, asset allocation, Bear Stearns, behavioural economics, buy and hold, carried interest, Cass Sunstein, credit crunch, Daniel Kahneman / Amos Tversky, diversification, estate planning, financial independence, fixed income, full employment, hindsight bias, housing crisis, loss aversion, market bubble, market clearing, mass affluent, Maui Hawaii, mental accounting, mortgage debt, mortgage tax deduction, National Debt Clock, negative equity, new economy, RFID, Richard Thaler, risk tolerance, Robert Shiller, side project, Silicon Valley, Steve Jobs, the rule of 72, Yogi Berra

For example, if we assume this individual had invested $500,000, he would need a rate of return of 10% each year to meet his retirement objectives. A 10% rate of return would require a substantially higher level of risk and, most likely, greater volatility. Your risk tolerance and the amount of risk you are willing to take when it comes to your retirement nest egg are important considerations when determining how much you need to invest and when you will retire. So, the less risk you can take to meet your objectives, the more comfortable you may be in meeting them. Understanding your own personal objectives and risk tolerance will help you overcome the desire to herd with the masses. Set Long-Term Financial Goals The achievement of any goal requires a plan.

Here are ten essential questions to ask yourself before reading this book: 1. When did you retire or when do you NOW expect to retire? 2. What role do you envision your house playing in your retirement? 3. What changes in your household spending if any do you think make sense today? 4. Do you believe your risk tolerance has changed in the last 18 months? 5. Do you think the likelihood of having to financially support extended family has impacted your retirement? 6. Would you be willing to put away your credit cards and use cash for just one month? 7. What is the lifestyle you expect in retirement--housing, travel, club membership, entertainment, and so on?

Improve Your Retirementology IQ These are scary times for an investor and for a retiree. But this is not the first time we’ve had an unnerving investment landscape. Understanding some retirement basics is a good start. Rather than following the herd, consider following these fundamental steps. Understand Your Objectives and Assess Your Risk Tolerance You must understand where you are in life, where you want to go with your financial future, and how much risk you are willing to take, or should take, to get you there. There are two key points to understanding your objectives: the anticipated cost of the objective and the timeframe you have to meet your objective.


pages: 357 words: 91,331

I Will Teach You To Be Rich by Sethi, Ramit

Albert Einstein, asset allocation, buy and hold, buy low sell high, diversification, diversified portfolio, do what you love, geopolitical risk, index fund, John Bogle, late fees, low interest rates, money market fund, mortgage debt, mortgage tax deduction, Paradox of Choice, prediction markets, random walk, risk tolerance, Robert Shiller, shareholder value, Silicon Valley, survivorship bias, the rule of 72, Vanguard fund

Moves like this don’t bother me as much as they might bother other people (my wife, for example) because my risk tolerance is high. I have twenty or thirty years to go before retirement. That’s two or three decades to recover from any further market drops. Risk and reward go hand in hand. The historically high returns of the stock market are impossible without risk; anyone who tells you otherwise is lying. But not everyone can stomach having all of their investments in stocks and mutual funds. If your risk tolerance is low (if you’re scared of bears), or you’re approaching retirement, it’s best to keep your money someplace safe, such as bond funds or high-yield savings accounts.

If your risk tolerance is low (if you’re scared of bears), or you’re approaching retirement, it’s best to keep your money someplace safe, such as bond funds or high-yield savings accounts. I keep cash equal to a few months of expenses in savings. I have a friend who is far less risk-tolerant than I am who keeps an entire year of expenses in savings. (Please, if you’re going to set this much money aside, put it into a high-yield savings account or certificates of deposit!) Even if your risk tolerance isn’t all that high, you can still invest in the stock market, even during downturns. Dollar-cost averaging is an excellent way to do this. Dollar-cost averaging simply means making regular, scheduled investments instead of buying into the stock market all at once.

These funds target roughly the same age—someone in his or her twenties—and assume retirement at age sixty-five. You should pay special attention to the minimum initial investment (it matters if you don’t have a lot of money lying around) and the asset allocation, which will help you determine which fund most suits your risk tolerance. Remember, these are only two example funds; you can choose among many lifecycle funds offered by companies like the ones I list on page 187. The major benefit to a lifecycle fund is that you set it and forget it. You just keep sending money and your fund will handle the allocation, trading, and maintenance, automatically diversifying for you.


The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk by William J. Bernstein

asset allocation, backtesting, book value, buy and hold, capital asset pricing model, commoditize, computer age, correlation coefficient, currency risk, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, index arbitrage, index fund, intangible asset, John Bogle, junk bonds, Long Term Capital Management, p-value, passive investing, prediction markets, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, South Sea Bubble, stocks for the long run, survivorship bias, the rule of 72, the scientific method, time value of money, transaction costs, Vanguard fund, Wayback Machine, Yogi Berra, zero-coupon bond

This is essentially a recapitulation of the Chapter 5 discussion, except that I’ve changed the order of the steps: 1. Determine your basic allocation between stocks and bonds. First, answer the question, “What is the biggest annual portfolio loss I am willing to tolerate in order to get the highest returns?” Table 8-1 summarizes the process of determining your risk tolerance. In previous versions of the book, I allowed the most risk-tolerant investors 100% equity exposure. At the present time, however, it appears that expected stock and bond returns going forward may not be all that different, and a dollop of bonds is recommended for all investors. The percentage stock recommendations in Table 8-1 will need to be revised downward depending on your time horizon.

Learn about the risk/reward characteristics of various specific investment types. 4. Appreciate that diversified portfolios behave very differently than the individual assets in them, in much the same way that a cake tastes different from shortening, flour, butter, and sugar. This is called portfolio theory and is critical to your future success. 5. Estimate how much risk you can tolerate; then learn how to use portfolio theory to construct a portfolio tailored to produce the most return for that amount of risk. 6. At this point you are finally ready to purchase individual stocks, bonds, and mutual funds. If you have succeeded in the above tasks, this is by far the easiest step.

In fact, the more exotic asset classes you add to your mix, the higher your tracking error will be. Remember, that tracking error does not mean lower returns, it just means that your portfolio will behave very differently from everyone else’s, and that it will often temporarily underperform everybody else’s. Risk Tolerance The third step in the asset allocation process is by far the easiest. You have already done the heavy lifting—deciding what stock asset classes to use, 80 The Intelligent Asset Allocator and in approximately what proportion to use them. Now all you have to determine is the overall mix of stocks and bonds.


pages: 300 words: 77,787

Investing Demystified: How to Invest Without Speculation and Sleepless Nights by Lars Kroijer

Andrei Shleifer, asset allocation, asset-backed security, Bernie Madoff, bitcoin, Black Swan, BRICs, Carmen Reinhart, clean tech, compound rate of return, credit crunch, currency risk, diversification, diversified portfolio, equity premium, equity risk premium, estate planning, fixed income, high net worth, implied volatility, index fund, intangible asset, invisible hand, John Bogle, Kenneth Rogoff, low interest rates, market bubble, money market fund, passive investing, pattern recognition, prediction markets, risk tolerance, risk/return, Robert Shiller, selection bias, sovereign wealth fund, too big to fail, transaction costs, Vanguard fund, yield curve, zero-coupon bond

It really does depend on your circumstances Like most things in investing, allocations are highly subject to individual circumstances and risk tolerance. Figure 10.4 shows how an investor’s allocations may change over his or her life, ignoring the complication of risky government and corporate bonds in the rational portfolio. Figure 10.4 Stages of life: moving from equities as you age Risk surveys As discussed above, getting a handle on your risk tolerances is not only critical in investment management, but also a very individual thing. In my view, far too often investors rely on their gut feelings in deciding on the risk levels in their portfolios, or are guilty of what some call ‘recency’ where we over-emphasise recent events in planning for the future.

As suggested, they are meant to give you an idea about your risk tolerances, often via stress tests, but in my view risk surveys often leave a lot to be desired. Risk surveys that I have completed are too simplistic to give a really detailed view of your risk profile, often because they don’t ask enough questions about your specific situation. Sometimes I find that the surveys are a prelude to someone trying to sell me a specific ‘tailor-made’ product (read: expensive), instead of objectively trying to help me understand my risk tolerance. In addition, risk surveys often fail to properly incorporate all my other assets and liabilities, including seemingly odd ones like education, inheritance, future tuition for children, or other critical things like what stage of life I’m at regarding career or retirement.

Table 3.1 The rational portfolio at different risk preferences So someone with £100 to invest and a medium ‘C’ risk profile could do as follows: Allocation Investment £33 UK government bond tracker with maturity matching investor’s time horizon £50 World equity index tracker product £7 Diversified return generating government bonds of varying maturities, countries and currencies, rated sub-AA £10 Broad range of corporate bonds of varying maturity, credit risk, currency, issuer and geography. I will discuss how I came up with the allocations above. Whilst the allocations are not an exact science and therefore do not have to be implemented in exactly the proportions illustrated, you would do very well if you implement your portfolio in a similar manner. Of course our risk tolerances differ. Let’s say that we have $100 now and need $110 in 10 years’ time, and that we invest in the world equity markets where we expect real returns of about 5% a year. If we assume that performance every year will in fact be 5% we know that in 10 years our $100 will have become $162 and be far in excess of what we need.


pages: 205 words: 55,435

The End of Indexing: Six Structural Mega-Trends That Threaten Passive Investing by Niels Jensen

Alan Greenspan, Basel III, Bear Stearns, declining real wages, deglobalization, disruptive innovation, diversification, Donald Trump, driverless car, eurozone crisis, falling living standards, fixed income, full employment, Greenspan put, income per capita, index fund, industrial robot, inflation targeting, job automation, John Nash: game theory, liquidity trap, low interest rates, moral hazard, offshore financial centre, oil shale / tar sands, old age dependency ratio, passive investing, Phillips curve, purchasing power parity, pushing on a string, quantitative easing, regulatory arbitrage, rising living standards, risk free rate, risk tolerance, Robert Solow, secular stagnation, South China Sea, total factor productivity, working-age population, zero-sum game

In game theory, and in the context of bargaining, there are four sources of overall power: Economic power. All other things being equal, the greater your economic power is, the greater your overall power is. Nash and Harsanyi labelled it resource endowment. Risk tolerance. The greater your risk tolerance is, relative to the risk tolerance of whoever you are bargaining with, the greater your overall power is. Threat power. In game theory, the greater your threat power is, i.e. your ability to inflict damage on the opposition, the greater your overall power is. Coalition power. In a bargaining situation, if you can gain support from other powers (players in game theory), you boost your own overall power.

Take Africa – while both Europe and the US have struggled in the aftermath of the Global Financial Crisis, China has roamed freely in Africa, pretty much unchallenged. Looking forward, as people age and demand for social welfare programmes rise, I would fully expect risk tolerance to continue to decline. Domestic challenges will simply reduce the West’s appetite for risk internationally. As a natural consequence of falling risk tolerance, the threat power is also in decline. Under President Obama, the US made an unusually low number of credible threats (ISIS kept them busy), and a very risk-averse Europe made virtually none. Meanwhile, China was busy making credible threats in Asia.

Exhibit 6.1: Chinese GDP catch-up under various assumptions Annual Chinese GDP Growth 3.00% 5.00% 7.00% Annual US GDP Growth 1.00% 2047 2032 2027 1.50% 2057 2034 2028 2.50% n/a 2041 2030 Source: Absolute Return Partners LLP Other sources of power If the anticipated shift in economic power from West to East is not that many years away, neither may we be far away from a shift in overall power. That view is further reinforced when looking at the other sources of power. Since the Global Financial Crisis, risk tolerance in the West has been in decline. In the US, recent administrations have clearly been more risk-averse than what used to be the case, although President Trump seems to be willing to reverse that trend. European governments, which have been noticeably more risk-averse than US administrations for many years, haven’t exactly picked up the baton left behind by the US under Obama.


pages: 149 words: 43,747

How I Invest My Money: Finance Experts Reveal How They Save, Spend, and Invest by Brian Portnoy, Joshua Brown

asset allocation, behavioural economics, bitcoin, blockchain, blue-collar work, buy and hold, coronavirus, COVID-19, cryptocurrency, diversification, diversified portfolio, estate planning, financial independence, fixed income, high net worth, housing crisis, index fund, John Bogle, low interest rates, mental accounting, passive investing, prediction markets, risk tolerance, Salesforce, Sharpe ratio, time value of money, underbanked, Vanguard fund

I hope to resume HSA savings in future years and build a savings account for future healthcare costs. I invest my retirement and after-tax accounts in the same portfolios I recommend to clients. My mix of stocks and bonds is based on two things: time horizon and risk tolerance. My time horizon is long. I plan to work for at least three more decades, and my children are very young. My risk tolerance is high because I have the benefit of time and because I work in the industry and therefore intimately understand the relationship between risk and return. That does not mean my portfolio is 100% invested in stocks. Instead, I place 80% in stocks and 20% in bonds.

It’s just what works for us. We do it because cash is the oxygen of independence, and—more importantly—we never want to be forced to sell the stocks we own. We want the probability of facing a huge expense and needing to liquidate stocks to cover it to be as close to zero as possible. Perhaps we just have a lower risk tolerance than others. But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expenses specifically because they did not expect them. The few people who know the details of our finances ask, “What are you saving for?

The firm is entirely bootstrapped from day one – no private equity, no debt, no outside investors. This is both strategically and emotionally important to us. My 401(k) is invested in the exact same asset allocation model as we use for our clients. I own the same funds, in the same proportions, that my clients of comparable risk tolerance own. I’m in an all-equity model because I’m relatively young, can bear risk and will not be accessing this capital for at least another 25 years. Every other employee of Ritholtz Wealth is also invested in the same asset allocation models as our clients. This was a very important decision we made early on.


pages: 337 words: 89,075

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio by Victor A. Canto

accounting loophole / creative accounting, airline deregulation, Alan Greenspan, Andrei Shleifer, asset allocation, Bretton Woods, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, equity risk premium, financial engineering, fixed income, frictionless, global macro, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, junk bonds, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low cost airline, low interest rates, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Phillips curve, price mechanism, purchasing power parity, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolling blackouts, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, statistical arbitrage, stocks for the long run, survivorship bias, systematic bias, Tax Reform Act of 1986, the market place, transaction costs, Y2K, yield curve, zero-sum game

The final element of the cyclical strategy is to forecast the foreign-exchange market. The conviction of this forecast can then be used to tilt a portfolio in favor of the asset class favored by the exchange-rate forecast. How much of the potential gain is captured by this strategy depends on the quality of the forecast and the risk tolerance of the investor. The greater the risk aversion, the less sensitive the tilt around the long-run allocation. This approach suggests a simple way for investors to take advantage of changing conditions over business and economic cycles. Chapter 3 Thinking in Cycles 65 This page intentionally left blank 4 TAX TIPS 67 T he corporate story in recent years has been an ugly one.

The first step uses the asset classes’ historical returns and the variance–covariance matrix to build a combination of the various asset classes that leads one to the efficient frontier. This step also leads an investor to the point where maximum expected returns are reached for a determined risk level. The second step determines risk tolerance so an investor can choose the risk/return combination best suiting his or her preferences. I have two major objections to this process as it is currently practiced. The first objection is simply empirical: How long of a historical sample does one need to determine long-run historical returns and the variance–covariance matrix?

The efficient market theory tells us that, in an idealized situation, the market portfolio is on the efficient frontier. If this is the case, then all asset classes should be included on the efficient frontier and, therefore, in an economy-wide (or aggregate) SAA portfolio. As it is true individuals differ regarding their risk-tolerances and investment preferences, it follows their individual asset-allocation plans differ from those of the aggregate economy. Investors, however, cannot collectively avoid economy-wide constraints. Ultimately, a weighted average of individual asset allocations must add up to the market allocation.


pages: 249 words: 77,342

The Behavioral Investor by Daniel Crosby

affirmative action, Asian financial crisis, asset allocation, availability heuristic, backtesting, bank run, behavioural economics, Black Monday: stock market crash in 1987, Black Swan, book value, buy and hold, cognitive dissonance, colonial rule, compound rate of return, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, disinformation, diversification, diversified portfolio, Donald Trump, Dunning–Kruger effect, endowment effect, equity risk premium, fake news, feminist movement, Flash crash, haute cuisine, hedonic treadmill, housing crisis, IKEA effect, impact investing, impulse control, index fund, Isaac Newton, Japanese asset price bubble, job automation, longitudinal study, loss aversion, market bubble, market fundamentalism, mental accounting, meta-analysis, Milgram experiment, moral panic, Murray Gell-Mann, Nate Silver, neurotypical, Nick Bostrom, passive investing, pattern recognition, Pepsi Challenge, Ponzi scheme, prediction markets, random walk, Reminiscences of a Stock Operator, Richard Feynman, Richard Thaler, risk tolerance, Robert Shiller, science of happiness, Shai Danziger, short selling, South Sea Bubble, Stanford prison experiment, Stephen Hawking, Steve Jobs, stocks for the long run, sunk-cost fallacy, systems thinking, TED Talk, Thales of Miletus, The Signal and the Noise by Nate Silver, Tragedy of the Commons, trolley problem, tulip mania, Vanguard fund, When a measure becomes a target

Tyler Durden’s Fight Club rant about the duplicity of airline safety protocols could just as easily be applied to the futile dance of financial advisors giving clients risk tolerance questionnaires. Risk tolerance questionnaires (RTQs) give the illusion of safety and insight, and fly in the face of research that suggests that risk-taking behavior is domain specific, context driven and dynamic. Some academics try to skirt this point through a bit of esoteric sleight of hand that distinguishes risk tolerance from risk perception. Risk tolerance is defined as your static, long-term attitudes about risk, whereas risk perception is the dynamic, contextual piece more likely to fluctuate during periods of market upheaval. Risk tolerance, academics are quick to point out, is unchanging and they have the studies to prove it.

The results, published in the Proceedings of the National Academy of Sciences, found that participants’ appetite for risk fell by an incredible 44% as a result of the elevated levels of cortisol.26 Formerly thought of as primarily a mental construct, Coates’ findings turned traditional notions of risk tolerance on their head, and painted a more dynamic picture of the interplay between mind and body. As he opines in The Biology of Risk, “Most models in economics and finance assume that risk preferences are a stable trait, much like your height. But this assumption, as our studies suggest, is misleading.

Risk tolerance, academics are quick to point out, is unchanging and they have the studies to prove it. Essentially, they say, you can have the right idea at heart about risk-reward tradeoffs (risk tolerance) even as you are engaging in the wrong behavior due to your risk perception in the heat of the moment. This Ivory Tower factoid is of very little practical use to investors who enter and exit the market at all the wrong times or the beleaguered investment advisors who take panicked phone calls from their clients. In the end, risk-taking behavior is all that matters and the fact remains that it is changeable and context-dependent.


pages: 356 words: 51,419

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle

asset allocation, backtesting, buy and hold, creative destruction, currency risk, diversification, diversified portfolio, financial intermediation, fixed income, index fund, invention of the wheel, Isaac Newton, John Bogle, junk bonds, low interest rates, new economy, passive investing, Paul Samuelson, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, stocks for the long run, survivorship bias, transaction costs, Upton Sinclair, Vanguard fund, William of Occam, yield management, zero-sum game

So do your best to diversify to the nth degree, minimize your investment expenses, and focus your emotions where they cannot wreak the kind of havoc that most other investors experience. Rely on your own common sense. Emphasize an S&P 500 Index fund or an all-stock-market index fund. (They’re pretty much the same.) Carefully consider your risk tolerance and the portion of your investments you allocate to equities. Then, stay the course. All index funds are not created equal. Costs to investors vary widely. I should add, importantly, that all index funds are not created equal. Although their index-based portfolios are substantially identical, their costs are anything but identical.

When You Retire. IN THIS CHAPTER AND the next, we tackle two complex issues: the general principles of asset allocation, and allocation funds specifically designed for your retirement years. These are issues that have no easy answers. Why? First, because we investors have a wide range of investment goals, risk tolerances, and behavioral characteristics. Second, because we’ve had 35 years of extraordinary returns in the stock market and the bond market alike, returns that are highly unlikely to recur in the coming decade. (See Chapter 9, “When the Good Times No Longer Roll.”) Third, authors of books on investing, are, in a real sense, captives of the eras that we have experienced.

Some investors can handle the ups and downs of the market without worry. But if you can’t sleep at night because you’re frightened about the volatility of your portfolio, you’re probably taking more risk than you can handle. Taken together, your ability to accept risk and your willingness to accept risk constitute your risk tolerance. A basic allocation model for the investor who is accumulating assets, and the investor who is retired. Let’s begin with a basic allocation model for the accumulation of assets for the wealth-building investor. The main points to consider are merely common sense. (1) Investors seeking to accumulate assets by investing regularly can afford to take somewhat more risk—that is, to be more aggressive—than investors who have a relatively fixed pool of capital and are dependent on income and even distributions from their capital to meet their day-to-day living expenses. (2) Younger investors, with more time to let the magic of compounding work for them, can also afford to be more aggressive, while older investors will likely want to steer a more conservative course.


pages: 263 words: 89,368

925 Ideas to Help You Save Money, Get Out of Debt and Retire a Millionaire So You Can Leave Your Mark on the World by Devin D. Thorpe

asset allocation, buy and hold, call centre, diversification, estate planning, fixed income, Home mortgage interest deduction, index fund, junk bonds, knowledge economy, low interest rates, money market fund, mortgage tax deduction, payday loans, random walk, risk tolerance, Skype, Steve Jobs, transaction costs, women in the workforce, zero-sum game

You can now choose a fifth fund to skew your portfolio in the direction that makes you most comfortable. If you are risk tolerant and sleep well knowing your funds go up and down in value, you may want to invest in a risky fund to help increase the yield in your portfolio. There are a variety of specialty funds that make concentrated investments in industries, regions and countries. These funds often beat the market one year and trail it dramatically the next. On the other hand, if you are not risk tolerant or are closer to retirement, you may want to make your final fund a short term government bond fund that invests in bonds with maturities of less than four years so there is very little interest rate risk and virtually no credit risk.

Cash features ultra-low risk and correspondingly low returns. The goal of asset allocation is to match your risk tolerance, return on investment goals, and investment objectives to your portfolio. For short-term objectives, investing only in cash or in cash and bonds would generally make sense. For long-term objectives, like retirement, investing in a combination of all three would be considered wise. People in their twenties investing for retirement have the flexibility, if they are risk tolerant enough, to be invested 100% in equities. As people age, retirement gets closer and the pain of a major setback in investment returns looms larger so they generally shift the allocation to include more bonds and even a bit of cash.

Such bonds have no credit risk, that is no risk of not being paid on schedule, but as interest rates change, the value of the bonds will fluctuate. Each of these fund categories would make a good first fund for your retirement savings. They offer high expected returns—compared to what you can earn in a bank account. They are listed in order from most risky to least risky. You can decide which of these three best represents your risk tolerance based on your own situation. Once you’ve decided upon a category, you’ll want to choose an individual fund based primarily on the expenses. Your broker should provide you with a list of mutual funds you can purchase with no transaction fees. You’ll also want to choose a fund that doesn’t charge a “load” or upfront fee.


pages: 199 words: 48,162

Capital Allocators: How the World’s Elite Money Managers Lead and Invest by Ted Seides

Albert Einstein, asset allocation, behavioural economics, business cycle, coronavirus, COVID-19, crowdsourcing, data science, deliberate practice, diversification, Everything should be made as simple as possible, fake news, family office, fixed income, high net worth, hindsight bias, impact investing, implied volatility, impulse control, index fund, Kaizen: continuous improvement, Lean Startup, loss aversion, Paradox of Choice, passive investing, Ralph Waldo Emerson, risk tolerance, Sharpe ratio, sovereign wealth fund, tail risk, The Wisdom of Crowds, Toyota Production System, zero-sum game

Aligning incentives is the most important feature of an external manager relationship, and a manager’s personal investment alongside clients is the most direct form of that alignment. Perspectives differ on the appropriate amount a manager should invest, however most agree that the amount should be substantial and serve to align risk tolerance. Doing so creates an “alignment of appetites” according to Andy Golden at Princeton University Investment Management Company. Probing about a manager’s other personal investments can shed light on their risk tolerance and on other potentially attractive investment opportunities. b. Competitive advantage “What is your superpower?” – Mario Therrien “What is your edge and why is it enduring?”

.”– Margaret Chen “In order to finish first, you first have to finish.”– Andy Golden “One guy came and pitched me the idea of the endowment buying a cow. A single cow. I said, ‘Sir, you do realize I can’t buy a cow.’ He went away very sad.”– Ellen Ellison “Your risk tolerance has to be the lesser of your own risk tolerance or the asset owner’s.”– David Druley “Emphasize the reflective over the reactive.”– James Aitken Appendices Appendix A: Initial Manager Meeting Outline The following outline is an example of a preparation document for a meeting with a long-short equity hedge fund manager.


pages: 231 words: 76,283

Work Optional: Retire Early the Non-Penny-Pinching Way by Tanja Hester

Affordable Care Act / Obamacare, Airbnb, anti-work, antiwork, asset allocation, barriers to entry, buy and hold, crowdsourcing, diversification, estate planning, financial independence, full employment, General Magic , gig economy, hedonic treadmill, high net worth, independent contractor, index fund, labor-force participation, lifestyle creep, longitudinal study, low interest rates, medical bankruptcy, mortgage debt, Mr. Money Mustache, multilevel marketing, obamacare, passive income, post-work, remote working, rent control, ride hailing / ride sharing, risk tolerance, robo advisor, side hustle, stocks for the long run, tech worker, Vanguard fund, work culture

Magic number = annual spending (minus any pension payments) × inverse of safe withdrawal rate + additional expected expenses Annual spending ($): x SWR (%): SWR Inverse of SWR (100/SWR): 100/SWR Base amount (annual expenses × multiplier) ($): 100x/SWR One-time additional expenses ($): y Ballpark magic number ($): 100x/SWR + y SAMPLE FULL EARLY RETIREMENT SCENARIOS Scenario 1: Low full early retirement annual expenses of $40,000 per year, high risk tolerance, and no other anticipated large future expenses Annual spending ($): 40,000 SWR (%): 4 Inverse of SWR (100/SWR): 25 Base amount (annual expenses × multiplier) ($): 1,000,000 One-time additional expenses ($): — Ballpark magic number ($): 1,000,000 Scenario 2: $50,000 annual expenses, medium risk tolerance, and $60,000 in anticipated kids’ college costs Annual spending ($): 50,000 SWR (%): 3.5 Inverse of SWR (100/SWR): 31.25 Base amount (annual expenses × multiplier) ($): 1,562,500 One-time additional expenses ($): 60,000 Ballpark magic number ($): 1,622,500 Scenario 3: $75,000 annual expenses, low risk tolerance, and $200,000 in anticipated kids’ college costs and support to aging parents Annual spending ($): 75,000 SWR (%): 3 Inverse of SWR (100/SWR): 33.33 Base amount (annual expenses × multiplier) ($): 2,500,000 One-time additional expenses ($): 200,000 Ballpark magic number ($): 2,700,000 For a rental real estate–focused full early retirement, what you’re looking to determine is how much you’ll need to invest in properties to generate the magic money that will support your lifestyle.

Stay away from investments that promise huge gains out of line with market averages, as those are likely scams or wishful thinking, and aim for investments that match the overall markets. In investing, average is good, just as boring is good. That said, it’s wise to do some introspection to determine how much risk you can tolerate without it stressing you out. If you know that investing your money in higher-risk vehicles will keep you from sleeping well at night, an aggressive investment strategy of 100% stock and stock funds is probably not for you. And conversely, if you don’t mind watching your account balances bob up and down a bit, then a more conservative strategy with a high percentage of bonds and cash wouldn’t suit you very well either.

And conversely, if you don’t mind watching your account balances bob up and down a bit, then a more conservative strategy with a high percentage of bonds and cash wouldn’t suit you very well either. Every type of asset comes with its own risk profile, and in general, the more an investment stands to gain, the more it also stands to lose. But there are other ways to manage risk tolerance that aren’t strictly focused on which investment vehicles you choose. So keep an open mind as we walk through your investment tool options. In addition to paying attention to risk profiles, fees should be high on your list of things to look out for. Investment fees, which go by names like expense ratios, management fees, loads, sales fees, or trading fees, can quickly erode your portfolio gains if you aren’t careful, even when they seem innocuous.


Trading Risk: Enhanced Profitability Through Risk Control by Kenneth L. Grant

backtesting, business cycle, buy and hold, commodity trading advisor, correlation coefficient, correlation does not imply causation, delta neutral, diversification, diversified portfolio, financial engineering, fixed income, frictionless, frictionless market, George Santayana, global macro, implied volatility, interest rate swap, invisible hand, Isaac Newton, John Meriwether, Long Term Capital Management, managed futures, market design, Myron Scholes, performance metric, price mechanism, price stability, proprietary trading, risk free rate, risk tolerance, risk-adjusted returns, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, two-sided market, uptick rule, value at risk, volatility arbitrage, yield curve, zero-coupon bond

Each trading account has (explicitly or implicitly) a finite amount of this currency, and it is vital to manage portfolio affairs in such a way that respects this resource constraint. Moreover, while the amount of risk that a given trader can responsibly assume has absolute boundaries (expressed, typically, in financial terms), within these boundaries, it is usually within the control of the individual to set his or her individual risk tolerance at levels that are likely to reach these boundaries or to exceed 1 Browning, in addition to being righteous, was quite prolific. Setting Performance Objectives 27 them by some measure, or to fall somewhere within them. The efficient use of economic stop-outs involves setting your loss-assumption tolerance at manageable levels that will afford you much greater control over the broad and diverse set of circumstances that you are likely to confront over the course of your trading career.

In particular, I recommend sitting down and performing the same type of review of markets, trading modes, and so on, that a professional institutional trader conducts. Have market conditions improved or worsened? How much time and energy can you devote to trading? Are you set up to maximize information flow and execution efficiency? Once you have answered these questions and applied them through the filter of your risk tolerance, the final piece of the puzzle will in most cases reside in your psyche. You should set your stop-out level at a figure that is large enough for you to feel that you have given your trading a fair shot but that falls short of the point where reaching it becomes demoralizing or debilitating. Whatever figure you finally identify as your largest acceptable loss, the most important thing is to live within this limit and to commit to a full-scale portfolio liquidation if you are unable to prevent this outcome.

The point here is that by combining information about your Sharpe Ratio with expectations of return, you begin to create a picture of what type of risk levels are appropriate to these objectives; volatility levels significantly below these ranges will almost guarantee a failure to achieve associated targets, whereas figures vastly above these thresholds give rise to potential inconsistencies between return targets and risk tolerances. Method 2: Managing Volatility as a Percentage of Trading Capital As you may have surmised, the Inverted Sharpe Ratio method is best adapted to determining the lower bound of exposure that is consistent with reaching your targeted objectives. The main insight that it will provide you in determining the appropriate associated upper bound is that if your volatility is too high, it will project out a return that far exceeds your objectives.


pages: 327 words: 91,351

Traders at Work: How the World's Most Successful Traders Make Their Living in the Markets by Tim Bourquin, Nicholas Mango

algorithmic trading, automated trading system, backtesting, buy and hold, commodity trading advisor, Credit Default Swap, Elliott wave, financial engineering, fixed income, global macro, Long Term Capital Management, managed futures, Market Wizards by Jack D. Schwager, paper trading, pattern recognition, prediction markets, risk tolerance, Small Order Execution System, statistical arbitrage, The Wisdom of Crowds, transaction costs, zero-sum game

I started doing that “quest” for the Holy Grail, just like every trader does at some point in their trading career. We all begin looking for the magic setup or a magic methodology that will work in all markets and all time frames. Of course, it doesn’t exist, but you still have to find a strategy and method that fits your personal style and risk tolerance. I searched high and low for a good couple of years before I found my current methodology. I really had to work hard to make the switch from trading momentum to trading on a more technical level based on charts. The point is you really need to get more technical to trade FX, because it’s so much more of a chess game than a boxing match with an opponent [the specialist], which is what day trading equities was.

Foster: It depends on allocation, and for my account versus some of my client accounts, I might be more aggressive. I might use more small caps if I think small caps are looking strong, or I might use a heavier allocation towards small caps because I think I am going to get better performance there than I would with the Dow. It also depends on my risk tolerance at the time. I’m usually pretty aggressive in my trades, but I do factor in current or upcoming events in my personal life and may become more hesitant to take risk under certain conditions. Bourquin: What’s an average option contract size for a trade in your personal account? Foster: I typically only use two contracts at a time, and while I might use multiple contracts in a week, in any one day I only use two contracts at once.

Not knowing, or simply guessing at, where these price points will be after you have entered a trade can lead to indecision or price targets outside of the average range of the security you are trading. Why set an arbitrary profit target of three points when the average range of that market is only two points? Furthermore, wealthy traders set position sizes and stop losses that are almost always a function of their risk tolerance for any given trade. For example, if the maximum risk on any one trade is 2 percent of their trading account, they will calculate both the number of shares they will trade (based on the price of shares) and a reasonable stop loss before they place the trade. I rarely talk with a wealthy trader who says their position size is 1,000 shares.


pages: 426 words: 115,150

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century by Vicki Robin, Joe Dominguez, Monique Tilford

asset allocation, book value, Buckminster Fuller, buy low sell high, classic study, credit crunch, disintermediation, diversification, diversified portfolio, fiat currency, financial independence, fixed income, fudge factor, full employment, Gordon Gekko, high net worth, index card, index fund, intentional community, job satisfaction, junk bonds, Menlo Park, money market fund, Parkinson's law, passive income, passive investing, profit motive, Ralph Waldo Emerson, retail therapy, Richard Bolles, risk tolerance, Ronald Reagan, Silicon Valley, software patent, strikebreaker, The Theory of the Leisure Class by Thorstein Veblen, Thorstein Veblen, Vanguard fund, zero-coupon bond

As an FIer, you don’t want to risk your nest egg. But you are already putting the value of your nest egg at risk if your investment returns don’t at least keep pace with inflation. How exactly do you manage your money to reduce the risks associated with inflation? Risk Tolerance Any financial professional will tell you that it’s important to determine your risk tolerance before making any investments. The spectrum ranges from conservative investors who do not want to risk their capital at all to aggressive ones at the other end of the spectrum who are willing to risk all their capital for the promise of significant returns.

Waaaaay at the speculative end you’ll find few FIers because they usually don’t have the stomach for putting their hard-earned nest egg at risk in the stock market. Most FIers probably fall somewhere in the middle. If you’d like to learn more about what your personal investment philosophy might be, type “risk tolerance” in your browser and take one of the many free tests available on the Web. THREE PILLARS OF FINANCIAL INDEPENDENCE: CAPITAL, CUSHION AND CACHE The basic FI investment program has three elements: Capital: The sum that is invested, ultimately producing at least as much income as indicated by the Crossover Point of Chapter 8.

◆Duration—the range of maturities available is extensive; you can buy a note or bond that will mature in a few months or one that won’t come due for thirty years. ◆Absolute stability of income over the long run—ideal for FI. Avoids the income fluctuations that would occur with money market funds, rental real estate, etc. Treasury Bonds Treasury bonds are the ideal investment vehicle for FIers with a low risk tolerance because they protect principal, provide a steady stream of income and are relatively easy to understand. In addition, they are exempt from local and state taxes, can be bought and sold almost instantly with minimal handling charges, and are protected by the full faith and trust of the U.S. government.


pages: 229 words: 61,482

The Gig Economy: The Complete Guide to Getting Better Work, Taking More Time Off, and Financing the Life You Want by Diane Mulcahy

Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, basic income, Clayton Christensen, cognitive bias, collective bargaining, creative destruction, David Brooks, deliberate practice, digital nomad, diversification, diversified portfolio, fear of failure, financial independence, future of work, gig economy, helicopter parent, Home mortgage interest deduction, housing crisis, independent contractor, job satisfaction, Kickstarter, loss aversion, low interest rates, low skilled workers, Lyft, mass immigration, mental accounting, minimum wage unemployment, mortgage tax deduction, negative equity, passive income, Paul Graham, remote working, risk tolerance, Robert Shiller, seminal paper, Silicon Valley, Snapchat, social contagion, TaskRabbit, TED Talk, the strength of weak ties, Uber and Lyft, uber lyft, universal basic income, wage slave, WeWork, Y Combinator, Zipcar

Beth’s case illustrates that her worst-case fears are unlikely given her situation. That’s not uncommon, but sometimes our fears are rooted in likely outcomes. In those cases, this exercise can be very helpful in identifying actions you can take to reduce risks. It’s possible that after completing this exercise, you’ve come across risks that are too big for your personal risk tolerance, even after you attempt to deal with them. In this case, you may want to consider modifying or restructuring the thing you want to do so that it’s smaller and less risky. For example, maybe after completing this exercise you determine that you really aren’t in a good financial position to start your own business.

Risks are concrete and specific, and once we’ve identified a risk, there are several options for evaluating it and dealing with it. Below are six possible options for dealing with risk. As you break down your fears into their underlying risks, consider each of the options below: Reduce Risk by Mitigating It If the risk you’re contemplating seems too high for your personal risk tolerance, you might be able to mitigate it. For example, John works full time at an accounting firm whose clients are medium-and large-sized businesses. If John’s employer goes out of business, John’s income would go from 100 percent to 0. John is uncomfortable with that risk, so he has developed a side business working with entrepreneurs and small businesses, helping them with their bookkeeping, financial statements, and taxes (these clients are not competitive with his employer).

Reduce Risk by Accepting It We regularly accept risk in our lives because most activities involve some degree of risk, even if it’s remote. We make reasonable trade-offs about the size of the risk and the probability that it will occur compared to the rewards we expect from pursuing the activity. How much risk we’re willing to accept depends on our personal risk tolerance. Heli skiers and skydivers are willing to accept relatively higher levels of risk for the thrill of pursuing those activities. Most of us are willing to accept low levels of risk in our daily lives. We eat out in restaurants, even though there’s a chance of food poisoning. We go swimming, even though we could drown, and we take buses and trains that have some small chance of crashing.


pages: 825 words: 228,141

MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins

"World Economic Forum" Davos, 3D printing, active measures, activist fund / activist shareholder / activist investor, addicted to oil, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, backtesting, Bear Stearns, behavioural economics, bitcoin, Black Monday: stock market crash in 1987, buy and hold, Carl Icahn, clean water, cloud computing, corporate governance, corporate raider, correlation does not imply causation, Credit Default Swap, currency risk, Dean Kamen, declining real wages, diversification, diversified portfolio, Donald Trump, estate planning, fear of failure, fiat currency, financial independence, fixed income, forensic accounting, high net worth, index fund, Internet of things, invention of the wheel, it is difficult to get a man to understand something, when his salary depends on his not understanding it, Jeff Bezos, John Bogle, junk bonds, Kenneth Rogoff, lake wobegon effect, Lao Tzu, London Interbank Offered Rate, low interest rates, Marc Benioff, market bubble, Michael Milken, money market fund, mortgage debt, Neil Armstrong, new economy, obamacare, offshore financial centre, oil shock, optical character recognition, Own Your Own Home, passive investing, profit motive, Ralph Waldo Emerson, random walk, Ray Kurzweil, Richard Thaler, risk free rate, risk tolerance, riskless arbitrage, Robert Shiller, Salesforce, San Francisco homelessness, self-driving car, shareholder value, Silicon Valley, Skype, Snapchat, sovereign wealth fund, stem cell, Steve Jobs, subscription business, survivorship bias, tail risk, TED Talk, telerobotics, The 4% rule, The future is already here, the rule of 72, thinkpad, tontine, transaction costs, Upton Sinclair, Vanguard fund, World Values Survey, X Prize, Yogi Berra, young professional, zero-sum game

Our need for certainty is a survival mechanism. It affects how much risk we’re willing to take in life—in our jobs, in our investments, and in our relationships. The higher the need for certainty, the less risk you’ll be willing to take or emotionally bear. By the way, this is where your real “risk tolerance” comes from. But what if you’re totally certain all the time? If you knew what was going to happen, when it was going to happen, how it was going to happen. You knew what people were going to say before they said it. How would you feel? At first you’d feel extraordinary, but eventually you’d be what?

Because those fees, taxes, and losses that come along with stock picking and market timing put a drag on your profits. Asset allocation is more than diversification. It means dividing up your money among different classes, or types, of investments (such as stocks, bonds, commodities, or real estate) and in specific proportions that you decide in advance, according to your goals or needs, risk tolerance, and stage of life. Wow, that’s a mouthful, isn’t it? Yet it’s the key to success or failure for the world’s best financial players, including every single one of the investors and traders I interviewed for this book. Paul Tudor Jones swears by it. Mary Callahan Erdoes, perhaps the most powerful woman on Wall Street, leads 22,000 financial professionals whose livelihoods depends on it.

You can have your complimentary asset allocation (and full portfolio review) done for you online at www.strongholdfinancial.com or by your own fiduciary advisor. But it’s important to understand the concept of asset allocation and which investments are available for each of these buckets so that your overall portfolio—your group of investments—reflects your goals and level of risk tolerance. That way you’re still running the show! At every decision point, you’ll be thinking, “How much am I risking and how much am I keeping secure?” That’s where the game is won or lost! And, as you’ve already seen, the biggest challenge for your Security Bucket today is: What is really secure? We know the world has changed, and even conservative savers have been forced into riskier and riskier investments by crazy-low interest rates.


pages: 395 words: 103,437

Becoming Kim Jong Un: A Former CIA Officer's Insights Into North Korea's Enigmatic Young Dictator by Jung H. Pak

anti-communist, Boeing 747, clean water, cognitive dissonance, colonial rule, cryptocurrency, death from overwork, Donald Trump, Doomsday Clock, facts on the ground, Francis Fukuyama: the end of history, Great Leap Forward, Mark Zuckerberg, Nelson Mandela, new economy, risk tolerance, Rubik’s Cube, Saturday Night Live, Silicon Valley, Steve Jobs, uranium enrichment

We were all too aware that the furious pace of the missile tests and the regime’s military modernization efforts had the potential to spiral quickly into an armed confrontation. At the time, one of our biggest questions was who or what served to constrain Kim’s behavior. How likely was Kim to veer toward a serious miscalculation? What—or who—were the brakes or enablers of his actions? What we were confident about was that Kim’s risk tolerance was high and his confidence was growing. * * * — Despite all the chest-thumping and bad behavior, Kim is not looking for a military confrontation with the United States. He is rational, not suicidal, and given his involvement in his country’s military affairs and almost certain knowledge of its deficiencies, he is aware that North Korea would not be able to sustain a prolonged conflict with either South Korea or the United States.

These “princes” and “princesses” wield influence as a result of their familial and financial networks and form Kim’s own base of support as he cultivates a new generation that is beholden to him and not his predecessors. Perhaps he sees them as less wedded to the old ways of conducting business—literally and figuratively—and more pliable and risk tolerant. There have been signs of Kim’s disdain for the older generations and their corresponding attitude toward governance. His sushi chef and childhood playmate, Fujimoto, saw a teenage Kim kick and taunt an elderly former aide to his grandfather; the aide had no choice but to take the abuse.

In the North Korean system, you have to praise Kim and sing hymns about him and take it seriously, even if you think it’s only a shit narrative.” And Kim Jong Un was making sure that no one challenges that narrative, even Americans. The Sony incident was the result of Kim’s paranoia combined with his brazenness and high risk tolerance for testing his capabilities. The New York Times reporter David Sanger concluded, “Cyberweapons were tailor-made for North Korea’s situation in the world: so isolated it had little to lose, so short of fuel it had no other way to sustain a conflict with greater powers, and so backward that its infrastructure was largely invulnerable to crippling counterattacks.”


pages: 482 words: 121,672

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition) by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, beat the dealer, Bernie Madoff, bitcoin, book value, butter production in bangladesh, buttonwood tree, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, Detroit bankruptcy, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, financial repression, fixed income, framing effect, George Santayana, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Salesforce, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, Teledyne, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond, zero-sum game

Bonds (and bond-like securities to be covered in Part Four) have proved their worth as an effective diversifier. Source: Vanguard. In summary, the timeless lessons of diversification are as powerful today as they were in the past. In Part Four, I will rely on this discussion of portfolio theory to craft appropriate asset allocations for individuals in different age brackets and with different risk tolerances. *Statisticians use the term “covariance” to measure what I have called the degree of parallelism between the returns of the two securities. If we let R stand for the actual return from the resort and R – be the expected or average return, whereas U stands for the actual return from the umbrella manufacturer and U – is the average return, we define the covariance between U and R (or COVUR) as follows: COVUR = Prob. rain (U, if rain – U –) (R, if rain – R –) + Prob. sun (U, if sun– U – ) (R, if sun – R –).

Hong, Kubik, and Stein provided more systematic evidence as to the importance of friends in influencing investors’ decisions. They found that social households—those who interact with their neighbors, or attend church—are substantially more likely to invest in the market than nonsocial households, controlling for wealth, race, education, and risk tolerance. Any investment that has become a topic of widespread conversation is likely to be especially hazardous to your wealth. It was true of gold in the early 1980s and Japanese real estate and stocks in the late 1980s. It was true of Internet-related stocks in the late 1990s and early 2000 and condominiums in California, Nevada, and Florida in the first decade of the 2000s.

On the other hand, if you are in a low tax bracket and need high current income, you should prefer taxable bonds and high-dividend-paying common stocks so that you don’t have to incur the transactions charges involved in selling off shares periodically to meet income needs. The two steps in this exercise—finding your risk level, and identifying your tax bracket and income needs—seem obvious. But it is incredible how many people go astray by mismatching the types of securities they buy with their risk tolerance and their income and tax needs. The confusion of priorities so often displayed by investors is not unlike that exhibited by a young woman whose saga was recently written up in a London newspaper: RED FACES IN PARK London, Oct. 30 Secret lovers were locked in a midnight embrace when it all happened.


pages: 416 words: 118,592

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

accounting loophole / creative accounting, Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, book value, BRICs, butter production in bangladesh, buy and hold, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dogs of the Dow, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial engineering, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Japanese asset price bubble, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, margin call, market bubble, Mary Meeker, money market fund, mortgage tax deduction, new economy, Own Your Own Home, PalmPilot, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, stock buybacks, stocks for the long run, sugar pill, survivorship bias, The Myth of the Rational Market, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

Domestic stocks: 1926–1970 S&P 500 Index (monthly reinv); 1971–4/22/2005 Dow Jones Wilshire 5000 Index; 4/22/2005 – present MSCI US Broad Market Index. In summary, the timeless lessons of diversification are as powerful today as they were in the past. In Part Four, I will rely on this discussion of portfolio theory to craft appropriate asset allocations for individuals in different age brackets and with different risk tolerances. REAPING REWARD BY INCREASING RISK Theories that are right only 50 percent of the time are less economical than coin-flipping. —George J. Stigler, The Theory of Price AS EVERY READER should know by now, risk has its rewards. Thus, both within academia and on the Street, there has long been a scramble to exploit risk to earn greater returns.

Harrison Hong, Jeffrey Kubik, and Jeremy Stein provided more systematic evidence as to the importance of friends in influencing investors’ decisions. They found that social households—those who interact with their neighbors, or attend church—are substantially more likely to invest in the market than nonsocial households, controlling for wealth, race, education, and risk tolerance. Any investment that has become a topic of widespread conversation is likely to be especially hazardous to your wealth. It was true of gold in the early 1980s and Japanese real estate and stocks in the late 1980s. It was true of Internet-related stocks in the late 1990s and early 2000 and condominiums in California, Nevada, and Florida in the first decade of the 2000s.

On the other hand, if you are in a low tax bracket and need high current income, you should prefer taxable bonds and high-dividend-paying common stocks so that you don’t have to incur the transactions charges involved in selling off shares periodically to meet income needs. The two steps in this exercise—finding your risk level, and identifying your tax bracket and income needs—seem obvious. But it is incredible how many people go astray by mismatching the types of securities they buy with their risk tolerance and their income and tax needs. The confusion of priorities so often displayed by investors is not unlike that exhibited by a young woman whose saga was recently written up in a London newspaper: RED FACES IN PARK London, Oct. 30 Secret lovers were locked in a midnight embrace when it all happened.


pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, behavioural economics, Bernie Madoff, Black Swan, Bob Litterman, bond market vigilante , book value, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, carbon credits, Carmen Reinhart, central bank independence, classic study, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global macro, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, inverted yield curve, invisible hand, John Bogle, junk bonds, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, pension time bomb, performance metric, Phillips curve, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, savings glut, search costs, selection bias, seminal paper, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stock buybacks, stocks for the long run, survivorship bias, systematic trading, tail risk, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Buying opportunities tend to be greater in bad times just when the risk or risk aversion is commensurately higher. Contrarian market timing is not for everyone (and cannot be—or contrarian investors would have no one to trade with). Investors who differ from the market by having a longer investment horizon and greater risk tolerance than most investors may be natural risky asset buyers during bad times when valuations are attractive. (This last statement is based more on strong intuition than on existing theoretical models; see note 5 in Chapter 28.) Time-varying risk premia can generate a “discount rate effect”: changes in the market’s required returns cause opposite-signed moves in realized returns.

Thus, higher price-to-rent ratios may reflect lower financing costs or changes in any of the features listed above. Such comparisons are one way to assess how much of the housing market rally was based on fundamentals and how much was irrational, perhaps reflecting extrapolative expectations and the naive belief that house prices cannot fall. General liquidity, high risk tolerance (complacency), securitization innovations in mortgage markets, and lax lending standards also contributed. Wallison (2009) has also blamed government policy intended at expanding the proportion of homeowners, but his argument explains only the housing boom in the U.S.—not the rest of the world.

These studies identify expected returns by the ability of some countercyclical indicator (such as yield curve steepness or consumption–wealth ratio) to predict near-term returns—and assume that fitted realized returns in a regression are the expected returns of a rational market. Based on this logic, rational investors may foresee low expected returns near a cyclical peak and accept these as fair, thanks to their higher risk tolerance amidst abundant wealth. However, even if predictability regressions capture objectively feasible near-term returns, survey evidence raises doubts about whether most investors subjectively expect such countercyclic patterns. Individual investor surveys, especially, suggest that at the end of expansions (near cyclical peaks), optimistic investors have subjectively high expected returns or a high risk appetite, which boosts today’s prices for risky assets and reduces their prospective feasible returns.


pages: 572 words: 94,002

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy by David Sawyer

"World Economic Forum" Davos, Abraham Maslow, Airbnb, Albert Einstein, asset allocation, beat the dealer, bitcoin, Black Monday: stock market crash in 1987, Cal Newport, cloud computing, cognitive dissonance, content marketing, crowdsourcing, cryptocurrency, currency risk, David Attenborough, David Heinemeier Hansson, Desert Island Discs, diversification, diversified portfolio, Edward Thorp, Elon Musk, fake it until you make it, fake news, financial independence, follow your passion, gig economy, Great Leap Forward, hiring and firing, imposter syndrome, index card, index fund, invention of the wheel, John Bogle, knowledge worker, loadsamoney, low skilled workers, Mahatma Gandhi, Mark Zuckerberg, meta-analysis, mortgage debt, Mr. Money Mustache, passive income, passive investing, Paul Samuelson, pension reform, risk tolerance, Robert Shiller, Ronald Reagan, Silicon Valley, Skype, smart meter, Snapchat, stakhanovite, Steve Jobs, sunk-cost fallacy, TED Talk, The 4% rule, Tim Cook: Apple, Vanguard fund, William Bengen, work culture , Y Combinator

If you can’t handle that, and would change course were it to happen, stock market investing may not be for you. (Google “Risk Tolerance Calculator”.) I wouldn’t blame you. There’s oodles of research showing that the Chimp side of our nature is unsuited to the vicissitudes of the stock market. Nobel prize for economics-winning economists such as Robert Shiller have found that: “Put concisely – it’s actually much smarter to admit that you aren’t perfectly rational, and to plan and invest accordingly, rather than deny your true nature[347].” Read up on risk tolerance, take into account your circumstances, work out your goals and timings based on how old you are, and see what you can afford to lose.

No, it doesn’t, for these reasons: You can only go on what has happened in the past for predicting what happens in the future. Use 3.5% as an expertly researched planning guide if you’re based in the UK. It’s not the be-all and end-all and you may decide to pick anything between 3% and 6.5% depending on where you live and your risk tolerance. All I ask is do your research first, pick a number and reassess every year; the blog Early Retirement Now has a 23-part series on the topic, a good place to start[337]. We’ve already identified that the biggest factor in your SWR is the first ten years after you achieve your stash target.

In the spirit of the Oscars, finally, I’d like to pay tribute to my hairdresser, Michael Dooey (and his erstwhile nextdoor neighbour, Matthew Casserly), who gets more of my money for less work the older I get. P.P.S. Spotlight down. Over to you… Glossary of Terms Asset allocation: an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon. Bonds: loans made to large organisations. These include corporations, cities and national governments. A bond is a piece of a big loan. Careerist: a professional person who has fallen into the habit of putting their career before their life. CETV: stands for Cash Equivalent Transfer Value, the monetary value of your final salary pension.


pages: 206 words: 70,924

The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton by Colin Read

Abraham Wald, Albert Einstein, Bayesian statistics, Bear Stearns, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, capital asset pricing model, collateralized debt obligation, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, discovery of penicillin, discrete time, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, floating exchange rates, full employment, Henri Poincaré, implied volatility, index fund, Isaac Newton, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Long Term Capital Management, Louis Bachelier, margin call, market clearing, martingale, means of production, moral hazard, Myron Scholes, Paul Samuelson, price stability, principal–agent problem, quantitative trading / quantitative finance, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Solow, Ronald Reagan, shareholder value, Sharpe ratio, short selling, stochastic process, Thales and the olive presses, Thales of Miletus, The Chicago School, the scientific method, too big to fail, transaction costs, tulip mania, Works Progress Administration, yield curve

Markowitz’s model is most profound if we accept the assumptions that a security can be priced based on its mean historic return and its Expected return Capital allocation line Efficient portfolio frontier Risk-free return Risk Figure 10.1 The capital allocation line 64 The Rise of the Quants Expected return High risk tolerance Capital allocation line Efficient portfolio frontier Low risk tolerance Risk-free return Risk Figure 10.2 Various choices of risk and return along the capital allocation line variance or standard deviation. However, it also acted as a springboard to an equally elegant interpretation from one of Markowitz’s associates, William Forsyth Sharpe.

Undaunted, Black began to think more about the optimal investment portfolio that could beat the market. He saw options as one way to adjust investment risk exposure at a given time. This is in contrast to the Samuelson approach, which saw options as a discounting problem to settlement based on an individual investor’s risk tolerance. The former is a market-based approach, while the latter is the economist’s representative agent approach. Black started with the assumption that an option price is simply a function of the underlying stock price and the amount of time remaining until settlement. Rewriting in modern standard notation the warrant denotation that Samuelson had used in 1965, we can express Black’s relationship as C(S,t).

A month after presenting the paper co-authored with Samuelson to the faculty seminar, he presented his own paper to the Harvard/MIT graduate student seminar. This paper was published the following summer as the other bookend to a paper that Samuelson had written on the life cycle of portfolio risk tolerance. In fact, Merton later admitted that his strategy was to learn the mathematics he needed rather than the economics his professors taught, much like Albert Einstein had done as a graduate physics 144 The Rise of the Quants student. He agreed that this was not the best strategy to secure superior grades.


Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game by Walker Deibel

barriers to entry, Blue Ocean Strategy, book value, Clayton Christensen, commoditize, deal flow, deliberate practice, discounted cash flows, diversification, drop ship, Elon Musk, family office, financial engineering, financial independence, high net worth, intangible asset, inventory management, Jeff Bezos, knowledge worker, Lean Startup, Mark Zuckerberg, meta-analysis, Network effects, new economy, Peter Thiel, risk tolerance, risk/return, rolodex, software as a service, Steve Jobs, subscription business, supply-chain management, Y Combinator

Extreme attention to detail tends to keep action at bay indefinitely, or at least results in delayed implementation. 48 Entrepreneurship is almost synonymous with a high-risk tolerance. It’s one of the first things people think of when startups are mentioned. Indeed, people who have a tolerance for risky endeavors will eventually find themselves participating in all-or-nothing type activities, and the startup model emulates the high risk-high return profile. That said, most startups fail, and the ones with high risk tolerance tend to fall in that category. Successful entrepreneurs tend to consider themselves comfortable with a certain amount of risk, but are extremely calculated in their efforts.

As you read through it, consider how strongly you see each attribute in yourself and what traits might be missing. Also consider what might be missing from the list. Strategic-thinking skills Interpersonal skills Intellectual ability Industry experience Ability to deal with ambiguity Tenacity Organized Laser-focused Achievement-oriented Thick-skinned Risk tolerant 41 Self-confident Creative Optimistic Assertive Decisive Methodical Perfectionistic Got it? Before reviewing the results, I want you to understand that data suggests that the number one characteristic of being successful is not on this list at all. It’s not a skill we would see in a job description or resume.

David Weller, founder of Leadership Alliance and a true expert in assessing top talent, told me that about a third of the variants for success are simple competencies. These include, but are not limited to: 49 Possessing a drive for results and being able to get results from others The ability to make decisions, including unpopular decisions Strategic agility when dealing with ambiguity A certain level of risk tolerance Financial acumen Critical thinking, which is an innate trait Tactical ability Perseverance Self-awareness, which includes the ability to work through your weaknesses and not have blind spots Interpersonal skills The last one is worth noting. When you are CEO of a company, you must be able to sell; it’s a requirement.


pages: 292 words: 76,185

Pivot: The Only Move That Matters Is Your Next One by Jenny Blake

Airbnb, Albert Einstein, Cal Newport, cloud computing, content marketing, data is the new oil, diversified portfolio, do what you love, East Village, en.wikipedia.org, Erik Brynjolfsson, fear of failure, future of work, high net worth, Jeff Bezos, job-hopping, Kevin Kelly, Khan Academy, knowledge worker, Lao Tzu, Lean Startup, minimum viable product, Nate Silver, passive income, Ralph Waldo Emerson, risk tolerance, Second Machine Age, sharing economy, side hustle, side project, Silicon Valley, Silicon Valley startup, Skype, Snapchat, software as a service, solopreneur, Startup school, stem cell, TED Talk, too big to fail, Tyler Cowen, white picket fence, young professional, zero-sum game

—Rainer Maria Rilke, Letters to a Young Poet CONTENTS Praise for Pivot Title Page Copyright Dedication Epigraph INTRODUCTION: PIVOT IS THE NEW NORMAL Pivot or Get Pivoted Changing Careers in the Age of the App Connect the Dots Looking Backward Pivot Method at a Glance HIGH NET GROWTH Career Operating Modes Trust Your Risk Tolerance Two (Many) Steps Ahead, One Step Back STAGE ONE: PLANT PLANT OVERVIEW CHAPTER 1: CALIBRATE YOUR COMPASS What Are Your Guiding Principles? What Is Your Happiness Formula? Create Your Compass Identify Your Happiness Formula Your Body Is Your Business Reduce Decision Fatigue Meditate to Activate Your Best Instincts CHAPTER 2: PUT A PIN IN IT What Excites You Most?

Not if you want to be antifragile in a world that is ruled by them. Impacters find ways to thrive in uncertainty and disorder. Rather than merely reacting to randomness or becoming paralyzed by it, they look for opportunities to alchemize what is already working into what comes next. TRUST YOUR RISK TOLERANCE After much deliberation, I chose not to return to Google after my sabbatical. That is when I first realized that financial security and great benefits were important to me, but not the ultimate drivers of my career decisions. I knew it would not be fair to Google or to my book to give both projects short shrift by taking on too much.

Barring massive events outside of our control, there is a sweet spot for when and how to pivot. You probably won’t know with 100 percent certainty when to make your next big career move, but you can get a lot smarter about how you reduce the risks and potential margin for error—error in the sense that you end up worse off than you are now. Riskometer We all have a different risk tolerance. What is risky for someone else may be a snoozefest for you. Take your risk temperature by identifying which of the four zones you currently fall into on the Riskometer diagram below. Keep these distinctions in mind as you proceed with your pivot. Pay attention to when you start playing it too safe (when you might find yourself slipping from the comfort zone into stagnation), when something feels edgy but exciting (stretch zone), or when a next step seems too overwhelming or extreme (panic zone).


file:///C:/Documents%20and%... by vpavan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Alan Greenspan, AOL-Time Warner, asset allocation, Bear Stearns, Berlin Wall, book value, business cycle, buttonwood tree, buy and hold, Carl Icahn, corporate governance, corporate raider, currency risk, disintermediation, diversification, diversified portfolio, Donald Trump, estate planning, financial engineering, fixed income, index fund, intangible asset, interest rate swap, John Bogle, junk bonds, Larry Ellison, margin call, Mary Meeker, money market fund, Myron Scholes, new economy, payment for order flow, price discovery process, profit motive, risk tolerance, shareholder value, short selling, Silicon Valley, Small Order Execution System, Steve Jobs, stocks for the long run, stocks for the long term, tech worker, technology bubble, transaction costs, Vanguard fund, women in the workforce, zero-coupon bond, éminence grise

You can do a similar calculation by going to the American Savings Education Council Web site, www.asec.org. Click on the "Ballpark Estimate" retirement planning worksheet, and plug in your own numbers. Now you're ready to take the next crucial steps: determining how much risk you can tolerate and how to allocate your funds among the many investment options. Risk tolerance and asset allocation go hand in hand. Risk is the possibility that your investment won't produce the level of returns that you were expecting. All investments are risky, and some are riskier than others. But in general, the higher the risk, the greater the potential reward.

But if you can lose 10 percent or 25 percent and take it in stride— hoping that the market will bounce back as it has done historically— then your appetite for risk is greater and you should consider investing a portion of your funds in smaller, fast-growing companies. Brokers also use this information to make sure they are complying with NASD "suitability" rules. These require brokers to recommend only securities that are suitable for your risk tolerance, financial situation, and investment objectives. In general, the higher the risk, the greater the potential for reward and for losses. Shares of start-up companies, or of companies in emerging markets such as Asia and Latin America, are considered high-risk. Low-risk investments, such as government bonds, are guaranteed to return a steady stream of interest, plus your initial investment.

"The biggest change over the next five years will be the emergence of what I call the final choice— delegating asset allocation to someone else," says David Wray, director of the Profit Sharing/401(k) Council of America, an industry-funded association. One such development is the so-called life-cycle fund. Rather than offering a confusing menu of investments, these options offer pre-set mixes of securities aimed at making it easy for workers to match investment choices to age and risk tolerance— that is, to their place in the life cycle. Such funds are professionally managed, with adjustments in portfolio holdings made over time, as appropriate. For example, a life-cycle account for younger investors, who can afford to be more aggressive, would hold more stocks than an account for workers nearing retirement.


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

Abraham Maslow, airport security, Alvin Toffler, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, CRISPR, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, Dunbar number, experimental economics, Fall of the Berlin Wall, financial deregulation, Future Shock, Garrett Hardin, George Akerlof, hydraulic fracturing, impulse control, income inequality, information security, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Bogle, John Nash: game theory, joint-stock company, Julian Assange, language acquisition, longitudinal study, mass incarceration, meta-analysis, microcredit, mirror neurons, moral hazard, Multics, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, off-the-grid, offshore financial centre, Oklahoma City bombing, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, Recombinant DNA, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Timothy McVeigh, too big to fail, traffic fines, Tragedy of the Commons, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, Yochai Benkler, zero-sum game

It's pedestrian, common, slowly evolving, affecting others, increasingly familiar, and (at least by techies) well-understood. So it makes sense that we understate the risks and underfund security. There are cultural biases to risk as well. According to one study conducted in 23 countries, people have a higher risk tolerance in cultures that avoid uncertainty or are individualistic, and a lower risk tolerance in cultures that are egalitarian and harmonious. Also—and this is particularly interesting—the wealthier a country is, the lower its citizens' tolerance for risk. Along similar lines, the greater the income inequality a society has, the less trusting its citizens are.

Part I The Science of Trust Chapter 2 A Natural History of Security Our exploration of trust is going to start and end with security, because security is what you need when you don't have any trust and—as we'll see—security is ultimately how we induce trust in society. It's what brings risk down to tolerable levels, allowing trust to fill in the remaining gaps. You can learn a lot about security from watching the natural world. Lions seeking to protect their turf will raise their voices in a “territorial chorus,” their cooperation reducing the risk of encroachment by other predators for the local food supply.

(Large, long-term risks like nuclear weapons, genetic engineering, and global warming are much harder for us to comprehend, and we tend to minimize them as a result.) Today, societal scale continues to grow as global trade increases, the world's economies link up, global interdependencies multiply, and international legal bodies gain more power. On a more personal level, the Internet continues to bring distant people closer. Our risk tolerance has become so low that we have a fetish for eliminating—or at least pretending to eliminate—as much risk as possible from our lives. Let's get back to societal pressures as a series of knobs. Technology is continuously improving, making new things possible and existing things easier, cheaper, better, or more reliable.


pages: 244 words: 58,247

The Gone Fishin' Portfolio: Get Wise, Get Wealthy...and Get on With Your Life by Alexander Green

Alan Greenspan, Albert Einstein, asset allocation, asset-backed security, backtesting, behavioural economics, borderless world, buy and hold, buy low sell high, cognitive dissonance, diversification, diversified portfolio, Elliott wave, endowment effect, Everybody Ought to Be Rich, financial independence, fixed income, framing effect, hedonic treadmill, high net worth, hindsight bias, impulse control, index fund, interest rate swap, Johann Wolfgang von Goethe, John Bogle, junk bonds, Long Term Capital Management, means of production, mental accounting, Michael Milken, money market fund, Paul Samuelson, Ponzi scheme, risk tolerance, risk-adjusted returns, short selling, statistical model, stocks for the long run, sunk-cost fallacy, transaction costs, Vanguard fund, yield curve

I’ll be the first to concede that once you reach the late stage of life where your primary (or sole) objective is to structure your portfolio for maximum income and capital preservation, you need to make your asset allocation more conservative. Still, the question remains: Does someone who realistically has a decade or more of life ahead of him truly need someone to assess his “personal risk tolerance” and design a customized asset allocation? My answer is no. As the pioneering fund manager John Templeton once said, “For all long-term investors, there is only one objective—maximum total return after taxes.” Yet some investment advisors seem to be planning for another objective: their clients’ inability to stick with the program, even if that means they won’t meet their long-term investment objectives.

He has spent a lot of time researching and writing about the perfect portfolio for retirement. In June 2002, he wrote a column on “Client Strategies” in the journal Financial Planning for fellow CFPs. He writes that, with very few exceptions, “The optimum asset allocation for an income portfolio has nothing to do with your client’s risk tolerance, his investment knowledge or many other countless questions that your clients are forced to answer during your initial interview. Other than fulfilling the regulatory requirements, the ritual of risk assessment has no significance to the optimum asset mix.” Some advisors will argue that their clients can’t withstand the volatility inherent in stocks.

(mutual fund research) DeMuth, Phil Earnings, share prices (relationship) Efficient market hypothesis (EMH) advocacy Efficient portfolio Emerging market stocks Emotional Intelligence (Goleman) Emotional quotient (EQ) European stocks Exchange-traded fund (ETF) advantages weighing expenses open-ended characteristic performance, cash drag portfolio ranking State Street Global Advisors initiation tax problems, avoidance WSJ/Morningstar study Expense ratio composition level Expert Political Judgment (Tetlock) Experts, knowledge Faugere, Christophe (money manager performance research) Fidelity Magellan Fund track record Financial advisor, requirement (absence) Financial freedom importance requirement step one Financial future, planning responsibility Financial goals, meeting Financial independence calculation proximity Financial markets, understanding (degree) Financial responsibility Fishing, truth Foreign markets diversification reasons risk Forsythe, Greg (emotions comment) (k) contribution disadvantage usage (b), usage Four Pillars of Investing, The (Bernstein) Future, prediction (problem) Global economy, U.S. proportion Gold movement returns shares inclusion, reasons proportion usage Graham, Benjamin investment advice investor problem Great Depression Greenspan, Alan (LTCM buyout) Growth portfolio Hand, Learned (tax management comments) Hedge fund ownership, eligibility High Expectations and False Dreams (Otar) High-grade bonds, investment High-grade corporate bonds, taxable income High-quality stocks, exposure High-yield bonds proportion stocks, correlation tax inefficiency usage Historical asset returns, understanding Historical averages, usage Historical data, examination Humility, wisdom (relationship) Index funds reliance Indexing, power Index mutual funds, WSJ/Morningstar study Individual Retirement Account (IRA) contribution usage percentage Inflation impact increase Inflation-adjusted Treasury bonds proportion usage Intelligent Asset Allocator, The (Bernstein) Investment advisors, usage (decision) aggressiveness, problem aims annual return automation compound timing confusion conservative approach, problem criticism decisions delegation, problems diversification argument expectations factors importance goals humility, impact knowledge mistakes objective philosophy pitfalls portfolio long-term value determination, factors usage principles understanding process, knowledge reality check risks, elimination seriousness stability/returns, relationship strategy problems, avoidance success system, steps Investors long-term financial requirement target taxes/expenses, reduction iShares iBoxx $ High Yield Corporate Bond Fund description holdings iShares Lehman TIPS Bond Fund description holdings Jensen, Michael (mutual fund manager analysis) Junk bonds, inclusion (criticism) Kaderlis, Billy/Akaisha (retirement example) Keogh, usage Large-cap stock, market capitalization Legg Mason Value Trust Lewis, Michael Life philosophy, presence Lifestyle, calculation Little Book of Common Sense Investing, The (Bogle) Long Term Capital Management (LTCM), crash Long-term core portfolio, short-term trading portfolio (separation) Long-term financial goals, meeting Long-term investment portfolio, personalization Long-term investment success Long-term portfolio, recommendation/ criticism Lynch, Peter investment advice market prediction Management fees Market capitalization declines outguessing, problem timing absence avoidance Market-impact cost Market Vectors Gold Miners ETF description holdings Markowitz, Harry Mental accounting Milken, Michael Miller, Bill Miller, Merton Millionaire Next Door (Stanley/Danko) Millionaires, characteristics Mind of the Market, The (Shermer) Modern portfolio theory (MPT) advocacy Money investment management managers, performance stocks division truth Mutual funds advantage Bogle research costs, shareholder absorption industry, size managers, benchmark underperformance principle stock trading behavior types Net asset value (NAV), divergence Net worth, result No-load bond funds, usage No-load index funds, usage Overseas markets, earnings growth Oxford Club Communique, Hulbert Financial Digest ranking Pacific Rim stocks Peer pressure, perspective Perma-bears recommendations Personal risk tolerance, assessment Phantom income, taxation Philosophy:Who Needs It (Rand) Portfolio annual return balance blend breakdown goals implementation market timer, impact net return, concern rebalancing process setup strategy tax management test tracking process volatility, reduction Precious metals index, assembly mining stocks Prediction, difficulty Pre-tax returns, post-tax returns (contrast) Private pension plans, disappearance Prosperity, stock market creation Raskob, Jacob Real estate investment trusts (REITs) proportion tax inefficiency usage Rebalancing emotions, avoidance process timing usage usefulness Recessions, predictability Redemptions, impact Retirement goals/plan steps Retirement Confidence Survey Rich, SEC definition Risk elimination level, acceptability Sacrifices, making Samuelson, Paul Savings amount importance priority proportion spending, balance Securities, pricing efficiency Self-interested parties, impact Share price, fluctuation Sharpe, William Shawky, Hany A.


pages: 108 words: 27,451

Magic Internet Money: A Book About Bitcoin by Jesse Berger

Alan Greenspan, barriers to entry, bitcoin, blockchain, Bretton Woods, Cambridge Analytica, capital controls, carbon footprint, correlation does not imply causation, cryptocurrency, diversification, diversified portfolio, Ethereum, ethereum blockchain, fiat currency, Firefox, forward guidance, Fractional reserve banking, George Gilder, inflation targeting, invisible hand, Johann Wolfgang von Goethe, liquidity trap, litecoin, low interest rates, Marshall McLuhan, Metcalfe’s law, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, planned obsolescence, price mechanism, Ralph Waldo Emerson, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Robert Metcalfe, Satoshi Nakamoto, the medium is the message, Vitalik Buterin

Bitcoin, as its own new monetary system and asset class, offers an unparalleled risk and reward profile. The key to understanding the opportunity it represents requires putting risk in context. 4.4.2 Calculated Risk: Expect the Unexpected “People think I got into bitcoin because I have a high risk tolerance ... actually I got in because I have a low risk tolerance for worst case scenarios.” Jill Carlson, Co-Founder of Open Money Initiative Generally speaking, there are two major risk categories to consider when investing in anything – unsystematic and systematic risk. Unsystematic risks are specific to a particular company, industry, or asset class, with narrow impacts typically associated with factors of productivity, such as land, labor, and physical and intellectual capital.


Demystifying Smart Cities by Anders Lisdorf

3D printing, artificial general intelligence, autonomous vehicles, backpropagation, behavioural economics, Big Tech, bike sharing, bitcoin, business intelligence, business logic, business process, chief data officer, circular economy, clean tech, clean water, cloud computing, computer vision, Computing Machinery and Intelligence, congestion pricing, continuous integration, crowdsourcing, data is the new oil, data science, deep learning, digital rights, digital twin, distributed ledger, don't be evil, Elon Musk, en.wikipedia.org, facts on the ground, Google Glasses, hydroponic farming, income inequality, information security, Infrastructure as a Service, Internet of things, Large Hadron Collider, Masdar, microservices, Minecraft, OSI model, platform as a service, pneumatic tube, ransomware, RFID, ride hailing / ride sharing, risk tolerance, Salesforce, self-driving car, smart cities, smart meter, software as a service, speech recognition, Stephen Hawking, Steve Jobs, Steve Wozniak, Stuxnet, Thomas Bayes, Turing test, urban sprawl, zero-sum game

This group uses the bleeding edge technologies that are experimental and unproven. It also has a high-risk tolerance. Early adopters – Are more selective than the innovators but put high emphasis in being first. They often look for a first-mover advantage in terms of adopting technology. Early majority – This group is open to innovation but likes to see it demonstrated by others first. This is one of the largest groups. Late majority – Adopt innovation after half of the market has already adopted it. They are skeptical and are also often driven by very low-risk tolerance in terms of technology. Laggards – Are the ones buying legacy technologies when most others have gotten rid of them.

When technology implementations are being considered, their respective position on the technology adoption curve should be matched against the city’s. It is not a good idea for a laggard city to engage in bleeding edge projects. The probability of success will be low because it takes a special way of management and risk tolerance to be successful with that. There is also a good chance that employees will not feel confident when they suddenly have to do a lot of unknown tasks. A city that is just getting ready to move some things off the mainframe may not be an ideal candidate for a block chain implementation. Conversely, cities that are innovators may not have motivation to implement technologies that provide only incremental gains.


pages: 420 words: 135,569

Imaginable: How to See the Future Coming and Feel Ready for Anything―Even Things That Seem Impossible Today by Jane McGonigal

2021 United States Capitol attack, Airbnb, airport security, Alvin Toffler, augmented reality, autism spectrum disorder, autonomous vehicles, availability heuristic, basic income, biodiversity loss, bitcoin, Black Lives Matter, blockchain, circular economy, clean water, climate change refugee, cognitive bias, cognitive dissonance, Community Supported Agriculture, coronavirus, COVID-19, CRISPR, cryptocurrency, data science, decarbonisation, digital divide, disinformation, Donald Trump, drone strike, Elon Musk, fake news, fiat currency, future of work, Future Shock, game design, George Floyd, global pandemic, global supply chain, Greta Thunberg, income inequality, index card, Internet of things, Jane Jacobs, Jeff Bezos, Kickstarter, labor-force participation, lockdown, longitudinal study, Mason jar, mass immigration, meta-analysis, microbiome, Minecraft, moral hazard, open borders, pattern recognition, place-making, plant based meat, post-truth, QAnon, QR code, remote working, RFID, risk tolerance, School Strike for Climate, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, Silicon Valley startup, Snapchat, social distancing, stem cell, TED Talk, telepresence, telepresence robot, The future is already here, TikTok, traumatic brain injury, universal basic income, women in the workforce, work culture , Y Combinator

However you choose to respond to this emergency alert will help determine the fate of a billion people. And given what’s been going on where you live—longer and more extreme heat waves, more frequent power and water outages—it might decide your fate too. EMERGENCY ALERT—IT’S PARTY TIME! Congratulations! You have been selected to participate in the First Global Census of Climate Risk Tolerance and Migration Intent. Ten years from today, the world will begin the largest human migration ever attempted. Up to one billion people are expected to request relocation from regions that have been severely affected by climate change. The Welcome Party, a coalition of thirty-three national governing parties, is preparing models and forecasts to help plan migration routes and to prepare climate-resilient destination cities for a rapid population influx.

You tap the link and scroll quickly through the questions to get a better sense of what information they want from you. No wonder they gave you ten days to think it over. Some of these questions you honestly have no idea how to answer. You start weighing your choices . . . The First Global Census of Climate Risk Tolerance and Migration Intent On a scale of 1 to 10, how free do you feel to move to a safer climate if you need to? (Not free at all) 1 2 3 4 5 6 7 8 9 10 (Completely free) What might cause you to STAY in your current home, even if the climate became extremely unsafe? Mark all that apply. I lack the financial resources to move.

Journaling ideas Below are some ideas for what you might journal about as you spend ten days in the world of “Welcome Party.” Pick and choose whichever ones you like (or invent your own prompts, guided by your own curiosity and creativity): 1. Spend some time taking the Welcome Party’s First Global Census of Climate Risk Tolerance and Migration Intent. Answer just one question each day. Remember, you’re answering the questionnaire as future you. Keep in mind where you might live, with whom, and what your life circumstances might be like in the year 2033—they might be the same as today, or they might be quite different.


Risk Management in Trading by Davis Edwards

Abraham Maslow, asset allocation, asset-backed security, backtesting, Bear Stearns, Black-Scholes formula, Brownian motion, business cycle, computerized trading, correlation coefficient, Credit Default Swap, discrete time, diversified portfolio, financial engineering, fixed income, Glass-Steagall Act, global macro, implied volatility, intangible asset, interest rate swap, iterative process, John Meriwether, junk bonds, London Whale, Long Term Capital Management, low interest rates, margin call, Myron Scholes, Nick Leeson, p-value, paper trading, pattern recognition, proprietary trading, random walk, risk free rate, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, short selling, statistical arbitrage, statistical model, stochastic process, systematic trading, time value of money, transaction costs, value at risk, Wiener process, zero-coupon bond

As long as the strategies are not highly correlated, traders can use diversification to reduce the overall risk of the portfolio. Not only does this lead to a potentially improved risk/return relationship, this has a big impact on profitability since the size of the portfolio is typically measured as a VAR number. KEY CONCEPT: TRADING DESKS AND RISK TOLERANCE Trading desks are typically limited by risk tolerance rather than capital. This is due to the fact that most trading desks can achieve a high degree of leverage by borrowing money, taking on leveraged trades, and similar activities. 112 RISK MANAGEMENT IN TRADING For example, if a trading desk with a $1 million VAR limit is trying to allocate investment between two uncorrelated strategies with the same Sharpe Ratio, the VAR limit for each investment (the size of the investment) will not be $500,000 each.

See probability density function percent returns, 148–150 phi, 203, 232–234 Index portfolio value-at-risk, calculating, 161–164 position limits, 142–143 setting, 2, 11 potential future exposure, current exposure and, 260 pre-trade monitoring, 117–118 preferred stock, 44–45 price of underlying asset, 201 prices, 21 probability density function, 64–65 probability of default, 240–241, 247–254 cumulative, 248–250 loss given default and, 254–255 market-based, 252–254 processing, 14 profits calculating, 2, 10–11 losses and, 121–123 prospective testing, 188 put/call parity and gamma, 225–226 305 Q quotes, 21 return, risk and, 99 reviewers, 115 reward, risk and, 26–27 rho, 203, 232–234 time value of money and, 232 right-way risk, 255 risk avoidance, 28–29 risk management, 9–10, 23, 116 risk, managing, 28–29 risk tolerance, trading desks and, 111 risk caused by value adjustment, 263 cost of eliminating, 229–230 defined, 23–25 holistic view of, 115–117 model, 107–108 monitoring, 27–28 removing, 180 return and, 99 reward and, 26–27 right- and wrong-way, 255 settlement, 262–263 trading decisions and, 10–11 transfer via hedging, 178 types of, 25 rogue trading, 113–114 R random numbers, 63–66 random walks, 72–75 randomness, results and, 111 real assets, 35–36 real estate investment trusts, 45 recursive calculations, 158 reduction, risk, 29, 267 regression tests, 191–194 REIT.

See real estate investment trusts reputational risk, 25 results, randomness and, 111 retrospective testing, 188 S sales, 13 scheduling, 13 second derivative, 84–85 securities, 22 settlement risk, 262–263 Sharpe Ratio, 109–110 short selling, regulations about, 16 shortfall, expected, 172–173 shorting, 4 simulation accuracy, 98 skew, 70–72 slippage, 101–105 social activity, trading as, 238 306 speculators, market stability and, 136 spot prices, 21 statistics, 66–67 stochastic processes, 64, 72–75 stocks, 42, 44–45 stop limit orders, 19 stop orders, 18–19 strategic risk, 25 strategies, 6–8 combining, 111–112 comparing, 108–111 strategy testing, 97–101 support and control, 13–14 systematic trading, 95–96 T Taylor Series Expansion, 89–90, 203–204 testing hedge effectiveness, 187–189 strategy, 97–101 tests, regression, 191–194 theta, 202, 226–230 time until expiration, 201 time value of money, 90–92 rho and, 232 time, vega and, 232 timing, 101 trade forensics, 1–2, 10 trade surveillance, 112–118 trading, 12–16 as social activity, 238 requirements for, 16 systematic, 95–96 trading decisions, risk and, 10–11 trading desks, 2–3 risk tolerance and, 111 trading limits, 147–148 trading positions, 20–21 INDEX trading risk, managing, 21–23 transactions, 130 transactions costs, 101–105 transfer, risk, 29, 267 Treasury bills, 49 U UL. See unexpected loss unexpected loss, 240–241 V validation, data, 96–97 value of options, 204–207 value-at-risk limits, in practice, 170 value-at-risk sensitivity, 162–163 value-at-risk as size measure, 147 defined, 143–147 misuse of, 171–173 non-parametric, 167–169 parametric, 150–161 zero and, 164 VAR.


pages: 345 words: 87,745

The Power of Passive Investing: More Wealth With Less Work by Richard A. Ferri

Alan Greenspan, asset allocation, backtesting, Benchmark Capital, Bernie Madoff, book value, buy and hold, capital asset pricing model, cognitive dissonance, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, endowment effect, estate planning, Eugene Fama: efficient market hypothesis, fixed income, implied volatility, index fund, intangible asset, John Bogle, junk bonds, Long Term Capital Management, money market fund, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, Ponzi scheme, prediction markets, proprietary trading, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, survivorship bias, Tax Reform Act of 1986, too big to fail, transaction costs, Vanguard fund, yield curve, zero-sum game

More established investors should not rely solely on questionnaires for determining their risk level. More thought and attention should be given to their unique situation. Finding a person’s maximum tolerance for risk requires soul-searching. We tend to feel brave when prices are going up, which means that it’s not the ideal time to decide our risk tolerance level. Perhaps the best time to decide is after the market has dropped 20 or 30 percent when we’re likely to be more honest with ourselves. No one can guarantee that any investment strategy will achieve its stated objective. However, emotionally-charged selling in a bear market will almost guarantee that an investment plan will be derailed.

reinvestment Use of investment income to buy additional securities. Many mutual fund companies and investment services offer the automatic reinvestment of dividends and capital gains distributions as an option to investors. return of capital A distribution that is not paid out of earnings and profits. It is a return of the investor’s principal. risk tolerance An investor’s ability or willingness to endure declines in the price of investments while waiting for them to increase in value. R-squared A measure of how much of a portfolio’s performance can be explained by the returns on the overall market (or a benchmark index). If a portfolio’s total return precisely matched the return on the overall market or benchmark, its R-squared would be 1.00.

active management of benchmark tracking and brokerage use of first of the growth in market introduction of taxes and turnover within U.S. equity Index investing, Wall Street’s battle against IndexUniverse.com Individual investor(s): asset allocation for asset side and assets to obligations beginning at the end hiring an advisor human vs. monetary capital investment decisions needs identification and obligations, estimation of risk tolerance of Individual Retirement Account (IRA) Inflation expectation Inheritances Institutional investors Insurance, types of Internal Revenue Service (IRS) International equity funds International risk premiums Internet investment resources Intrinsic value of stocks Invesco PowerShares Investment Advisers Act of 1940 Investment advisors Investment Company Act of 1940 Investment monitoring Investment Performance Measurement Investment policy changes Investment Policy Statement (IPS): as guidebook life obligations and rebalancing and steps leading to Investment pyramid Investments, savings and Investment selection: asset classes and commodities and inflation rate and low-cost index funds/EFTs Investment strategy options Investors.


pages: 257 words: 13,443

Statistical Arbitrage: Algorithmic Trading Insights and Techniques by Andrew Pole

algorithmic trading, Benoit Mandelbrot, constrained optimization, Dava Sobel, deal flow, financial engineering, George Santayana, Long Term Capital Management, Louis Pasteur, low interest rates, mandelbrot fractal, market clearing, market fundamentalism, merger arbitrage, pattern recognition, price discrimination, profit maximization, proprietary trading, quantitative trading / quantitative finance, risk tolerance, Sharpe ratio, statistical arbitrage, statistical model, stochastic volatility, systematic trading, transaction costs

Thus, the goal becomes: Maximize expected return subject to a limit on expected variance of return. Let us express these results in mathematical form. First, definition of terms: n fi ip k Number of stocks in investment universe Expected forecast return for stock i; f = (f1 , . . . , fn ) Expected variance of returns, V[f ] Value to be invested in stock i; p = (p1 , . . . , pn ) Risk tolerance factor Now the goal is expressed as: maximize p f − kp p 29 Statistical Arbitrage 2.5.1 Exposure to Market Factors Statistical arbitrage fund managers typically do not want a portfolio that takes long positions only: Such a portfolio is exposed to the market. (A pairs trading scheme, by definition, will not be biased but statistical arbitrage models more generally readily generate forecasts that, unless constrained, would lead to a portfolio with long or short bias.)

The significance of this fact is in directing a manager to construct stop loss rules (early exit from a bet that is not working according to forecast expectation) that curtail losses without limiting gains. Where this is possible, a model with seemingly textbook sized relative odds in favor of winning forecasts can be profitably traded within prescribed risk tolerances. Technically, such rules modify the utility function of a model by altering the characteristics of the outcome set by employing a procedure in which the forecast model is only one of several elements. A warning: Beware of being fooled by purveyors of tales of randomness. A strategy that offers bets that typically generate a small loss and occasionally a whopping gain sounds alluring when proffered as relief after a cunningly woven web of disaster shown to seemingly inevitably follow plays where the odds are conventionally in favor of winning.

Event correlation 70 SAI FRE 60 50 40 30 20 10 19960102 19961231 19971231 FIGURE 8.1 Adjusted price histories for FRE and SAI 19980806 143 Nobel Difficulties 70 SAI FRE 60 50 40 30 20 10 19960102 19961231 19971231 19980806 FIGURE 8.2 Adjusted price histories for FRE and SAI to August 1998 indicates what might be expected to trade well in groups within prescribed risk tolerances (see Chapter 2). Visually and statistically, it looks as though the pair [FRE, SAI] will trade profitably in a simple spread reversion model. Simulation of a basic popcorn process model (see Chapter 2) demonstrates that was indeed the case. Figure 8.2 shows the adjusted price series for FRE and SAI extended through the second quarter of 1998 to August 6.


Smart Cities, Digital Nations by Caspar Herzberg

Asian financial crisis, barriers to entry, business climate, business cycle, business process, carbon footprint, clean tech, clean water, cloud computing, corporate social responsibility, Dean Kamen, demographic dividend, Edward Glaeser, Edward Snowden, Hacker News, high-speed rail, hive mind, Internet of things, knowledge economy, Masdar, megacity, New Urbanism, operational security, packet switching, QR code, remote working, RFID, rising living standards, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley startup, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, smart meter, social software, special economic zone, Stephen Hawking, telepresence, too big to fail, trade route, transcontinental railway, upwardly mobile, urban planning, urban sprawl, women in the workforce, working poor, X Prize

CCI will continue to participate in consulting projects and maintain Cisco’s alignment with this quiet, steady rollout of smart city services. China may have a great many services to refine, and delivery of anything—tangible or intangible—to 1.6 billion people will never be simple. But the combination of aggressiveness, high risk tolerance, concentrated power, and key partnerships means that Cisco’s work will continue to be innovative, even when the headlines of the day turn bleak. The inevitable signs of economic slowdown began to appear in 2012–2013; by the next year, a wild card news item assured that Cisco’s efforts in China would be a rough ride for the next few years.

It is precisely this boldness that will underpin any greenfield smart and connected city of the future; it also will characterize the actions of any leader who is willing to break with past methods and embrace IoE solutions with shorter success trails but extensive potential to make a city work better for more people. Those who believe such imagination and risk tolerance are rare finds in China likely have given the market only a cursory glance. This is a nation of ambition on many levels; the ambition runs deep enough for opportunity to exist for motivated outsiders as well as the burgeoning national suppliers. But sales and consulting arms will have to be aggressive in courting them

After an initial setback in Saudi Arabia, the group needed a new place to continue the digital city experiment; South Korea was ready to engage and take the idea further. In China, the team found scale; in India, digital nation building. All the while, the parent corporate structure allowed the author and his peers to experiment, while demanding accountability, progress, and the application of lessons learned. This culture that fosters ambition, risk tolerance, and collaboration with new partners is critical to the success of future city-building projects. The third and most personal theme is linked directly to the second: facing failure, which is an inevitable byproduct of engineering on the scale of cities. There is a corollary need to recognize success that goes beyond the surface or real time.


Early Retirement Guide: 40 is the new 65 by Manish Thakur

Airbnb, diversified portfolio, financial independence, hedonic treadmill, index fund, lifestyle creep, Lyft, passive income, passive investing, risk tolerance, Robert Shiller, side hustle, time value of money, uber lyft, Vanguard fund, William Bengen, Zipcar

If you're more risk averse and will worry about having enough, you can use a higher multiplier, such as 30, to calculate your required amount. For people who are more tolerant of risk and believe they can easily become employed if their money runs out, the multiplier could be lower, around 20x yearly spending. For less risk tolerant people, this multiplier will be anywhere from 30-50x. Challenges: 1. Based on a quick calculation of your yearly expenses, determine how much money you would need at this moment to become financially independent. 2. Calculate how much you would need to save to reach this number based on what you've already saved.


pages: 470 words: 144,455

Secrets and Lies: Digital Security in a Networked World by Bruce Schneier

Ayatollah Khomeini, barriers to entry, Bletchley Park, business process, butterfly effect, cashless society, Columbine, defense in depth, double entry bookkeeping, drop ship, fault tolerance, game design, IFF: identification friend or foe, information security, John Gilmore, John von Neumann, knapsack problem, macro virus, Mary Meeker, MITM: man-in-the-middle, moral panic, Morris worm, Multics, multilevel marketing, mutually assured destruction, PalmPilot, pez dispenser, pirate software, profit motive, Richard Feynman, risk tolerance, Russell Brand, Silicon Valley, Simon Singh, slashdot, statistical model, Steve Ballmer, Steven Levy, systems thinking, the payments system, Timothy McVeigh, Y2K, Yogi Berra

These guys know that you have to spend money to make money, and are willing to invest in profitable attacks against a financial system. They have minimal expertise, but can purchase it. They have minimal access, but they can purchase it. They often have a higher risk tolerance than lone criminals; the pecking order of the crime syndicate often forces those in the lower ranks to take greater risks, and the protection afforded by the syndicate makes the risks more tolerable. POLICE You can think of the police as kind of like a national intelligence organization, except that they are less well funded, less technically savvy, and focused on crimefighting. Understand, though, that depending on how benevolent the country is and whether or not they hold occasional democratic elections, “crimefighting” could cover a whole lot of things not normally associated with law enforcement.

In extreme cases the insider might have considerable expertise, especially if he was involved in the design of the systems he is now attacking. Revenge, financial gain, institutional change, or even publicity can motivate insiders. They generally also fit into another of the categories: a hacker, a lone criminal, or a national intelligence agent. Malicious insiders can have a risk tolerance ranging from low to high, depending on whether they are motivated by a “higher purpose” or simple greed. Of course, insider attacks aren’t new, and the problem is bigger than cyberspace. If the e-mail system hadn’t been there, the Schwab employees might have used the telephone system, or fax machines, or maybe even paper mail.

Industrial espionage can be well-funded; an amoral but rational company will devote enough resources toward industrial espionage to achieve an acceptable return on investment. Even if stealing a rival’s technology costs you half a million dollars, it could be one-tenth the cost of developing the technology yourself. (Ever wonder why the Russian Space Shuttle looks a whole lot like the U.S. Space Shuttle?) This kind of adversary has a medium risk tolerance because a company’s reputation (an intangible but valuable item) will be damaged considerably if it is caught spying on the competition—but desperate times can bring desperate measures. PRESS Think of the press as a subspecies of industrial spy, but with different motivations. The press isn’t interested in a competitive advantage over its targets;it is interested in a “newsworthy” story.This would be the Washington City Pages publishing the video rental records of Judge Bork (which led to the Video Privacy Protection Act of 1988), the British tabloids publishing private phone conversations between Prince Charles and Camilla Parker Bowles, or a newspaper doing an exposé on this company or that government agency.


Capital Ideas Evolving by Peter L. Bernstein

Albert Einstein, algorithmic trading, Andrei Shleifer, asset allocation, behavioural economics, Black Monday: stock market crash in 1987, Bob Litterman, book value, business cycle, buy and hold, buy low sell high, capital asset pricing model, commodity trading advisor, computerized trading, creative destruction, currency risk, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, diversification, diversified portfolio, endowment effect, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, fixed income, high net worth, hiring and firing, index fund, invisible hand, Isaac Newton, John Meriwether, John von Neumann, Joseph Schumpeter, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, market bubble, mental accounting, money market fund, Myron Scholes, paper trading, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, price anchoring, price stability, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, seminal paper, Sharpe ratio, short selling, short squeeze, Silicon Valley, South Sea Bubble, statistical model, survivorship bias, systematic trading, tail risk, technology bubble, The Wealth of Nations by Adam Smith, transaction costs, yield curve, Yogi Berra, zero-sum game

., have better information— there would be no gains from trade. . . . There have to be other reasons for trade. Although some price moves occur because of changes in information, other price changes take place because of changes in the risk tolerance or liquidity preferences of certain investors.1 Grossman cites two examples of price changes taking place because of changes in risk tolerance or liquidity preferences. The first example involves a pension fund aiming to improve the match between its assets and liabilities by shifting out of stocks into an immunized bond portfolio. The second example involves investors who desire immediacy of execution.

In addition to providing a benchmark for how the university chooses to trade off risk versus expected return, the Policy Portfolio also serves as the overall yardstick against which the Investment Committee can judge the actual performance of Swensen and his staff. Jack Meyer, Swensen’s counterpart at Harvard from 1990 to 2005, sees the Policy Portfolio in the same light: “If you use a policy portfolio that doesn’t align precisely with your return goals, risk tolerance, and basic asset mix, no amount of clever trading will save you.”3 Nevertheless, the Yale committee’s attachment to the Policy Portfolio has an aggressive as well as a defensive f lavor. As the 1995 report describes it, “Because of the importance of maintaining policy targets, the Investment Office closely monitors deviations of actual from target allocations in the Endowment.

In an ironic sense, the Capital Asset Pricing Model and the Efficient Market Hypothesis would become descriptions of reality rather than abstract models. Everybody would want to own the same portfolio, and that portfolio in effect would become The Market. Then all prices would clear without variation, everyone would have the same risk tolerance, everyone would earn same rate of return, and everyone would be taking on the same level of risk. To some extent, this process is already well under way. REITs are a conversion of real estate from an asset you can kick to a piece of paper trading in the financial markets. Private equity used to be priced in a negotiation between seller and buyer; now private equity is priced in auction markets.


pages: 338 words: 104,815

Nobody's Fool: Why We Get Taken in and What We Can Do About It by Daniel Simons, Christopher Chabris

Abraham Wald, Airbnb, artificial general intelligence, Bernie Madoff, bitcoin, Bitcoin "FTX", blockchain, Boston Dynamics, butterfly effect, call centre, Carmen Reinhart, Cass Sunstein, ChatGPT, Checklist Manifesto, choice architecture, computer vision, contact tracing, coronavirus, COVID-19, cryptocurrency, DALL-E, data science, disinformation, Donald Trump, Elon Musk, en.wikipedia.org, fake news, false flag, financial thriller, forensic accounting, framing effect, George Akerlof, global pandemic, index fund, information asymmetry, information security, Internet Archive, Jeffrey Epstein, Jim Simons, John von Neumann, Keith Raniere, Kenneth Rogoff, London Whale, lone genius, longitudinal study, loss aversion, Mark Zuckerberg, meta-analysis, moral panic, multilevel marketing, Nelson Mandela, pattern recognition, Pershing Square Capital Management, pets.com, placebo effect, Ponzi scheme, power law, publication bias, randomized controlled trial, replication crisis, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, Sharpe ratio, short selling, side hustle, Silicon Valley, Silicon Valley startup, Skype, smart transportation, sovereign wealth fund, statistical model, stem cell, Steve Jobs, sunk-cost fallacy, survivorship bias, systematic bias, TED Talk, transcontinental railway, WikiLeaks, Y2K

Independent replications by other labs generally find far smaller effects, and meta-analyses that correct for selective publication show little or no benefit.27 • A 2010 study of 42 participants reported that those who held their bodies in two separate “power poses” for one minute each subsequently had increased testosterone levels, decreased cortisol levels, greater risk tolerance, and stronger feelings of power than those in a control group. The study was published in Psychological Science and has been cited more than 1,400 times. A TED talk on power posing has been viewed more than sixty-seven million times. Subsequent studies found no evidence of hormonal changes or risk tolerance, the key findings of the study, and the first author of the original study has since disavowed the results.28 • A series of studies and scientific papers in the late 1980s and early 1990s touted the idea that “mastery orientation,” which is now known as “growth mindset,” helps people overcome adversity.

Cuddy, and A. J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21 (2010): 1363–1368. TED talk: Amy Cuddy, “Your Body Language May Shape Who You Are,” YouTube, October 1, 2012 [https://www.ted.com/talks/amy_cuddy_your_body_language_may_shape_who_you_are]. A failed replication: E. Ranehill, A. Dreber, M. Johannesson, S. Leiberg, S. Sul, and R. A. Weber, “Assessing the Robustness of Power Posing: No Effect on Hormones and Risk Tolerance in a Large Sample of Men and Women,” Psychological Science 33 (2015): 1–4 [https://doi.org/10.1177/0956797614553946].


pages: 741 words: 199,502

Human Diversity: The Biology of Gender, Race, and Class by Charles Murray

23andMe, affirmative action, Albert Einstein, Alfred Russel Wallace, Asperger Syndrome, assortative mating, autism spectrum disorder, basic income, behavioural economics, bioinformatics, Cass Sunstein, correlation coefficient, CRISPR, Daniel Kahneman / Amos Tversky, dark triade / dark tetrad, domesticated silver fox, double helix, Drosophila, emotional labour, epigenetics, equal pay for equal work, European colonialism, feminist movement, glass ceiling, Gregor Mendel, Gunnar Myrdal, income inequality, Kenneth Arrow, labor-force participation, longitudinal study, meritocracy, meta-analysis, nudge theory, out of africa, p-value, phenotype, public intellectual, publication bias, quantitative hedge fund, randomized controlled trial, Recombinant DNA, replication crisis, Richard Thaler, risk tolerance, school vouchers, Scientific racism, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, Skinner box, social intelligence, Social Justice Warrior, statistical model, Steven Pinker, The Bell Curve by Richard Herrnstein and Charles Murray, the scientific method, The Wealth of Nations by Adam Smith, theory of mind, Thomas Kuhn: the structure of scientific revolutions, twin studies, universal basic income, working-age population

Mental abilities were cognitive performance, educational attainment, general cognitive ability, highest math class taken, intelligence, and self-reported math ability. Personality features (combined sample = 1,319). Personality features were adventurousness, alcohol consumption (drinks per week), general risk tolerance, risk-taking tolerance, life satisfaction, positive affect, subjective well-being, and well-being spectrum. 14. The choice of the particular traits used for this illustrative table doesn’t make much difference. If all of the SNPs in the GWAS Catalog are used, 32 percent of the physiological traits and 34 percent of the cognitive traits have target allele differences that qualify as “large.” 15.

Depression: Depressed affect, Depression, Depression (quantitative trait), Depressive symptoms, Depressive symptoms (MTAG), Depressive symptoms (SSRI exposure interaction), Depressive symptoms (stressful life events interaction), Major depressive disorder, Major depressive disorder (broad), Major depressive disorder (probable), Current major depressive disorder. Neuroticism: Neuroticism, Neuroticism (MTAG). Worry: Feeling worry, Worry, Worry too long after an embarrassing experience. Risk tolerance: General risk tolerance (MTAG), Risk-taking tendency (4-domain principal component model). Well-being: Eudaimonic well-being, Hedonic well-being, Subjective well-being, Subjective well-being (MTAG), Well-being spectrum (multivariate analysis). Autism: Autism, Autism spectrum disorder, Obsessive-compulsive disorder or autistic spectrum disorder, Social autistic-like traits.

The noncognitive traits are major diseases such as breast cancer and Parkinson’s disease, physiological biomarkers such as height and weight, and blood parameters such as red cell count and metabolite levels. The cognitive traits are cognitive disorders such as depression, cognitive ability (both IQ and neurocognitive functioning), and personality features such as risk-taking tolerance and life satisfaction. The note gives details.[13] TARGET ALLELE DIFFERENCES QUALIFYING AS “LARGE” (.20+) Physiological Traits No. of Unique SNPs: 13,431 Total: 33% African-Asian: 37% European-African: 33% Asian-European: 30% Diseases No. of Unique SNPs: 3,718 Total: 33% African-Asian: 38% European-African: 33% Asian-European: 30% Biomarkers No. of Unique SNPs: 5,298 Total: 35% African-Asian: 39% European-African: 35% Asian-European: 31% Blood parameters No. of Unique SNPs: 4,415 Total: 31% African-Asian: 35% European-African: 31% Asian-European: 28% Cognitive Traits No. of Unique SNPs: 9,628 Total: 36% African-Asian: 39% European-African: 37% Asian-European: 32% Cognitive disorders No. of Unique SNPs: 2,594 Total: 35% African-Asian: 38% European-African: 37% Asian-European: 31% Mental abilities No. of Unique SNPs: 5,715 Total: 36% African-Asian: 39% European-African: 36% Asian-European: 32% Personality features No. of Unique SNPs: 1,319 Total: 38% African-Asian: 42% European-African: 38% Asian-European: 35% Source: Author’s analysis, GWAS Catalog and Phase 1 of the 1000 Genomes Project.


pages: 194 words: 59,336

The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by J L Collins

asset allocation, Bernie Madoff, Black Monday: stock market crash in 1987, buy and hold, compound rate of return, currency risk, diversification, financial independence, full employment, German hyperinflation, index fund, inverted yield curve, John Bogle, lifestyle creep, low interest rates, money market fund, Mr. Money Mustache, nuclear winter, passive income, payday loans, risk tolerance, side hustle, The 4% rule, Vanguard fund, yield curve

In my own career there were many times I chose to step away from working for months or even years at a time. Each time changed my stage. Using this framework of two stages and two funds, you have all the tools you need to find your own balance. In determining that balance you’ll also want to consider two additional factors: How much effort you are willing to apply and your risk tolerance. Effort For the wealth accumulation stage an allocation of 100% stocks using VTSAX is the soul of simplicity. But as we’ve seen, some studies suggest that adding a small percentage of bonds—say 10-25%—actually outperforms 100% stocks. You can see this effect by playing with the various calculators found on the internet.

This is very much a function of your tolerance for risk and your personal situation. For the smoothest transition, you might start slowly shifting into your bond allocation 5 or 10 years before you are fully retired. Especially if you have a fixed date firmly in mind. But if you are flexible as to your retirement date and more risk tolerant, you might stay fully in stocks right up until you make the change. In doing so the stronger potential of stocks could get you there sooner. But if the market moves against you, you’ll have to be willing to push your retirement date back a bit. Of course, any time you shift between the accumulation and preservation stages, you’ll want to reassess and possibly adjust your allocation.


pages: 278 words: 84,002

Strategy Strikes Back: How Star Wars Explains Modern Military Conflict by Max Brooks, John Amble, M. L. Cavanaugh, Jaym Gates

a long time ago in a galaxy far, far away, British Empire, data acquisition, false flag, invisible hand, Jon Ronson, risk tolerance, South China Sea, Steven Pinker, Strategic Defense Initiative, Stuxnet, The future is already here, Yogi Berra

This illustrates an important point: for Rebels, separatists, and weaker nations, strategic shifts are always higher-risk ventures, since their aggregate power inferiority means that they have less of a cushion if the shift turns out to be unwise, undertaken too soon, or undertaken too late. Weaker parties must have a greater risk tolerance than stronger ones, but this makes them more susceptible to disaster. Unsurprisingly, though, the Star Wars metaphor is incomplete when it comes to understanding strategic shifts. Its mythological universe is missing some of the things that can drive strategic shifts, such as the ascension to power of a new leadership cadre with different priorities, objectives, value systems, and risk-tolerance levels and domestic factors like deep social, demographic, and political change or altered economic conditions.

But ultimately a strategic shift, like the creation of strategy itself, is more art than science, demanding psychological acuity; cross-cultural perceptiveness; an ability to peer through the fog of the future; and, most of all, the boldness to abandon something that had been working and strike out into the unknown with only a blurry, prediction-dependent map. A number of things can inspire an empire, state, or protostate to consider a strategic shift. None is more powerful than a defeat or disaster that proves that the old strategy was bankrupt and compels the boldness and risk tolerance that strategic shifts demand. Think Britain after Dunkirk or the United States after Pearl Harbor and the loss of the Philippines.2 Samuel Johnson once said that the prospect of being hanged concentrates the mind wonderfully. So does defeat or disaster. Even short of this, though, major change in the security situation can inspire or compel a strategic shift.


pages: 312 words: 83,998

Testosterone Rex: Myths of Sex, Science, and Society by Cordelia Fine

"World Economic Forum" Davos, assortative mating, behavioural economics, Cass Sunstein, classic study, confounding variable, credit crunch, Donald Trump, Downton Abbey, Drosophila, epigenetics, experimental economics, gender pay gap, George Akerlof, glass ceiling, helicopter parent, Jeremy Corbyn, longitudinal study, meta-analysis, phenotype, publication bias, risk tolerance, seminal paper

Yale Law School academic Dan Kahan showed that, when asked about the risks to human health, safety, or prosperity arising from high tax rates for business, now it was the women’s and minority men’s turn to be sanguine. This, he notes, beautifully illustrates Nelson’s point: It confirms that men are more risk tolerant than women only if some unexamined premise about what counts as a “risk” excludes from assessment the sorts of things that scare the pants off of white men (or at least hierarchical, individualistic ones).39 The white male effect in the United States, viewed alongside the similar risk perceptions of native Swedish men and women, suggests that it can at least sometimes be the different social place, identities, and experiences of men and women in the world, rather than some enduring dissimilarity of biology, that underlie sex differences in risk perception.

In fact, in the United States, the “masculinity gap” has been closing over time, in step with women’s changing roles and status in society.43 If risk taking is an integral part of a masculine identity, then we can predict that men should take greater financial risks when that identity, or the norms associated with it, are made salient. Viennese academics Katja Meier-Pesti and Elfriede Penz found exactly that. They primed young women and men with either masculine, feminine, or (in a control condition) gender-neutral stimuli. Men primed with masculinity gave the most risk-tolerant responses on a questionnaire assessing attitudes toward risk taking in investments.44 A more recent study also explored the importance of masculine identity for financial risk taking, by exploiting a rather depressing phenomenon known as the “failure-as-an-asset” effect. It turns out that presenting men with evidence that they have done poorly at something at which women tend to excel provides a little boost to their self-esteem, because incompetence in low-status femininity helps establish high-status manliness.

A., & Sikdar, A. (2009). The role of gender stereotypes in perceptions of entrepreneurs and intentions to become an entrepreneur. Entrepreneurship Theory and Practice, 33(2), 397–417. 42. Lemaster, P., & Strough, J. (2014). Beyond Mars and Venus: Understanding gender differences in financial risk tolerance. Journal of Economic Psychology, 42, 148–160; Meier-Pesti, K., & Penz, E. (2008). Sex or gender? Expanding the sex-based view by introducing masculinity and femininity as predictors of financial risk taking. Journal of Economic Psychology, 29(2), 180–196. 43. Twenge, J. (1997). Changes in masculine and feminine traits over time: A meta-analysis.


pages: 490 words: 117,629

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen

asset allocation, asset-backed security, Benchmark Capital, book value, buy and hold, capital controls, classic study, cognitive dissonance, corporate governance, deal flow, diversification, diversified portfolio, equity risk premium, financial engineering, fixed income, index fund, junk bonds, law of one price, Long Term Capital Management, low interest rates, market bubble, market clearing, market fundamentalism, money market fund, passive investing, Paul Samuelson, pez dispenser, price mechanism, profit maximization, profit motive, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, shareholder value, Silicon Valley, Steve Ballmer, stocks for the long run, survivorship bias, technology bubble, the market place, transaction costs, Vanguard fund, yield curve, zero-sum game

While hot stocks and brilliant timing make wonderful cocktail party chatter, the conversation-stopping policy portfolio proves far more important to investment success. The essence of the process that leads to creation of viable portfolio targets involves knowledge of basic investment principles, definition of specific investment goals, and understanding of individual risk tolerances. Fundamental investment tenets provide the framework upon which investors build portfolios with the greatest probability of meeting investor needs. Clear articulation of goals defines the task that investors desire to accomplish, while explicit specification of risk preferences outlines the parameters within which investors sensibly operate.

Asset-class weights range from 5 to 30 percent of assets, meeting the requirement of diversification. A portfolio with assets allocated according to fundamental investment principles establishes a strong starting point for individual investment programs. Ultimately, successful portfolios reflect the specific preferences and risk tolerances of individual investors. Understanding the quantitative and qualitative characteristics of asset-class exposure creates a basis for determining which asset classes to include and in which proportions to invest. Chapter 2, Core Asset Classes, offers a primer on those asset classes likely to contribute to investor goals.

Personal preferences play a critical subjective role in portfolio decision making. Unless an investor embraces wholeheartedly a particular portfolio structure, failure awaits. Lightly held positions invite casual reversal, exposing vacillating investors to the costly consequences of market whipsaw. By adopting asset-allocation targets that dovetail with personal risk tolerances, investors vastly increase the odds of investment success. Individual circumstances introduce important considerations to the portfolio structuring process. Nonfinancial assets, such as homes and privately held businesses, influence an investor’s desired portfolio composition. Financial liabilities, such as mortgages and personal loans, factor into investor decisions regarding asset allocation, particularly with respect to holdings of fixed income.


pages: 519 words: 118,095

Your Money: The Missing Manual by J.D. Roth

Airbnb, Alan Greenspan, asset allocation, bank run, book value, buy and hold, buy low sell high, car-free, Community Supported Agriculture, delayed gratification, diversification, diversified portfolio, do what you love, estate planning, Firefox, fixed income, full employment, hedonic treadmill, Home mortgage interest deduction, index card, index fund, John Bogle, late fees, lifestyle creep, low interest rates, mortgage tax deduction, Own Your Own Home, Paradox of Choice, passive investing, Paul Graham, random walk, retail therapy, Richard Bolles, risk tolerance, Robert Shiller, speech recognition, stocks for the long run, traveling salesman, Vanguard fund, web application, Zipcar

Lazy Portfolios The most important investment decision you can make—besides how much to invest—is where to invest. As with so many aspects of investing, there's no one option that works for every person. One factor that can help you decide how to invest your money is risk tolerance. That's a measure of how much uncertainty—and possible loss—you're willing to deal with in your investments. If your risk tolerance is high, you can handle big fluctuations in your investment returns in exchange for the possibility of large gains. If your tolerance is low, on the other hand, you'd rather not deal with the ups and downs—even if that means giving up a chance at making higher returns.

If your tolerance is low, on the other hand, you'd rather not deal with the ups and downs—even if that means giving up a chance at making higher returns. Some of your portfolio should be in fixed-income investments like bonds and CDs, which pay interest on a regular schedule. How much depends on your goals, needs, and risk tolerance. A common rule of thumb is that the percentage of fixed-income investments in your portfolio should be equal to your age. So, if you're 30, you should have 30% in something like a bond mutual fund. (A lot of experts dislike this guideline, but it's an easy place to start.) Most (maybe all) of the rest should be in stocks. Some of these should be stocks in American companies, and some should be in foreign companies.

If you decide to buy a lifecycle fund, buy only that fund. If you spread your money around (especially to other lifecycle funds), you defeat the whole purpose of this kind of investment. Note You don't have to pick a lifestyle fund that matches your likely retirement date. Instead, choose one that matches your risk tolerance. If the Fidelity Freedom 2035 is too aggressive for you, for example, go with the Fidelity Freedom 2025 instead. You can read more about lifecycle funds in this New York Times article: http://tinyurl.com/NYT-tdfunds. All-in-one funds If you like the idea of investing in just one fund but you don't want its asset allocation to change over time, you have a handful of other single-fund options, including: Vanguard STAR Fund (VGSTX), a collection of 11 other Vanguard mutual funds.


pages: 542 words: 145,022

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest by Andrew W. Lo, Stephen R. Foerster

Alan Greenspan, Albert Einstein, AOL-Time Warner, asset allocation, backtesting, behavioural economics, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, Charles Babbage, Charles Lindbergh, compound rate of return, corporate governance, COVID-19, credit crunch, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, Edward Glaeser, equity premium, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, fake news, family office, fear index, fiat currency, financial engineering, financial innovation, financial intermediation, fixed income, hiring and firing, Hyman Minsky, implied volatility, index fund, interest rate swap, Internet Archive, invention of the wheel, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John von Neumann, joint-stock company, junk bonds, Kenneth Arrow, linear programming, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, new economy, New Journalism, Own Your Own Home, passive investing, Paul Samuelson, Performance of Mutual Funds in the Period, prediction markets, price stability, profit maximization, quantitative trading / quantitative finance, RAND corporation, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, selection bias, seminal paper, shareholder value, Sharpe ratio, short selling, South Sea Bubble, stochastic process, stocks for the long run, survivorship bias, tail risk, Thales and the olive presses, Thales of Miletus, The Myth of the Rational Market, The Wisdom of Crowds, Thomas Bayes, time value of money, transaction costs, transfer pricing, tulip mania, Vanguard fund, yield curve, zero-coupon bond, zero-sum game

Any ideas or strategies discussed in this book should not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial objectives, needs, and risk tolerance. Princeton University Press, the authors, and the subjects of this book expressly disclaim any liability for loss incurred by any person who acts on the information, ideas, or strategies discussed herein. We dedicate this book to the most perfect of all portfolios, our families: Nancy, Derek, and Wesley Linda, Jennifer, Christopher, Thomas, and Melanie CONTENTS Preface      ix The Pioneers and Their Connections      xiv   1    A Brief History of Investments      1   2    Harry Markowitz and Portfolio Selection      18   3    William Sharpe and the Capital Asset Pricing Model      51   4    Eugene Fama and Efficient Markets      81   5    John Bogle and the Vanguard Portfolio      113   6    Myron Scholes and the Black-Scholes / Merton Option Pricing Model      140   7    Robert Merton, from Derivatives to Retirement      173   8    Martin Leibowitz, from Bond Guru to Investment Strategist      199   9    Robert Shiller and Irrational Exuberance      226 10    Charles Ellis and Winning at the Loser’s Game      255 11    Jeremy Siegel, the Wizard of Wharton      281 12    So, What Is the Perfect Portfolio?      

Any reference to an investment’s past or potential performance isn’t a recommendation or a guarantee of any specific outcome. We strongly encourage you to consult with a financial professional for the purpose of assessing whether the ideas or strategies discussed in this book are suitable to you based on your own personal financial objectives, needs, and risk tolerance. We wish you all the success in your investments, but any losses are yours alone. As in any such endeavor, we wish to acknowledge the important contributors on whose inputs and insights we have relied while stressing that any inadvertent errors are our own. We thank Jayna Cummings for carefully reviewing our preliminary drafts and general editorial support, Jeff Silberman for helpful suggestions, John Cochrane for exhaustive and insightful comments that greatly improved this book, Will Goetzmann for offering his unique historical perspective on chapter 1, Michael Nolan and John Bogle Jr. for comments related to chapter 5, senior editor Joe Jackson as well as Jackie Delaney, Josh Drake, and the excellent team at Princeton University Press, and Deborah Grahame-Smith and Yvonne Ramsey at Westchester Publishing Services.

“Assume we are Bayesians. If we don’t have the same prior [beliefs], we shouldn’t have the same portfolios. Are we the same ages? Do we have the same risk preferences? If not, we shouldn’t have the same portfolios. The thing that is perfect for you is not perfect for me.… It depends on our ages, our objectives, our risk tolerance, and even given that, there is wiggle room.”100 The notion of a Perfect Portfolio for Markowitz is one that we all pursue, how we each individually construct our own portfolio. His work allows all of us to pursue the Perfect Portfolio that’s right for us. Markowitz gave an example of a waitress who, following his advice, had invested in a portfolio that was weighted 50 percent in stocks and 50 percent in bonds.


pages: 416 words: 106,532

Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond: The Innovative Investor's Guide to Bitcoin and Beyond by Chris Burniske, Jack Tatar

Airbnb, Alan Greenspan, altcoin, Alvin Toffler, asset allocation, asset-backed security, autonomous vehicles, Bear Stearns, bitcoin, Bitcoin Ponzi scheme, blockchain, Blythe Masters, book value, business cycle, business process, buy and hold, capital controls, carbon tax, Carmen Reinhart, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, correlation coefficient, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, disintermediation, distributed ledger, diversification, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, fiat currency, financial engineering, financial innovation, fixed income, Future Shock, general purpose technology, George Gilder, Google Hangouts, high net worth, hype cycle, information security, initial coin offering, it's over 9,000, Jeff Bezos, Kenneth Rogoff, Kickstarter, Leonard Kleinrock, litecoin, low interest rates, Marc Andreessen, Mark Zuckerberg, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, packet switching, passive investing, peer-to-peer, peer-to-peer lending, Peter Thiel, pets.com, Ponzi scheme, prediction markets, quantitative easing, quantum cryptography, RAND corporation, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seminal paper, Sharpe ratio, Silicon Valley, Simon Singh, Skype, smart contracts, social web, South Sea Bubble, Steve Jobs, transaction costs, tulip mania, Turing complete, two and twenty, Uber for X, Vanguard fund, Vitalik Buterin, WikiLeaks, Y2K

MODERN PORTFOLIO THEORY When evaluating any investment decision, the starting point is always an individual’s financial goals, time horizon, and risk tolerance. Goals are what the funds will be used for, and the time horizon reveals when they will be used. Risk tolerance takes a bit more analysis. Each investor has a unique tolerance for the ongoing gyrations of the value of his or her portfolio. For example, do people lose sleep when their portfolio fluctuates, or do they slumber through ups and downs, dreaming of long-term gains? Once goals, time horizon, and risk tolerance are determined, one can proceed to developing an investment portfolio that maximizes returns while staying within the bounds of these parameters.

THE WORLD OF CRYPTOASSET WALLETS Storing cryptoassets on an exchange may not always be the safest option. The risk is lower for those exchanges that have insurance, keep the majority of their assets in cold storage, and employ other best-in-class security measures like penetration testing and regular audits. For other exchanges, the risk should only be tolerated if the innovative investor is trading regularly and making use of the exchange’s capabilities, such as offering newer cryptoassets. If not trading regularly, investors should consider one of the following wallet options to store their assets safely. Broadly speaking, there are five kinds of wallets: web (cloud), desktop, mobile, hardware, and paper.


pages: 252 words: 70,424

The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value by John Sviokla, Mitch Cohen

Bear Stearns, Blue Ocean Strategy, business cycle, Cass Sunstein, Colonization of Mars, corporate raider, Daniel Kahneman / Amos Tversky, driverless car, eat what you kill, Elon Musk, Frederick Winslow Taylor, game design, global supply chain, James Dyson, Jeff Bezos, John Harrison: Longitude, Jony Ive, loss aversion, Mark Zuckerberg, market design, megaproject, old-boy network, paper trading, RAND corporation, randomized controlled trial, Richard Thaler, risk tolerance, scientific management, self-driving car, Sheryl Sandberg, Silicon Valley, smart meter, Steve Ballmer, Steve Jobs, Steve Wozniak, tech billionaire, Tony Hsieh, Toyota Production System, Virgin Galactic, young professional

MORE EVIDENCE THAT BILLIONAIRES ARE NOT BIG RISK TAKERS We were surprised, and somewhat skeptical, by our finding that billionaires do not possess a greater tolerance for risk than the average businessperson—the cliché of the entrepreneur as risk taker is so strong and pervasive in business culture. Yet as we thought about it more and did more research, it became clear that the issue is not risk tolerance but risk attitudes. Billionaires do not overweigh failure, nor do they take irrational risks. One story that Dean Spanos, son of the billionaire Alex Spanos, shared with us when we sat down with him and his siblings in Stockton, California, underscores this idea of the kind of risks billionaires are—and are not—willing to take.

Give emergent Producers projects or roles that stretch their skills. The ones you think have huge potential should be given a chance to try out important roles that you aren’t sure they can handle yet. You are not setting up anyone to fail. On the contrary, you are challenging them to succeed. When you give people something they have to reach for, their risk tolerance increases and you give them a chance to show themselves what they are capable of. Ideally, the Producers you challenge have either a proven track record or a palpable ability to see the upside—opportunities lost should be as salient to them as risks avoided. When deciding who should get what role or opportunity, make sure as well that the managers and leaders evaluating the options also have the appropriate risk balance in mind.


pages: 353 words: 88,376

The Investopedia Guide to Wall Speak: The Terms You Need to Know to Talk Like Cramer, Think Like Soros, and Buy Like Buffett by Jack (edited By) Guinan

Albert Einstein, asset allocation, asset-backed security, book value, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, clean water, collateralized debt obligation, computerized markets, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, fear index, financial engineering, fixed income, Glass-Steagall Act, implied volatility, index fund, intangible asset, interest rate swap, inventory management, inverted yield curve, junk bonds, London Interbank Offered Rate, low interest rates, margin call, money market fund, mortgage debt, Myron Scholes, passive investing, performance metric, risk free rate, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, short selling, short squeeze, statistical model, time value of money, transaction costs, yield curve, zero-coupon bond

Related Terms: • Balance Sheet • Depreciation • Tangible Asset • Current Assets • Intangible Asset 14 The Investopedia Guide to Wall Speak Asset Allocation What Does Asset Allocation Mean? An investment strategy that aims to balance risk and reward by spreading investments across three main asset classes—equities, bonds, and cash—in accordance with an individual’s goals, risk tolerance, and investment horizon. Historically, different asset classes have varying degrees of risk and return and therefore behave differently over time. Investopedia explains Asset Allocation There is no simple formula to determine the proper asset allocation for every individual. However, the consensus among financial professionals is that asset allocation is one of the most important investment components.

A group of investments such as stocks, bonds and cash equivalents, mutual funds, exchange-traded funds, and closed-end funds that are selected on the basis of an investor’s short-term or long-term investment goals. Portfolios are held directly by investors and/or managed by financial professionals. Investopedia explains Portfolio Prudence suggests that investors construct an investment portfolio in accordance with their risk tolerance and investment objectives. One should think of an investment portfolio as a pie that is divided into pieces of varying sizes that represent a variety of asset classes and/or types of investments to accomplish an appropriate riskadjusted return. For example, a conservative investor may favor a portfolio with large-cap value stocks, broad-based market index 226 The Investopedia Guide to Wall Speak funds, investment-grade bonds, and cash.

Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential returns. According to the risk-return trade-off, invested money can render higher profits only if it is subject to the possibility of being lost. Investopedia explains Risk-Return Trade-Off Because of the risk-return trade-off, investors must recognize their personal risk tolerance when choosing investments. Taking on additional risk is the price of achieving potentially higher returns; therefore, if an investor wants to make money, he or she cannot cut out all risk. The goal instead is to find an appropriate balance that generates some profit but allows the investor to sleep at night.


The Manager’s Path by Camille Fournier

Big Tech, emotional labour, failed state, fear of failure, hiring and firing, hive mind, interchangeable parts, job automation, Kanban, Larry Wall, microservices, pull request, risk tolerance, Schrödinger's Cat, side project, Steve Jobs, WebSocket, work culture

Finally, you graduate to a spaceship, where you can’t make quick moves and the course is set long in advance, but you’re capable of going very far and taking tons of people along for the ride. Assessing Your Role Recognize the size of the vessel you’re steering. This will be determined by a combination of the number of people in the company, the age of the company, the size of the existing business infrastructure (software, processes, and the like), and risk tolerance: 196 | THE MANAGER’S PATH People The more people you have, the more thoughtful structure you need to get everyone moving in the right direction. Leaders who want a high degree of control over their organization tend to need more structure in place to make sure their wishes are enacted. Modern companies often put their structural focus on goal setting instead of trying to make all decisions from the top, but don’t underestimate the structure you need to successfully set and communicate goals.

Size of existing infrastructure If you have few established business rules (such as “this is how we determine what to charge our customers”) and little code or physical infrastructure (like stores, warehouses, or inventory), there is less need for structure. On the other hand, the more existing business rules and infrastructure you have, the more you’ll need clarity on how to handle them. Risk tolerance Are you in a highly regulated industry? Do you have a lot to lose if certain types of mistakes are made? Or are you in an unregulated industry, with little on the line? Your structures and processes should reflect this. In general, the more people you have depending on you and the larger the business is, the less risk you’ll be willing to take even without regulatory requirements.

Career ladders, values, team structures—all of those are easy compared to the general angst and frustration that you can cause by adopting the wrong engineering processes for your teams. Without any process, your teams will struggle to scale. With the wrong process, they will be slowed down. Balancing the current size and risk tolerance of your team with the processes at hand is the essence of guiding good software development and operational guidelines. 212 | THE MANAGER’S PATH Ask the CTO: Engineering Process I’m the head of engineering at a small but quickly growing startup. We have very little process right now: there are no code reviews, we use Trello to manage tasks but rarely put everything into that system, and our architecture decisions tend to be made by whomever is working on the project at the time, with my sign-off.


pages: 195 words: 63,455

Damsel in Distressed: My Life in the Golden Age of Hedge Funds by Dominique Mielle

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", activist fund / activist shareholder / activist investor, airline deregulation, Alan Greenspan, banking crisis, Bear Stearns, Black Monday: stock market crash in 1987, blood diamond, Boris Johnson, British Empire, call centre, capital asset pricing model, Carl Icahn, centre right, collateralized debt obligation, Cornelius Vanderbilt, coronavirus, COVID-19, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, Elon Musk, Eugene Fama: efficient market hypothesis, family office, fear of failure, financial innovation, fixed income, full employment, glass ceiling, high net worth, hockey-stick growth, index fund, intangible asset, interest rate swap, John Meriwether, junk bonds, Larry Ellison, lateral thinking, Long Term Capital Management, low interest rates, managed futures, mega-rich, merger arbitrage, Michael Milken, Myron Scholes, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, offshore financial centre, Paul Samuelson, profit maximization, Reminiscences of a Stock Operator, risk free rate, risk tolerance, risk-adjusted returns, satellite internet, Savings and loan crisis, Sharpe ratio, Sheryl Sandberg, SoftBank, survivorship bias, Tesla Model S, too big to fail, tulip mania, union organizing

I was a lot less talented but a lot more hardworking, so I made up for any of my deficiencies through brute force. The first was a class in risk management taught by Darrell Duffie. Professor Duffie was instrumental in my conviction that risk tolerance is a skill, like financial analysis or bankruptcy reorganization, that you learn and refine. It is a muscle that you exercise and stretch. Risk tolerance is no different from physical endurance. Everyone has some; it’s only a matter of degree. What matters is how you quantify and manage it, or in finance terms, the amount of return you garner per unit of risk, a concept aptly named the Sharpe ratio, conceived by the 1990 Nobel laureate in economic sciences, William F.


pages: 417 words: 103,458

The Intelligence Trap: Revolutionise Your Thinking and Make Wiser Decisions by David Robson

active measures, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, Atul Gawande, autism spectrum disorder, availability heuristic, behavioural economics, classic study, cognitive bias, corporate governance, correlation coefficient, cuban missile crisis, Daniel Kahneman / Amos Tversky, dark matter, deep learning, deliberate practice, dematerialisation, Donald Trump, Dunning–Kruger effect, fake news, Flynn Effect, framing effect, fundamental attribution error, illegal immigration, Isaac Newton, job satisfaction, knowledge economy, Large Hadron Collider, lone genius, meta-analysis, Nelson Mandela, obamacare, Parler "social media", pattern recognition, post-truth, price anchoring, reality distortion field, Richard Feynman, risk tolerance, Silicon Valley, social intelligence, Steve Jobs, sunk-cost fallacy, tacit knowledge, TED Talk, the scientific method, theory of mind, traveling salesman, ultimatum game, Y2K, Yom Kippur War

Before we end our conversation, Tinsley emphasises that some risks will be inevitable; the danger is when we are not even aware they exist. She recalls a seminar during which a NASA engineer raised his hand in frustration. ‘Do you not want us to take any risks?’ he asked. ‘Space missions are inherently risky.’ ‘And my response was that I’m not here to tell you what your risk tolerance should be. I’m here to say that when you experience a near miss, your risk tolerance will increase and you won’t be aware of it.’ As the fate of the Challenger and Columbia missions shows, no organisation can afford that blind spot. In hindsight, it is all too easy to see how Deepwater Horizon became a hotbed of irrationality before the spill.

In both lab experiments and data gathered during real NASA projects, Tinsley has found that people are far more likely to note and report near misses when safety is emphasised as part of the overall culture, in its mission statements – sometimes with as much as a five-fold increase in reporting.21 As an example, consider one of those scenarios involving the NASA manager planning the unmanned space mission. Participants told that ‘NASA, which pushes the frontiers of knowledge, must operate in a high-risk, risk-tolerant environment’ were much less likely to notice the near miss. Those told that ‘NASA, as a highly visible organization, must operate in a high-safety, safety-first environment’, in contrast, successfully identified the latent danger. The same was also true when the participants were told that they would need to justify their judgement to the board.


pages: 304 words: 22,886

Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler, Cass R. Sunstein

Al Roth, Albert Einstein, asset allocation, availability heuristic, behavioural economics, call centre, carbon tax, Cass Sunstein, choice architecture, continuous integration, currency risk, Daniel Kahneman / Amos Tversky, desegregation, diversification, diversified portfolio, do well by doing good, endowment effect, equity premium, feminist movement, financial engineering, fixed income, framing effect, full employment, George Akerlof, index fund, invisible hand, late fees, libertarian paternalism, loss aversion, low interest rates, machine readable, Mahatma Gandhi, Mason jar, medical malpractice, medical residency, mental accounting, meta-analysis, Milgram experiment, money market fund, pension reform, presumed consent, price discrimination, profit maximization, rent-seeking, Richard Thaler, Right to Buy, risk tolerance, Robert Shiller, Saturday Night Live, school choice, school vouchers, systems thinking, Tragedy of the Commons, transaction costs, Vanguard fund, Zipcar

They found that the more stock funds the plan offered, the greater was the percentage of participants’ money invested in stocks. Many plans have attempted to help participants deal with the difficult problem of portfolio construction by offering “lifestyle” funds that blend stocks and bonds in a way designed to meet the needs of different levels of risk tolerance. For example, an employer might offer three lifestyle funds: conservative, moderate, and aggressive. These funds are already diversified, so individuals need pick only the fund that fits their risk preference. Some funds also adjust the asset allocation with the age of the participant. Such a fund assortment is a good idea and represents an excellent set of default options (if the fees are reasonable).

INDEX AARP ABBA, Gold: Greatest Hits “above average” effect Abu Ghraib prison accessibility accountability, in schools acid deposition program acid rain air conditioners, filters for air pollution alcohol abuse Ambient Orb American dream American Express anchoring and adjustment angels annual percentage rate (APR) anonymity arbitrage opportunity arousal, power of asbestos, warnings about Asch, Solomon aspects, elimination by asset allocation, company stock, diversification heuristic, and loss aversion, and market timing, mutual funds, and rates of return, and risk tolerance, rules of thumb for, stocks and bonds asymmetric paternalism ATM cards attention, lack of Attila the Hun Austria, organ donations in autokinetic effect automatic pilot Automatic System, and Doers, mindless choosing by, and priming, and risk, in Stroop test, and temptation Automatic Tax Return automobiles: buying, catalytic converters for, emissions from, fuel economy standards for, gas tank caps, user-friendly, Zipcar rentals autopsies, corneas removed in availability bias Ayres, Ian “back to zero” option Barrera, Ramiro basketball: “hot hands” in, “streak shooting,” behavior: dynamically inconsistent, risk-related Benartzi, Shlomo Bennett, Robert Bettinger, Eric Big Blue birth control pills Bismarck, Otto von boomerang effect borrowing, see also credit markets Boston, school system in Boston Research Group brain, functioning of Brandeis, Louis brand switching Breman, Anna broadcast programming Burke, Edmund Bush, George H.

., status quo bias in, use of term, variations on a theme McAllen, Texas, Medicare Part D in McFadden, Daniel Medicaid, and Medicare Part D Medicare Advantage Medicare Part D, see prescription drug plan Medicare Web site mental accounting mere-measurement effect Merrell, Katie Métro, Le, Paris Meulbroek, Lisa microfinance loans mistakes, learning from MIT, Poverty Action Lab money: borrowing, as fungible, liquid assets of households, personal savings, for retirement, see retirement plans; Save More Tomorrow money illusion money market accounts Montana, social influence in mortgage brokers mortgages, and the American dream, annual percentage rate (APR), costs of, fees, fixed-rate, and foreclosures, “good-faith estimate” in, interest-only, online shopping for, points, prepayment penalties, and RECAP, research findings about, in sub-prime market, and teaser rates, and Truth in Lending Act, variable-rate motorcycle helmets music downloads mutual funds MySpace nail polish, no-bite National Association of Chain Drug Stores National Community Pharmacists Association National Environmental Policy Act (1972) Nazism negligence: defined, right to sue for negotiations, opening offers in Nelson, Willie neutrality New Deal No Child Left Behind Act noodge, meaning of term Norman, Don, The Design of Everyday Things nudge, use of term, nudges, evaluation of obesity, and conformity, and self-control, and social influence Occupational Safety and Health Administration (OSHA) One Size Fits All optical illusions optimism “opt-in” policy “opt-out” policy Oreopoulos, Phil organ donations, “brain dead” sources of, complexities in, default rule in, explicit consent in, inertia in, mandated choice, market in, presumed consent, rejection rate in, routine removal, social norms overconfidence ozone layer painting a ceiling paint store Parker, Tom, Rules of Thumb parking garages paternalism: asymmetric, and coercion, of government, “one-mouse-click,”; One Size Fits All, rejection of, stopping point for, use of term pedestrians peer pressure Pension Protection Act (2006) pensions, see retirement plans pesticides, warnings about Petrified Forest National Park, Arizona Planners planning fallacy pluralistic ignorance politics: brand switching in, libertarian paternalism in, predictions in, private-sector interests in, probability of voting, Third Way in, voting patterns pollution popcorn portfolio theory postcompletion errors practice, and feedback preferences Prelec, Drazen prescription drug plan, available alternative plans, confusing choices in, coverage in, defects of, design of, “doughnut hole” in, and drug prices, dual eligibles in, enrollment routes, failure to serve, flexible switching option in, individuals with no coverage, intelligent assignment in, key features of, lessons to be learned from, as Medicare Part D, minimum coverage requirements for, non-enrollment as default option, and pharmacy networks; poor choices made in, price differences in, random default, RECAP proposal for, restructuring of, simplicity needed in, Web site as tool for Prestwood, Charlie presumed consent, and organ removal prices, and incentives priming procrastination publicity principle public policy, and framing random processes: neutrality in, patterns in, “streak shooting,” Rawls, John Read, Daniel RECAP (Record, Evaluate, Compare Alternative Prices), and credit cards, and Medicare Part D, and mortgages, and student loans, and transparency recycling redistribution Reflective System, and Planners Regulation Z (Truth in Lending Act) representativeness required choice restaurant health inspection retirement plans: automatic enrollment in, automatic savings for, choice architecture in, choosing, complex choices in, conflicts of interest in, contribution rates, default options in, defined-benefit, defined-contribution, discretionary contributions to, diversification rule of, education about, enrollment decisions, ERISA, errors expected in, exclusive benefit rule of, feedback in, forced choice in, “free money” in, and government, incentives in, investments for, see investments; and job switching, mappings in, matching contributions to, and mindless choosing, obstacles to saving for, portable, postretirement income needed in, prudence rule of, “safe harbor status” for, Save More Tomorrow, saving for, simplicity in, status quo bias in, synchronized to pay raises, tax-favored savings accounts right to be wrong risk assessment risk-related behavior risk tolerance Robur Aktiefond Contura, Sweden Rogers, Kenny, “The Gambler,” Romalis, John Roosevelt, Franklin D. Roth, Al rules of thumb, anchoring, availability, in investments, representativeness, systematic biases in Rules of Thumb (Parker) Rumsfeld, Donald saccharine, warnings about Saks, Michael Salganik, Matthew salience same-sex relationships Samuelson, William San Marcos, California, energy use in San Marcos, Texas, schools Santorum, Rick Save More Tomorrow, and automatic enrollment, contributions synchronized to pay raises, government role in, obstacles to saving, and Pension Protection Act scents, as cues Schiphol Airport, Amsterdam, men’s rooms in Sears, profit-sharing plan Seattle Windshield Pitting Epidemic self-control: with credit cards, and gambling, market-driven, and mindless choosing, and Save More Tomorrow, sinful goods, strategies for, and temptation, two-system conception of Sell More Tomorrow Shaikh, Altaf Shea, Dennis Shepard, Roger Sherif, Muzafer Shu, Suzanne Silverstein, Shel, “Smart,” similarity heuristic Simister, Duncan simplifying strategies sinful goods slippery-slope argument smoking: CARES, intrusive paternalism vs., quitting without a patch, risks of, and self-control, and social influence Snow, Tony social influences, as choice architecture, conformity, and cultural change, in health care, and information, in Jonestown, learning from others, in peer pressure, power of, priming, spotlight effect, and unpredictability “social norms” approach Social Security, and advertising, default fund for, lessons learned from the Swedish experience, simplified choice process, Swedish privatization of, and timing Souleles, Nick Southern California Edison Spain, organ donations in spotlight effect Stafford loans status quo bias: and default option, in education, as inertia, and lack of attention, and magazine subscriptions, in marriage, in retirement savings Stewart, Potter Stickk.com Stigler, George stimulus response compatibility stocks and bonds, company stock, diversification of, and environmental blacklist, market timing, Sell More Tomorrow strategic misrepresentation Stroop test student loans, avoiding, college savings accounts (529 plans), expected family contribution in, FAFSA for, as opportunity to fleece confused consumers, from private sector, RECAP applied to subliminal advertising subprime mortgages sunlamps supply and demand Sweden, in world economy Swedish Social Security, active choosers in, advertising, asset allocation in, availability bias in, default fund of, inertia in, Just Maximize Choices in, lessons learned from table test “target maturity funds,” tax-favored savings accounts Tax Return, Automatic teenage pregnancy television, default option in temptation, and arousal, cashew phenomenon, and “hot-cold empathy gap,”; and mental accounting, and mindless choosing, and packaging, and self-control, sinful goods, of Ulysses terror alert system tetanus shots Texas, anti-littering campaign in Thaler, Richard H., and Save More Tomorrow thinking, in Reflective System Third Way Thompson, Clive TIAA-CREF Tierney, John Toxic Release Inventory tragedy of the commons transparency Truth in Lending Act (Regulation Z) Tversky, Amos Ulysses, resisting temptation unpredictability, user ratings, U.S.


pages: 197 words: 53,831

Investing to Save the Planet: How Your Money Can Make a Difference by Alice Ross

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, An Inconvenient Truth, barriers to entry, British Empire, carbon footprint, carbon tax, circular economy, clean tech, clean water, coronavirus, corporate governance, COVID-19, creative destruction, decarbonisation, diversification, Elon Musk, energy transition, Extinction Rebellion, family office, food miles, Future Shock, global pandemic, Goldman Sachs: Vampire Squid, green transition, Greta Thunberg, high net worth, hiring and firing, impact investing, Intergovernmental Panel on Climate Change (IPCC), Jeff Bezos, lockdown, low interest rates, Lyft, off grid, oil shock, passive investing, Peter Thiel, plant based meat, precision agriculture, risk tolerance, risk/return, sharing economy, Silicon Valley, social distancing, sovereign wealth fund, TED Talk, Tragedy of the Commons, uber lyft, William MacAskill

That’s why you shouldn’t just copy your friends, as Caroline did with David. The company he was investing in might have made sense for him given his risk portfolio and goals – maybe he had money to burn – but it probably didn’t make sense for her. A good financial adviser will suggest investment products or styles that are in line with your financial goals and your risk tolerance. Investing ethically adds a new layer of personal decisions. That’s because, just as there’s no one answer to what investment fund you should buy or what mortgage you should get, there’s no one answer for how you should invest to save the planet. Companies and funds that are helping to mitigate climate change are choosing to do it in different ways.

So philanthropists had to be essentially prepared to lose their money: a climate change investment gamble. It worked, and the rest was history. Echoing Breakthrough’s view on the matter, Systrom says: ‘A lot of tech in this space is really risky and you need a different kind of investor than a 5–10-year closed-end venture investor. It matches well with the attributes of philanthropy: very risk-tolerant, very long time frame for a return, if there even is one.’ How to invest in clean energy The Breakthrough Energy Ventures approach, while inspiring, is a niche form of investment available to the select few: those who can afford to tie up huge sums of capital and risk losing much of it over the next 20 years or more.


pages: 345 words: 84,847

The Runaway Species: How Human Creativity Remakes the World by David Eagleman, Anthony Brandt

active measures, Ada Lovelace, agricultural Revolution, Albert Einstein, Andrew Wiles, Apollo 13, Burning Man, cloud computing, computer age, creative destruction, crowdsourcing, Dava Sobel, deep learning, delayed gratification, Donald Trump, Douglas Hofstadter, en.wikipedia.org, Frank Gehry, Gene Kranz, Google Glasses, Great Leap Forward, haute couture, informal economy, interchangeable parts, Isaac Newton, James Dyson, John Harrison: Longitude, John Markoff, Large Hadron Collider, lone genius, longitudinal study, Menlo Park, microbiome, Netflix Prize, new economy, New Journalism, pets.com, pneumatic tube, QWERTY keyboard, Ray Kurzweil, reversible computing, Richard Feynman, risk tolerance, Scaled Composites, self-driving car, Simon Singh, skeuomorphism, Solyndra, SpaceShipOne, stem cell, Stephen Hawking, Steve Jobs, Stewart Brand, synthetic biology, TED Talk, the scientific method, Watson beat the top human players on Jeopardy!, wikimedia commons, X Prize

You wouldn’t guess that creature would take over the planet. As with Mother Nature, we can’t know what our world will look like in the future; we don’t know what new ideas will prosper. This is why we need to water the seeds all around us, in every neighborhood. We need to establish classrooms in which options are proliferated, risk-tolerance is enabled, wrong answers are creatively mined and children are engaged and inspired to send trial balloons into the future. We need to shape individuals and build companies in which new ideas blossom, different distances are explored, trimming is part of the process and change is the norm. We don’t know where an investment in creativity will take us.


pages: 412 words: 115,266

The Moral Landscape: How Science Can Determine Human Values by Sam Harris

Albert Einstein, banking crisis, Bayesian statistics, behavioural economics, cognitive bias, cognitive load, end world poverty, endowment effect, energy security, experimental subject, framing effect, higher-order functions, hindsight bias, impulse control, John Nash: game theory, language acquisition, longitudinal study, loss aversion, meta-analysis, mirror neurons, Monty Hall problem, out of africa, Paradox of Choice, pattern recognition, peak-end rule, placebo effect, Ponzi scheme, public intellectual, Richard Feynman, risk tolerance, scientific worldview, stem cell, Stephen Hawking, Steven Pinker, TED Talk, the scientific method, theory of mind, traumatic brain injury, trolley problem, ultimatum game, World Values Survey

However, people differ significantly with respect to risk tolerance, and these differences appear to be governed by a variety of genes—including genes for the D4 dopamine receptor and the protein stathmin (which is primarily expressed in the amygdala). Believing that there can be no optimal degree of risk aversion, Burton concludes that we can never truly reason about such ethical questions. “Reason” will simply be the name we give to our unconscious (and genetically determined) biases. But is it really true to say that every degree of risk tolerance will serve our purposes equally well as we struggle to build a global civilization?

See cultural relativism; moral relativism religion: afterlife and, 18, 33 belief in God’s existence, 6–7, 25, 158, 159, 165–66 belief in Jesus, 137–38 brain science and, 128, 152–54, 232n37, 233nn 48–49, 234n54 Burton on, 129 children and, 151 cognitive templates for, 150–51 corporal punishment in schools and, 3 Einstein on, 202n18, 236n77 in Europe, 145–46 evolution and, 147–52 God as Creator, 164 Golden Rule and, 78, 209n45 happiness from, 231–32n15 industrialization and, 145 Jesus as Son of God, 162–63, 167–68 of Judaism, 33, 38 miracles and, 167–68, 237n82 moral law and, 33, 38, 161, 169–70 morality and, 2, 33, 46, 62–63, 78, 146, 191 mysticism and, 128, 235n76 prayer and, 148, 152, 168 problems of, 6, 22–25, 157, 203n19, 227n45 prophecies and, 154–55 reason versus, 158–76 religious practices, 148–49 resurrection of the dead, 166–67 revelation and, 78 science versus, 6, 24–25 scientists’ belief in, 159–76, 237–38n99 scriptures of, 78, 89, 150, 236–37n82 sexual abuse scandal in Catholic Church, 35, 199–201n14 significance of, 154–58, 199n9 social health of least religious countries, 146–47 societal insecurity and, 146–47 soul and, 110, 158–59, 171, 179, 235n66 states of mind at core of, 165 in United States, 145–47, 149–50, 158, 234–35n64 witchcraft compared with, 129–30 See also Catholic Church; Islam religious conservatives, 5–6, 46, 53, 86, 89, 90, 158, 180–81 remembering self, 184–87 Repugnant Conclusion argument, 71 responsibility. See moral responsibility retributive justice, 1, 106, 109, 110–11 reverse inference problem, 212n71, 224n34 right and wrong. See evil; good/goodness; morality; values risk and risk tolerance, 128, 143, 226n35 Rosenhan, David L., 141–42 Ruse, Michael, 48 Rushdie, Salman, 46 Russell, Bertrand, 78 Sai Baba, Sathya, 167–68 Salk Institute, 23–24 sanity, legal definition of, 98 Savoy, R. L., 229n62 schadenfreude, 113, 222n18 schizophrenia, 127, 142, 152, 162, 195n3, 205n24 Schrödinger, Erwin, 213n77 science: belief and, 144 bias of, 47–48 concessions made to religious dogmatism by, 5–6, 22–23 consensus versus controversy in, 31, 198n6 “consilience” in, 8 definition of, 37 doubts about authority of, 47–48 Einstein on religion and, 202n18, 236n77 epistemic values of, 202n16 funding for, 24 growth of scientific knowledge, 124 hostility against, by general public and governments, 24 humility of scientists, 124 hypothesis testing in, 116 moral truth and, 1–4, 28, 46–53 narrow definition of, 29 objectivity and, 29–30, 47, 48 philosophy and, 179–81 religion versus, 6, 24–25 religious beliefs of scientists, 159–76, 237–38n99 reluctance of, to take stand on moral issues, 6–7, 10–11, 22–25, 191 tools of, 29 validity in, 143–44 values and, 1–4, 11, 28, 49–53, 143–44, 189–91, 202n16 See also brain science; brain structures; facts; neuroimaging research; and specific scientists scientism, 46–47 SCNT.


pages: 339 words: 109,331

The Clash of the Cultures by John C. Bogle

Alan Greenspan, asset allocation, buy and hold, collateralized debt obligation, commoditize, compensation consultant, corporate governance, corporate social responsibility, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, estate planning, Eugene Fama: efficient market hypothesis, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Glass-Steagall Act, Hyman Minsky, income inequality, index fund, interest rate swap, invention of the wheel, John Bogle, junk bonds, low interest rates, market bubble, market clearing, military-industrial complex, money market fund, mortgage debt, new economy, Occupy movement, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, Ponzi scheme, post-work, principal–agent problem, profit motive, proprietary trading, prudent man rule, random walk, rent-seeking, risk tolerance, risk-adjusted returns, Robert Shiller, seminal paper, shareholder value, short selling, South Sea Bubble, statistical arbitrage, stock buybacks, survivorship bias, The Wealth of Nations by Adam Smith, transaction costs, two and twenty, Vanguard fund, William of Occam, zero-sum game

Both organizational structures honor the tenet, “Treat your customers as if they were your owners.” But only the mutual organization can, with accuracy, tack on the phrase, “because your customers are your owners.” Risk Management Strategy. In conventionally operated mutual funds, investment strategy can, in the search for higher returns, be risk-tolerant, so long as a fund’s risk—usually measured by its short-term price volatility—is consistent with the risks assumed by its peer funds. A mutual organization’s investment strategy can afford to be risk-intolerant. With costs far below competitive norms, there is little need to reach for slightly higher returns on stock funds or higher yields on bond funds.

So this massive transfer of the two great risks of retirement plan savings—investment risk and longevity risk—from corporate balance sheets to individual households will relieve pressure on corporate earnings, even as it will require our families to take responsibility for their own retirement savings. A further benefit is that investments in properly designed DC plans can be tailored to the specific individual requirements of each family—reflecting its prospective wealth, its risk tolerance, the age of its bread-winner(s), and its other assets (including Social Security). DB plans, on the other hand, are inevitably focused on the average demographics and average salaries of the firm’s work force in the aggregate. The 401(k) plan, then, is an idea whose time has come. That’s the good news.

As a result, DC plan investing has been unfocused, and post-work financial outcomes have been, and continue to be highly uncertain, raising fundamental questions about the effectiveness and sustainability of this individualistic pension model. 2. Traditional DB plans lump the young and the old on the same balance sheet, and unrealistically assume they have the same risk tolerance and that property rights between the two groups are clear. These unrealistic assumptions have had serious consequences. Over the course of the last decade, aggressive return assumptions and risk-taking—together with falling asset prices, falling interest rates, and deteriorating demographics—have punched gaping holes in many DB plan balance sheets, to which unfocused responses have ranged the full spectrum—from complete de-risking at one end to piling on more risk at the other . . .


pages: 333 words: 76,990

The Long Good Buy: Analysing Cycles in Markets by Peter Oppenheimer

Alan Greenspan, asset allocation, banking crisis, banks create money, barriers to entry, behavioural economics, benefit corporation, Berlin Wall, Big bang: deregulation of the City of London, Black Monday: stock market crash in 1987, book value, Bretton Woods, business cycle, buy and hold, Cass Sunstein, central bank independence, collective bargaining, computer age, credit crunch, data science, debt deflation, decarbonisation, diversification, dividend-yielding stocks, equity premium, equity risk premium, Fall of the Berlin Wall, financial engineering, financial innovation, fixed income, Flash crash, foreign exchange controls, forward guidance, Francis Fukuyama: the end of history, general purpose technology, gentrification, geopolitical risk, George Akerlof, Glass-Steagall Act, household responsibility system, housing crisis, index fund, invention of the printing press, inverted yield curve, Isaac Newton, James Watt: steam engine, Japanese asset price bubble, joint-stock company, Joseph Schumpeter, Kickstarter, Kondratiev cycle, liberal capitalism, light touch regulation, liquidity trap, Live Aid, low interest rates, market bubble, Mikhail Gorbachev, mortgage debt, negative equity, Network effects, new economy, Nikolai Kondratiev, Nixon shock, Nixon triggered the end of the Bretton Woods system, oil shock, open economy, Phillips curve, price stability, private sector deleveraging, Productivity paradox, quantitative easing, railway mania, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Shenzhen special economic zone , Simon Kuznets, South Sea Bubble, special economic zone, stocks for the long run, tail risk, Tax Reform Act of 1986, technology bubble, The Great Moderation, too big to fail, total factor productivity, trade route, tulip mania, yield curve

And that means investors with the ability to understand cycles will find opportunities for profit.’ Over the long run, even accepting the fluctuations caused by cycles, investing can be extremely profitable. Different assets tend to perform best at different times, and returns will depend on the risk tolerance of the investor. But for equity investors in particular, history suggests that, if they can hold their investments for at least five years and, especially, if they can recognise the signs of bubbles and of inflection points in the cycle, they can benefit from the ‘long good buy’. Notes 1 Under European Community guidelines, France and Italy were required to end all exchange controls by 1 July 1990 but France implemented these six months earlier in order to show its commitment to the principles of free movement of goods, capital and people in Europe. 2 Stone, M. (2015).

Within 15 years, it should be possible not only to deliver renewable electricity at prices that are fully competitive with fossil-fuel-based power but also to provide the low-cost backup and storage required to make it possible to run power systems that are 80%–90% reliant on intermittent renewables.2 Over the long run, even accepting the fluctuations caused by cycles, investing can be extremely profitable. Different assets tend to perform best at different times, and returns will depend on the risk tolerance of the investor. But for equity investors in particular, history suggests that, if they can hold their investments for at least 5 years and, especially, if they can recognise the signs of bubbles and of changes in the cycle, they really can enjoy a ‘long good buy’. Notes 1 SINTEF. (2013).


The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals by Daniel R. Solin

Alan Greenspan, asset allocation, buy and hold, corporate governance, diversification, diversified portfolio, index fund, John Bogle, market fundamentalism, money market fund, Myron Scholes, PalmPilot, passive investing, prediction markets, prudent man rule, random walk, risk tolerance, risk-adjusted returns, risk/return, transaction costs, Vanguard fund, zero-sum game

Invest the stock and bond portions of your portfolio in the ETFs described in this book. lllO The Heal Way Smart Investors Beat 95%of the ~Pros" 4. RebaJance your portfolio twice a year to keep your portfolio either aJigned with your original asset aJlocarion or with a new asset allocation that meets your changed investment objectives and/or risk tolerance. T hat's it. Read on for more details on each step. Chapter 34 Step 1: Determine Your Asset Allocation Over 90% ofinvestment returns are determined by how investors allocate their assets versus security selection, market timing and other foctors. -Brinson, Singer and Beebower, "Determinants of Portfolio Performance II : An Update, n Financial Analysts JournaL.


pages: 247 words: 68,918

The End of the Free Market: Who Wins the War Between States and Corporations? by Ian Bremmer

"World Economic Forum" Davos, affirmative action, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, centre right, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, cuban missile crisis, Deng Xiaoping, diversified portfolio, Doha Development Round, Exxon Valdez, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Glass-Steagall Act, global reserve currency, global supply chain, household responsibility system, invisible hand, joint-stock company, Joseph Schumpeter, Kickstarter, laissez-faire capitalism, low skilled workers, mass immigration, means of production, megacity, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Naomi Klein, Nelson Mandela, new economy, offshore financial centre, open economy, race to the bottom, reserve currency, risk tolerance, Savings and loan crisis, shareholder value, Shenzhen special economic zone , South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, trade route, tulip mania, uranium enrichment, Washington Consensus, Yom Kippur War, zero-sum game

International investors also await the chance to invest freely in the Saudi stock market, but the 2008 financial crisis may have convinced Saudi leaders that the more connected they are to international markets, the greater their risks of economic (and political) instability. The famously low risk tolerance of senior royals and the strength of their grip on power ensure that Saudi state capitalism won’t be going away any time soon. United Arab Emirates No Middle Eastern country has profited more handsomely as a fashionable international business destination than the United Arab Emirates (UAE), thanks mainly to the determination of powerful political officials among the various ruling families to drive and control the local and federal economies.

But if future market volatility generates large-scale social unrest, as it did briefly during a bout of global food inflation in 2008, Hosni Mubarak has both the power and the personal inclination to tighten the state’s grip on Egypt’s economic development. When it comes to reform, the president lacks his son’s risk tolerance, and market-friendly government ministers have no popular support base of their own. For the moment, Egypt is moving cautiously from state dominance of the economy toward a tentative embrace of free markets. Algeria Not so in Algeria, where the state’s grip on economic policy is tighter than ever.


pages: 268 words: 64,786

Cashing Out: Win the Wealth Game by Walking Away by Julien Saunders, Kiersten Saunders

barriers to entry, basic income, Big Tech, Black Monday: stock market crash in 1987, blockchain, COVID-19, cryptocurrency, death from overwork, digital divide, diversification, do what you love, Donald Trump, estate planning, financial independence, follow your passion, future of work, gig economy, glass ceiling, global pandemic, index fund, job automation, job-hopping, karōshi / gwarosa / guolaosi, lifestyle creep, Lyft, microaggression, multilevel marketing, non-fungible token, off-the-grid, passive income, passive investing, performance metric, ride hailing / ride sharing, risk tolerance, Salesforce, side hustle, TaskRabbit, TED Talk, Uber and Lyft, uber lyft, universal basic income, upwardly mobile, Vanguard fund, work culture , young professional

Getting a good job, climbing the corporate ladder, buying a nice home, growing a successful business, and making financial decisions are incredibly difficult feats for the majority of Black people today. There are different qualitative variables that require us to do emotional calculus while others perform basic arithmetic. This calculus has a tremendous effect on our decision-making process, mental health, risk tolerance, family, and ultimately financial life. For instance, many of us are all too familiar with having to choose between investing for our own future and giving back to support our parents in their later years. Or having to choose between responding to a child’s developmental needs, nurturing a broken marriage, and our own self-care to keep the family afloat.

Uncertainty is an element of risk, but your uncertainty about something doesn’t make it inherently risky. Think about it: you may be uncertain about how a date is going to turn out, but that doesn’t make meeting up for coffee a risky exercise. When it comes to investing, the phrase “no risk, no reward” exists for a reason. Rather than avoid risks altogether, you need to find your sweet spot, or risk-tolerance level. Whenever you find yourself dismissing something because it seems too risky, take the time to get specific about which aspects of the opportunity are causing your red flags, and then ask yourself whether they can be managed or mitigated. Going back to the index fund example, you need to get specific about why an investment feels like a risk.


pages: 44 words: 13,346

Extreme Early Retirement: An Introduction and Guide to Financial Independence (Retirement Books) by Clayton Geoffreys

asset allocation, dividend-yielding stocks, financial independence, index fund, passive income, risk tolerance, The 4% rule

Throughout the next pages, you will be learning more about passive income but the basic idea is to couple your active income with various sources of passive income. Two of the most common sources that early retirees can live with are dividend-yielding stocks and rental properties. However, every source of passive income requires an investment and nearly all kinds of investments involve risk. It is important for you to calculate your risk tolerances and consider safer options so you do not end up burning your savings. 5 Reasons You Should Consider Extreme Early Retirement You Will Have More Time Enjoying the Goodness in Life The average age when people retire is 65 or 70, and if you think about it, people spend more time working instead of living.


pages: 261 words: 74,471

Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies by Charles de Ganahl Koch

Abraham Maslow, Albert Einstein, big-box store, book value, British Empire, business process, commoditize, creative destruction, disruptive innovation, do well by doing good, Garrett Hardin, global supply chain, hiring and firing, income per capita, Internet of things, invisible hand, Isaac Newton, Joseph Schumpeter, low interest rates, oil shale / tar sands, personalized medicine, principal–agent problem, proprietary trading, Ralph Waldo Emerson, risk tolerance, Salesforce, Solyndra, tacit knowledge, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, transfer pricing

This is accomplished by eliminating steps and activities that don’t add sufficient value to justify the time and expense involved, considering opportunity cost. Lastly, employees need to make decisions that reflect the company’s risk philosophy rather than their own. Any approach to business risk involves both risk preference (one’s inherent inclination toward or away from risk) and risk tolerance (the magnitude of risk that one finds acceptable). In general, since the company makes numerous financial bets and has far greater resources, the company’s risk philosophy differs markedly from any individual employee’s. For the company to continue to be successful and grow, employees must undertake far higher and larger financial risks than they would as individuals, so long as it is compliant and profitable to do so.

With respect to embedded insurance, decision rights are dispersed throughout the businesses. This heightens the need for broad education and understanding; otherwise, we cannot identify and evaluate situations in a way that ensures consistently profitable decision making. Incentives Because individual employees and leaders usually have different risk tolerances than those of Koch Industries as a whole, we make a point of educating everyone about the company’s risk philosophy. This discipline is important because, while individual decisions that are inconsistent with the company’s risk philosophy may seem immaterial, in the aggregate they are not. Any financial losses from an incident, such as a fire, are the responsibility of the particular Koch company—so the incentive compensation of its leaders is reduced accordingly.


Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies by Jeremy J. Siegel

addicted to oil, Alan Greenspan, asset allocation, backtesting, behavioural economics, Black-Scholes formula, book value, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, capital asset pricing model, cognitive dissonance, compound rate of return, correlation coefficient, currency risk, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, fixed income, German hyperinflation, implied volatility, index arbitrage, index fund, Isaac Newton, it's over 9,000, John Bogle, joint-stock company, Long Term Capital Management, loss aversion, machine readable, market bubble, mental accounting, Money creation, Myron Scholes, new economy, oil shock, passive investing, Paul Samuelson, popular capitalism, prediction markets, price anchoring, price stability, proprietary trading, purchasing power parity, random walk, Richard Thaler, risk free rate, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, stock buybacks, stocks for the long run, subprime mortgage crisis, survivorship bias, technology bubble, The Great Moderation, The Wisdom of Crowds, transaction costs, tulip mania, uptick rule, Vanguard fund, vertical integration

By finding the points on the longerterm efficient frontiers that have a slope equal to the slope on the one-year frontier, one can determine the allocations that represent the same risk-return trade-offs for all holding periods. 34 PART 1 The Verdict of History RECOMMENDED PORTFOLIO ALLOCATIONS What percentage of an investor’s portfolio should be invested in stocks? The answer can be seen in Table 2-2, which is based on standard portfolio models incorporating both the risk tolerance and the holding period of the investor.7 Four classes of investors are analyzed: the ultraconservative investor who demands maximum safety no matter the return, the conservative investor who accepts small risks to achieve extra return, the moderate-risk-taking investor, and the aggressive investor who is willing to accept substantial risks in search of extra returns.

This is 7 The one-year proportions (except minimum risk point) are arbitrary and are used as benchmarks for other holding periods. Choosing different proportions as benchmarks does not qualitatively change the analysis. TABLE 2–2 Portfolio Allocation: Percentage of Portfolio Recommended in Stocks Based on All Historical Data Risk Tolerance 1 Year Holding Period 5 Years 10 Years 30 Years Ultraconservative (Minimum Risk) 9.0% 22.0% 39.3% 71.4% Conservative 25.0% 38.7% 59.6% 89.5% Moderate 50.0% 61.6% 88.0% 116.2% Aggressive Risk Taker 75.0% 78.5% 110.1% 139.1% CHAPTER 2 Risk, Return, and Portfolio Allocation 35 because modern portfolio theory was established when the academic profession believed in the random walk theory of security prices.

Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225–264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge: MIT Press, 1991, pp. 181–200. See also Zvi Bodie, Robert Merton, and William Samuelson, “Labor Supply Flexibility and Portfolio Choice in a Lifecycle Model,” Journal of Economic Dynamics and Control, vol. 16, no. 3 (July–October 1992), pp. 427–450.


Science Fictions: How Fraud, Bias, Negligence, and Hype Undermine the Search for Truth by Stuart Ritchie

Albert Einstein, anesthesia awareness, autism spectrum disorder, Bayesian statistics, Black Lives Matter, Carmen Reinhart, Cass Sunstein, Charles Babbage, citation needed, Climatic Research Unit, cognitive dissonance, complexity theory, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, data science, deindustrialization, Donald Trump, double helix, en.wikipedia.org, epigenetics, Estimating the Reproducibility of Psychological Science, fake news, Goodhart's law, Growth in a Time of Debt, Helicobacter pylori, Higgs boson, hype cycle, Kenneth Rogoff, l'esprit de l'escalier, Large Hadron Collider, meta-analysis, microbiome, Milgram experiment, mouse model, New Journalism, ocean acidification, p-value, phenotype, placebo effect, profit motive, publication bias, publish or perish, quantum entanglement, race to the bottom, randomized controlled trial, recommendation engine, rent-seeking, replication crisis, Richard Thaler, risk tolerance, Ronald Reagan, Scientific racism, selection bias, Silicon Valley, Silicon Valley startup, social distancing, Stanford prison experiment, statistical model, stem cell, Steven Pinker, TED Talk, Thomas Bayes, twin studies, Tyler Cowen, University of East Anglia, Wayback Machine

This powerful posture would give you a psychological – and hormonal – boost. An experiment by Cuddy and her colleagues in 2010 had found that, compared to those who were asked to sit with arms folded or slouched forward, people who were made to power-pose not only felt more powerful, but had higher risk tolerance in a betting game and had increased levels of testosterone and decreased levels of the stress hormone cortisol.15 Cuddy’s message that people who used the two-minute power pose could ‘significantly change the outcomes of their life’ struck a chord: hers became the second-most-watched TED talk ever, with over 73.5 million views in total.16 It was followed in 2015 by Cuddy’s New York Times-bestselling self-help book, Presence, whose publisher informed us that it presented ‘enthralling science’ that could ‘liberate [us] from fear in high-pressure moments’.17 Provoking quite some degree of mockery, the UK’s Conservative Party seemed to take Cuddy’s message to heart, with a spate of photos appearing that same year of their politicians adopting the wide-legged stance at various conferences and speeches.18 Alas, also in 2015, when another team of scientists tried to replicate the power-posing effects, they found that while power-posers did report feeling more powerful, the study ‘failed to confirm an effect of power posing on testosterone, cortisol, and financial risk’.19 The critical spotlight that was activated in the replication crisis has also been aimed at older pieces of psychology research, with similarly worrying results.

Kahneman also wrote an open letter to social psychologists, telling them that he saw a ‘train wreck looming’ and urged them to change the way they went about their research. A copy can be found at the following link: https://go.nature.com/2T7A2NV 15.  Dana R. Carney et al., ‘Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance’, Psychological Science 21, no. 10 (Oct. 2010): pp. 1363–68; https://doi.org/10.1177/0956797610383437 16.  The total of the 56 million views on the TED website and the additional 17.6 million views on YouTube – numbers at the time of writing in February 2020. The talk was originally titled ‘Your Body Language Shapes Who You Are’ but at some point, post-replication crisis, it has been renamed ‘Your Body Language May Shape Who You Are’.

The quotation is from the publisher page at the following link: https://www.littlebrown.com/titles/amy-cuddy/presence/9780316256575/ 18.  Homa Khaleeli, ‘A Body Language Lesson Gone Wrong: Why is George Osborne Standing like Beyoncé?’ Guardian, 7 Oct. 2015; https://www.theguardian.com/politics/shortcuts/2015/oct/07/who-told 19.  Eva Ranehill et al., ‘Assessing the Robustness of Power Posing: No Effect on Hormones and Risk Tolerance in a Large Sample of Men and Women’, Psychological Science 26, no. 5 (May 2015): pp. 653–56; https://doi.org/10.1177/0956797614553946, p. 655.The power-posing debate has gone on and on since then. A 2017 review concluded that power-posing effects are ‘hypotheses currently lacking in empirical support’.


pages: 733 words: 179,391

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Alan Greenspan, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, bitcoin, Bob Litterman, Bonfire of the Vanities, bonus culture, break the buck, Brexit referendum, Brownian motion, business cycle, business process, butterfly effect, buy and hold, capital asset pricing model, Captain Sullenberger Hudson, carbon tax, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, confounding variable, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, democratizing finance, Diane Coyle, diversification, diversified portfolio, do well by doing good, double helix, easy for humans, difficult for computers, equity risk premium, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Glass-Steagall Act, global macro, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, information security, interest rate derivative, invention of the telegraph, Isaac Newton, it's over 9,000, James Watt: steam engine, Jeff Hawkins, Jim Simons, job satisfaction, John Bogle, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, language acquisition, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, megaproject, merger arbitrage, meta-analysis, Milgram experiment, mirror neurons, money market fund, moral hazard, Myron Scholes, Neil Armstrong, Nick Leeson, old-boy network, One Laptop per Child (OLPC), out of africa, p-value, PalmPilot, paper trading, passive investing, Paul Lévy, Paul Samuelson, Paul Volcker talking about ATMs, Phillips curve, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, proprietary trading, public intellectual, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Solow, Sam Peltzman, Savings and loan crisis, seminal paper, Shai Danziger, short selling, sovereign wealth fund, Stanford marshmallow experiment, Stanford prison experiment, statistical arbitrage, Steven Pinker, stochastic process, stocks for the long run, subprime mortgage crisis, survivorship bias, systematic bias, Thales and the olive presses, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, uptick rule, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

The idea that investors don’t like risk is at the very foundation of financial theory and practice. Economists speak of risk/reward trade-offs all the time, in the same way that we acknowledge that there are no free lunches, and you don’t get something for nothing. However, we also understand that not everyone has the same level of risk aversion and tolerance: there are conservative investors who put their money in T-Bills, and then there are hedge fund managers who make billion-dollar bets on the future price of a security. What determines an individual’s level of risk aversion? The traditional economist’s response is that risk aversion is a “deep parameter,” a fundamental trait of an individual.

The starting point for most economic analysis is the individual’s “utility function,” a mathematical yardstick that measures a consumer’s level of happiness or satisfaction as a function of the amount consumed. The standard definition of risk aversion is embedded in this function. Some people have very risk-averse utility functions, while others have very risk-tolerant functions, but economists rarely ask why or how. That would be like asking why some people like fish instead of chicken; they just do. But from the perspective of the Adaptive Markets Hypothesis, we can ask why—and more importantly, how—such behaviors arise. Imagine a tribble faced with two possible actions, a and b (not necessarily the valley or plateau of our earlier example), where a yields three offspring for sure, and b is a lottery ticket that offers a 50 percent chance of two offspring and a 50 percent chance of four offspring.

There are fancier heuristics that attempt to reduce your risk as you get closer to retirement, like investing a percentage of 100-minus-your-age in stocks and the rest in bonds, so a twenty-year-old will have 80 percent in stocks, while a sixty-five-year-old will only have 35 percent in stocks. The idea is to adjust your asset allocation to suit your risk tolerance and your long-run investment objectives. Principle 5 makes your asset allocation decision even simpler: just hold stocks for the long run. This principle is based on the hugely influential book Stocks for the Long Run, written by the Wharton financial economist Jeremy Siegel.2 First published in 1994, this book is now in its fifth edition, and has become the “buy and hold Bible” of the investment management industry.


pages: 304 words: 89,879

Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX by Eric Berger

"Peter Beck" AND "Rocket Lab", 3D printing, Apollo 11, Boeing 747, Colonization of Mars, Donald Trump, Elon Musk, fear of failure, inflight wifi, intermodal, James Webb Space Telescope, Jeff Bezos, Kwajalein Atoll, low earth orbit, Mercator projection, multiplanetary species, Neil Armstrong, Palm Treo, risk tolerance, rolodex, Ronald Reagan, Scaled Composites, side project, Silicon Valley, SpaceShipOne, SpaceX Starlink, Steve Jobs, Strategic Defense Initiative, subprime mortgage crisis, Tesla Model S, Virgin Galactic

When Shotwell began selling the Falcon 1 rocket, customers were desperate for cheaper small-launch service. Today, there are half a dozen well-capitalized companies with strong technical plans. Customers can afford to wait and see who succeeds before signing on, and they’re much less tolerant of risk. “That’s one of the things Elon brought to SpaceX—risk tolerance,” Chinnery said. “He didn’t want to fail, but he wasn’t afraid of it. And I think in a lot of other aerospace businesses, there still is that fear of failure, they want to be better than that.” With so many competitors, companies today really can’t afford to fail. So they go a little bit further.

See also Omelek site Redstone Arsenal, 56 Reduced-gravity flight, 141–42 Reingold, Jennifer, 86 Relativity Space, 248, 251 Rémy Martin, 27–29, 145 Renaissance Hotel, 12–13 Ressi, Adeo, 9–10, 12, 237 Reusable launch systems, 230–34 Richichi, Jeff, 168, 231–32, 262 Ride, Sally, 50, 99–100 Riley, Talulah, 216 “Risk tolerance,” 245 Rocket Boys (Hickam), 153 Rocketdyne, 32, 33, 126. See also Aerojet Rocketdyne Rocket Lab, 236, 245 Rocket reuse, 230–34 Role models, 99, 100 Romo, Eric, 155, 261 Ronald Reagan Ballistic Missile Defense Test Site, 55, 58, 67, 169. See also Omelek site Rotary Rocket, 142 Roth, Ed, 184 Sales, 95–116 Scaled Composites, 39–40 Scorpius, 79–80 Sea Launch, 125, 126 Seal Beach, 53 Searles, Rachel, 21, 22 Sea salt spray and corrosion, 121–23, 233 Sensors, 124, 136 September 11 attacks (2001), 98–99 Sexism, 51, 62 Sheehan, Mike, 185, 190–91, 193, 195–96 Shotwell, Gwynne, 255–56 at Aerospace Corporation, 102 Air Force and, 61–62 background of, 99–101 at Chrysler, 101–2 Falcon 1’s Washington, D.C. debut, 105 Flight One failure, 120 Flight Four launch, 202–3 success, 210–11 hiring of, 95–98 Lockheed Martin and, 112–13 at Microcosm, 50, 95, 96, 102 Omelek site, 54–55 Quake parties, 17–18 sales, 17, 54–55, 96, 97–98, 103–4, 106–7, 112–14, 115, 116, 216, 220 222 Shotwell, Robert, 202–3, 210 Sloan, Chris, 262 Slosh baffles, 127–28, 138, 140 Society of Women Engineers, 100 Solar sails, 10, 164 Soyuz, 93 Space and Missile Defense Command, U.S.


pages: 342 words: 101,370

Test Gods: Virgin Galactic and the Making of a Modern Astronaut by Nicholas Schmidle

Apollo 11, bitcoin, Boeing 737 MAX, Charles Lindbergh, Colonization of Mars, crew resource management, crewed spaceflight, D. B. Cooper, Dennis Tito, Donald Trump, dual-use technology, El Camino Real, Elon Musk, game design, Jeff Bezos, low earth orbit, Neil Armstrong, no-fly zone, Norman Mailer, Oklahoma City bombing, overview effect, private spaceflight, Ralph Waldo Emerson, risk tolerance, Ronald Reagan, Scaled Composites, Silicon Valley, SpaceShipOne, Stephen Hawking, Tacoma Narrows Bridge, time dilation, trade route, twin studies, vertical integration, Virgin Galactic, X Prize

Phelps, Michael plastic-fuel motor Pomerantz, William Powell, Colin Principal, Victoria problems, “bounded” vs. “unbounded” propulsion propulsion system Putin, Vladimir Radian Aerospace Raibeck, Dave Rainey, Steve reaction control system (RCS) Reagan, Ronald Redstone Rich, Ben Richardson, Bill The Right Stuff (film) risk tolerance/aversion rocket fuel rocket motors Branson donates motor to National Air and Space Museum hybrid motors plastic-fuel motor rubber-fuel design motor rocket systems. See also rocket motors Rodgers, June Scobee Rosepink, Deborah Rosepink, Ron rubber-fuel design motor Russia Rutan, Burt Allen and Branson and Branson honors Colby and “cold flow” test explosion and documentary about NASA and Presidential Citizen’s Medal received from Reagan receives medallion from Aero Club de France rocket-powered flight test and Schmidle’s “Rocket Man” profile of Stucky in New Yorker and SkiGull and SpaceShipOne and Stucky and takes medical leave Trump and wins X Prize Rutan, Tonya Sagan, Carl Salina, Kansas Saling, Michelle Salter, James, The Hunters Salty Dogs SAPs (special-access programs) Saturn IB Saturn V Saudi Arabia Scaled Composites accused of sloppiness “cold flow” test explosion at crash of SpaceShipTwo and as engineering cult design of SpaceShipOne and party in 2009 and PR and rocket-powered flight test Rutan’s philosophy at SETP tour and SpaceShipOne and SpaceShipTwo and Stucky and Virgin Galactic and Schmidle, Bohan Schmidle, Nicholas (author) background of centrifuge training and at ceremony honoring Stucky and Sturckow childhood of compartmentalization and embeds with Virgin Galactic field trip to Mojave and in Idaho invited to Virgin Islands by Branson meets Stucky in Pakistan Patterson and “Rocket Man” Shane and Stucky and Sturckow and takes sons to National Air and Space Museum trip to Mojave with family Virgin Galactic’s adversarial turn against writing for New Yorker Schmidle, Oscar Schmidle, Pamela Schmidle, Robert (“Rooster”) in Bosnia at ceremony honoring Stucky and Sturckow goes down over Japan Gulf War and receives Distinguished Flying Cross return from Gulf War Stucky and Sturckow and Schwarzenegger, Arnold science Scobee, Dick “scoot shelters” Scott, David scramjets SCUM truck (Scaled Composite Unit Mobile) Seguin, Elliot September eleventh attacks Sex Pistols Shane, Doug Shenzhou Shepard, Alan Shotwell, Gwynne Siebold, Peter Siebold, Traci Sierra Nevada Corporation SkiGull Skunk Works Smith, Michael Smith, Ned Abel Society of Experimental Test Pilots solar wind Soviet Union.

Louis Sputnik spy planes SR-71 stability augmentation system stability issues “sterile cockpit rules” Stinemetze, Matt Stofan, Ellen Storms, Harrison Stucky, Dillon first SpaceShipTwo space flight and paragliding and reconnects with father Stucky, Joan Stucky, Lauren Stucky, Mark (“Forger”) 13211 Stucky asteroid named for addresses stability issues in Air Force assigned to F-117 squadron attention to weather becomes mortgage broker centrifuge training and ceremony in his honor childhood in Salina, Kansas in China Lake, California completes Top Gun co-writes Paragliding: A Pilot’s Training Manual crash of SpaceShipTwo and delivers commencement address in Salina, Kansas dietary regimen of divorces Joan at Dryden Flight Research Center earns Navy commendation medal elation about SpaceShipOne Ericson and fails to make final cut for Astronaut Candidate Program first SpaceShipTwo space flight and Fischer and G-LOC experience hang gliding in 1974 hired by Scaled h-stab problem and in Idaho interviewed by O’Donoghue in Gulf War in Iraq War job offer at Aerion joins Air Force reserves joins United Airlines at Kansas State University knee surgery and leaves Marines looks at real estate in New Mexico loses his job with United Airlines Mackay and in Marines medical exams and Moses and mother and moves in with Agin moves to Houston move to New Mexico and at niece’s funeral organizes rescue effort for Hunt in Palmdale, California paragliding accidents and party in 2009 and presentation at SETP symposium propulsion system and at Quantico quits NASA reaction control system (RCS) and receives award from Air Force receives Iven C. Kincheloe Award from Society of Experimental Test Pilots risk tolerance and rocket-powered flight test and Rutan and Saling and at Scaled Composites Schmidle (author) and Schmidle (Robert) and Schmidle’s “Rocket Man” profile in New Yorker SETP and shunned by Scaled Siebold and in SkiGull skydiving and at Space Mirror Memorial SpaceShipTwo and SpaceShipTwo’s final glide flight (2018) before rocket-powered flights test flight with Beth Moses on board and as test pilot for NASA as test pilot in Middle East tours Scaled Composites in training squadron in Yuma, Arizona Virgin Galactic and wager with Fischer in Washington, DC at winging ceremony Stucky, Paul Stucky, Sascha Sturckow, Rick (“C.J.


pages: 353 words: 148,895

Triumph of the Optimists: 101 Years of Global Investment Returns by Elroy Dimson, Paul Marsh, Mike Staunton

asset allocation, banking crisis, Berlin Wall, Black Monday: stock market crash in 1987, book value, Bretton Woods, British Empire, buy and hold, capital asset pricing model, capital controls, central bank independence, classic study, colonial rule, corporate governance, correlation coefficient, cuban missile crisis, currency risk, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, European colonialism, fixed income, floating exchange rates, German hyperinflation, index fund, information asymmetry, joint-stock company, junk bonds, negative equity, new economy, oil shock, passive investing, purchasing power parity, random walk, risk free rate, risk tolerance, risk/return, selection bias, shareholder value, Sharpe ratio, stocks for the long run, survivorship bias, Tax Reform Act of 1986, technology bubble, transaction costs, yield curve

Beta measures the risk of the asset relative to the market portfolio, and beta estimates are widely available in most stock markets. The average beta for all stocks in a market is, by definition, equal to one. So the equity market risk premium is fundamental in determining CAPM expected returns. The CAPM links the equity market risk premium to the risk tolerance of investors. The historical reward to equity market investment has, in the United States, looked large. But has it been excessive? The CAPM emphasizes how stock market investments contribute to the level of and uncertainty about an investor’s wealth. To say whether the premium has been excessive, we need to look beyond fluctuations in an investor’s wealth.

We explore some of the implications of our research below. 14.4 Implications for individual investors In every country studied in this book, equities have over the long haul beaten bonds and bills. This outperformance is not simply a pattern from the past; it reflects the theory that risky securities should command a lower price than otherwise similar safe securities. Risky equities can therefore be expected to offer a higher expected return. For risk-tolerant investors, that makes equities a desirable long-term investment. On the other hand, we have provided new estimates of equity risk premia that are, on balance, lower than previous research had suggested. What does this suggest for financial markets? We conclude this chapter with a set of implications of our research for investors.

We start with the implications of our work for asset allocation. The classic US asset allocation, as described by Loeb (1996) and others, is one-tenth in cash, with risky assets split roughly 60 percent in stocks and 40 percent in bonds. While most advisors will then modify such recommendations in the light of an investor’s risk tolerance and investment horizon, many observers have puzzled about this 60:40 stock:bond mix. The fact is, almost any analysis of the historical record suggests allocating more than 60 percent to stocks, and less than 40 percent to bonds. Stocks have displayed a high average return, and low-return bonds have been too volatile to justify a large weighting in an optimized portfolio.


pages: 87 words: 25,823

The Politics of Bitcoin: Software as Right-Wing Extremism by David Golumbia

3D printing, A Declaration of the Independence of Cyberspace, Affordable Care Act / Obamacare, Alvin Toffler, Big Tech, bitcoin, blockchain, Burning Man, Californian Ideology, Cody Wilson, crony capitalism, cryptocurrency, currency peg, digital rights, distributed ledger, Dogecoin, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, Extropian, fiat currency, Fractional reserve banking, George Gilder, Ian Bogost, jimmy wales, John Perry Barlow, litecoin, Marc Andreessen, Modern Monetary Theory, Money creation, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, new economy, obamacare, Peter Thiel, Philip Mirowski, printed gun, risk tolerance, Ronald Reagan, Satoshi Nakamoto, seigniorage, Silicon Valley, Singularitarianism, smart contracts, Stewart Brand, technoutopianism, The Chicago School, Travis Kalanick, Vitalik Buterin, WikiLeaks

Gox don’t happen in the future, it may be useful as a global system of payments (but so are generally non-transformative technologies like PayPal and Dwolla). But that will hardly shake world political structures at their foundations. If it remains outside of all forms of both value and transactional regulation, Bitcoin will continue to be a very dangerous place for any but the most risk-tolerant among us (i.e., the very wealthy, whose interest in Bitcoin should indicate to advocates how and why it cannot be economically transformative) to put their hard-earned money. It is beyond ironic, indeed it is symptomatic, that Bitcoin has experienced dramatic deflationary and inflationary spirals just as it is being promoted as a corrective to inflation and deflation.


pages: 297 words: 91,141

Market Sense and Nonsense by Jack D. Schwager

3Com Palm IPO, asset allocation, Bear Stearns, Bernie Madoff, Black Monday: stock market crash in 1987, Brownian motion, buy and hold, collateralized debt obligation, commodity trading advisor, computerized trading, conceptual framework, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fixed income, global macro, high net worth, implied volatility, index arbitrage, index fund, Jim Simons, junk bonds, London Interbank Offered Rate, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, merger arbitrage, negative equity, pattern recognition, performance metric, pets.com, Ponzi scheme, proprietary trading, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, selection bias, Sharpe ratio, short selling, statistical arbitrage, statistical model, subprime mortgage crisis, survivorship bias, tail risk, transaction costs, two-sided market, value at risk, yield curve

For example, what if investors have a choice between Managers C and D in Figure 8.1, but there are practical impediments to increasing the exposure of Manager D? Now return and risk are inextricably bundled, and investors must choose between the higher-return/higher-risk profile of Manager C and the lower-return/lower-risk profile of Manager D. It might seem that risk-tolerant investors would always be better off with Manager C. Such investors might say, “I don’t care if Manager C is riskier, as long as the end return is higher.” The flaw in this premise is that investors who start with Manager C at the wrong time—and that is easy to do—may actually experience significant losses rather than gains, even if they maintain the investment, and especially if they don’t.

The 2DUC chart implies that the average worst-case scenario for investors with Manager E is 10 times worse than with Manager F; that is a lot of extra risk for a 1.3 percent difference in the average annual compounded return. Based on performance, it would be difficult to justify choosing Manager E over Manager F, even for the most risk-tolerant investor. Figure 8.12 2DUC: Manager E versus Manager F Investment Misconceptions Investment Misconception 23: The average annual return is probably the single most important performance statistic. Reality: Return alone is a meaningless statistic because return can always be increased by increasing risk.


pages: 328 words: 90,677

Ludicrous: The Unvarnished Story of Tesla Motors by Edward Niedermeyer

autonomous vehicles, barriers to entry, Bear Stearns, bitcoin, business climate, call centre, carbon footprint, Clayton Christensen, clean tech, Colonization of Mars, computer vision, crowdsourcing, disruptive innovation, Donald Trump, driverless car, Elon Musk, en.wikipedia.org, facts on the ground, fake it until you make it, family office, financial engineering, Ford Model T, gigafactory, global supply chain, Google Earth, housing crisis, hype cycle, Hyperloop, junk bonds, Kaizen: continuous improvement, Kanban, Kickstarter, Lyft, Marc Andreessen, Menlo Park, minimum viable product, new economy, off grid, off-the-grid, OpenAI, Paul Graham, peak oil, performance metric, Ponzi scheme, ride hailing / ride sharing, risk tolerance, Sand Hill Road, self-driving car, short selling, short squeeze, side project, Silicon Valley, Silicon Valley startup, Skype, smart cities, Solyndra, stealth mode startup, Steve Jobs, Steve Jurvetson, tail risk, technoutopianism, Tesla Model S, too big to fail, Toyota Production System, Uber and Lyft, uber lyft, union organizing, vertical integration, WeWork, work culture , Zipcar

Though other automakers offer versions of lane-keep assist, they either don’t allow or heavily limit hands-free operation due to safety concerns. Though testing has shown that Autosteer performs better than competitive lane-keep assist systems, the key to Autopilot’s success was not an overwhelming technological advantage but Tesla’s risk tolerance. In addition to allowing longer periods of hands-free driving than other automakers, Tesla permitted owners to use the system on any road even while warning that the system was only safe on divided highways with no cross traffic. While Tesla’s official representatives consistently emphasized the fact that Autopilot was not autonomous and required constant driver engagement, Musk had always danced around the contradiction at the heart of the Autopilot gambit.

That Citroën does not dominate the car market of the early twenty-first century takes nothing away from the influence, innovation, and beauty of its landmark vehicles. But it does illustrate an important point: the innovator is often a transitional figure. Once the impact of its vision is understood, it often falls to less fanciful and risk-tolerant players to translate the vision into more accessible and prosaic forms. This seems likely to become Tesla’s fate: its place in the history books is secure, but its present is coming under direct assault from more experienced, pragmatic automakers. At the same time, its future is being disrupted by a fresh crop of innovators who are leaving the entire idea of the car behind.


pages: 420 words: 94,064

The Revolution That Wasn't: GameStop, Reddit, and the Fleecing of Small Investors by Spencer Jakab

4chan, activist fund / activist shareholder / activist investor, barriers to entry, behavioural economics, Bernie Madoff, Bernie Sanders, Big Tech, bitcoin, Black Swan, book value, buy and hold, classic study, cloud computing, coronavirus, COVID-19, crowdsourcing, cryptocurrency, data science, deal flow, democratizing finance, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, Everybody Ought to Be Rich, fake news, family office, financial innovation, gamification, global macro, global pandemic, Google Glasses, Google Hangouts, Gordon Gekko, Hacker News, income inequality, index fund, invisible hand, Jeff Bezos, Jim Simons, John Bogle, lockdown, Long Term Capital Management, loss aversion, Marc Andreessen, margin call, Mark Zuckerberg, market bubble, Masayoshi Son, meme stock, Menlo Park, move fast and break things, Myron Scholes, PalmPilot, passive investing, payment for order flow, Pershing Square Capital Management, pets.com, plutocrats, profit maximization, profit motive, race to the bottom, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robinhood: mobile stock trading app, Saturday Night Live, short selling, short squeeze, Silicon Valley, Silicon Valley billionaire, SoftBank, Steve Jobs, TikTok, Tony Hsieh, trickle-down economics, Vanguard fund, Vision Fund, WeWork, zero-sum game

In the summer of 2021, Robinhood agreed to the largest-ever fine imposed by brokers’ own regulator, the Financial Industry Regulatory Authority (FINRA). Part of the complaint said that Robinhood used bots to approve people for options trading. FINRA gave the example of a twenty-year-old who said he had low risk tolerance and little experience and was rejected. Three minutes later, he changed his risk tolerance to medium and said he had three years of trading experience—difficult to have at age twenty—and was approved to trade options.[21] Robinhood had good reason to encourage the instruments’ use, though. “They get paid a lot more for options trading,” said Roper.


pages: 286 words: 92,521

How Medicine Works and When It Doesn't: Learning Who to Trust to Get and Stay Healthy by F. Perry Wilson

Affordable Care Act / Obamacare, barriers to entry, Barry Marshall: ulcers, cognitive bias, Comet Ping Pong, confounding variable, coronavirus, correlation does not imply causation, COVID-19, data science, Donald Trump, fake news, Helicobacter pylori, Ignaz Semmelweis: hand washing, Louis Pasteur, medical malpractice, meta-analysis, multilevel marketing, opioid epidemic / opioid crisis, p-value, personalized medicine, profit motive, randomized controlled trial, risk tolerance, selection bias, statistical model, stem cell, sugar pill, the scientific method, Thomas Bayes

The idea of a randomized trial represents a fundamental shift from traditional medical practices, which focus on the relationship between an individual doctor and an individual patient. Under ordinary circumstances, a doctor formulates a treatment plan based on the characteristics of a specific patient: the patient’s risk factors, risk tolerance, disease status, other medications, and a host of other factors born out of long experience. The patient and doctor discuss the recommendation, modify it, and, eventually, implement it. Treatment is personal. Randomized trials, in contrast, are fundamentally impersonal. Indeed, that is perhaps their greatest strength.

Doctors can’t force patients to do anything, but key to building and maintaining trust is to come to a decision that both parties understand (even if they don’t fully agree with it). The language of the “number needed to treat” can be an incredibly useful tool to discuss the real risks and benefits of a medication choice. It allows you to say “Yes, I understand that this medication may save my life. I also understand that chances are I’ll be fine without it, and given my risk tolerance, I am willing to roll the dice on this.” Your doctor may not agree, but they are not the one who has to pay for or take the medication. In the end, it is your decision. You may decide even a 1 percent chance of a better outcome is worth it. Our primary goal as physicians is to make sure you are making that decision with the real information.


pages: 389 words: 109,207

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone

"RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Albert Einstein, anti-communist, asset allocation, Bear Stearns, beat the dealer, Benoit Mandelbrot, Black Monday: stock market crash in 1987, Black-Scholes formula, Bletchley Park, Brownian motion, buy and hold, buy low sell high, capital asset pricing model, Claude Shannon: information theory, computer age, correlation coefficient, diversified portfolio, Edward Thorp, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial engineering, Henry Singleton, high net worth, index fund, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, John Meriwether, John von Neumann, junk bonds, Kenneth Arrow, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Michael Milken, Myron Scholes, New Journalism, Norbert Wiener, offshore financial centre, Paul Samuelson, publish or perish, quantitative trading / quantitative finance, random walk, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Rubik’s Cube, short selling, speech recognition, statistical arbitrage, Teledyne, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, traveling salesman, value at risk, zero-coupon bond, zero-sum game

To answer that, you have to compute the variance of the wheels’ returns. I’ll spare you the trouble—the variance of the wheels increases from left to right. So does the arithmetic mean return. Consequently, Markowitz theory refuses to decide among these three wheels. All are legitimate choices. A risk-tolerant investor looking for the highest return might choose the third wheel. A conservative investor willing to sacrifice return for security might choose the first. The middle wheel is good, too, for people in the middle. The last bit of advice is particularly hard to swallow. Most would agree that the middle wheel is the riskiest because it alone poses the danger of total loss.

The familiar mean-variance mapping is not a good way of visualizing this type of problem, noted the University of North Carolina’s Richard McEnally. In the mean-variance mapping (left), return rises as a straight line as leverage increases. Risk rises, too, but this diagram shows no reason why a very aggressive and risk-tolerant trader should not increase leverage to any degree obtainable. In the Kelly mapping (right), the line of return is a curve that boomerangs back to zero and negative returns. Two Views of Risk and Return It is not a question of which mapping is “right.” Both mappings are right for different contexts.


pages: 1,164 words: 309,327

Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris

active measures, Andrei Shleifer, AOL-Time Warner, asset allocation, automated trading system, barriers to entry, Bernie Madoff, Bob Litterman, book value, business cycle, buttonwood tree, buy and hold, compound rate of return, computerized trading, corporate governance, correlation coefficient, data acquisition, diversified portfolio, equity risk premium, fault tolerance, financial engineering, financial innovation, financial intermediation, fixed income, floating exchange rates, High speed trading, index arbitrage, index fund, information asymmetry, information retrieval, information security, interest rate swap, invention of the telegraph, job automation, junk bonds, law of one price, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market clearing, market design, market fragmentation, market friction, market microstructure, money market fund, Myron Scholes, National best bid and offer, Nick Leeson, open economy, passive investing, pattern recognition, payment for order flow, Ponzi scheme, post-materialism, price discovery process, price discrimination, principal–agent problem, profit motive, proprietary trading, race to the bottom, random walk, Reminiscences of a Stock Operator, rent-seeking, risk free rate, risk tolerance, risk-adjusted returns, search costs, selection bias, shareholder value, short selling, short squeeze, Small Order Execution System, speech recognition, statistical arbitrage, statistical model, survivorship bias, the market place, transaction costs, two-sided market, vertical integration, winner-take-all economy, yield curve, zero-coupon bond, zero-sum game

The last tranche, which is usually called the Z tranche, gets whatever is left over. It is obviously the most risky tranche. CMOs are also called real estate mortgage investment conduits (REMICs). Companies issue CMOs to distribute mortgage prepayment risk and interest rate risk among investors with varying degrees of risk tolerance. All debt instruments are collectively known as fixed-income products. 3.3.3 Derivative Contracts Derivative contracts are instruments that derive their values from the values of the underlying instruments upon which they are based. They are contractual agreements between buyers and sellers that specify the exchange of certain privileges and liabilities.

Economists sometimes call utilitarian traders liquidity traders because they need liquidity to accomplish their goals. TABLE 8-3. Utilitarian Trader Summary Utilitarian traders want to trade instruments that best solve their problems. Investors trade only instruments that expose them to risks they can tolerate. Asset exchangers trade only for assets that they need. Hedgers trade instruments that are closely correlated to the risks they face. Gamblers trade instruments that excite them. 8.2 PROFIT-MOTIVATED TRADERS Profit-motivated traders trade only because they expect to profit. Like all traders, they profit if they buy low and sell high.

• The inferences dealers make about future order flows create a spread between their bid and ask prices. This spread is called the adverse selection spread component. • The adverse selection spread component increases with trade size. 13.15 QUESTIONS FOR THOUGHT • Which traders do you expect are more risk averse, dealers or brokers? • Which traders do you expect make better dealers, risk tolerant (mildly risk-averse) individuals or very risk-averse individuals? • Are preferencing arrangements good for brokerage customers? • How can dealers control the risk of trading with informed traders? • Could a proprietary trading firm program a computer to trade profitably as a dealer? What risks would such a trading operation encounter?


pages: 329 words: 99,504

Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud by Ben McKenzie, Jacob Silverman

algorithmic trading, asset allocation, bank run, barriers to entry, Ben McKenzie, Bernie Madoff, Big Tech, bitcoin, Bitcoin "FTX", blockchain, capital controls, citizen journalism, cognitive dissonance, collateralized debt obligation, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cryptocurrency, data science, distributed ledger, Dogecoin, Donald Trump, effective altruism, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, experimental economics, financial deregulation, financial engineering, financial innovation, Flash crash, Glass-Steagall Act, high net worth, housing crisis, information asymmetry, initial coin offering, Jacob Silverman, Jane Street, low interest rates, Lyft, margin call, meme stock, money market fund, money: store of value / unit of account / medium of exchange, Network effects, offshore financial centre, operational security, payday loans, Peter Thiel, Ponzi scheme, Potemkin village, prediction markets, proprietary trading, pushing on a string, QR code, quantitative easing, race to the bottom, ransomware, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Robinhood: mobile stock trading app, Ross Ulbricht, Sam Bankman-Fried, Satoshi Nakamoto, Saturday Night Live, short selling, short squeeze, Silicon Valley, Skype, smart contracts, Steve Bannon, systems thinking, TikTok, too big to fail, transaction costs, tulip mania, uber lyft, underbanked, vertical integration, zero-sum game

Some government agencies shared those suspicions, with Celsius facing legal action in multiple states: New Jersey, Alabama, and even Texas. To set up a promo stand in a state where your company was currently embroiled in litigation against that state took a certain kind of gall. But gall was in abundant supply in the risk-tolerant world of crypto. Alex Mashinsky, the CEO of Celsius, wasn’t immune to this kind of hubris. Celsius’s chief financial officer had been arrested in Israel in November 2021 on charges of fraud, but Mashinsky refused to even discuss the issue publicly. Instead, he continued to tout the Celsius brand on Twitter, at conventions, and across crypto media.

Stepping back, I felt a growing civic concern after I started to see too many similarities between the unregulated crypto markets and the subprime crisis of 2007/08 that had nearly brought down the entire economy. My hunch was that crypto, which was born out of the ashes of the Global Financial Crisis, was now, ironically, recreating the circumstances that had led to the previous crisis. Risk-tolerant crypto traders and exchanges owners were stacking leverage on leverage (or fake dollars on top of fake dollars) to extract returns—in real dollars—on their investments. Tethers were being printed by the billions and issued to a very small group of important players like crypto mogul Justin Sun, who issued a token called TRON, along with sophisticated trading firms like Cumberland and Alameda Research, the Bahamas-based outfit owned by Sam Bankman-Fried, known in the crypto world (and now beyond) as SBF.


The Permanent Portfolio by Craig Rowland, J. M. Lawson

Alan Greenspan, Andrei Shleifer, asset allocation, automated trading system, backtesting, bank run, banking crisis, Bear Stearns, Bernie Madoff, buy and hold, capital controls, correlation does not imply causation, Credit Default Swap, currency risk, diversification, diversified portfolio, en.wikipedia.org, fixed income, Flash crash, high net worth, High speed trading, index fund, inflation targeting, junk bonds, low interest rates, margin call, market bubble, money market fund, new economy, passive investing, Ponzi scheme, prediction markets, risk tolerance, stocks for the long run, survivorship bias, technology bubble, transaction costs, Vanguard fund

If you're not a market timer but you really think stocks are a good deal, then buy some extra of a total stock market index fund. Or if you feel like doing nothing, then hold it all in cash until something catches your attention. A word of warning though: All investors have different risk tolerances and unfortunately many investors don't find out what their risk tolerance actually is until after it has been exceeded by unforeseen losses. The Variable Portfolio should be approached with caution and an investor should make sure that the money he allocates to it is money that he truly can afford to lose if his speculative bets don't turn out as expected.


pages: 571 words: 106,255

The Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous

"World Economic Forum" Davos, Airbnb, Alan Greenspan, altcoin, bank run, banks create money, bitcoin, Black Swan, blockchain, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, Charles Babbage, conceptual framework, creative destruction, cryptocurrency, currency manipulation / currency intervention, currency peg, delayed gratification, disintermediation, distributed ledger, Elisha Otis, Ethereum, ethereum blockchain, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, George Gilder, Glass-Steagall Act, global reserve currency, high net worth, initial coin offering, invention of the telegraph, Isaac Newton, iterative process, jimmy wales, Joseph Schumpeter, low interest rates, market bubble, market clearing, means of production, military-industrial complex, Money creation, money: store of value / unit of account / medium of exchange, moral hazard, Network effects, Paul Samuelson, peer-to-peer, Peter Thiel, price mechanism, price stability, profit motive, QR code, quantum cryptography, ransomware, reserve currency, Richard Feynman, risk tolerance, Satoshi Nakamoto, scientific management, secular stagnation, smart contracts, special drawing rights, Stanford marshmallow experiment, The Nature of the Firm, the payments system, too big to fail, transaction costs, Walter Mischel, We are all Keynesians now, zero-sum game

Hence, it encourages deferred consumption, resulting in lower time preference. A currency that depreciates in value, on the other hand, leaves citizens constantly searching for returns to beat inflation, returns that must come with a risk, and so leads to an increase in investment in risky projects and an increased risk tolerance among investors, leading to increased losses. Societies with money of stable value generally develop a low time preference, learning to save and think of the future, while societies with high inflation and depreciating economies will develop high time preference as people lose track of the importance of saving and concentrate on immediate enjoyment.

The debates of academia are almost entirely irrelevant to the real world, and its journals' articles are almost never read by anyone except the people who write them for job promotion purposes, but the government bezzle indefinitely rolls on because there is no mechanism by which government funding can ever be reduced when it does not benefit anybody. In a society with sound money, banking is a very important and productive job, where bankers perform two highly pivotal functions for economic prosperity: the safekeeping of assets as deposits, and the matching of maturity and risk tolerance between investors and investment opportunities. Bankers make their money by taking a cut from the profits if they succeed in their job, but make no profit if they fail. Only the successful bankers and banks stay in their job, as those that fail are weeded out. In a society of sound money, there are no liquidity concerns over the failure of a bank, as all banks hold all their deposits on hand, and have investments of matched maturity.


pages: 354 words: 26,550

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems by Irene Aldridge

algorithmic trading, asset allocation, asset-backed security, automated trading system, backtesting, Black Swan, Brownian motion, business cycle, business process, buy and hold, capital asset pricing model, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, computerized trading, diversification, equity premium, fault tolerance, financial engineering, financial intermediation, fixed income, global macro, high net worth, implied volatility, index arbitrage, information asymmetry, interest rate swap, inventory management, Jim Simons, law of one price, Long Term Capital Management, Louis Bachelier, machine readable, margin call, market friction, market microstructure, martingale, Myron Scholes, New Journalism, p-value, paper trading, performance metric, Performance of Mutual Funds in the Period, pneumatic tube, profit motive, proprietary trading, purchasing power parity, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, short selling, Small Order Execution System, statistical arbitrage, statistical model, stochastic process, stochastic volatility, systematic trading, tail risk, trade route, transaction costs, value at risk, yield curve, zero-sum game

The information asymmetry cost—a market maker trading with wellinformed traders may often be forced into a disadvantaged trading position. As a result, Stoll’s (1978) model predicts that the differences in bidask spreads between different market makers are a function of the market makers’ respective risk tolerances and execution set-ups. In Ho and Stoll (1981), the market maker determines bid and ask prices so as to maximize wealth while minimizing risk. The market maker controls his starting wealth positions, as well as the amounts of cash and inventory held on the book at any given time. As in Garman (1976), the arrival rates 138 HIGH-FREQUENCY TRADING of bid and ask orders are functions of bid and ask prices, respectively.

Determining organizational goals for risk management is hardly a trivial endeavor. To effectively manage risk, an organization first needs to create clear and effective processes for measuring risk. The risk management goals, therefore, should set concrete risk measurement methodologies and quantitative benchmarks for risk tolerance associated with different trading strategies as well as with the organization as a whole. Expressing the maximum allowable risk in numbers is difficult, and obtaining organization-wide agreement on the subject is even more challenging, but the process pays off over time through quick and efficient daily decisions and the resulting low risk.


pages: 403 words: 110,492

Nomad Capitalist: How to Reclaim Your Freedom With Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments by Andrew Henderson

Affordable Care Act / Obamacare, Airbnb, airport security, Albert Einstein, Asian financial crisis, asset allocation, bank run, barriers to entry, birth tourism , bitcoin, blockchain, business process, call centre, capital controls, car-free, content marketing, cryptocurrency, currency risk, digital nomad, diversification, diversified portfolio, Donald Trump, Double Irish / Dutch Sandwich, Elon Musk, failed state, fiat currency, Fractional reserve banking, gentrification, intangible asset, land reform, low interest rates, medical malpractice, new economy, obamacare, offshore financial centre, passive income, peer-to-peer lending, Pepsi Challenge, place-making, risk tolerance, side hustle, Silicon Valley, Skype, too big to fail, white picket fence, work culture , working-age population

They also have smaller market capitalization, higher volatility, fewer financial regulatory institutions, yet are still open and accessible to foreign investors and entrepreneurs. The risk involved in pursuing these final frontiers is what keeps a lot of investors and businesses from entering the market within these countries. However, for the risk-tolerant, this means that you will have open access to countries with great fundamentals for high returns and incredible business success. The Benefits of Frontier Market Entrepreneurship There are numerous benefits to doing business in a frontier market, let’s examine just a few of them. Contribute to Positive Development From a less profit-minded perspective, the first benefit of frontier market entrepreneurship is the knowledge that you are contributing to the growth and development of other countries.

The best and often only way to learn about the opportunities in any given country is not from reading blogs or calling lawyers but from boots-on-the-ground intelligence. You cannot effectively scout out a great business idea without being there in person. While books like this can serve as a tool to provide guidance, suggest ideas, and point you in the best direction for your interests and risk tolerance, they will not replace seeing an opportunity with your own eyes. Setting foot in a new place gives you the chance to observe trends that are going on there. You can read about these places all you want, but things only really come into focus once you can personally see for yourself what you have been reading about.


pages: 250 words: 79,360

Escape From Model Land: How Mathematical Models Can Lead Us Astray and What We Can Do About It by Erica Thompson

Alan Greenspan, Bayesian statistics, behavioural economics, Big Tech, Black Swan, butterfly effect, carbon tax, coronavirus, correlation does not imply causation, COVID-19, data is the new oil, data science, decarbonisation, DeepMind, Donald Trump, Drosophila, Emanuel Derman, Financial Modelers Manifesto, fudge factor, germ theory of disease, global pandemic, hindcast, I will remember that I didn’t make the world, and it doesn’t satisfy my equations, implied volatility, Intergovernmental Panel on Climate Change (IPCC), John von Neumann, junk bonds, Kim Stanley Robinson, lockdown, Long Term Capital Management, moral hazard, mouse model, Myron Scholes, Nate Silver, Neal Stephenson, negative emissions, paperclip maximiser, precautionary principle, RAND corporation, random walk, risk tolerance, selection bias, self-driving car, social distancing, Stanford marshmallow experiment, statistical model, systematic bias, tacit knowledge, tail risk, TED Talk, The Great Moderation, The Great Resignation, the scientific method, too big to fail, trolley problem, value at risk, volatility smile, Y2K

We may still disagree entirely, but it will at least be clear that our disagreement results from different value judgements about the outcomes, for example, present versus future costs, or the role of government versus that of the individual, or the appropriate balance of freedom with responsibility to others. All real-world decisions are necessarily a question of values: what is the intended outcome? Who will benefit? Who will pay? What collateral damage is acceptable? What risks are tolerable? A particular difficulty for the construction of common ground on which to hold discussions about the future is the way in which models that project future conditions entangle facts with values. When models are presented as best-available statements of physical law, their projections are a kind of conditional fact (‘if carbon dioxide emissions continue to rise, then X will happen’; ‘if everyone wears a mask to reduce disease transmission, then Y will happen’).

Conviction narratives In simple decision-making situations, we know roughly what outcomes will result from our actions, and the question is how to scan the possible outcomes in as efficient a way as possible to identify the actions that will result in the best outcome. There may be some uncertainty about the outcomes and this can be taken into account by including a level of risk tolerance in the definition of what is meant by the ‘best’ outcome. This is what is often called ‘rational decision-making’ and frameworks for arriving at the ‘best’ outcome in many different kinds of situations are well researched. Of course, very few real-world decisions are so simple. In deciding which of two job offers to accept, for example, you are not only weighing up the quantified benefits offered by each position, but also the overall career prospects, the attractiveness of the location, the impact on your spouse or family, the effect on your existing friendships if you move away and so on.


pages: 483 words: 141,836

Red-Blooded Risk: The Secret History of Wall Street by Aaron Brown, Eric Kim

Abraham Wald, activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, Asian financial crisis, Atul Gawande, backtesting, Basel III, Bayesian statistics, Bear Stearns, beat the dealer, Benoit Mandelbrot, Bernie Madoff, Black Swan, book value, business cycle, capital asset pricing model, carbon tax, central bank independence, Checklist Manifesto, corporate governance, creative destruction, credit crunch, Credit Default Swap, currency risk, disintermediation, distributed generation, diversification, diversified portfolio, Edward Thorp, Emanuel Derman, Eugene Fama: efficient market hypothesis, experimental subject, fail fast, fear index, financial engineering, financial innovation, global macro, illegal immigration, implied volatility, independent contractor, index fund, John Bogle, junk bonds, Long Term Capital Management, loss aversion, low interest rates, managed futures, margin call, market clearing, market fundamentalism, market microstructure, Money creation, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, natural language processing, open economy, Pierre-Simon Laplace, power law, pre–internet, proprietary trading, quantitative trading / quantitative finance, random walk, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, shareholder value, Sharpe ratio, special drawing rights, statistical arbitrage, stochastic volatility, stock buybacks, stocks for the long run, tail risk, The Myth of the Rational Market, Thomas Bayes, too big to fail, transaction costs, value at risk, yield curve

This chapter explains the two ideas and their interaction in a historical counterfactual. What if Kelly had been in the University of Chicago library one fateful afternoon when Harry was musing over some stock tables? What if Harry had met Kelly? Kelly Conventional wisdom says risk decisions should be made by subjective preference: your risk tolerance or your utility function. But in 1956, John Kelly published a contrary result: that there is a calculable amount of risk that always does best in the long run. Most people think that taking more risk increases the probability of both very good and very bad outcomes. Kelly showed that beyond a certain point, more risk only increases the probability of bad outcomes.

Since the high Sharpe ratio strategies have limited capacity but grow so quickly that initial investment is almost irrelevant, they are appropriate for people investing their own money. Sharpe ratios around 0.5 make good hedge fund strategies. The lower Sharpe ratios are useful for large institutions with cheap capital and high risk tolerance. Card counters gravitated to very high Sharpe ratio strategies. When I say these have limited capacity, I don’t mean there are always opportunities to invest a small amount in them. More commonly, opportunities come up unpredictably. For that reason the strategies are sometimes referred to as “event driven.”


pages: 153 words: 12,501

Mathematics for Economics and Finance by Michael Harrison, Patrick Waldron

Brownian motion, buy low sell high, capital asset pricing model, compound rate of return, discrete time, incomplete markets, law of one price, market clearing, Myron Scholes, Pareto efficiency, risk tolerance, riskless arbitrage, short selling, stochastic process

Agents with different wealths (but the same increasing, strictly concave, VNM utility) hold the same risky unit cost portfolio, p∗ say, (but may differ in the mix of the riskfree asset and risky portfolio) i.e. ∀ portfolios p, wealths W0 , ∃λ s.t. h E u W0 rf + λW0 p∗ > (r̃ − rf 1) i h i ≥ E u W0 rf + p> (r̃ − rf 1) (6.3.22) ⇐⇒ Risk-tolerance (1/RA (z)) is linear (including constant) i.e. ∃ Hyperbolic Absolute Risk Aversion (HARA, incl. CARA) i.e. the utility function is of one of these types: • Extended power: u(z) = 1 (A (C+1)B + Bz)C+1 • Logarithmic: u(z) = ln(A + Bz) A • Negative exponential: u(z) = − B exp{Bz} where A, B and C are chosen to guarantee u0 > 0, u00 < 0. i.e. marginal utility satisfies u0 (z) = (A + Bz)C or u0 (z) = A exp{Bz} (6.3.23) where A, B and C are again chosen to guarantee u0 > 0, u00 < 0.


pages: 464 words: 117,495

The New Trading for a Living: Psychology, Discipline, Trading Tools and Systems, Risk Control, Trade Management by Alexander Elder

additive manufacturing, Atul Gawande, backtesting, behavioural economics, Benoit Mandelbrot, buy and hold, buy low sell high, Checklist Manifesto, computerized trading, deliberate practice, diversification, Elliott wave, endowment effect, fear index, loss aversion, mandelbrot fractal, margin call, offshore financial centre, paper trading, Ponzi scheme, price stability, psychological pricing, quantitative easing, random walk, Reminiscences of a Stock Operator, risk tolerance, short selling, South Sea Bubble, systematic trading, systems thinking, The Wisdom of Crowds, transaction costs, transfer pricing, traveling salesman, tulip mania, zero-sum game

At this point, I only want to make clear that risk management is the essential part of serious trading. Forget the days when you would look at the ceiling and say, “I'll trade 500 shares,” “I'll trade a thousand shares,” or any other arbitrary number. Later in this book, you'll learn a simple formula for sizing your trades, based on your account and risk tolerance. At the time of this writing, I have three strategies that I trade. My favorite is a false breakout with a divergence. My second choice is a pullback to value during a powerful trend—that's the strategy of the trade shown on the screen (Figure 38.1). Last, I occasionally “fade an extreme”—bet on a reversal of an overstretched trend.

For example, you may decide that once the breakeven stop is in place, you'll protect a third of your open profit. If the open profit on the trade described above rises to $600, you'll move up your stop, so that the $200 profit is protected. These levels aren't set in stone. You may choose different percentages, depending on your level of confidence in a trade and risk tolerance. As a trade moves in your favor, your remaining potential gain begins to shrink, while your risk—the distance to the stop—keeps increasing. To trade is to manage risk. As the reward-to-risk ratio for your winning trades slowly deteriorates, you need to begin reducing your risk. Protecting a portion of your paper profits will keep your reward-to-risk ratio on a more even keel.


pages: 176 words: 55,819

The Start-Up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career by Reid Hoffman, Ben Casnocha

Airbnb, Andy Kessler, Apollo 13, Benchmark Capital, Black Swan, business intelligence, Cal Newport, Clayton Christensen, commoditize, David Brooks, Donald Trump, Dunbar number, en.wikipedia.org, fear of failure, follow your passion, future of work, game design, independent contractor, information security, Jeff Bezos, job automation, Joi Ito, late fees, lateral thinking, Marc Andreessen, Mark Zuckerberg, Max Levchin, Menlo Park, out of africa, PalmPilot, Paul Graham, paypal mafia, Peter Thiel, public intellectual, recommendation engine, Richard Bolles, risk tolerance, rolodex, Salesforce, shareholder value, Sheryl Sandberg, side project, Silicon Valley, Silicon Valley startup, social web, Steve Jobs, Steve Wozniak, the strength of weak ties, Tony Hsieh, transaction costs, Tyler Cowen

This is a main reason many young people start companies, travel around the world, and do other relatively “high-risk” career moves: the downside is lower. If something worthwhile will be riskier in five years than it is now, be more aggressive about taking it on now. As you age and build more assets, your risk tolerance shifts. Pursue Opportunities Where Others Misperceive the Risk There will be times when what’s risky to someone else is not risky to you because your particular characteristics and circumstances make it a different analysis. Risk is personal. But there will also be times when people like you—people with similar assets, aspirations, and operating within the same market realities—will perceive something as riskier than it actually is.


pages: 212 words: 70,224

How to Retire the Cheapskate Way by Jeff Yeager

asset allocation, car-free, employer provided health coverage, estate planning, FedEx blackjack story, financial independence, fixed income, Pepto Bismol, pez dispenser, rent control, ride hailing / ride sharing, risk tolerance, Ronald Reagan, Zipcar

After all, if you can live comfortably on less money, you don’t need to gamble so aggressively on high-risk investments. The preservation of capital becomes the overriding consideration. Create an individualized asset allocation plan, a plan for what types of investments make sense for you and involve whatever level of risk you can tolerate and still sleep well at night. Remember, in the very act of diversification there is, almost without exception, greater security. “Ton-tog-an-y. Isn’t that Lakota for ‘Don’t put all your eggs in one basket’?” Maintain appropriate insurances to protect yourself and your assets. Take care of your stuff.

That’s when I started to think of it as ‘making at a living’ … starting small, risking nothing but my time, and not worrying about whether I’d ever earn a nickel at it. It was the most refreshing, exciting feeling,” Dan says, adding with a quick smile, “but then again, I was an accountant for almost forty years, so I’m easily excited.” With “an investment of absolute zero … just my level of risk tolerance,” Dan relied on word of mouth and a few flyers posted in businesses around the neighborhood to advertise his pet sitting and pet walking services. “To be honest with you, at first I felt a little silly doing it … like a sixty-year old kid starting a lemonade stand. I was thinking I might get a call or two out of it, but that would be about it.”


pages: 141 words: 40,979

The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey

Airbus A320, barriers to entry, book value, business process, call centre, carbon tax, creative destruction, credit crunch, discounted cash flows, intangible asset, John Bogle, knowledge worker, late fees, low cost airline, Network effects, pets.com, price anchoring, risk tolerance, risk/return, rolodex, search costs, shareholder value, Stewart Brand

Selling a modestly undervalued stock to fund the purchase of a supercheap stock is a smart strategy. So is selling an overvalued stock and parking the proceeds in cash if there aren’t any attractively priced stocks at the time. 4. Selling a stock when it becomes a huge part of your portfolio can make sense, depending on your risk tolerance. Conclusion More than Numbers I LOVE THE STOCK MARKET. I don’t love all the raving and ranting about job reports and Federal Reserve meetings, nor the breathless discussions of quarterly earnings reports minutes after they hit the newswires. Most if this is just noise, anyway, and has little bearing on the long-term value of individual companies.


pages: 179 words: 42,081

DeFi and the Future of Finance by Campbell R. Harvey, Ashwin Ramachandran, Joey Santoro, Vitalik Buterin, Fred Ehrsam

activist fund / activist shareholder / activist investor, bank run, barriers to entry, bitcoin, blockchain, collateralized debt obligation, crowdsourcing, cryptocurrency, David Graeber, Ethereum, ethereum blockchain, fault tolerance, fiat currency, fixed income, Future Shock, initial coin offering, Jane Street, margin call, money: store of value / unit of account / medium of exchange, Network effects, non-fungible token, passive income, peer-to-peer, prediction markets, rent-seeking, RFID, risk tolerance, Robinhood: mobile stock trading app, Satoshi Nakamoto, seigniorage, smart contracts, transaction costs, Vitalik Buterin, yield curve, zero-coupon bond

Oracles are surely an open design question and challenge for DeFi to achieve utility beyond its own isolated chain. STABLECOINS A crucial shortcoming of many cryptocurrencies is excessive volatility. This adds friction to users who wish to take advantage of DeFi applications but don't have the risk-tolerance for a volatile asset like ETH. To solve this, an entire class of cryptocurrencies called stablecoins has emerged. Intended to maintain price parity with some target asset, USD, or gold, for instance, stablecoins provide the necessary consistency that investors seek to participate in many DeFi applications and allow a cryptocurrency native solution to exit positions in more volatile cryptoassets.


pages: 321

Finding Alphas: A Quantitative Approach to Building Trading Strategies by Igor Tulchinsky

algorithmic trading, asset allocation, automated trading system, backpropagation, backtesting, barriers to entry, behavioural economics, book value, business cycle, buy and hold, capital asset pricing model, constrained optimization, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, currency risk, data science, deep learning, discounted cash flows, discrete time, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial engineering, financial intermediation, Flash crash, Geoffrey Hinton, implied volatility, index arbitrage, index fund, intangible asset, iterative process, Long Term Capital Management, loss aversion, low interest rates, machine readable, market design, market microstructure, merger arbitrage, natural language processing, passive investing, pattern recognition, performance metric, Performance of Mutual Funds in the Period, popular capitalism, prediction markets, price discovery process, profit motive, proprietary trading, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, selection bias, sentiment analysis, shareholder value, Sharpe ratio, short selling, Silicon Valley, speech recognition, statistical arbitrage, statistical model, stochastic process, survivorship bias, systematic bias, systematic trading, text mining, transaction costs, Vanguard fund, yield curve

Each generation of algorithmic modelers has an opportunity set that includes the possibility of discovering powerful market forecasts that will generate significant profit. THE OPPORTUNITY Exploitable price patterns and tradable forecasting models exist because market participants differ in their investment objectives, their preferences (such as risk tolerance), and their ability to process information. Participants work with a finite set of resources and aim to optimize their investment strategies subject to the limits imposed by those resources. They leave to others the chance to take advantage of whatever trading opportunities they haven’t had the bandwidth or ability to focus on.

Published 2020 by John Wiley & Sons, Ltd. 242 Finding Alphas who focus exclusively on particular sets of futures and currencies; the hedgers seek to control their exposure to the risks of particular factors. Commodity futures provide a good example, as producers and consumers of physical commodities use futures to hedge their risk on specific commodities. Each group of traders can have its own characteristic risk limits, tolerances, and trading behavior, which in turn can give rise to qualitatively different market behavior. For example, the farmers and food-producing corporations that use the agricultural markets to control their risks have little in common with the airlines that employ energy futures to hedge their future fuel costs.


Unknown Market Wizards by Jack D. Schwager

3D printing, algorithmic trading, automated trading system, backtesting, barriers to entry, Black Monday: stock market crash in 1987, Brexit referendum, buy and hold, commodity trading advisor, computerized trading, COVID-19, cryptocurrency, diversification, Donald Trump, eurozone crisis, family office, financial deregulation, fixed income, forward guidance, index fund, Jim Simons, litecoin, Long Term Capital Management, margin call, market bubble, Market Wizards by Jack D. Schwager, Nick Leeson, performance metric, placebo effect, proprietary trading, quantitative easing, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Sharpe ratio, short squeeze, side project, systematic trading, tail risk, transaction costs

It’s the same feeling I had as a kid going to garage sales. Every night I start the process, and I don’t know what I’m going to find. I enjoy doing my nightly analysis; that’s why I think I’m good at it. The things I do are so different from other traders. You would have a hard time finding someone who is more risk-tolerant than I am. I never use stop losses. Most traders will say, “Never add to a losing position.” If I am in a losing position and nothing has changed in the information dissemination, I will double down. I don’t care about price action. Other traders want a methodology that is systematic and regular; I am as far removed from systematic and regular as it is possible to be.

If a meaningful stop point implies too much risk, it means that your position is too large. Reduce the position size so that you can place the stop at a price the market shouldn’t go to if your trade idea is correct, while still restricting the implied loss at that stop point to an amount within your risk tolerance on the trade. 11. You Don’t Have to Wait for a Stop to Be Hit A stop is intended to limit your approximate maximum loss on a trade to some predetermined amount. However, as Bargh advises, you don’t need to wait for a stop to be hit. The longer a trade has an open loss, the more seriously you should consider liquidation even though the stop point hasn’t been hit.


The Art of Scalability: Scalable Web Architecture, Processes, and Organizations for the Modern Enterprise by Martin L. Abbott, Michael T. Fisher

always be closing, anti-pattern, barriers to entry, Bernie Madoff, business climate, business continuity plan, business intelligence, business logic, business process, call centre, cloud computing, combinatorial explosion, commoditize, Computer Numeric Control, conceptual framework, database schema, discounted cash flows, Dunning–Kruger effect, en.wikipedia.org, fault tolerance, finite state, friendly fire, functional programming, hiring and firing, Infrastructure as a Service, inventory management, machine readable, new economy, OSI model, packet switching, performance metric, platform as a service, Ponzi scheme, power law, RFC: Request For Comment, risk tolerance, Rubik’s Cube, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, six sigma, software as a service, the scientific method, transaction costs, Vilfredo Pareto, web application, Y2K

The business rules very likely will include limiting changes during peak utilization of your platform or system. If you have the heaviest utilization between 10 AM and 2 PM C HANGE M ANAGEMENT and 7 PM and 9 PM, it probably doesn’t make sense to be making your largest and most disrupting changes during this timeframe. You might limit or eliminate altogether changes during this timeframe if your risk tolerance is low. The same might hold true for specific times of the year. Sometimes though, as in very high volume change environments, we simply don’t have the luxury of disallowing changes during certain portions of the day and we need to find ways to manage our change risks elsewhere. The Business Change Calendar Many businesses, from large to small, put the next three to six months and maybe even the next year’s worth of proposed changes into a shared calendar for internal viewing.

We would argue that risk is cumulative to some degree, perhaps with an exponential decay but still additive. A risky event today can result in failures in the future, either because of direct correlation such as today’s change breaks something else in the future, or via indirect methods such as an increased risk tolerance by the organization leading to riskier behaviors in the future. Either way, actions can have near- and long-term consequences. Because risk management is important to scalability, we need to understand the components and steps of the risk management process. We’ll cover this in more detail M EASURING R ISK in this chapter but a high-level overview of the risk management process entails first and foremost as accurately as possible determining the risk of a particular action.

If the development team has been working in a development environment with a single database and two days before the release the database is split into a master and read host, it’s pretty likely that the next release is going to have a problem unless there has been a ton of coordination and remediation work done. The second factor that should be considered in the overall risk analysis is the human factor. As people perform riskier and riskier activities, their level of risk tolerance goes up. This human conditioning can work for us very well when we need to become adapted to a new environment, but when it comes to controlling risk in a system, this can lead us astray. If a sabre-toothed tiger has moved into the neighborhood and you still have to leave your cave each day to hunt, the ability to adapt to the new risk in your life is critical to your survival.


pages: 669 words: 210,153

Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers by Timothy Ferriss

Abraham Maslow, Adam Curtis, Airbnb, Alexander Shulgin, Alvin Toffler, An Inconvenient Truth, artificial general intelligence, asset allocation, Atul Gawande, augmented reality, back-to-the-land, Ben Horowitz, Bernie Madoff, Bertrand Russell: In Praise of Idleness, Beryl Markham, billion-dollar mistake, Black Swan, Blue Bottle Coffee, Blue Ocean Strategy, blue-collar work, book value, Boris Johnson, Buckminster Fuller, business process, Cal Newport, call centre, caloric restriction, caloric restriction, Carl Icahn, Charles Lindbergh, Checklist Manifesto, cognitive bias, cognitive dissonance, Colonization of Mars, Columbine, commoditize, correlation does not imply causation, CRISPR, David Brooks, David Graeber, deal flow, digital rights, diversification, diversified portfolio, do what you love, Donald Trump, effective altruism, Elon Musk, fail fast, fake it until you make it, fault tolerance, fear of failure, Firefox, follow your passion, fulfillment center, future of work, Future Shock, Girl Boss, Google X / Alphabet X, growth hacking, Howard Zinn, Hugh Fearnley-Whittingstall, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, John Markoff, Kevin Kelly, Kickstarter, Lao Tzu, lateral thinking, life extension, lifelogging, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, Mason jar, Menlo Park, microdosing, Mikhail Gorbachev, MITM: man-in-the-middle, Neal Stephenson, Nelson Mandela, Nicholas Carr, Nick Bostrom, off-the-grid, optical character recognition, PageRank, Paradox of Choice, passive income, pattern recognition, Paul Graham, peer-to-peer, Peter H. Diamandis: Planetary Resources, Peter Singer: altruism, Peter Thiel, phenotype, PIHKAL and TIHKAL, post scarcity, post-work, power law, premature optimization, private spaceflight, QWERTY keyboard, Ralph Waldo Emerson, Ray Kurzweil, recommendation engine, rent-seeking, Richard Feynman, risk tolerance, Ronald Reagan, Salesforce, selection bias, sharing economy, side project, Silicon Valley, skunkworks, Skype, Snapchat, Snow Crash, social graph, software as a service, software is eating the world, stem cell, Stephen Hawking, Steve Jobs, Stewart Brand, superintelligent machines, TED Talk, Tesla Model S, The future is already here, the long tail, The Wisdom of Crowds, Thomas L Friedman, traumatic brain injury, trolley problem, vertical integration, Wall-E, Washington Consensus, We are as Gods, Whole Earth Catalog, Y Combinator, zero-sum game

I subscribe to the Nassim Taleb “barbell” school of investment, which I implement as 90% in conservative asset classes like cash-like equivalents and the remaining 10% in speculative investments that can capitalize on positive “black swans.” Even if the above criteria are met, people overestimate their risk tolerance. Even if you have only $100 to invest, this is important to explore. In 2007, I had one wealth manager ask me, “What is your risk tolerance?” and I answered honestly: “I have no idea.” It threw him off. I then asked him for the average of his clients’ responses. He said, “Most answer that they would not panic up to about 20% down in one quarter.” My follow-up question was: “When do most actually panic and start selling low?”

They’re attractive for many reasons: developing new business skills, developing a better business network, or—most often—taking what is effectively a 2-year vacation that looks good on a résumé. In 2001, and again in 2004, I wanted to do all three things. This short chapter will share my experience with MBA programs and how I created my own. My hope is that it will make you think about real-world experiments versus theoretical training, untested assumptions (especially about risk tolerance), and the good game of business as a whole. There is no need to spend $60K per year to apply the principles I’ll be discussing. Last caveat: Nothing here is intended to portray me as an investing expert, which I am not. Beginnings * * * Ah, Stanford Graduate School of Business (GSB).


Mastering Private Equity by Zeisberger, Claudia,Prahl, Michael,White, Bowen, Michael Prahl, Bowen White

Alan Greenspan, asset allocation, backtesting, barriers to entry, Basel III, Bear Stearns, book value, business process, buy low sell high, capital controls, carbon credits, carried interest, clean tech, commoditize, corporate governance, corporate raider, correlation coefficient, creative destruction, currency risk, deal flow, discounted cash flows, disintermediation, disruptive innovation, distributed generation, diversification, diversified portfolio, family office, fixed income, high net worth, impact investing, information asymmetry, intangible asset, junk bonds, Lean Startup, low interest rates, market clearing, Michael Milken, passive investing, pattern recognition, performance metric, price mechanism, profit maximization, proprietary trading, risk tolerance, risk-adjusted returns, risk/return, Savings and loan crisis, shareholder value, Sharpe ratio, Silicon Valley, sovereign wealth fund, statistical arbitrage, time value of money, transaction costs, two and twenty

PE funds finance the full range of underlying real assets, from the development of greenfield projects to the improvement of existing facilities to the operation of mature assets. The maturity or stage of the development has of course a distinct impact on the risk−return profile of the underlying investment: a pre-completion project requires a higher risk tolerance but offers the greatest potential for price appreciation, while an investment in mature projects provides exposure to stable, long-term cash flows.5 Leverage is typically employed at all stages of development to enhance returns, with the physical assets themselves serving as collateral. Exhibit 5.4 provides a simple overview of the two project stages (early stage and mature) and the risk−return characteristics of real estate, infrastructure and natural resources projects.

GPs may also define their niche by focusing on smaller, more complex deals, including restructuring activities or frontier market investing. Fundraising needs to be tailored to these strategies, for instance by targeting smaller investors such as high-net worth individuals and family offices, who have a higher risk tolerance and remain willing to invest in the original PE model. Where does this leave the industry? We expect several distinct segments to emerge: For lower risk (e.g., infrastructure or secondary buys from PE firms) and larger bilateral transactions, we expect to see more investors attempt to deploy capital directly, to save on the layer of fees and gain more control over their exposure.


Design of Business: Why Design Thinking Is the Next Competitive Advantage by Roger L. Martin

algorithmic management, Apple Newton, asset allocation, autism spectrum disorder, Buckminster Fuller, business process, Frank Gehry, global supply chain, high net worth, Innovator's Dilemma, Isaac Newton, mobile money, planned obsolescence, QWERTY keyboard, Ralph Waldo Emerson, risk tolerance, Salesforce, scientific management, six sigma, Steve Ballmer, Steve Jobs, stock buybacks, supply-chain management, Wall-E, winner-take-all economy

A reliable system can generate tremendous time savings; once designed, it eliminates the need for subjective and thoughtful analysis by an expensive and time-pressed manager or professional. Hence the appeal of automated asset-allocation systems at investment advisory firms: before new clients even meet an adviser, the clients complete a questionnaire designed to reliably assess their investment horizons, risk tolerance, and investment goals. The data feeds into a program that impersonally graphs the recommended mix of stocks, bonds, and other investments. It takes the massively complex job of understanding individual investment needs out of the hands of the adviser. Where there was once an adviser consulting with clients at length and depth, and then tailoring a portfolio by applying a heuristic and subjective judgment, there is now an algorithm that quickly produces reliable answers.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, balance sheet recession, bank run, barriers to entry, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, driverless car, Erik Brynjolfsson, eurozone crisis, fear index, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, geopolitical risk, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, low interest rates, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, Sheryl Sandberg, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

Many, including the least creditworthy ones that could ill afford commercial borrowing terms, were tempted by the easy availability of debt financing as creditors rushed to provide financing at ever more lenient terms. With the private sector credit factories working at feverish levels of activity, the notion of proper creditworthiness analysis gave way to an emphasis on driving lending volumes ever higher. As such, a crazy culture of risk tolerance and spread convergence took hold. Even the worst-managed countries found themselves able to access large loans on terms (interest rate and maturity) that no longer diverged materially from those offered to the best-managed ones (Figure 1, illustrating the extent to which the spread on Greek bonds relative to German ones was compressed for many years).


pages: 261 words: 79,883

Start With Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek

Apple II, Apple's 1984 Super Bowl advert, Black Swan, business cycle, commoditize, Do you want to sell sugared water for the rest of your life?, hiring and firing, John Markoff, low cost airline, Neil Armstrong, Nick Leeson, Pepsi Challenge, RAND corporation, risk tolerance, Ronald Reagan, shareholder value, Steve Ballmer, Steve Jobs, Steve Wozniak, The Wisdom of Crowds, trade route

According to the Law of Diffusion, mass-market success can only be achieved after you penetrate between 15 percent to 18 percent of the market. That’s because the early majority won’t try something new until someone else has tried it first. This is why we have to drop our price or offer value-added services. We’re attempting to reduce the risk tolerance of these practical-minded people until they feel comfortable to buy. That’s what a manipulation is. They may buy, but they won’t be loyal. Don’t forget, loyalty is when people are willing to suffer some inconvenience or pay a premium to do business with you. They may even turn down a better offer from someone else—something the late majority rarely does.


pages: 241 words: 78,508

Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg

affirmative action, business process, Cass Sunstein, constrained optimization, experimental economics, fear of failure, gender pay gap, glass ceiling, job satisfaction, labor-force participation, longitudinal study, Mark Zuckerberg, meta-analysis, old-boy network, Richard Thaler, risk tolerance, Sheryl Sandberg, Silicon Valley, social graph, Susan Wojcicki, women in the workforce, work culture , young professional

Nicole Perlroth and Claire Cain Miller, “The $1.6 Billion Woman, Staying on Message,” New York Times, February 4, 2012, http://​www.​nytimes.​com/​2012/​02/​05/​business/​sheryl-​sandberg-​of-​facebook-​staying-​on-​message.​html?page​wanted=​all. 12. Dana R. Carney, Amy J. C. Cuddy, and Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21, no. 10 (2010): 1363–68. 13. Bianca Bosker, “Cisco Tech Chief Outlines the Advantages of Being a Woman in Tech,” The Huffington Post, October 27, 2011, http://​www.​huffington​post.​com/​2011/​10/​27/​cisco-​chief-​technology-​officer-​woman-​in-​tech_​n_​1035880.​html. 14.


pages: 255 words: 55,018

Architecting For Scale by Lee Atchison

Amazon Web Services, business logic, business process, cloud computing, continuous integration, DevOps, Internet of things, microservices, platform as a service, risk tolerance, software as a service, web application

By creating this artificial mapping, they are able to load balance usage more effectively. Maintaining Location Diversity for Availability Reasons How do you ensure that AWS resources you launch have redundant components that are guaranteed to be located in different data centers and therefore risk tolerant to outages? There are a couple things you can do. First, make sure that you maintain redundant components in distinct AZs within a single account. If you have redundant components that are in multiple accounts, make sure you maintain redundancy in multiple AZs within each account individually.


pages: 209 words: 53,175

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel

airport security, Amazon Web Services, Bernie Madoff, book value, business cycle, computer age, Cornelius Vanderbilt, coronavirus, discounted cash flows, diversification, diversified portfolio, do what you love, Donald Trump, financial engineering, financial independence, Hans Rosling, Hyman Minsky, income inequality, index fund, invisible hand, Isaac Newton, It's morning again in America, Jeff Bezos, Jim Simons, John Bogle, Joseph Schumpeter, knowledge worker, labor-force participation, Long Term Capital Management, low interest rates, margin call, Mark Zuckerberg, new economy, Paul Graham, payday loans, Ponzi scheme, quantitative easing, Renaissance Technologies, Richard Feynman, risk tolerance, risk-adjusted returns, Robert Gordon, Robert Shiller, Ronald Reagan, side hustle, Stephen Hawking, Steven Levy, stocks for the long run, tech worker, the scientific method, traffic fines, Vanguard fund, WeWork, working-age population

It’s just what works for us. We do it because cash is the oxygen of independence, and—more importantly—we never want to be forced to sell the stocks we own. We want the probability of facing a huge expense and needing to liquidate stocks to cover it to be as close to zero as possible. Perhaps we just have a lower risk tolerance than others. But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expenses specifically because they did not expect them. The few people who know the details of our finances ask, “What are you saving for?


Investment: A History by Norton Reamer, Jesse Downing

activist fund / activist shareholder / activist investor, Alan Greenspan, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, book value, break the buck, Brownian motion, business cycle, buttonwood tree, buy and hold, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, Cornelius Vanderbilt, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, dogs of the Dow, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, flying shuttle, Glass-Steagall Act, Gordon Gekko, Henri Poincaré, Henry Singleton, high net worth, impact investing, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, John Bogle, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, managed futures, margin call, means of production, Menlo Park, merger arbitrage, Michael Milken, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Performance of Mutual Funds in the Period, Ponzi scheme, Post-Keynesian economics, price mechanism, principal–agent problem, profit maximization, proprietary trading, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Sand Hill Road, Savings and loan crisis, seminal paper, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, tail risk, technology bubble, Teledyne, The Wealth of Nations by Adam Smith, time value of money, tontine, too big to fail, transaction costs, two and twenty, underbanked, Vanguard fund, working poor, yield curve

By the end of 2012, defined contribution plans held $5.1 trillion in assets.5 These plans, such as 401(k) plans, 403(b) plans, and 457 plans, are not managed by a single sponsor managing one fund. Instead, each employee controls his or her own account; the individual makes allocation decisions in accordance with his or her own risk tolerance and savings needs. This mitigates the risks associated with unfunded pension liabilities in many defined benefit plans, but it shifts the risk of investment loss and the management of the New Clients and New Investments 123 assets to the beneficiary. Very likely defined contribution plans will continue to be the employers’ retirement plan of choice because then employers are able to avoid the liabilities and risks associated with defined benefit plans.

Asian sovereign wealth funds, by contrast, have foreign reserves due to positive trade balances as their source; thus their focus is more about diversifying away from the currency price risk to which they are exposed.33 The investment strategies of sovereign wealth funds also tend to align with the fundamental reasons for their creation. Most sovereign wealth funds tend to be slightly more interested in capital preservation, whereas ones that are centrally concerned with growing the assets often have a slightly higher risk tolerance. But in general, New Clients and New Investments 131 sovereign wealth funds are widely diversified and can manage a wide liquidity spectrum, since they do not have explicitly dated liabilities. Given the historical trend and the broadening of the conviction in the merits of these funds, the future seems bright for sovereign wealth funds.


pages: 459 words: 144,009

Upheaval: Turning Points for Nations in Crisis by Jared Diamond

anti-communist, Asian financial crisis, Berlin Wall, British Empire, California gold rush, carbon tax, clean water, correlation coefficient, cuban missile crisis, Dissolution of the Soviet Union, Gini coefficient, high-speed rail, illegal immigration, interchangeable parts, invention of writing, Jeff Bezos, low interest rates, medical malpractice, mutually assured destruction, Nelson Mandela, Nick Bostrom, nuclear winter, oil shale / tar sands, peak oil, post-work, purchasing power parity, rising living standards, risk tolerance, Ronald Reagan, Suez canal 1869, Suez crisis 1956, The Spirit Level, Timothy McVeigh, traffic fines, transcontinental railway, women in the workforce, World Values Survey

Even Native Americans are descended from immigrants who arrived beginning at least by 13,000 years ago. To understand the fundamental benefits of an immigrant population, imagine that you could divide the population of any country into two groups: one consisting on the average of the youngest, healthiest, boldest, most risk-tolerant, most hard-working, ambitious, and innovative people; the other consisting of everybody else. Transplant the first group to another country, and leave the second group in their country of origin. That selective transplanting approximates the decision to emigrate and its successful accomplishment.

That selective transplanting approximates the decision to emigrate and its successful accomplishment. Hence it comes as no surprise that more than one-third of American Nobel Prize winners are foreign-born, and over half are either immigrants themselves or else the children of immigrants. That’s because Nobel Prize–winning research demands those same qualities of boldness, risk tolerance, hard work, ambition, and innovativeness. Immigrants and their offspring also contribute disproportionately to American art, music, cuisine, and sports. Everything that I have described so far in this chapter can be boiled down to saying: the U.S. enjoys enormous advantages. But countries can squander their advantages, as has Argentina.


pages: 477 words: 144,329

How Money Became Dangerous by Christopher Varelas

activist fund / activist shareholder / activist investor, Airbnb, airport security, barriers to entry, basic income, Bear Stearns, Big Tech, bitcoin, blockchain, Bonfire of the Vanities, California gold rush, cashless society, corporate raider, crack epidemic, cryptocurrency, discounted cash flows, disintermediation, diversification, diversified portfolio, do well by doing good, Donald Trump, driverless car, dumpster diving, eat what you kill, fiat currency, financial engineering, fixed income, friendly fire, full employment, Gordon Gekko, greed is good, initial coin offering, interest rate derivative, John Meriwether, junk bonds, Kickstarter, Long Term Capital Management, low interest rates, mandatory minimum, Mary Meeker, Max Levchin, Michael Milken, mobile money, Modern Monetary Theory, mortgage debt, Neil Armstrong, pensions crisis, pets.com, pre–internet, profit motive, proprietary trading, risk tolerance, Saturday Night Live, selling pickaxes during a gold rush, shareholder value, side project, Silicon Valley, Steve Jobs, technology bubble, The Predators' Ball, too big to fail, universal basic income, zero day

It instilled a new Wild West culture at Salomon Brothers, ushering in an every-man-for-himself atmosphere, in which individual employees made colossal gambles for the possibility of lucrative payouts. The central reason for this massive shift in risk was that Salomon traders had essentially started playing with house money, the balance sheet of the public company, rather than using their own personal capital. Not using their own money led to higher risk tolerance and larger losses when things didn’t go right. Investment banks went public for multiple reasons. A primary reason was access to the capital needed to scale the business in response to customer demand for bigger financings and underwritings. Globalization and the creation of mega-international corporations demanded financial institutions that could underwrite larger and larger debt and equity issuances, as well as institutions that could support those issuances with trading and analysis on a level that a traditional partnership could not.

The lawyers, bankers, and business development teams from each of the firms were there at the table, with people raising this and that issue. Every new point would have ripple effects on the closing terms, which kept compounding: working-capital adjustments, reps and warranties, who would be responsible for this or that happening. Each party had different personalities and levels of sophistication, different deal appetites and risk tolerances. Not to mention, the companies at the table were geographically and culturally diverse—from Japan, North Carolina, and upstate New York. Every time you asked the Japanese team a question, they said yes, even when the answer should absolutely have been no. For example, we’d ask, “Is it possible that Furukawa could do the entire deal?”


pages: 201 words: 62,593

The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich by David Bach

asset allocation, diversified portfolio, financial independence, index fund, job automation, late fees, money market fund, Own Your Own Home, risk tolerance, robo advisor, transaction costs, Vanguard fund

If you use an online tool from any of these firms (large or small) to build your automatic portfolio, please take time to go through the questionnaires carefully. Don’t just fly through the questions and click away. Most of these firms determine the mix of investments based on what you tell them about your time horizon and your risk tolerance. If you click on one wrong button, your entire portfolio can be built incorrectly, with either too much risk or not enough. When in doubt, call the company and talk to one of their advisors. I want you to be safe, prepared, and knowledgable about the decisions you make on this. GOING TO A BROKERAGE FIRM OR BANK After looking at the company web sites I just described, you may want to do even more research.


pages: 208 words: 57,602

Futureproof: 9 Rules for Humans in the Age of Automation by Kevin Roose

"World Economic Forum" Davos, adjacent possible, Airbnb, Albert Einstein, algorithmic bias, algorithmic management, Alvin Toffler, Amazon Web Services, Atul Gawande, augmented reality, automated trading system, basic income, Bayesian statistics, Big Tech, big-box store, Black Lives Matter, business process, call centre, choice architecture, coronavirus, COVID-19, data science, deep learning, deepfake, DeepMind, disinformation, Elon Musk, Erik Brynjolfsson, factory automation, fake news, fault tolerance, Frederick Winslow Taylor, Freestyle chess, future of work, Future Shock, Geoffrey Hinton, George Floyd, gig economy, Google Hangouts, GPT-3, hiring and firing, hustle culture, hype cycle, income inequality, industrial robot, Jeff Bezos, job automation, John Markoff, Kevin Roose, knowledge worker, Kodak vs Instagram, labor-force participation, lockdown, Lyft, mandatory minimum, Marc Andreessen, Mark Zuckerberg, meta-analysis, Narrative Science, new economy, Norbert Wiener, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, off-the-grid, OpenAI, pattern recognition, planetary scale, plutocrats, Productivity paradox, QAnon, recommendation engine, remote working, risk tolerance, robotic process automation, scientific management, Second Machine Age, self-driving car, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social distancing, Steve Jobs, Stuart Kauffman, surveillance capitalism, tech worker, The Future of Employment, The Wealth of Nations by Adam Smith, TikTok, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, warehouse robotics, Watson beat the top human players on Jeopardy!, work culture

And ultimately, if you did decide to invite the chimp army into your office, you wouldn’t do it right away. You might conduct a Chimp Safety Audit or convene a Chimp Oversight Task Force. You might decide to put a small number of chimps in a room under close supervision, train them to do a simple task, and evaluate the results before giving them more important assignments. But whatever your risk tolerance was, I’m fairly confident that you wouldn’t just invite the chimps in, give them badges and lanyards, and say “Okay, get to work!” And you sure as hell wouldn’t put them in charge. * * * — You probably see where I’m going with this. In the last chapter, we discussed what happens when humans are turned into endpoints—when a process can’t be fully automated yet, and people are called in to fill the gaps in the meantime.


Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David Aronson

Albert Einstein, Andrew Wiles, asset allocation, availability heuristic, backtesting, Black Swan, book value, butter production in bangladesh, buy and hold, capital asset pricing model, cognitive dissonance, compound rate of return, computerized trading, Daniel Kahneman / Amos Tversky, distributed generation, Elliott wave, en.wikipedia.org, equity risk premium, feminist movement, Great Leap Forward, hindsight bias, index fund, invention of the telescope, invisible hand, Long Term Capital Management, managed futures, mental accounting, meta-analysis, p-value, pattern recognition, Paul Samuelson, Ponzi scheme, price anchoring, price stability, quantitative trading / quantitative finance, Ralph Nelson Elliott, random walk, retrograde motion, revision control, risk free rate, risk tolerance, risk-adjusted returns, riskless arbitrage, Robert Shiller, Sharpe ratio, short selling, source of truth, statistical model, stocks for the long run, sugar pill, systematic trading, the scientific method, transfer pricing, unbiased observer, yield curve, Yogi Berra

In such a world, some investors would be more adverse to risk than others, and they would be willing to pay other investors to accept the burden of additional risk. Also, there would likely be risk-tolerant investors looking to profit from the opportunity to assume additional risk. All that would be needed in such a world is a mechanism by which risk can be transferred from the risk adverse to the risk tolerant and for compensation to be paid to those willing to accept said risk. Let’s step away from markets for a moment to consider one mechanism by which the risk adverse can compensate the risk inclined—the insurance premium.


pages: 523 words: 61,179

Human + Machine: Reimagining Work in the Age of AI by Paul R. Daugherty, H. James Wilson

3D printing, AI winter, algorithmic management, algorithmic trading, AlphaGo, Amazon Mechanical Turk, Amazon Robotics, augmented reality, autonomous vehicles, blockchain, business process, call centre, carbon footprint, circular economy, cloud computing, computer vision, correlation does not imply causation, crowdsourcing, data science, deep learning, DeepMind, digital twin, disintermediation, Douglas Hofstadter, driverless car, en.wikipedia.org, Erik Brynjolfsson, fail fast, friendly AI, fulfillment center, future of work, Geoffrey Hinton, Hans Moravec, industrial robot, Internet of things, inventory management, iterative process, Jeff Bezos, job automation, job satisfaction, knowledge worker, Lyft, machine translation, Marc Benioff, natural language processing, Neal Stephenson, personalized medicine, precision agriculture, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, robotic process automation, Rodney Brooks, Salesforce, Second Machine Age, self-driving car, sensor fusion, sentiment analysis, Shoshana Zuboff, Silicon Valley, Snow Crash, software as a service, speech recognition, tacit knowledge, telepresence, telepresence robot, text mining, the scientific method, uber lyft, warehouse automation, warehouse robotics

Its more than twenty-eight hundred stylists log in at their own computers, which become a digital console of sorts, and then click around an interface that’s designed to help them make quick, relevant styling decisions. Options are automatically sorted so they waste no time searching through wrong-sized items. The interface also provides client information like risk tolerance and feedback history. Interestingly, the interface is designed to help stylists overcome biases; it can vary the information they see to test for and nudge them out of recommendation ruts.3 Even with constant monitoring and algorithms that guide decision making, according to internal surveys, Stitch Fix stylists are mostly satisfied with the work.


Alpha Trader by Brent Donnelly

Abraham Wald, algorithmic trading, Asian financial crisis, Atul Gawande, autonomous vehicles, backtesting, barriers to entry, beat the dealer, behavioural economics, bitcoin, Boeing 747, buy low sell high, Checklist Manifesto, commodity trading advisor, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, currency risk, deep learning, diversification, Edward Thorp, Elliott wave, Elon Musk, endowment effect, eurozone crisis, fail fast, financial engineering, fixed income, Flash crash, full employment, global macro, global pandemic, Gordon Gekko, hedonic treadmill, helicopter parent, high net worth, hindsight bias, implied volatility, impulse control, Inbox Zero, index fund, inflation targeting, information asymmetry, invisible hand, iterative process, junk bonds, Kaizen: continuous improvement, law of one price, loss aversion, low interest rates, margin call, market bubble, market microstructure, Market Wizards by Jack D. Schwager, McMansion, Monty Hall problem, Network effects, nowcasting, PalmPilot, paper trading, pattern recognition, Peter Thiel, prediction markets, price anchoring, price discovery process, price stability, quantitative easing, quantitative trading / quantitative finance, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Robert Shiller, secular stagnation, Sharpe ratio, short selling, side project, Stanford marshmallow experiment, Stanford prison experiment, survivorship bias, tail risk, TED Talk, the scientific method, The Wisdom of Crowds, theory of mind, time dilation, too big to fail, transaction costs, value at risk, very high income, yield curve, you are the product, zero-sum game

Distilling all the research down to one formula, I get this new equation: Trading success = rational thinking + IQ + self-control - overconfidence Recall from Chapter 3, the formula for general success (money, academic grades, and sports) was: Success = conscientiousness + IQ + talent/skill + luck - neuroticism Combining it all together, we get this final equation: Alpha Trader = rational + intelligent + skilled + conscientious + calibrated confidence Note my equation for trading success excludes some traits that are important but not critical to trading success. I did not include risk appetite, for example. People at each end of the risk-taking continuum (extremely risk averse or highly risk seeking) might underperform those in the middle, but risk appetite is not an important character trait in the literature on trading performance. Furthermore, risk tolerance can be dialed up or down fairly easily with a simple set of rules. I have seen traders at every point on the risk-taking spectrum succeed. Note that before the year 2000 or so, IQ was less important in trading because trading was more skill-based and less quantitative. Now, a higher level of intelligence is required although I would argue that Wall Street currently overvalues IQ and academics, and does not focus enough on grit, street smarts and fire in the belly.

Gardner), 81, 492 risk allocation, 107, 362, 374 risk appetite, 72 assessing, 108—119 banks and, 151 effects influencing, 108, 172—173 moderate, 113—117 strong, 117—119, 186 systematic increases in versus winner’s tilt, 379 too much, 119, 186 varying, 355 See also risk-averse trader risk-averse trader, 109—113, 116—117, 186, 352 tips, 110—113 See also risk aversion risk aversion, 13, 14, 113 in Europe, 480 global, 481 periods, 262 regular versus crisis, 443 risk management, 191 automated system, 158, 482, 484 challenges, 349 daily, 367—368 importance of, 349 lack of focus on, 156, 167—168 process, 268 risk of ruin and, 361 rule creation, 106 See also risk management, individual trade; risk management, monthly; risk management, yearly; risk management system, developing risk management, individual trade, 369—385 abandoning plan, 385 conviction level and, 369—374 evolution of expected value over life of trade, 380-381 knowing default mode network (DMN), 382-384 moving stop loss and, 380 position sizing and, 376—379 rare attractive trade and, 369—370 sticking to plan, 381-382, 384 tiered system, 369 type of trade and, 369 risk management, monthly, 362—367 determining $ at risk for Type I, II, and III trades, 362 determining goals before month, 362 determining monthly stop loss, 362 See also variance risk management, yearly, 354—362 avoid blowing up, 358—359 family and, 358 path dependence, 356, 359—362 slow start and gradual P&L buildup, 354—358 understanding of metagame, 358 risk management system, developing, 353—354 capital of trader and, 354, 356, 368 leverage access of trader and, 354 liquidity of products traded and, 354 personality of trader and, 354 time horizon and, 354, 368 trading style and, 354, 368 risk of ruin, 167, 168, 191, 256 risk management and, 361 Risk Parity, 87 risk-seeker, 34 risk-taking continuum, 72 risk tolerance, 72 Robbins, Tony, 138, 461 Robinhood, 9, 24 Roosevelt, Theodore, 267 Roth, J., 140 round number bias, 214—216, 481 idea generation and, 406 NFLX, 216 TSLA, 215 round trip, 276 RSI. See relative strength indicator (RSI) run-up trade, 396—397 idea generation and, 396—397 lotto ticket trade and, 397 obvious trade and, 397 positioning and, 397 Russia Crisis (1998), 441 S&P 500, 222, 243, 263, 274, 341, 370, 472 futures, 316, 420 performance, 224, 262, 264, 284, 317, 318, 340 rally, 14, 480 since World War II, 264, 265 TSLA added to, 292, 294 safe haven, gold as, 262, 263 Saffo, Paul, 83—84 Saudi/Russia oil price war (2020), 441 Schneider, Frédéric, 68 Schwager, Jack, 491 Science of Self-Discipline, The (P Hollins), 106, 491 screen breaks, 194—195 seasonality, 246, 319, 402, 431 self-assessment.


pages: 337 words: 96,666

Practical Doomsday: A User's Guide to the End of the World by Michal Zalewski

accounting loophole / creative accounting, AI winter, anti-communist, artificial general intelligence, bank run, big-box store, bitcoin, blockchain, book value, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carrington event, clean water, coronavirus, corporate governance, COVID-19, cryptocurrency, David Graeber, decentralized internet, deep learning, distributed ledger, diversification, diversified portfolio, Dogecoin, dumpster diving, failed state, fiat currency, financial independence, financial innovation, fixed income, Fractional reserve banking, Francis Fukuyama: the end of history, Haber-Bosch Process, housing crisis, index fund, indoor plumbing, information security, inventory management, Iridium satellite, Joan Didion, John Bogle, large denomination, lifestyle creep, mass immigration, McDonald's hot coffee lawsuit, McMansion, medical bankruptcy, Modern Monetary Theory, money: store of value / unit of account / medium of exchange, moral panic, non-fungible token, nuclear winter, off-the-grid, Oklahoma City bombing, opioid epidemic / opioid crisis, paperclip maximiser, passive investing, peak oil, planetary scale, ransomware, restrictive zoning, ride hailing / ride sharing, risk tolerance, Ronald Reagan, Satoshi Nakamoto, Savings and loan crisis, self-driving car, shareholder value, Silicon Valley, supervolcano, systems thinking, tech worker, Ted Kaczynski, TED Talk, Tunguska event, underbanked, urban sprawl, Wall-E, zero-sum game, zoonotic diseases

If you approach a financial advisor and ask them what to do with your savings, their first question will be about your investment objective—expecting to hear that you want to retire early, send your children to a posh college, or make a lot of money on self-driving cars. But their first real question will be about your risk tolerance. If you’re risk-averse, they’ll keep your account mostly in cash or government bonds, but if you tell them you want to get rich quick, they’ll recommend putting a good chunk of your money into stocks that historically showed high volatility, with the implication that higher payoffs might result down the line.* For the purpose of safeguarding rainy-day funds, I believe this thinking is flawed; risk has many dimensions.


pages: 253 words: 65,834

Mastering the VC Game: A Venture Capital Insider Reveals How to Get From Start-Up to IPO on Your Terms by Jeffrey Bussgang

business cycle, business process, carried interest, deal flow, digital map, discounted cash flows, do well by doing good, hiring and firing, It's morning again in America, Jeff Bezos, Kickstarter, Marc Andreessen, Mark Zuckerberg, Menlo Park, moveable type in China, pattern recognition, Paul Graham, performance metric, Peter Thiel, pets.com, public intellectual, risk tolerance, rolodex, Ronald Reagan, Sand Hill Road, selection bias, shareholder value, Silicon Valley, Skype, software as a service, sovereign wealth fund, Steve Jobs, Steve Jurvetson, technology bubble, The Wisdom of Crowds

They are much more likely to start something that has a reasonably clear path to success and can generate income within a year or two (particularly rare for start-ups involving sophisticated technology with a long development cycle). Or they may tinker with their idea, hire an employee or two, and dribble in money as needed, working out of their basement or garage or in a corner of somebody else’s office. Entrepreneurs often also raise money from family and friends but, again, the amounts available and the risk tolerances are relatively low. Some large companies, especially technology companies like Microsoft, IBM, and Siemens, can also be seen as a type of VC, because they invest funds in what might be thought of as start-up technology ventures within their organizations. They extol the virtues of entrepreneurship, work to instill the spirit of individual enterprise within their employees, and would dearly love to create breakthrough products in their own research and development (R&D) labs—and sometimes do.


pages: 214 words: 71,585

Selfish, Shallow, and Self-Absorbed: Sixteen Writers on the Decision Not to Have Kids by Meghan Daum

delayed gratification, demographic transition, Donald Trump, financial independence, happiness index / gross national happiness, index card, Joan Didion, Mason jar, Multics, peak oil, Ponzi scheme, risk tolerance, Skype, women in the workforce

She knew everything that I (and science) knew about prenatal drug abuse. But she scoffed when I reminded her. She also knew what Hugh Laurie’s character had said in nearly every episode of House: “Everybody lies.” And addicts lie the most. Some people are energized by risk. There’s no reason why they shouldn’t be. But in a relationship, the risk tolerance of partners should match. To draw upon the wisdom of Aesop, ants should not marry grasshoppers. I am an unglamorous ant—deferring gratification, socking away money religiously and investing it prudently. My partner was a grasshopper—seeking what she wants when she wants it, unconcerned by the threat of a rainy day.


pages: 276 words: 64,903

Built for Growth: How Builder Personality Shapes Your Business, Your Team, and Your Ability to Win by Chris Kuenne, John Danner

Airbnb, Amazon Web Services, asset light, Benchmark Capital, Berlin Wall, Bob Noyce, business climate, business logic, call centre, cloud computing, disruptive innovation, don't be evil, Fairchild Semiconductor, Fall of the Berlin Wall, Gordon Gekko, Jeff Bezos, Kickstarter, Larry Ellison, Lean Startup, Mark Zuckerberg, pattern recognition, risk tolerance, Sand Hill Road, self-driving car, Silicon Valley, solopreneur, Steve Jobs, Steve Wozniak, sugar pill, super pumped, supply-chain management, systems thinking, TED Talk, work culture , zero-sum game

For this book, we applied the same methodology to answer a question further upstream: who builds the businesses that sell those products and services in the first place, and why? Whom We Focused On Building a successful business and growing it to large scale is a marathon effort. We do not focus here on the general personality characteristics that might differentiate the runners of that race from the public at large—things like risk tolerance, comfort with ambiguity, ambition, a sense of independence, and personal initiative. You can read elsewhere about those traits that are shared by most entrepreneurs the world over, whether they are successful or not. We concentrate instead on the winners of the marathon—the successful men and women who have built businesses that have survived and grown.


pages: 228 words: 68,315

The Complete Guide to Property Investment: How to Survive & Thrive in the New World of Buy-To-Let by Rob Dix

buy and hold, diversification, diversified portfolio, driverless car, Firefox, low interest rates, Mr. Money Mustache, risk tolerance, TaskRabbit, transaction costs, young professional

If you could make roughly the same net return from a couple of unencumbered properties or a globally diversified portfolio of stocks and bonds, the latter might give you better peace of mind. Restructure The options above are all totally valid strategies, but the best option of all is likely to be a mix-and-match of all of them, depending on your risk tolerance and income requirements. For example, you could: Sell a couple of properties to raise cash to put into stocks and bonds for diversification. Sell another to reduce your loan-to-value. Keep the rest for income, with very low mortgages so you’re not overly worried about changes to interest rates.


pages: 224 words: 13,238

Electronic and Algorithmic Trading Technology: The Complete Guide by Kendall Kim

algorithmic trading, automated trading system, backtesting, Bear Stearns, business logic, commoditize, computerized trading, corporate governance, Credit Default Swap, diversification, en.wikipedia.org, family office, financial engineering, financial innovation, fixed income, index arbitrage, index fund, interest rate swap, linked data, market fragmentation, money market fund, natural language processing, proprietary trading, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, short selling, statistical arbitrage, Steven Levy, transaction costs, yield curve

This consideration requires the use of properties of the distribution estimates, in addition to averages, such as standard deviation measures. 4. Price sensitivity As price sensitivity increases, structure becomes less useful, due to the need to advertise willingness to trade. Short-term volatility history and real-time deviation are inputs along the dimension. 5. Risk tolerance Refers to execution risks versus the benchmark. Greater tolerance generates less need for a structured horizon and schedule. Pre-trade information can map out optimal tradeoffs between risk, cost, and alpha for varying trade horizons.2 6.3 Algorithmic Feasibility Not all trade orders are suitable for an algorithmic strategy.


pages: 272 words: 64,626

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler

23andMe, Abraham Maslow, Alan Greenspan, Andy Kessler, bank run, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bob Noyce, bread and circuses, British Empire, business cycle, business process, California gold rush, carbon credits, carbon footprint, Cass Sunstein, cloud computing, collateralized debt obligation, collective bargaining, commoditize, computer age, Cornelius Vanderbilt, creative destruction, disintermediation, Douglas Engelbart, Dutch auction, Eugene Fama: efficient market hypothesis, fiat currency, Firefox, Fractional reserve banking, George Gilder, Gordon Gekko, greed is good, income inequality, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, junk bonds, Kickstarter, knowledge economy, knowledge worker, Larry Ellison, libertarian paternalism, low skilled workers, Mark Zuckerberg, McMansion, Michael Milken, Money creation, Netflix Prize, packet switching, personalized medicine, pets.com, prediction markets, pre–internet, profit motive, race to the bottom, Richard Thaler, risk tolerance, risk-adjusted returns, Silicon Valley, six sigma, Skype, social graph, Steve Jobs, The Wealth of Nations by Adam Smith, transcontinental railway, transfer pricing, vertical integration, wealth creators, Yogi Berra

Fortunately, money sloshes around the globe seeking its highest return. To be a true Free Radical, be the highest return. Money goes wherever it damn pleases. Moving around the globe, pulsing through electronic networks and bank databases, seeking to maximize its risk-adjusted return. Maybe someone’s risk tolerance is low so they invest their money in U.S. Treasury Bills. So be it. Others (like me) think that teams of smart people inventing the future are actually less risky than big corporations that are or will soon be under attack from these entrepreneurs, so I invest in small companies and start-ups.


Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, Franklin Allen

3Com Palm IPO, accelerated depreciation, accounting loophole / creative accounting, Airbus A320, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, banking crisis, Bear Stearns, Bernie Madoff, big-box store, Black Monday: stock market crash in 1987, Black-Scholes formula, Boeing 747, book value, break the buck, Brownian motion, business cycle, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, capital controls, Carl Icahn, Carmen Reinhart, carried interest, collateralized debt obligation, compound rate of return, computerized trading, conceptual framework, corporate governance, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cross-border payments, cross-subsidies, currency risk, discounted cash flows, disintermediation, diversified portfolio, Dutch auction, equity premium, equity risk premium, eurozone crisis, fear index, financial engineering, financial innovation, financial intermediation, fixed income, frictionless, fudge factor, German hyperinflation, implied volatility, index fund, information asymmetry, intangible asset, interest rate swap, inventory management, Iridium satellite, James Webb Space Telescope, junk bonds, Kenneth Rogoff, Larry Ellison, law of one price, linear programming, Livingstone, I presume, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, low interest rates, market bubble, market friction, money market fund, moral hazard, Myron Scholes, new economy, Nick Leeson, Northern Rock, offshore financial centre, PalmPilot, Ponzi scheme, prediction markets, price discrimination, principal–agent problem, profit maximization, purchasing power parity, QR code, quantitative trading / quantitative finance, random walk, Real Time Gross Settlement, risk free rate, risk tolerance, risk/return, Robert Shiller, Scaled Composites, shareholder value, Sharpe ratio, short selling, short squeeze, Silicon Valley, Skype, SpaceShipOne, Steve Jobs, subprime mortgage crisis, sunk-cost fallacy, systematic bias, Tax Reform Act of 1986, The Nature of the Firm, the payments system, the rule of 72, time value of money, too big to fail, transaction costs, University of East Anglia, urban renewal, VA Linux, value at risk, Vanguard fund, vertical integration, yield curve, zero-coupon bond, zero-sum game, Zipcar

Thus the corporation’s financial manager faces two broad financial questions: First, what investments should the corporation make? Second, how should it pay for those investments? The investment decision involves spending money; the financing decision involves raising it. A large corporation may have hundreds of thousands of shareholders. These shareholders differ in many ways, such as their wealth, risk tolerance, and investment horizon. Yet we shall see that they usually share the same financial objective. They want the financial manager to increase the value of the corporation and its current stock price. Thus the secret of success in financial management is to increase value. That is easy to say, but not very helpful.

There is no way that these shareholders can be actively involved in management; it would be like trying to run New York City by town meetings. Authority has to be delegated to professional managers. But how can Walmart’s managers make decisions that satisfy all the shareholders? No two shareholders are exactly the same. They differ in age, tastes, wealth, time horizon, risk tolerance, and investment strategy. Delegating the operation of the firm to professional managers can work only if the shareholders have a common objective. Fortunately there is a natural financial objective on which almost all shareholders agree: Maximize the current market value of shareholders’ investment in the firm.

Maximizing shareholder wealth is a sensible goal when the shareholders have access to well-functioning financial markets.6 Financial markets allow them to share risks and transport savings across time. Financial markets give them the flexibility to manage their own savings and investment plans, leaving the corporation’s financial managers with only one task: to increase market value. A corporation’s roster of shareholders usually includes both risk-averse and risk-tolerant investors. You might expect the risk-averse to say, “Sure, maximize value, but don’t touch too many high-risk projects.” Instead, they say, “Risky projects are OK, provided that expected profits are more than enough to offset the risks. If this firm ends up too risky for my taste, I’ll adjust my investment portfolio to make it safer.”


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

asset-backed security, backtesting, banking crisis, barriers to entry, Bear Stearns, beat the dealer, Bernie Madoff, Black-Scholes formula, book value, British Empire, business cycle, buy and hold, buy the rumour, sell the news, Claude Shannon: information theory, clean tech, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, do what you love, Edward Thorp, family office, financial independence, fixed income, Flash crash, global macro, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Jones Act, legacy carrier, Long Term Capital Management, managed futures, margin call, market bubble, market fundamentalism, Market Wizards by Jack D. Schwager, merger arbitrage, Michael Milken, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, proprietary trading, quantitative easing, quantitative trading / quantitative finance, Reminiscences of a Stock Operator, Right to Buy, risk free rate, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Savings and loan crisis, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

The larger the position, the greater the danger that trading decisions will be driven by fear rather than by judgment and experience. According to Clark, one way of knowing your position is too large is if you wake up thinking about it. You also need to be sure that your methodology is consistent with your risk tolerance. For example, if your trade implementation strategy allows for building a three-unit position, but your natural risk tolerance is only one unit, you can easily end up panicking out of good positions because you are trading larger than your comfort level. Trading size needs to be kept small enough so that fear does not become the prevailing instinct guiding your judgment.


The Handbook of Personal Wealth Management by Reuvid, Jonathan.

asset allocation, banking crisis, BRICs, business cycle, buy and hold, carbon credits, collapse of Lehman Brothers, correlation coefficient, credit crunch, cross-subsidies, currency risk, diversification, diversified portfolio, estate planning, financial deregulation, fixed income, global macro, high net worth, income per capita, index fund, interest rate swap, laissez-faire capitalism, land tenure, low interest rates, managed futures, market bubble, merger arbitrage, negative equity, new economy, Northern Rock, pattern recognition, Ponzi scheme, prediction markets, proprietary trading, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, short selling, side project, sovereign wealth fund, statistical arbitrage, systematic trading, transaction costs, yield curve

Any assessment that falls short is fruitless, not to be mention potentially damaging to the attainment of the investor’s financial targets. The primary profiling considerations are summarized in Figure 1.1.2. ឣ 10 PORTFOLIO INVESTMENT _________________________________________________ Investors risk tolerances Tolerance to loss of capital Volatility (ability to withstand fluctuations in returns) Return objectives Return target over specified time frame Time horizon Time expectation for goal achievement Income The requirement for cash flow (coupons, dividends) Could be tied to liability management Liquidity requirements and illiquidity tolerance Tolerance to illiquidity Consideration to future portfolio evolution/cash needs Currency Base currency or basket of currencies reference Hedging requirements Taxation considerations/advice being taken Specific areas of awareness – universe restrictions Capital vs income return derivation Further preferences and constraints Specific/important/ancillary information Source: Citi Private Bank Figure 1.1.2 Profiling considerations A well-constructed portfolio plan is the end result of extensive profiling and holistic review.


pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game by Lee Munson

affirmative action, Alan Greenspan, asset allocation, backtesting, barriers to entry, Bear Stearns, Bernie Madoff, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fear index, fiat currency, financial engineering, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, Glass-Steagall Act, global macro, High speed trading, housing crisis, index fund, joint-stock company, junk bonds, managed futures, Market Wizards by Jack D. Schwager, Michael Milken, military-industrial complex, money market fund, moral hazard, Myron Scholes, National best bid and offer, off-the-grid, passive investing, Ponzi scheme, power law, price discovery process, proprietary trading, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, risk/return, Savings and loan crisis, short squeeze, stocks for the long run, stocks for the long term, too big to fail, trade route, Vanguard fund, walking around money

Let’s not even get into the world of commodities or complex strategies. If the industry can convince you only to think of the asset class’s expected return, you are then tuned into their prognostications of what those returns will be. The pie chart is just the delivery system, like a cigarette. Now, with your handy little allocation and risk tolerance given to you by a trusted adviser, you are free to roam the garbage dumps of Wall Street noise to find your golden goose. Will it be Eastern Europe that boosts your returns this year, or perhaps a bet on China? What would otherwise look like reckless abandon is now fully sanctioned by Wall Street.


pages: 266 words: 79,297

Forge Your Future with Open Source by VM (Vicky) Brasseur

AGPL, anti-pattern, Benevolent Dictator For Life (BDFL), call centre, continuous integration, Contributor License Agreement, Debian, DevOps, don't repeat yourself, en.wikipedia.org, Firefox, FOSDEM, Free Software Foundation, Guido van Rossum, information security, Internet Archive, Larry Wall, microservices, Perl 6, premature optimization, pull request, Richard Stallman, risk tolerance, Turing machine

While you could just whip up a project and throw it out on a code forge somewhere, you’ll get a lot better results if you pay attention to the small but important details that make a project worth using and worth contributing to in the first place. This chapter assumes you want to release a personal project. Releasing a project for work may share a lot of the same steps, but it’s a different matter entirely and is covered in the next chapter. Company-released projects often differ in scope, but they always differ in risk tolerance, intellectual property considerations, and strategic reasons for releasing the project. These characteristics make a very large difference in how you approach releasing a FOSS project, and messing them up can result in enormous costs. Which is to say: This chapter is for your own personal use.


pages: 280 words: 71,268

Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World With OKRs by John Doerr

Abraham Maslow, Albert Einstein, Big Tech, Bob Noyce, cloud computing, collaborative editing, commoditize, crowdsourcing, data science, fail fast, Fairchild Semiconductor, Firefox, Frederick Winslow Taylor, Google Chrome, Google Earth, Google X / Alphabet X, Haight Ashbury, hockey-stick growth, intentional community, Jeff Bezos, job satisfaction, Khan Academy, knowledge worker, Mary Meeker, Menlo Park, meta-analysis, PageRank, Paul Buchheit, Ray Kurzweil, risk tolerance, Salesforce, scientific management, self-driving car, Sheryl Sandberg, side project, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, Steven Levy, subscription business, Susan Wojcicki, web application, Yogi Berra, éminence grise

Stretch your team too fast and too far, and it may snap. In pursuing high-effort, high-risk goals, employee commitment is essential. Leaders must convey two things: the importance of the outcome, and the belief that it’s attainable. Few entities have Google’s resources to fall back upon when a moonshot crashes. Organizations have a range of risk tolerance, which may change over time. The greater the margin for error, the more a company can extend itself. For example, a 40 percent OKR failure rate might seem too risky—and too discouraging, no matter what leadership says. For high achievers, anything shy of perfection can sap morale. At Risk Management Solutions in California, there are “more degrees than employees,” says Amelia Merrill, a former HR leader.


pages: 326 words: 74,433

Do More Faster: TechStars Lessons to Accelerate Your Startup by Brad Feld, David Cohen

An Inconvenient Truth, augmented reality, computer vision, corporate governance, crowdsourcing, deal flow, disintermediation, fail fast, hiring and firing, hockey-stick growth, Inbox Zero, independent contractor, Jeff Bezos, Kickstarter, knowledge worker, Lean Startup, lolcat, Ray Kurzweil, recommendation engine, risk tolerance, Silicon Valley, Skype, slashdot, social web, SoftBank, software as a service, Steve Jobs, subscription business

It is critical to decide up front how this cash will be treated. Is it debt? Is it convertible debt? Does it buy a different class of shares? What happens if the company raises follow-on funding? What will we pay ourselves? Who gets to change this in the future? This can be a touchy issue. Risk tolerance varies by individual and it is a good idea to factor this into determining the compensation plan for the founders. The issue can be clouded sometimes when one of the founders is investing significant cash into the enterprise. What are the financing plans for the company? Will the company be self-funded and bootstrapped?


pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

Alan Greenspan, asset-backed security, bank run, banking crisis, Bernie Madoff, bond market vigilante , bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, deal flow, disintermediation, diversification, fiat currency, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, foreign exchange controls, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Greenspan put, Home mortgage interest deduction, inverted yield curve, Isaac Newton, joint-stock company, junk bonds, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, low interest rates, margin call, market clearing, mass immigration, Money creation, money market fund, moral hazard, mortgage tax deduction, Nixon triggered the end of the Bretton Woods system, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Phillips curve, plutocrats, Ponzi scheme, profit maximization, proprietary trading, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, Suez canal 1869, systems thinking, tail risk, The Great Moderation, the long tail, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, We are all Keynesians now, Y2K, yield curve

History has not ended, it has been rewound to the 1970s and before, all the way back to the post-war socialist consensus that lonely voices like Ayn Rand railed against. YOU AND YOUR MONEY This brings us back to you and your money. The balance of risk and return in a market can be reasonably gauged when the rules are known. We can’t anticipate exactly what the market will do tomorrow, but we can hedge our bets and act on our own risk tolerance. We Conclusion can make our own decisions like grown-ups and take responsibility for the ones that go wrong. If something sounds too good to be true, it probably is, and those who are not skeptical of the claims of financial professionals can end up at the wrong end of a Ponzi scheme or an exploding interest-only mortgage.


pages: 280 words: 79,029

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better by Andrew Palmer

Affordable Care Act / Obamacare, Alan Greenspan, algorithmic trading, Andrei Shleifer, asset-backed security, availability heuristic, bank run, banking crisis, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, bonus culture, break the buck, Bretton Woods, call centre, Carmen Reinhart, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Graeber, diversification, diversified portfolio, Edmond Halley, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, family office, financial deregulation, financial engineering, financial innovation, fixed income, Flash crash, Google Glasses, Gordon Gekko, high net worth, housing crisis, Hyman Minsky, impact investing, implied volatility, income inequality, index fund, information asymmetry, Innovator's Dilemma, interest rate swap, Kenneth Rogoff, Kickstarter, late fees, London Interbank Offered Rate, Long Term Capital Management, longitudinal study, loss aversion, low interest rates, margin call, Mark Zuckerberg, McMansion, Minsky moment, money market fund, mortgage debt, mortgage tax deduction, Myron Scholes, negative equity, Network effects, Northern Rock, obamacare, payday loans, peer-to-peer lending, Peter Thiel, principal–agent problem, profit maximization, quantitative trading / quantitative finance, railway mania, randomized controlled trial, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Savings and loan crisis, short selling, Silicon Valley, Silicon Valley startup, Skype, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Thales of Miletus, the long tail, transaction costs, Tunguska event, unbanked and underbanked, underbanked, Vanguard fund, web application

He escaped by jumping a wall topped with razor wire—and still has the scars on his hand and leg to prove it. The aim was to scare him, not kill him. “They succeeded,” he says ruefully. Oldfield abandoned his Russian adventure and headed back to London. That first abrupt experience gave him a feel for his own levels of risk tolerance. It also educated him on how mortgage markets in general work. One feature of the housing-finance market in particular bothered him: home ownership requires both the borrowers and the lenders to take on an awful lot of risk. Borrowers must face up to the possibility of unemployment, negative equity, and rising interest rates; lenders must cope with the threat of defaulting borrowers and declining asset values.


Genentech The Beginnings of Biotech (Synthesis) -University Of Chicago Press (2011) by Sally Smith Hughes

Albert Einstein, Asilomar, Asilomar Conference on Recombinant DNA, barriers to entry, creative destruction, full employment, industrial research laboratory, invention of the wheel, Joseph Schumpeter, mass immigration, Menlo Park, power law, prudent man rule, Recombinant DNA, risk tolerance, Ronald Reagan, Sand Hill Road, Silicon Valley

Arriving in 1970, Swanson encountered a thriving center of the microelectronics and computer industries in a region thirty miles south of San Francisco, soon to become known as Silicon Valley. It was without doubt the most entrepreneurial region in the world, boasting a refreshingly boundless, risk-tolerant, success-breeds-success culture in which an aspiring young person could spread his wings and try new things.7 Swanson had found his milieu. Inevitably, not every Citicorp investment went well. It became Swanson’s task to try to salvage the bank’s stake in a company rapidly going downhill. Serving on the board of the failing company, he met Eugene Kleiner, who with Thomas Perkins in 1972 had founded Kleiner & Perkins, a venture capital partnership with offices in San Francisco.8 Taking a measure of Swanson, Kleiner was impressed, according to Perkins, with the young man’s ability “to think straight and get things done.” 9 When Swanson decided to leave Citibank and seek a new position, Kleiner recommended him to Perkins to fi ll a vacancy at the partnership.


pages: 314 words: 75,678

How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need by Bill Gates

agricultural Revolution, call centre, carbon footprint, carbon tax, clean water, coronavirus, COVID-19, decarbonisation, electricity market, energy security, energy transition, fear of failure, Ford Model T, global pandemic, Haber-Bosch Process, Hans Rosling, Intergovernmental Panel on Climate Change (IPCC), invention of air conditioning, Louis Pasteur, megacity, microplastics / micro fibres, negative emissions, oil shock, performance metric, plant based meat, purchasing power parity, risk tolerance, social distancing, Solyndra, systems thinking, TED Talk, the built environment, the High Line, urban planning, yield management

., 112 Gates, Melinda, 4, 8, 12, 62, 117 Gates Foundation projects, see Bill & Melinda Gates Foundation geoengineering, 176 geothermal power, 67, 85, 90 Germany, 78, 153, 192 global temperature increase, 20 and cascading effects of climate change and climate disasters, 24 history and future of, 21, 24, 25 human activity as cause of, 7, 18, 21, 24, 238n impact of small degree of, 20, 24, 30 regional variations in, 21 government policies, role of, 179, 203, 230 in accounting for carbon costs, 186, 194, 206, 210, 212, 215, 223 for bringing technology to market, 108, 181, 189, 198, 202, 223 for buying green products, 146, 203, 208, 210, 213, 214 for infrastructure, 146, 170, 189, 204, 209, 210 in a just energy transition, 187, 229 at national, state, and local levels, 183, 188, 203, 208 need to update, 48, 90, 157, 187, 190, 205 for R&D funding, 184, 199 (see also R&D funding for innovations) for scaling new products, 205, 210, 213 see also adaptation to warmer climates Great Smog of London, 179, 80 greenhouse gas emissions, 22 capturing, 63, 94, 107, 108, 109, 111 carbon prices as a way to reduce, 186, 194, 206, 210, 212, 215, 223 causes of, 22, 24, 54, 55n cost for reduction of, 58 (see also Green Premiums) COVID-19’s effect on, 3n, 13, 64, 132, 33 and economic development, 40, 43, 72, 73, 101, 102, 115, 116, 133, 150, 151, 163 global temperature increase from, 7, 18, 21, 24, 238n growth and persistence of, 18, 19, 24, 41, 49 heat-trapping effect of, 18, 22 measuring, 53, 55n reduction of (see climate disaster, avoiding; zero, getting to) in rich vs. developing and poor countries, 40, 43, 162 see also carbon dioxide; methane; nitrous oxide Green Premiums, 58, 59n affordability of, 60, 61, 64, 158, 188, 214 calculation of, 59, 59n for cooling and heating, 151, 153, 154, 156, 157, 244n for electricity, 72, 79, 81, 83, 106, 194, 221 for food production, 119, 120, 125 for manufacturing, 106, 107 reduction/elimination of, 186, 204, 206, 209, 216, 223 for transportation, 136, 137, 139, 140, 142, 143, 144, 146, 242n Green Revolution, 114, 122, 166 grid-scale electricity storage, 92 growing plants and animals, zero-carbon goal for, 112 deforestation and trees and, 113, 126, 172 emissions to be reduced in, 55, 112, 117, 121, 124, 126, 162 with fertilizer, 115, 121 with food need increase, 113, 122, 23, 129, 165 Green Premiums for, 119, 120, 125 innovations for, 118, 125, 127, 165 solutions available for, 118, 165 H heating and cooling, zero-carbon goal for, 148 with A/C units, 148 and n, 150, 152, 154, 244n emissions to be reduced in, 55, 151, 152, 153, 157 with furnaces and water heaters, 60, 153, 56, 186, 221, 244n government policies needed for, 151, 155, 172, 186 Green Premiums for, 151, 153, 154, 156, 157, 244n innovations and, 152, 155, 56, 157 solutions available for, 151, 153, 54, 155, 156, 221, 244n heat pumps, 60, 153, 154, 156, 221, 244n home emissions, reducing, 187, 221 see also heating and cooling hydrogen, 88, 93, 105, 139 hydropower, 7n, 58, 69 and n, 70, 85 I India, 68, 73, 103, 114, 150, 167 Indonesia, 127, 150 infrastructure, building of, 170, 189, 204, 209, 210 innovations needed, technological for adaptation to warmer climates, 174, 176 carbon capture as, 63, 94, 107, 108, 109, 111, 207 for cooling and heating, 152, 155, 56, 157 as economic opportunity, 35, 61, 185, 216 for electricity production, 84, 90, 96, 190 (see also electrification; electrofuels) government policy and markets for, 108, 181, 189, 198, 202, 223 for growing food and forests, 118, 125, 127, 165 for manufacturing, 102, 108, 111 priorities for, 61, 189, 199, 200 for transportation, 137, 40, 141, 44, 146 see also R&D funding for innovations Intergovernmental Panel on Climate Change (IPCC), 7, 24, 28, 29 intermittency of renewable energy, 8, 57, 75, 77n, 81, 93 international cooperation, 152, 201, 214, 227 see also Paris Agreement ITER nuclear fusion facility, 89 J Japan, 78 and n, 86, 103, 150, 192, 216 jet fuel, 144, 143 jobs, transition to new, 187, 229 K Kenya, 163, 161 kilowatts, 56, 57, 73 L life cycle of products, 69n, 137, 154, 208 lightbulbs, replacing, 221 liquid metals for batteries, 92 lithium-ion batteries, 92 local government, role of, 183, 188, 203, 209, 213, 219 Low Carbon Fuel Standard, 207 low-income countries climate disasters in, 29, 163 energy use and emissions in, 4, 6, 162, 165, 170, 215, 237n farming in, 35, 118, 121, 23, 161, 163, 165 fighting both poverty and climate change in, 4, 6, 7, 9, 67, 68, 133, 160, 169, 175 forests in, 126, 127, 172 health in, 4, 62, 148, 164 M maize, drought-tolerant, 166 mangrove trees, 173 manufacturing cars, 135n, 145 with concrete and cement, 98, 100, 104, 107, 108, 109, 187 emissions to be reduced in, 54, 55 and n, 102, 103, 106, 7, 109 Green Premiums for, 106, 107 innovations for, 102, 108, 111 outsourcing of, 41 with plastics, 100, 104, 107, 110 product standards for, 208 recycling and reusing in, 110 with steel, 100, 102, 107, 108, 109 zero-carbon goal for, 98 meat and alternatives, 112, 115, 16, 117, 126, 129, 222, 241n methane short-term impact of, 21, 35, 176 sources of, 19, 21, 69, 113, 117, 118, 121 Mexico, 115, 116, 150, 166, 172 Miami, FL middle-income countries, 35, 64, 65, 133, 169, 199, 209, 216 Mission Innovation, 11, 12 N natural defenses, preservation and restoration of, 73 natural fertilizer, 123 natural gas for cooling and heating, 149n, 154, 155, 156, 244n global electricity from, 71, 70 history of use and cost of, 44 and job replacements, 188 and methane, 19, 21 net-negative emissions, 19, 110 net-zero emissions goal see also zero, getting to Nigeria, 4, 5, 127 nitrogen, 123, 125 nitrous oxide, 21, 113, 117, 124 nuclear energy advanced reactors, 8, 86, 89, 190 advantages of, 57, 84, 85, 86, 190 global electricity from, 84, 70 government policies on, 190 innovations in, 8, 86, 93, 190 for manufacturing, 107 power density of, 58 risks and safety of, 47, 86, 87, 190 for ships, 147 nuclear fission, 84 nuclear fusion, 87 O offshore wind energy, 89, 194 oil, 39, 43, 44, 70, 71, 87, 156, 191, 192 onshore wind energy, 194, 205 outsourcing of manufacturing, 41 oxygen, 30, 103, 104, 105, 110 P palm oil and deforestation, 127 pandemic, impact of, see COVID-19, impact of Paris Agreement, 10, 11, 12, 50, 212, 213, 215, 237n permafrost, melting of, 35 plant-based burgers, 119, 222 plastics, 100, 104, 107, 110 policies, see government policies power grids, decarbonized, 80, 82n, 97, 111, 151, 156 power lines, 81, 83 power plants, 57, 66, 67, 73, 80, 85, 87, 95, 190, 197, 208 private-public partnerships, 174, 184, 193, 194, 202, 211, 223 Puerto Rico, 27 pumped hydro and alternatives, 92 R R&D funding for innovations with industry partnerships, 174, 184, 193, 194, 202, 211, 222 with long-term commitment, 11, 48, 174, 184, 201, 204, 212 need for steep increases in, 189, 200, 212 priorities for, 61, 189, 199, 200 with risk tolerance, 11, 47, 175, 184, 201, 204, 212, 222 in U.S., 200, 210, 216 radioactive fuel and waste, 87, 88 reducing and reusing as lifestyle, 95, 110, 121, 145 refrigerants, 152 renewable energy batteries for, 75, 79 and n, 91, 93 government policies for, 90, 192, 207 intermittent generation of, 8, 57, 75, 77n, 81, 93 location and transmission with, 74 and n, 77, 80, 94 potential and limitations with, intro.1 and n, 8, 70, 74, 81, 224, 239n timing of transition to, 44, 45, 83, 238n in U.S., 7n, 73, 77n, 84, 89, 192, 193, 207 see also specific renewable sources Renewable Fuel Standard, 191, 207 renewable portfolio standards, 207 research and development, see innovations needed; R&D funding for innovations rice, new types of, 167, 168 Russia, 190 S sea level rise, 28, 160, 171 Seattle, WA, 26, 77, 157, 58 Shanghai, growth of, 101, 102 Shenzhen, China, 140, 41 ships and fuel alternatives, 132, 134, 143, 44, 147, 243n smallholder farms, 161, 163, 166 soil, nitrogen and carbon in, 124, 125 solar energy costs of, 81, 192 initiatives with, 174, 192, 202 intermittent generation of, 57, 75, 81, 86, 93 material use in panels for, 85, 240n power density of, 58, 86, 96 scaling of, 205 solar panels, 46, 80, 85, 157, 192, 240n state government, role of, 183, 203, 209, 212 steel, 100, 102, 107, 108, 109 storage of electricity, 91 see also batteries storms, 26, 27 sub-Saharan Africa, 4, 6, 29, 67, 68, 121, 163, 166 synthetic fertilizer, 115, 121 T temperature, see global temperature increase TerraPower nuclear reactor, 8, 86, 93, 190 thermal storage, 93 “This Is Water” speech (Wallace), 37, 38 and n transmission of electricity, regional, 74 and n, 80 transportation, zero-carbon goal for, 130 with electric alternatives (see electric vehicles) emissions to be reduced in, 54, 55, 131, 132, 33, 134, 135 and n with fuel alternatives, 137, 40, 142, 143, 44, 147, 191, 207 with fuel efficiency, 46, 48, 145 future demand for, 132, 33 Green Premiums for, 136, 137, 139, 140, 142, 143, 144, 146, 242n innovations for, 137, 40, 141, 44, 146 solutions available for, 135, 140, 41, 145, 205, 207 TransWest Express, 82 trees for carbon capture, 127 trucks and fuel alternatives, 134, 140, 141, 42, 146, 147 2050, getting to zero by, 35, 80, 137, 196, 209, 213, 230 U underground power lines, 83 United Kingdom, 90, 91, 179 United States electricity in, 69, 72, 80, 90, 182, 207 emissions in, 41, 132, 152, 163 energy policies in, 48, 179, 191, 207 government role in energy innovation, 210 R&D funding in, 200, 210, 216 renewables in, 7n, 73, 77n, 84, 89, 192, 193, 207 U.S.


pages: 491 words: 131,769

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini, Stephen Mihm

Alan Greenspan, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, Bear Stearns, behavioural economics, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bond market vigilante , bonus culture, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, dark matter, David Ricardo: comparative advantage, debt deflation, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, Glass-Steagall Act, global pandemic, global reserve currency, Gordon Gekko, Greenspan put, Growth in a Time of Debt, housing crisis, Hyman Minsky, information asymmetry, interest rate swap, invisible hand, Joseph Schumpeter, junk bonds, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market bubble, market fundamentalism, Martin Wolf, means of production, Minsky moment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, Northern Rock, offshore financial centre, oil shock, Paradox of Choice, paradox of thrift, Paul Samuelson, Ponzi scheme, price stability, principal–agent problem, private sector deleveraging, proprietary trading, pushing on a string, quantitative easing, quantitative trading / quantitative finance, race to the bottom, random walk, regulatory arbitrage, reserve currency, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, subprime mortgage crisis, Suez crisis 1956, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, too big to fail, tulip mania, Tyler Cowen, unorthodox policies, value at risk, We are all Keynesians now, Works Progress Administration, yield curve, Yom Kippur War

These CDOs of CDOs (sometimes called a CDO2) paled next to the more baroque products coming out of the labs on Wall Street: CDOs of CDOs of CDOs, better known as CDO3; and synthetic CDOs, which assembled a bunch of credit default swaps to mimic an underlying CDO. Some of these more esoteric products had far more than three tranches: they might have fifty or even one hundred, each of which represented a certain level of risk tolerance. In hindsight, the peril of this kind of financial innovation is easy to understand. Slicing and dicing credit risk and transferring it around the world suffused the system with financial instruments that were exotic, complex, and illiquid. These creations became so fiendishly complex and unique that it became difficult to value them by conventional means.


pages: 407 words: 109,653

Top Dog: The Science of Winning and Losing by Po Bronson, Ashley Merryman

Asperger Syndrome, Berlin Wall, Charles Lindbergh, conceptual framework, crowdsourcing, delayed gratification, deliberate practice, Edward Glaeser, experimental economics, Fall of the Berlin Wall, fear of failure, FedEx blackjack story, Ford Model T, game design, industrial cluster, Jean Tirole, knowledge worker, Larry Ellison, longitudinal study, loss aversion, Mark Zuckerberg, meta-analysis, Mikhail Gorbachev, phenotype, Richard Feynman, risk tolerance, school choice, selection bias, shareholder value, Silicon Valley, six sigma, Steve Jobs, the Cathedral and the Bazaar, work culture , zero-sum game

Mitchell, “Serum Testosterone Levels in Surgeons during Major Head and Neck Cancer Surgery: A Suppositional Study,” British Journal of Oral & Maxillofacial Surgery, vol. 49(3), pp. 190–193 (2011) Carney, Dana R., Amy J. C. Cudy, & Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science, vol. 21(10), pp. 1363–1368 (2010) Carré, Justin M., Jenna D. Gilchrist, Mark D. Morrissey, & Cheryl M. McCormick, “Motivational and Situational Factors and the Relationship between Testosterone Dynamics and Human Aggression during Competition,” Biological Psychology, vol. 84(2), pp. 346–353 (2010) Carré, Justin M., & Pranjal J.


pages: 356 words: 106,161

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, availability heuristic, barriers to entry, basic income, benefit corporation, Berlin Wall, Bernie Madoff, Bernie Sanders, bitcoin, Boris Johnson, Branko Milanovic, Bretton Woods, Brexit referendum, Capital in the Twenty-First Century by Thomas Piketty, capitalist realism, carbon footprint, Carmen Reinhart, centre right, clean water, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer age, Corn Laws, corporate governance, corporate raider, creative destruction, cryptocurrency, cuban missile crisis, David Graeber, David Ricardo: comparative advantage, death from overwork, decarbonisation, deindustrialization, Deng Xiaoping, Doha Development Round, don't be evil, Donald Trump, Doomsday Clock, Dunning–Kruger effect, Elon Musk, European colonialism, fake news, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, fundamental attribution error, gig economy, Gini coefficient, Glass-Steagall Act, Great Leap Forward, green new deal, Hans Rosling, housing crisis, income inequality, income per capita, index fund, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, Jeff Bezos, Jeremy Corbyn, Jevons paradox, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, karōshi / gwarosa / guolaosi, Kenneth Rogoff, Kickstarter, lake wobegon effect, land value tax, Landlord’s Game, late capitalism, liberal capitalism, long peace, loss aversion, low interest rates, Mark Zuckerberg, market fundamentalism, means of production, meta-analysis, military-industrial complex, Mont Pelerin Society, moral hazard, moral panic, neoliberal agenda, Network effects, North Sea oil, Northern Rock, offshore financial centre, opioid epidemic / opioid crisis, Overton Window, Pareto efficiency, passive investing, Peter Thiel, plutocrats, principal–agent problem, profit motive, public intellectual, purchasing power parity, race to the bottom, rent-seeking, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, savings glut, Scientific racism, secular stagnation, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, Social Justice Warrior, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Stanislav Petrov, Steven Pinker, structural adjustment programs, surveillance capitalism, tail risk, tech bro, TED Talk, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transatlantic slave trade, trolley problem, unbiased observer, universal basic income, Vilfredo Pareto, Washington Consensus, Winter of Discontent, Y2K, young professional, zero-sum game

It is evident that the optimism bias also serves as a coping mechanism for life: If we can’t dream of success, why bother pursuing it? Imagine, for example, if we took to heart the statistic that half of all businesses fail in their first five years.18 Perhaps entrepreneurship would be limited to exceedingly risk-tolerant individuals, or those with deep enough pockets that they can bear the financial costs of bankruptcy from the start. Everyone who starts a business has to deceive themselves that they will be among the surviving half. Imagine also living with the constant psychological burden of knowing the increasing odds of every disease that could kill us as we get older.


pages: 1,380 words: 190,710

Building Secure and Reliable Systems: Best Practices for Designing, Implementing, and Maintaining Systems by Heather Adkins, Betsy Beyer, Paul Blankinship, Ana Oprea, Piotr Lewandowski, Adam Stubblefield

air gap, anti-pattern, barriers to entry, bash_history, behavioural economics, business continuity plan, business logic, business process, Cass Sunstein, cloud computing, cognitive load, continuous integration, correlation does not imply causation, create, read, update, delete, cryptocurrency, cyber-physical system, database schema, Debian, defense in depth, DevOps, Edward Snowden, end-to-end encryption, exponential backoff, fault tolerance, fear of failure, general-purpose programming language, Google Chrome, if you see hoof prints, think horses—not zebras, information security, Internet of things, Kubernetes, load shedding, margin call, microservices, MITM: man-in-the-middle, NSO Group, nudge theory, operational security, performance metric, pull request, ransomware, reproducible builds, revision control, Richard Thaler, risk tolerance, self-driving car, single source of truth, Skype, slashdot, software as a service, source of truth, SQL injection, Stuxnet, the long tail, Turing test, undersea cable, uranium enrichment, Valgrind, web application, Y2K, zero day

With that command, you might raise ComponentState[MASVN] on components that receive an update late in the deployment pipeline, after qualifying the release on enough devices that you have high confidence that it will work as planned. An API like this may be useful when you’re responding to an active compromise or a particularly severe vulnerability, where velocity is critical and risk tolerance is higher than normal for availability issues. So far, this example has avoided introducing a dedicated API to mutate ComponentState. ComponentState is a delicate collection of values that impacts your ability to recover systems through updates or rollbacks. It is component-local, and external to the configured intent that a centralized piece of automation directly controls.

They can inject this knowledge into their team’s development process later on. Engaging with a Red Team helps you better understand your organization’s security posture and develop a roadmap for implementing meaningful risk reduction projects. By understanding the implications of your current risk tolerance, you can determine whether you need to make adjustments. External Researchers Another way to examine and improve your security posture is to work closely with outside researchers and enthusiasts who find vulnerabilities in your systems. As we mentioned in Chapter 2, this can be a useful way to get feedback about your systems.


When Free Markets Fail: Saving the Market When It Can't Save Itself (Wiley Corporate F&A) by Scott McCleskey

Alan Greenspan, Asian financial crisis, asset-backed security, bank run, barriers to entry, Bear Stearns, Bernie Madoff, break the buck, call centre, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, financial engineering, financial innovation, fixed income, Glass-Steagall Act, information asymmetry, invisible hand, Isaac Newton, iterative process, junk bonds, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, place-making, Ponzi scheme, prediction markets, proprietary trading, risk tolerance, Savings and loan crisis, shareholder value, statistical model, The Wealth of Nations by Adam Smith, time value of money, too big to fail, web of trust

One of the lessons of the financial crisis is that avoiding this tipping point is crucially important. This is how a firm can find itself falling from the top of the heap to the bottom of the pile with dizzying speed. Still, in many cases the problem corrects itself eventually when an investor with a higher risk tolerance sees the value of the collateral as undervalued, or the higher interest rates extorted from the failing firm as a good investment. The market creates a floor at which point investors come in, and the market stabilizes. Of course, if all else fails, the government could step in and play this supporting role—in other words, give a bailout.


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The Charisma Myth: How Anyone Can Master the Art and Science of Personal Magnetism by Olivia Fox Cabane

airport security, Boeing 747, cognitive dissonance, Elon Musk, en.wikipedia.org, hedonic treadmill, Jeff Hawkins, Lao Tzu, mirror neurons, Nelson Mandela, nocebo, Parkinson's law, Peter Thiel, placebo effect, Ralph Waldo Emerson, randomized controlled trial, reality distortion field, risk tolerance, social intelligence, Steve Jobs

Baccus, and Michelle Palmer, “Self-Criticism and Self-Warmth: An Imagery Study Exploring Their Relation to Depression,” Journal of Cognitive Psychotherapy 20, no. 2 (2006): 183–200. 12. D. R. Carney, A. J. C. Cuddy, and A. J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science OnlineFirst, September 21, 2010, http://www.people.hbs.edu/acuddy/in%20press,%20carney,%20cuddy,%20&%20yap,%20psych%20science.pdf. 13. R. F. Baumeister, “Ego Depletion and Self-Regulation Failure: A Resource Model of Self-Control,” Alcoholism: Clinical and Experimental Research 27, no. 2 (2003): 281–84. 14.


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

"there is no alternative" (TINA), "World Economic Forum" Davos, activist fund / activist shareholder / activist investor, air traffic controllers' union, Alan Greenspan, banking crisis, basic income, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, currency risk, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial repression, fixed income, full employment, Garrett Hardin, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, low interest rates, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, Tragedy of the Commons, union organizing, winner-take-all economy, Wolfgang Streeck

In the psychologistic worldview of labour economics, the distinction between residual capital income and contractually fixed labour income – between profits and wages – is associated with different ‘risk propensities’: ‘risk-averse’ individuals prefer to be workers, with a low but secure labour income, while the more ‘risk-tolerant’ become entrepreneurs, with a less secure but potentially high capital income. Whereas recipients of residual income seek the highest possible yield on their capital investment, earners of fixed income try to keep as low as possible the input required of them.41 Distribution conflicts arise from the fact that, other things being equal, higher residual income for the profit-dependent entails lower wages for the wage-dependent, and vice versa.42 For a theory of political economy in which capital is an actor and not just machinery, the seemingly technical ‘functioning’ of the ‘economy’ – above all, growth and full employment – is in reality a political matter.


pages: 292 words: 85,151

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest

23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, anti-fragile, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, behavioural economics, Ben Horowitz, bike sharing, bioinformatics, bitcoin, Black Swan, blockchain, Blue Ocean Strategy, book value, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, circular economy, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, data science, Dean Kamen, deep learning, DeepMind, dematerialisation, discounted cash flows, disruptive innovation, distributed ledger, driverless car, Edward Snowden, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, fail fast, game design, gamification, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, holacracy, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Joi Ito, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, low earth orbit, Lyft, Marc Andreessen, Mark Zuckerberg, market design, Max Levchin, means of production, Michael Milken, minimum viable product, natural language processing, Netflix Prize, NetJets, Network effects, new economy, Oculus Rift, offshore financial centre, PageRank, pattern recognition, Paul Graham, paypal mafia, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, Planet Labs, prediction markets, profit motive, publish or perish, radical decentralization, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Rutger Bregman, Salesforce, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, SpaceShipOne, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, Steve Jurvetson, subscription business, supply-chain management, synthetic biology, TaskRabbit, TED Talk, telepresence, telepresence robot, the long tail, Tony Hsieh, transaction costs, Travis Kalanick, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, urban planning, Virgin Galactic, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game

So the person handling legal for a product has two reporting lines, one to the head of product, who has revenue accountability, and the other to the head of legal, whose job it is to ensure consistency across numerous products. This is great for command and control, but it’s terrible for accountability, speed and risk tolerance. Every time you try to do something, you have to get authorization from all the muckety-mucks in HR, legal, accounting and so on, which takes time. Another major issue Salim has observed with matrix structures is that, over time, power accrues to the horizontals. Often, HR or legal have no incentive to say yes, so their default answer becomes no (which is why HR is often referred to as “inhuman resources”).


pages: 442 words: 85,640

This Book Could Fix Your Life: The Science of Self Help by New Scientist, Helen Thomson

Abraham Wald, Black Lives Matter, caloric restriction, caloric restriction, classic study, coronavirus, correlation does not imply causation, COVID-19, David Attenborough, delayed gratification, Donald Trump, Elon Musk, fake it until you make it, Flynn Effect, George Floyd, global pandemic, hedonic treadmill, job satisfaction, Kickstarter, lock screen, lockdown, meta-analysis, microbiome, nocebo, placebo effect, publication bias, randomized controlled trial, risk tolerance, selective serotonin reuptake inhibitor (SSRI), Sheryl Sandberg, social distancing, Steve Jobs, sugar pill, sunk-cost fallacy, survivorship bias, TED Talk, TikTok, ultra-processed food, Walter Mischel

, Frontiers in Psychology 10, 1145. 5. Lammers, J. et al. (2013), ‘Power Gets the Job: Priming Power Improves Interview Outcomes’, Journal of Experimental Social Psychology 49, 4, 776–9. 6. Carney, D. R. et al. (2010), ‘Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance’, Psychological Science 21, 10, 1363–8. 7. Simmons, J. P. and Simonsohn, U. (2017), ‘Power Posing: P-curving the Evidence’, Psychological Science 28, 5, 687–93. 8. Cuddy, A. J. C. et al. (2017), ‘P-curving a More Comprehensive Body of Research on Postural Feedback Reveals Clear Evidential Value for Power-Posing Effects: Reply to Simmons and Simonsohn’, Psychological Science 29, 4, 656–66. 9.


pages: 303 words: 84,023

Heads I Win, Tails I Win by Spencer Jakab

Alan Greenspan, Asian financial crisis, asset allocation, backtesting, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, book value, business cycle, buy and hold, collapse of Lehman Brothers, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, diversification, dividend-yielding stocks, dogs of the Dow, Elliott wave, equity risk premium, estate planning, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, fear index, fixed income, geopolitical risk, government statistician, index fund, Isaac Newton, John Bogle, John Meriwether, Long Term Capital Management, low interest rates, Market Wizards by Jack D. Schwager, Mexican peso crisis / tequila crisis, money market fund, Myron Scholes, PalmPilot, passive investing, Paul Samuelson, pets.com, price anchoring, proprietary trading, Ralph Nelson Elliott, random walk, Reminiscences of a Stock Operator, risk tolerance, risk-adjusted returns, Robert Shiller, robo advisor, Savings and loan crisis, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, statistical model, Steve Jobs, subprime mortgage crisis, survivorship bias, technology bubble, transaction costs, two and twenty, VA Linux, Vanguard fund, zero-coupon bond, zero-sum game

Though she’s still retained a lot of her frugal habits, she doesn’t need to. If she had gone with her emotions rather than my advice, the situation might be a lot different. I’m not telling you this to portray myself as some sort of hero or genius. I’m doing it to make a point. Because she trusted me, because her finances and risk tolerance were completely transparent to me, and because I was able to look at her situation rationally rather than emotionally, my mom’s finances potentially were saved from a ruinous outcome. A lot of the stocks she owned lost 90 percent, and in some cases 100 percent, of their value in the next two years.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

"World Economic Forum" Davos, AI winter, Alan Greenspan, algorithmic trading, AOL-Time Warner, Apollo 11, asset allocation, banking crisis, barriers to entry, Bear Stearns, Big bang: deregulation of the City of London, Bob Litterman, book value, business cycle, butter production in bangladesh, butterfly effect, buttonwood tree, buy and hold, buy low sell high, capital asset pricing model, Charles Babbage, citizen journalism, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, electricity market, Emanuel Derman, en.wikipedia.org, experimental economics, fake news, financial engineering, financial innovation, fixed income, Ford Model T, Gordon Gekko, Hans Moravec, Herman Kahn, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, Ivan Sutherland, Jim Simons, John Bogle, John Nash: game theory, Kenneth Arrow, load shedding, Long Term Capital Management, machine readable, machine translation, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, military-industrial complex, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, proprietary trading, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Reminiscences of a Stock Operator, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, semantic web, Sharpe ratio, short selling, short squeeze, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, stock buybacks, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, tontine, too big to fail, transaction costs, Turing machine, two and twenty, Upton Sinclair, value at risk, value engineering, Vernor Vinge, Wayback Machine, yield curve, Yogi Berra, your tax dollars at work

We may then select optimal strategies either by minimizing a quadratic utility function, or minimizing Value at Risk . . . , that explicitly considers the tradeoff between volatility risk and liquidation costs. Figure 3.2 is worth many words in understanding this trading model, and the intuitively appealing implications of its results for traders of different risk tolerances. Trader A is realistically risk-averse, accelerating to reduce risk at the cost of higher impact. Trader B is patient and risk-neutral, executing only to reduce expected costs. Trader C is an unrealistic trader who likes risk and who slows down the execution to get more risk, also incurring more impact cost.


pages: 393 words: 115,263

Planet Ponzi by Mitch Feierstein

Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Bear Stearns, Bernie Madoff, book value, break the buck, centre right, collapse of Lehman Brothers, collateralized debt obligation, commoditize, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, disintermediation, diversification, Donald Trump, energy security, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Future Shock, Glass-Steagall Act, government statistician, high net worth, High speed trading, illegal immigration, income inequality, interest rate swap, invention of agriculture, junk bonds, light touch regulation, Long Term Capital Management, low earth orbit, low interest rates, mega-rich, money market fund, moral hazard, mortgage debt, negative equity, Neil Armstrong, Northern Rock, obamacare, offshore financial centre, oil shock, pensions crisis, plutocrats, Ponzi scheme, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, risk tolerance, Robert Shiller, Ronald Reagan, tail risk, too big to fail, trickle-down economics, value at risk, yield curve

But that doesn’t mean that the scheme is dead and finished with. It just means that the public sector chose to swallow the private sector’s debts. The debts are still there. The bad assets are still there. The same corrupt incentives are still in place. The same degree of profiteering. The same blindness to risk. The same astonishing tolerance for ever-increasing debt. But don’t think all this means that things are as bad as they ever were. They’re not. They’re worse‌—‌much worse. Remember: Ponzi schemes can only operate because of their merry-go-round nature. New dummies providing the influx of funds to pay out the old dummies.

If you fancy treading still higher on the risk–reward ladder, there are additional steps which may appeal to a minority of confident investors. If you’re inclined to explore these upper steps, go ahead and do so‌—‌but always bearing in mind that as the opportunity for reward increases, so the risk of loss increases too. You need to evaluate your investments against your own risk tolerance‌—‌very low, low, medium, high, or very high. In general, younger folk can afford to invest a small proportion of their assets in well-researched medium- to high-risk opportunities; but no matter who you are, if you are attracted to high-risk opportunities, make sure you never invest money you can’t afford to lose.


pages: 496 words: 154,363

I'm Feeling Lucky: The Confessions of Google Employee Number 59 by Douglas Edwards

"World Economic Forum" Davos, Albert Einstein, AltaVista, Any sufficiently advanced technology is indistinguishable from magic, AOL-Time Warner, barriers to entry, book scanning, Build a better mousetrap, Burning Man, business intelligence, call centre, commoditize, crowdsourcing, don't be evil, Dutch auction, Elon Musk, fault tolerance, Googley, gravity well, invisible hand, Jeff Bezos, job-hopping, John Markoff, Kickstarter, machine translation, Marc Andreessen, Menlo Park, microcredit, music of the spheres, Network effects, PageRank, PalmPilot, performance metric, pets.com, Ralph Nader, risk tolerance, second-price auction, Sheryl Sandberg, side project, Silicon Valley, Silicon Valley startup, slashdot, stem cell, Superbowl ad, Susan Wojcicki, tech worker, The Turner Diaries, Y2K

Evidently, I was that fool. Others shared my incredulity. One engineer was so appalled by the plan that he considered writing a letter to the VCs on the board informing them we were about to lose all the money they had invested in us. Chad Lester—the omnivore engineer—however, celebrated our founder's risk tolerance. "I was excited about it," Chad told me after the fact. "It was like high school and TP-ing someone's house. Why not try it and see what happens?" I'd seen managers build consensus before moving ahead with unpopular decisions, and I knew bosses who dipped their toes in untested waters, fully prepared to pull out quickly if the temperature rose above or dropped below their comfort level.


pages: 323 words: 92,135

Running Money by Andy Kessler

Alan Greenspan, Andy Kessler, Apple II, bioinformatics, Bob Noyce, British Empire, business intelligence, buy and hold, buy low sell high, call centre, Charles Babbage, Corn Laws, cotton gin, Douglas Engelbart, Fairchild Semiconductor, family office, flying shuttle, full employment, General Magic , George Gilder, happiness index / gross national happiness, interest rate swap, invisible hand, James Hargreaves, James Watt: steam engine, joint-stock company, joint-stock limited liability company, junk bonds, knowledge worker, Leonard Kleinrock, Long Term Capital Management, mail merge, Marc Andreessen, margin call, market bubble, Mary Meeker, Maui Hawaii, Menlo Park, Metcalfe’s law, Michael Milken, Mitch Kapor, Network effects, packet switching, pattern recognition, pets.com, railway mania, risk tolerance, Robert Metcalfe, Sand Hill Road, Silicon Valley, South China Sea, spinning jenny, Steve Jobs, Steve Wozniak, Suez canal 1869, Toyota Production System, TSMC, UUNET, zero-sum game

Treasuries, which are backed by the tax payments from the high wages that high-margin businesses pay to programmers and engineers versus low-paid factory workers. So far, so good. Foreigners own something like 45% of all Treasuries, some as reserves for their central banks in lieu of gold. Some of those dollars, which are more risk tolerant, buy corporate debt. But the real smart dollars are invested in the highmargin businesses directly. Those dollars can and do buy Intel stock or Microsoft stock. Directly and indirectly, those dollars invest in a high-margin economy. In fact, when they don’t, and invest at home, they almost always screw up.


pages: 400 words: 88,647

Frugal Innovation: How to Do Better With Less by Jaideep Prabhu Navi Radjou

3D printing, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, barriers to entry, Baxter: Rethink Robotics, behavioural economics, benefit corporation, Bretton Woods, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, circular economy, cloud computing, collaborative consumption, collaborative economy, Computer Numeric Control, connected car, corporate social responsibility, creative destruction, crowdsourcing, disruptive innovation, driverless car, Elon Musk, fail fast, financial exclusion, financial innovation, gamification, global supply chain, IKEA effect, income inequality, industrial robot, intangible asset, Internet of things, job satisfaction, Khan Academy, Kickstarter, late fees, Lean Startup, low cost airline, M-Pesa, Mahatma Gandhi, Marc Benioff, megacity, minimum viable product, more computing power than Apollo, new economy, payday loans, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, planned obsolescence, precision agriculture, race to the bottom, reshoring, risk tolerance, Ronald Coase, Salesforce, scientific management, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, software as a service, standardized shipping container, Steve Jobs, supply-chain management, tacit knowledge, TaskRabbit, TED Talk, The Fortune at the Bottom of the Pyramid, the long tail, The Nature of the Firm, Tony Fadell, transaction costs, Travis Kalanick, unbanked and underbanked, underbanked, value engineering, vertical integration, women in the workforce, work culture , X Prize, yield management, Zipcar

Within one year of its launch, more than 1,000 Ford employees had benefited from the TechShop membership. During this time, these tinkerers have helped Ford boost patentable ideas by over 100% (and the quality of patents has also risen) without having to spend significantly more on R&D. The more entrepreneurial and innovative culture has made Ford more open, agile and risk tolerant. Bill Coughlin, CEO of Ford Global Technologies (Ford’s intellectual property arm), who made it all happen, explains how TechShop has radically shifted the corporate culture:17 There is now greater appreciation for the value of new inventions. Killing a concept that’s only on paper is relatively easy, even a disruptive or breakthrough concept.


pages: 313 words: 92,053

Places of the Heart: The Psychogeography of Everyday Life by Colin Ellard

Apollo 11, augmented reality, Benoit Mandelbrot, Berlin Wall, Broken windows theory, Buckminster Fuller, carbon footprint, classic study, cognitive load, commoditize, crowdsourcing, data science, Dunbar number, Frank Gehry, gentrification, Google Glasses, Guggenheim Bilbao, haute couture, Howard Rheingold, Internet of things, Jaron Lanier, Lewis Mumford, mandelbrot fractal, Marshall McLuhan, Masdar, mass immigration, megastructure, mirror neurons, Mondo 2000, more computing power than Apollo, Oculus Rift, overview effect, Peter Eisenman, RFID, Richard Florida, risk tolerance, sentiment analysis, Skinner box, smart cities, starchitect, TED Talk, the built environment, theory of mind, time dilation, urban decay, urban planning, urban sprawl, Victor Gruen

The phenomenon has been repeated many times in many laboratories, including my own where we use the demonstration to interest students in issues related to embodiment. 7A technical account of remapping of space using pointers is provided by Longo and Lourenco of the University of Chicago in a paper titled “On the nature of near space: Effects of tool use and the transition to far space,” in Neuropsychologia (2006, Volume 44, pages 977–981). 8Amy Cuddy’s fascinating and popular TED talk can be found at http://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are?language=en A technical paper describing some of the findings she discusses in the talk can be found in a paper titled “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” in Psychological Science (2010, Volume 21, pages 1363–1368). 9Maarten Bos and Amy Cuddy describe the effects of use of electronic devices of varying size on power postures and, through this our behavior in a paper titled “iPosture: The Size of Electronic Consumer Devices Affects Our Behavior,” in Harvard Business School Working Paper (2013, No. 13-097).


pages: 346 words: 90,371

Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, book value, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, foreign exchange controls, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land bank, land reform, land tenure, land value tax, Landlord’s Game, low interest rates, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, Minsky moment, Money creation, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, Post-Keynesian economics, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Robert Solow, Second Machine Age, secular stagnation, shareholder value, subprime mortgage crisis, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

Under such circumstances, it becomes difficult for the bank to estimate an interest rate that comfortably reflects the (unknowable) risk associated with the loan. An interest rate that covers this type of risk is likely to be very high and may lead to many reliable borrowers being priced out and only people with very high risk tolerance – ‘gamblers’ – choosing to take out loans. This problem is known as ‘adverse selection’ in the economics literature (Akerlof, 1970). Instead of using interest rates to determine borrowing decisions, the evidence suggests banks simply ration their lending quantitatively according to other criteria (Werner, 2005, pp. 194–196).


pages: 302 words: 95,965

How to Be the Startup Hero: A Guide and Textbook for Entrepreneurs and Aspiring Entrepreneurs by Tim Draper

3D printing, Airbnb, Apple's 1984 Super Bowl advert, augmented reality, autonomous vehicles, basic income, Berlin Wall, bitcoin, blockchain, Buckminster Fuller, business climate, carried interest, connected car, CRISPR, crowdsourcing, cryptocurrency, deal flow, Deng Xiaoping, discounted cash flows, disintermediation, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, fake news, family office, fiat currency, frictionless, frictionless market, growth hacking, high net worth, hiring and firing, initial coin offering, Jeff Bezos, Kickstarter, Larry Ellison, low earth orbit, Lyft, Mahatma Gandhi, Marc Benioff, Mark Zuckerberg, Menlo Park, Metcalfe's law, Metcalfe’s law, Michael Milken, Mikhail Gorbachev, Minecraft, Moneyball by Michael Lewis explains big data, Nelson Mandela, Network effects, peer-to-peer, Peter Thiel, pez dispenser, Ralph Waldo Emerson, risk tolerance, Robert Metcalfe, Ronald Reagan, Rosa Parks, Salesforce, Sand Hill Road, school choice, school vouchers, self-driving car, sharing economy, Sheryl Sandberg, short selling, Silicon Valley, Skype, smart contracts, Snapchat, sovereign wealth fund, stealth mode startup, stem cell, Steve Jobs, Steve Jurvetson, Tesla Model S, Twitter Arab Spring, Uber for X, uber lyft, universal basic income, women in the workforce, Y Combinator, zero-sum game

My mission has been to support them; to support these people who may be misunderstood, may be willing to take the company further to the edge of the cliff than their boards do, but still have the heart and vision that may change the world. They need the respect and protection to overcome nervous boards like ours that might not have the same vision or risk tolerance that they do. This one is for you, Bob, and for all of those entrepreneurs like you out there who make extraordinary sacrifices for their businesses, some coming up short and some going the distance. ✽✽✽ The Riskmaster *All Rights Reserved. Lyrics by Tim Draper Invested all his mattress money Divorced his prom queen hometown honey Scraping up his alimony Friends think he’s a little funny Needs a “world class CEO.”


pages: 342 words: 94,762

Wait: The Art and Science of Delay by Frank Partnoy

algorithmic trading, Atul Gawande, behavioural economics, Bernie Madoff, Black Swan, blood diamond, Cass Sunstein, Checklist Manifesto, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate governance, cotton gin, Daniel Kahneman / Amos Tversky, delayed gratification, Flash crash, Frederick Winslow Taylor, George Akerlof, Google Earth, Hernando de Soto, High speed trading, impulse control, income inequality, information asymmetry, Isaac Newton, Long Term Capital Management, Menlo Park, mental accounting, meta-analysis, MITM: man-in-the-middle, Nick Leeson, paper trading, Paul Graham, payday loans, Pershing Square Capital Management, Ralph Nader, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Saturday Night Live, scientific management, six sigma, social discount rate, Spread Networks laid a new fibre optics cable between New York and Chicago, Stanford marshmallow experiment, statistical model, Steve Jobs, systems thinking, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, upwardly mobile, Walter Mischel, work culture

The brain scans of the subjects showed that they made superficial judgments primarily in the amygdalae, the neural regions that specialize in automatic processing, while individuated judgments were spread around a neural network of several other brain regions. It appears from this research that the amygdalae, though important and useful in numerous ways, also play a major role when we form implicit biases. 33. Dana R. Carney, Amy J. C. Cuddy, and Andy Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21(10, 2010): 1363–1368. 34. Ibid., p. 9. Testosterone has been shown to blunt social emotions such as guilt, embarrassment, and anxiety; it makes both men and women feel less empathy. See Erno Jan Hermans, Peter Putman, and Jack van Honk, “Testosterone Administration Reduces Empathetic Behavior: A Facial Mimicry Study,” Psychoneuroendocrinology 31(2006): 859–866; Erno Jan Hermans, Peter Putman, Johanna M.


Learn Algorithmic Trading by Sebastien Donadio

active measures, algorithmic trading, automated trading system, backtesting, Bayesian statistics, behavioural economics, buy and hold, buy low sell high, cryptocurrency, data science, deep learning, DevOps, en.wikipedia.org, fixed income, Flash crash, Guido van Rossum, latency arbitrage, locking in a profit, market fundamentalism, market microstructure, martingale, natural language processing, OpenAI, p-value, paper trading, performance metric, prediction markets, proprietary trading, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, short selling, sorting algorithm, statistical arbitrage, statistical model, stochastic process, survivorship bias, transaction costs, type inference, WebSocket, zero-sum game

It can be a command-line system or a user interface receiving the commands from the traders and sending the messages to the appropriate components. Let's have a look at the following diagram: As shown in the diagram, if we need to update the trading strategy parameters, the trader can use a text field on a web-based application to specify the risk tolerance the trading strategy can take. The number (corresponding to the tolerance limit) will be sent to the appropriate trading strategy. Services Additional components may be added to the trading system. We will talk about the following components (it is not an exhaustive list): Position server: This keeps track of all the trades.


pages: 474 words: 87,687

Stealth by Peter Westwick

Berlin Wall, centre right, computer age, cuban missile crisis, Dr. Strangelove, fixed-gear, friendly fire, Haight Ashbury, Isaac Newton, John Markoff, knowledge economy, machine translation, Mikhail Gorbachev, military-industrial complex, mutually assured destruction, Neil Armstrong, Norman Mailer, RAND corporation, risk tolerance, Ronald Reagan, Silicon Valley, Strategic Defense Initiative, Teledyne, Vladimir Vetrov: Farewell Dossier, white flight

Consider the words of a former military test pilot who came to the Skunk Works to fly the first Stealth prototypes: I must admit I was kind of surprised when I got to the Skunk Works. … I was surprised at the level of patriotism and how hard those people worked for the airplane. Rag-tag militia. I mean, you talk about beards and mustaches and long hair and tie-dyed shirts and all those things. … Tearaways. Free thinkers. Oh, yeah. Yep. And it’s encouraged.14 The region’s risk-tolerant, freethinking climate may help explain why Stealth emerged there. In the boom years of the 1950s and 1960s, as billions of federal dollars poured into Southern California, the hothouse atmosphere nourished countless intersections between aerospace and the broader culture. The LA architects William Pereira and Albert Martin Jr. rendered Space Age aesthetics in glass and steel for aerospace companies, in what has been described as “aerospace modernism.”15 In art, Robert Irwin worked with Lockheed and NASA engineers, exploring how the sensory deprivation of anechoic chambers or of astronauts in orbit affected aesthetic perception, while the Art and Technology movement sought to forge collaboration between leading artists such as Robert Rauschenberg and engineers at local aerospace firms.16 In literature, aerospace not only helped make LA a capital of science fiction; it also gave Thomas Pynchon his start (as a technical writer for Boeing), and he filled his books with aerospace allusions—including Gravity’s Rainbow, which he wrote in the late 1960s and early 1970s while living in Manhattan Beach, a beachside bedroom community for aerospace engineers from nearby TRW and Northrop.17 Aerospace engineers also helped create Southern California’s vaunted leisure culture.


pages: 339 words: 92,785

I, Warbot: The Dawn of Artificially Intelligent Conflict by Kenneth Payne

Abraham Maslow, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, AlphaGo, anti-communist, Any sufficiently advanced technology is indistinguishable from magic, artificial general intelligence, Asperger Syndrome, augmented reality, Automated Insights, autonomous vehicles, backpropagation, Black Lives Matter, Bletchley Park, Boston Dynamics, classic study, combinatorial explosion, computer age, computer vision, Computing Machinery and Intelligence, coronavirus, COVID-19, CRISPR, cuban missile crisis, data science, deep learning, deepfake, DeepMind, delayed gratification, Demis Hassabis, disinformation, driverless car, drone strike, dual-use technology, Elon Musk, functional programming, Geoffrey Hinton, Google X / Alphabet X, Internet of things, job automation, John Nash: game theory, John von Neumann, Kickstarter, language acquisition, loss aversion, machine translation, military-industrial complex, move 37, mutually assured destruction, Nash equilibrium, natural language processing, Nick Bostrom, Norbert Wiener, nuclear taboo, nuclear winter, OpenAI, paperclip maximiser, pattern recognition, RAND corporation, ransomware, risk tolerance, Ronald Reagan, self-driving car, semantic web, side project, Silicon Valley, South China Sea, speech recognition, Stanislav Petrov, stem cell, Stephen Hawking, Steve Jobs, strong AI, Stuxnet, technological determinism, TED Talk, theory of mind, TikTok, Turing machine, Turing test, uranium enrichment, urban sprawl, V2 rocket, Von Neumann architecture, Wall-E, zero-sum game

But, like the centaur chess team, the creativity unleashed by human-machine collaboration points the way towards strategically useful AIs. A machine that throws up unexpected gibberish is of limited use to strategists, but in combination with humans, new creative possibilities emerge. The machine may produce surprises. It may make startling moves that appear bolder, or more risk tolerant than a human would make. Would human strategists working with the machine go along with that? The stakes in war would be rather higher than those facing the human part of the centaur chess team. If the machine says to do something whacky, like AlphaGo did in move 37, would you go along with its judgment?


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

Affordable Care Act / Obamacare, Alan Greenspan, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, behavioural economics, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Monday: stock market crash in 1987, Black Swan, Bonfire of the Vanities, bonus culture, book value, Bretton Woods, buy and hold, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, Cornelius Vanderbilt, corporate governance, Credit Default Swap, cross-subsidies, currency risk, dematerialisation, disinformation, disruptive innovation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial engineering, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Greenspan put, Growth in a Time of Debt, Ida Tarbell, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, it is difficult to get a man to understand something, when his salary depends on his not understanding it, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jim Simons, John Meriwether, junk bonds, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost airline, M-Pesa, market design, Mary Meeker, megaproject, Michael Milken, millennium bug, mittelstand, Money creation, money market fund, moral hazard, mortgage debt, Myron Scholes, NetJets, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, Paul Volcker talking about ATMs, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, proprietary trading, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, reality distortion field, regulatory arbitrage, Renaissance Technologies, rent control, risk free rate, risk tolerance, road to serfdom, Robert Shiller, Ronald Reagan, Schrödinger's Cat, seminal paper, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, vertical integration, Washington Consensus, We are the 99%, Yom Kippur War

Advertisement for Patek Philippe, luxury watch manufacturer Businesses and households use the deposit channel to facilitate their everyday transactions. They also utilise it for short-term savings when they require a high degree of confidence that their money will be available in full when needed. Long-term savers select the investment channel, where they assume a degree of risk in the hope of higher returns. Long time horizons and greater risk-tolerance fit together: the more extended the time-scale, the greater the likelihood that an investment strategy that on average yields a higher return will actually do so. As I described in Chapter 5, the functions of the investment channel involve both search and stewardship. Through the search process described there, capital is allocated through the investment channel to various long-term uses, in business, investment, property and infrastructure.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

"World Economic Forum" Davos, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, benefit corporation, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, financial engineering, fixed income, geopolitical risk, Glass-Steagall Act, Greenspan put, high net worth, Hyman Minsky, interest rate derivative, invisible hand, junk bonds, Ken Thompson, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, low interest rates, margin call, market bubble, Martin Wolf, Michael Milken, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

Option ARMs were restyled as “Pick-A-Pay” loans, a name more evocative of lottery tickets than mortgages, and they were marketed to people who were simply unable to pay the full, “non-option” rate. Perhaps Herb Sandler, who had grown up on New York’s Lower East Side, the son of a gambler whose income was devoured by loan sharks, had some empathy with subprime borrowers—or perhaps, as with Killinger, the rising tide of risk tolerance loosened his moorings. The search for growth led Golden West inland to new developments in the California desert, where cookie-cutter homes and no-doc mortgages were the standard. By 2006, they had written more than $100 billion in ARMs,24 and though the Sandlers continued to insist on a margin of collateral, home values were so inflated, and loan applications so rife with fraud, that the quality of their book was as suspect as WaMu’s.


pages: 571 words: 124,448

Building Habitats on the Moon: Engineering Approaches to Lunar Settlements by Haym Benaroya

3D printing, anti-fragile, Apollo 11, Apollo 13, biofilm, Black Swan, Brownian motion, Buckminster Fuller, carbon-based life, centre right, clean water, Colonization of Mars, Computer Numeric Control, conceptual framework, data acquisition, dual-use technology, Elon Musk, fault tolerance, Gene Kranz, gravity well, inventory management, Johannes Kepler, low earth orbit, Neil Armstrong, orbital mechanics / astrodynamics, performance metric, RAND corporation, restrictive zoning, risk tolerance, Ronald Reagan, stochastic process, tacit knowledge, telepresence, telerobotics, the scientific method, Two Sigma, urban planning, Virgin Galactic, X Prize, zero-sum game

Commonality of parts is a strategic goal, and therefore a design constraint. Here is one approach to a design framework . A large-scale lunar outpost, if designed for low risk to inhabitants, would be a complex and expensive undertaking, primarily because humans are very delicate. Instead, lunar settlements can be designed to higher risk tolerances with significant cost savings, but to ensure an overall high level of human safety, a number of smaller, much safer, emergency facilities can be placed throughout a settlement at easily accessible locations. These smaller facilities are designed to support the population for a significant amount of time – the time needed for rescue missions to arrive from the other settlements on the Moon, or Earth, depending on the time frame under consideration.


The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan

addicted to oil, air freight, airline deregulation, Alan Greenspan, Albert Einstein, asset-backed security, bank run, Berlin Wall, Black Monday: stock market crash in 1987, Bretton Woods, business cycle, business process, buy and hold, call centre, capital controls, carbon tax, central bank independence, collateralized debt obligation, collective bargaining, compensation consultant, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, cotton gin, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, currency risk, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Glass-Steagall Act, Hernando de Soto, income inequality, income per capita, information security, invisible hand, Joseph Schumpeter, junk bonds, labor-force participation, laissez-faire capitalism, land reform, Long Term Capital Management, low interest rates, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, Nelson Mandela, new economy, North Sea oil, oil shock, open economy, open immigration, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, Reminiscences of a Stock Operator, reserve currency, Right to Buy, risk tolerance, Robert Solow, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, special economic zone, stock buybacks, stocks for the long run, Suez crisis 1956, the payments system, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tipper Gore, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, We are all Keynesians now, working-age population, Y2K, zero-sum game

A recent poll shows that 71 percent of Americans agree that the free-market system is the best economic system available. Only 36 percent of the French agree. Another poll indicates that three-fourths of young French men and women aspire to a job in government. Few young Americans express that preference. Such numbers speak to a remarkable difference in risk tolerance. The French are far less inclined to suffer the competitive pressures of a free market and overwhelmingly seek the security of a government job, despite the widespread evidence that risk taking is essential for economic growth. I can't say the greater the risk taking, the greater the rate of growth.

This compression of risk premiums is global. I am uncertain whether in periods of euphoria people reach for an amount of risk that is at the outer limits of human tolerance, irrespective of the institutional environment in which they live. The prevailing financial infrastructure perhaps merely leverages this risk tolerance. For decades prior to the Civil War, banks had to hold capital well in excess of 40 percent to secure their notes and deposits. By 1900, national banks' capital cover was down to 20 percent of assets, to 12 percent by 1925, and below 10 percent in recent years. But owing to financial flexibility and far greater sources of liquidity, the fundamental risk borne by the individual banks, and presumably investors generally, may not have changed much over that time period.


pages: 453 words: 111,010

Licence to be Bad by Jonathan Aldred

"Friedman doctrine" OR "shareholder theory", Affordable Care Act / Obamacare, Alan Greenspan, Albert Einstein, availability heuristic, Ayatollah Khomeini, behavioural economics, Benoit Mandelbrot, Berlin Wall, Black Monday: stock market crash in 1987, Black Swan, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, Charles Babbage, clean water, cognitive dissonance, corporate governance, correlation does not imply causation, cuban missile crisis, Daniel Kahneman / Amos Tversky, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dr. Strangelove, Edward Snowden, fake news, Fall of the Berlin Wall, falling living standards, feminist movement, framing effect, Frederick Winslow Taylor, From Mathematics to the Technologies of Life and Death, full employment, Gary Kildall, George Akerlof, glass ceiling, Glass-Steagall Act, Herman Kahn, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jeff Bezos, John Nash: game theory, John von Neumann, Linda problem, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, meta-analysis, Mont Pelerin Society, mutually assured destruction, Myron Scholes, Nash equilibrium, Norbert Wiener, nudge unit, obamacare, offshore financial centre, Pareto efficiency, Paul Samuelson, plutocrats, positional goods, power law, precautionary principle, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, scientific management, Skinner box, Skype, Social Responsibility of Business Is to Increase Its Profits, spectrum auction, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tragedy of the Commons, transaction costs, trickle-down economics, Vilfredo Pareto, wealth creators, zero-sum game

We have already noted the preference for bell-curve thinking over the hard-won yet meagre rewards of Mandelbrotian maths. More generally, the idea that we can reduce uncertainty to a single number, a probability, appeals to our desire for simplicity, security and stability. Once captured in a single number, uncertainty can seemingly be controlled. We can choose the amount of risk we will tolerate. In parallel with the desire to control our destiny comes a set of beliefs suggesting that we can do so. Many people have a deep-rooted, barely conscious belief that there are stable patterns in history which will continue into the future. This connects to the way we understand most things in terms of narratives and stories.


pages: 1,157 words: 379,558

pages: 410 words: 101,260

Originals: How Non-Conformists Move the World by Adam Grant

"World Economic Forum" Davos, Abraham Maslow, Albert Einstein, Apple's 1984 Super Bowl advert, availability heuristic, barriers to entry, behavioural economics, Bluma Zeigarnik, business process, business process outsourcing, Cass Sunstein, classic study, clean water, cognitive dissonance, creative destruction, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dean Kamen, double helix, Elon Musk, emotional labour, fear of failure, Firefox, George Santayana, Ignaz Semmelweis: hand washing, information security, Jeff Bezos, Jeff Hawkins, job satisfaction, job-hopping, Joseph Schumpeter, Kevin Roose, Kickstarter, Lean Startup, Louis Pasteur, Mahatma Gandhi, Mark Zuckerberg, meta-analysis, minimum viable product, Neil Armstrong, Nelson Mandela, Network effects, off-the-grid, PalmPilot, pattern recognition, Paul Graham, Peter Thiel, Ralph Waldo Emerson, random walk, risk tolerance, Rosa Parks, Saturday Night Live, Sheryl Sandberg, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Steven Pinker, TED Talk, The Wisdom of Crowds, women in the workforce

Ferris, and Emre Unlu, “It Takes Two: The Incidence and Effectiveness of Co-CEOs,” The Financial Review 46 (2011): 385–412; see also Ryan Krause, Richard Priem, and Leonard Love, “Who’s in Charge Here? Co-CEOs, Power Gaps, and Firm Performance,” Strategic Management Journal (2015) “entrepreneurs are significantly more risk-averse”: Hongwei Xu and Martin Ruef, “The Myth of the Risk-Tolerant Entrepreneur,” Strategic Organization 2 (2004): 331–55. successful entrepreneurs . . . stealing valuables: Ross Levine and Yona Rubinstein, “Smart and Illicit: Who Becomes an Entrepreneur and Does It Pay?,” National Bureau of Economic Research working paper no. 19276 (August 2013); Zhen Zhang and Richard D.


pages: 146 words: 43,446

The New New Thing: A Silicon Valley Story by Michael Lewis

Alan Greenspan, Albert Einstein, Andy Kessler, Benchmark Capital, business climate, classic study, creative destruction, data acquisition, Fairchild Semiconductor, family office, high net worth, invention of the steam engine, invisible hand, Ivan Sutherland, Jeff Bezos, Larry Ellison, Marc Andreessen, Mary Meeker, Menlo Park, PalmPilot, pre–internet, risk tolerance, Sand Hill Road, Silicon Valley, Silicon Valley startup, tech worker, the new new thing, Thorstein Veblen, wealth creators, Y2K

A simple-minded graph with an arrow pointing up and to the right illustrated the principle that the more risk you take with your money, the more you stand to gain or lose. In the past ten months Clark had "lost" $600 million simply by holding Page 164 on to his shares in Netscape. "If they only knew," he said. The Swiss banker chuckled unhappily. Clark remained straight-faced. His eyes drifted farther down the page, to a category marked "Return Objectives and Risk Tolerance." This was a summary of the typical Swiss banker's idea of the range of possible attitudes toward financial risk. It read, Conservative: I seek to... minimize investment volatility. Moderate Growth: I want to take some risk while also preserving capital. High Capital Growth: I have a minimum time horizon of five years with which to pursue my objectives.


pages: 347 words: 97,721

Only Humans Need Apply: Winners and Losers in the Age of Smart Machines by Thomas H. Davenport, Julia Kirby

"World Economic Forum" Davos, AI winter, Amazon Robotics, Andy Kessler, Apollo Guidance Computer, artificial general intelligence, asset allocation, Automated Insights, autonomous vehicles, basic income, Baxter: Rethink Robotics, behavioural economics, business intelligence, business process, call centre, carbon-based life, Clayton Christensen, clockwork universe, commoditize, conceptual framework, content marketing, dark matter, data science, David Brooks, deep learning, deliberate practice, deskilling, digital map, disruptive innovation, Douglas Engelbart, driverless car, Edward Lloyd's coffeehouse, Elon Musk, Erik Brynjolfsson, estate planning, financial engineering, fixed income, flying shuttle, follow your passion, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, game design, general-purpose programming language, global pandemic, Google Glasses, Hans Lippershey, haute cuisine, income inequality, independent contractor, index fund, industrial robot, information retrieval, intermodal, Internet of things, inventory management, Isaac Newton, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joi Ito, Khan Academy, Kiva Systems, knowledge worker, labor-force participation, lifelogging, longitudinal study, loss aversion, machine translation, Mark Zuckerberg, Narrative Science, natural language processing, Nick Bostrom, Norbert Wiener, nuclear winter, off-the-grid, pattern recognition, performance metric, Peter Thiel, precariat, quantitative trading / quantitative finance, Ray Kurzweil, Richard Feynman, risk tolerance, Robert Shiller, robo advisor, robotic process automation, Rodney Brooks, Second Machine Age, self-driving car, Silicon Valley, six sigma, Skype, social intelligence, speech recognition, spinning jenny, statistical model, Stephen Hawking, Steve Jobs, Steve Wozniak, strong AI, superintelligent machines, supply-chain management, tacit knowledge, tech worker, TED Talk, the long tail, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, Works Progress Administration, Zipcar

• Elicit the information the system needs It’s often not that easy to get the information an automated decision system needs to do its work. In automated financial planning, for example, it’s relatively easy to figure out the ideal stock and bond portfolio for a wealthy individual. But if you’re trying to determine a family’s retirement needs, you have to input current spending levels, risk tolerance, likely retirement dates, and so forth. The client could enter that information him or herself, but it’s often difficult to come up with such data. A human financial planner can help to motivate clients and elicit difficult information. There are many other settings in which humans can play the same type of role


pages: 296 words: 98,018

Winners Take All: The Elite Charade of Changing the World by Anand Giridharadas

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, activist lawyer, affirmative action, Airbnb, benefit corporation, Bernie Sanders, bitcoin, Black Lives Matter, Boeing 747, Brexit referendum, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cognitive dissonance, collective bargaining, corporate raider, corporate social responsibility, critical race theory, crowdsourcing, David Brooks, David Heinemeier Hansson, deindustrialization, disintermediation, do well by doing good, Donald Trump, Edward Snowden, Elon Musk, fake it until you make it, fake news, food desert, friendly fire, gentrification, global pandemic, high net worth, hiring and firing, housing crisis, Hyperloop, impact investing, income inequality, independent contractor, invisible hand, Jeff Bezos, Kevin Roose, Kibera, Kickstarter, land reform, Larry Ellison, Lyft, Marc Andreessen, Mark Zuckerberg, microaggression, new economy, Occupy movement, offshore financial centre, opioid epidemic / opioid crisis, Panopticon Jeremy Bentham, Parag Khanna, Paul Graham, Peter Thiel, plutocrats, profit maximization, public intellectual, risk tolerance, rolodex, Ronald Reagan, shareholder value, sharing economy, Sheryl Sandberg, side hustle, side project, Silicon Valley, Silicon Valley billionaire, Silicon Valley startup, Skype, social distancing, Social Responsibility of Business Is to Increase Its Profits, Steven Pinker, systems thinking, tech baron, TechCrunch disrupt, technoutopianism, TED Talk, The Chicago School, The Fortune at the Bottom of the Pyramid, the High Line, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Travis Kalanick, trickle-down economics, Two Sigma, Uber and Lyft, uber lyft, Upton Sinclair, Vilfredo Pareto, Virgin Galactic, work culture , working poor, zero-sum game

Cuddy was nervous about speaking, for the first time, to hundreds of strangers who weren’t in her field, who weren’t enthusiastic students who had signed up for her class, who didn’t know any of the basic concepts of social psychology. Although her work on images of men in individualist and collectivist societies was on her mind, it may not have exhilarated PopTech. Another paper she had published, in Psychological Science, “Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” would become the basis for her talk. The stage lights came up from darkness. Cuddy stood center stage with her hands on her hips, her feet planted shoulder-width apart, tucked into a pair of brown cowboy boots that only added to what would come to be called her signature “power pose.” On the giant screen behind her was an image of Wonder Woman, whose hands and feet were in the same powerful posture, engaged in the same willful taking of space.


pages: 370 words: 97,138

Beyond: Our Future in Space by Chris Impey

3D printing, Admiral Zheng, Albert Einstein, Alfred Russel Wallace, AltaVista, Apollo 11, Apollo 13, Berlin Wall, Biosphere 2, Buckminster Fuller, built by the lowest bidder, butterfly effect, California gold rush, carbon-based life, Charles Lindbergh, Colonization of Mars, cosmic abundance, crowdsourcing, cuban missile crisis, dark matter, Dennis Tito, discovery of DNA, Doomsday Clock, Edward Snowden, Elon Musk, Eratosthenes, Great Leap Forward, Haight Ashbury, Hans Moravec, Hyperloop, I think there is a world market for maybe five computers, Isaac Newton, Jeff Bezos, Johannes Kepler, John von Neumann, Kickstarter, Kim Stanley Robinson, Late Heavy Bombardment, life extension, low earth orbit, Mahatma Gandhi, Marc Andreessen, Mars Rover, Mars Society, military-industrial complex, mutually assured destruction, Neal Stephenson, Neil Armstrong, Nick Bostrom, ocean acidification, Oculus Rift, operation paperclip, out of africa, Peter H. Diamandis: Planetary Resources, phenotype, private spaceflight, purchasing power parity, quantum entanglement, radical life extension, RAND corporation, Ray Kurzweil, RFID, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Rubik’s Cube, Scaled Composites, Search for Extraterrestrial Intelligence, Searching for Interstellar Communications, seminal paper, Silicon Valley, skunkworks, Skype, Snow Crash, space junk, SpaceShipOne, Stephen Hawking, Steven Pinker, supervolcano, technological singularity, telepresence, telerobotics, the medium is the message, the scientific method, theory of mind, There's no reason for any individual to have a computer in his home - Ken Olsen, Virgin Galactic, VTOL, wikimedia commons, world market for maybe five computers, X Prize, Yogi Berra

It’s now an international activity; fewer than half of the satellites launched for commercial use are built in the United States (Figure 34).21 The economic viability of space tourism is difficult to extrapolate—its capabilities aren’t very impressive and its eventual size and long-term future are unclear. A few wealthy individuals have ponied up $20 million for a trip to the International Space Station, and it’s the belief of space visionaries that as the price comes down, the demand will increase. But there are wild cards, such as the risk tolerance of people indulging in a recreation that could lead to a grisly end. The best market study done so far is by the Futron Corporation, an aerospace consulting firm with no skin in the space-tourism game. For orbital trips, they assume that the $20 million price tag will come down to $5 million after twenty years.


pages: 372 words: 101,678

Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success by Scott Davis, Carter Copeland, Rob Wertheimer

3D printing, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, airport security, asset light, barriers to entry, Big Tech, Boeing 747, business cycle, business process, clean water, commoditize, coronavirus, corporate governance, COVID-19, data science, disruptive innovation, Elisha Otis, Elon Musk, factory automation, fail fast, financial engineering, Ford Model T, global pandemic, hydraulic fracturing, Internet of things, iterative process, junk bonds, Kaizen: continuous improvement, Kanban, low cost airline, Marc Andreessen, Mary Meeker, megacity, Michael Milken, Network effects, new economy, Ponzi scheme, profit maximization, random walk, RFID, ride hailing / ride sharing, risk tolerance, Salesforce, shareholder value, Silicon Valley, six sigma, skunkworks, software is eating the world, strikebreaker, tech billionaire, TED Talk, Toyota Production System, Uber for X, value engineering, warehouse automation, WeWork, winner-take-all economy

Those risks were often ignored by those who negotiated the deals. Meanwhile the accounting around GE Capital took the company one more step away from reality. Welch even spoke about the art of moving dollars around each quarter to manage the ups and downs of divisional results. Immelt simply deepened the behavior and raised the risk tolerance. To boost sales and their own bonuses, salespeople gave more discounts and took on shaky customers. They offered more financing with longer terms and smaller down payments. In China, supposedly a GE strength, executives agreed to terms that produced short-term revenues at the cost of intellectual property.


pages: 419 words: 102,488

Chaos Engineering: System Resiliency in Practice by Casey Rosenthal, Nora Jones

Amazon Web Services, Asilomar, autonomous vehicles, barriers to entry, blockchain, business continuity plan, business intelligence, business logic, business process, cloud computing, cognitive load, complexity theory, continuous integration, cyber-physical system, database schema, DevOps, fail fast, fault tolerance, hindsight bias, human-factors engineering, information security, Kanban, Kubernetes, leftpad, linear programming, loose coupling, microservices, MITM: man-in-the-middle, no silver bullet, node package manager, operational security, OSI model, pull request, ransomware, risk tolerance, scientific management, Silicon Valley, six sigma, Skype, software as a service, statistical model, systems thinking, the scientific method, value engineering, WebSocket

Slack is a service used by companies small and large to conduct their business; it is critical that the service is there for them all the time. Stated more formally, Slack does not have sufficient error budget to accept severe or lengthy customer impact as a result of one of these planned exercises. You may have more of an error budget or risk tolerance and, if you wield them effectively, end up learning more, more quickly, thanks to the exercises they allow you to plan. Data durability is even more of a priority. That isn’t to say that storage systems are not exercised by this process. Rather, it simply means the plans and contingencies for those plans must ensure that data is never irrecoverably lost.


Forward: Notes on the Future of Our Democracy by Andrew Yang

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Amazon Web Services, American Society of Civil Engineers: Report Card, basic income, benefit corporation, Bernie Sanders, blockchain, blue-collar work, call centre, centre right, clean water, contact tracing, coronavirus, correlation does not imply causation, COVID-19, data is the new oil, data science, deepfake, disinformation, Donald Trump, facts on the ground, fake news, forensic accounting, future of work, George Floyd, gig economy, global pandemic, income inequality, independent contractor, Jaron Lanier, Jeff Bezos, job automation, Kevin Roose, labor-force participation, Marc Benioff, Mark Zuckerberg, medical bankruptcy, new economy, obamacare, opioid epidemic / opioid crisis, pez dispenser, QAnon, recommendation engine, risk tolerance, rolodex, Ronald Reagan, Rutger Bregman, Sam Altman, Saturday Night Live, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, single-payer health, Snapchat, social distancing, SoftBank, surveillance capitalism, systematic bias, tech billionaire, TED Talk, The Day the Music Died, the long tail, TikTok, universal basic income, winner-take-all economy, working poor

But change is not an absolute good. There are times when conscientiousness and a preservation of preexisting norms, relationships, and loyalties are just what you need. Right now many Americans are being buffeted by economic changes and institutional failures that are not benign; that’s the reality. Openness and risk tolerance are likely being reduced dramatically by the coronavirus and an increasingly punitive economy. A lot of people’s actions are going to be increasingly driven by a sense of threat to their way of life. This is not going to be a time for a lot of new generosity and openness. The question is, how do we dampen polarization and generate a new political language that people of both sides would find unifying or at least interesting?


pages: 347 words: 103,518

The Stolen Year by Anya Kamenetz

"Hurricane Katrina" Superdome, 2021 United States Capitol attack, Anthropocene, basic income, Black Lives Matter, contact tracing, coronavirus, COVID-19, crowdsourcing, Day of the Dead, desegregation, disinformation, Donald Trump, East Village, emotional labour, ending welfare as we know it, epigenetics, food desert, George Floyd, glass ceiling, global pandemic, helicopter parent, informal economy, inventory management, invisible hand, Kintsugi, labor-force participation, lockdown, Mark Zuckerberg, Maui Hawaii, medical residency, Minecraft, moral panic, opioid epidemic / opioid crisis, Ponzi scheme, QAnon, Ralph Waldo Emerson, RAND corporation, randomized controlled trial, rent stabilization, risk tolerance, school choice, Sheryl Sandberg, Silicon Valley, social distancing, Thorstein Veblen, TikTok, traveling salesman, trickle-down economics, universal basic income, upwardly mobile, wages for housework, War on Poverty, white flight, women in the workforce, working poor, Works Progress Administration

Ex-partners butted heads over visitation agreements because they were worried about the risk of travel, because one parent was an essential worker or lived in a COVID hotspot, because of a particularly vulnerable household member, or simply because of the added risk of moving between two different households. They argued over different rules and risk tolerances—over masking, indoor playdates, sending kids to school and daycare. Family courts were working less efficiently during the pandemic, making it harder to get clarity on disputes. If visitation stopped or decreased, the parent with primary custody, usually the mom, was left with even more responsibility than before.


pages: 407 words: 112,767

The Tao of Fully Feeling: Harvesting Forgiveness Out of Blame by Pete Walker

Albert Einstein, Lao Tzu, Lewis Mumford, life extension, Ralph Waldo Emerson, risk tolerance, Saturday Night Live

Accordingly, I hope you will distinguish between those parenting practices that merit gratitude, and those that need to be repudiated. When we authentically forgive our parents, we know what we are forgiving them for, and what specifically was blameworthy about their behavior in the first place. If we do not recognize the exact nature of our parents’ transgressions, we risk tolerating similar kinds of hurtfulness in the present. Children who are not allowed to blame their parents’ bad behavior often become adults who do not protect themselves from abuse. There are many perpetrators who seem to have a sixth sense for identifying people who have lost the ability to protest and blame unfairness.


pages: 426 words: 105,423

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich by Timothy Ferriss

Abraham Maslow, Albert Einstein, Amazon Mechanical Turk, Apollo 13, call centre, clean water, digital nomad, Donald Trump, drop ship, en.wikipedia.org, Firefox, fixed income, follow your passion, Ford Model T, fulfillment center, game design, global village, Iridium satellite, knowledge worker, language acquisition, late fees, lateral thinking, Maui Hawaii, oil shock, paper trading, Paradox of Choice, Parkinson's law, passive income, peer-to-peer, pre–internet, Ralph Waldo Emerson, remote working, risk tolerance, Ronald Reagan, side project, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, Vilfredo Pareto, wage slave, William of Occam

The hysterical part is that, even after becoming aware of this bias, it’s hard to prevent the latter response. Therefore, I manipulate the environmental causes of poor responses instead of depending on error-prone self-discipline. I should not invest in public stocks where I cannot influence outcomes. Once realizing that almost no one can predict risk tolerance and response to losses, I moved all of my investments into fixed-income and cashlike instruments in July 2008 for this reason, setting aside 10% of pretax income for angel investments where I can contribute significant UI/design, PR, and corporate partnership help. (Suggested reading: Rethinking Investing—Part 1, Rethinking Investing—Part 2 on www.fourhourblog.com.)


pages: 322 words: 107,576

Bad Science by Ben Goldacre

Asperger Syndrome, classic study, confounding variable, correlation does not imply causation, disinformation, Edward Jenner, experimental subject, food desert, hygiene hypothesis, Ignaz Semmelweis: hand washing, John Snow's cholera map, Louis Pasteur, meta-analysis, Nelson Mandela, nocebo, offshore financial centre, p-value, placebo effect, public intellectual, publication bias, Richard Feynman, risk tolerance, Ronald Reagan, selection bias, selective serotonin reuptake inhibitor (SSRI), sugar pill, systematic bias, the scientific method, urban planning

You will need: One car battery charger Two large nails Kitchen salt Warm water One Barbie doll A full analytic laboratory (optional) This experiment involves electricity and water. In a world of hurricane hunters and volcanologists, we must accept that everyone sets their own level of risk tolerance. You might well give yourself a nasty electric shock if you perform this experiment at home, and it could easily blow the wiring in your house. It is not safe, but it is in some sense relevant to your understanding of MMR, homeopathy, post-modernist critiques of science and the evils of big pharma.


pages: 319 words: 106,772

Irrational Exuberance: With a New Preface by the Author by Robert J. Shiller

Alan Greenspan, Andrei Shleifer, asset allocation, banking crisis, benefit corporation, Benoit Mandelbrot, book value, business cycle, buy and hold, computer age, correlation does not imply causation, Daniel Kahneman / Amos Tversky, demographic transition, diversification, diversified portfolio, equity premium, Everybody Ought to Be Rich, experimental subject, hindsight bias, income per capita, index fund, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, Long Term Capital Management, loss aversion, Mahbub ul Haq, mandelbrot fractal, market bubble, market design, market fundamentalism, Mexican peso crisis / tequila crisis, Milgram experiment, money market fund, moral hazard, new economy, open economy, pattern recognition, Phillips curve, Ponzi scheme, price anchoring, random walk, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Small Order Execution System, spice trade, statistical model, stocks for the long run, Suez crisis 1956, survivorship bias, the market place, Tobin tax, transaction costs, tulip mania, uptick rule, urban decay, Y2K

But when one looks at long-term data on stocks, bonds, and real estate, one finds that there has in fact been very little relation between their real values.12 Possibly these differences across asset classes could still be reconciled with a Baby Boom theory, by postulating that people in different age groups have different attitudes toward risk because of age-related differences in risk tolerance, that the stock market is relatively high now because the numerous people in their forties today are naturally less risk averse than older people. But such a theory has never been carefully worked out or shown to explain relative price movements. It is also noteworthy that the personal savings rate in the United States has recently been nearly zero, not significantly positive, as the life-cycle theory might suggest.


pages: 519 words: 104,396

Priceless: The Myth of Fair Value (And How to Take Advantage of It) by William Poundstone

availability heuristic, behavioural economics, book value, Cass Sunstein, collective bargaining, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, Dr. Strangelove, East Village, en.wikipedia.org, endowment effect, equal pay for equal work, experimental economics, experimental subject, feminist movement, game design, German hyperinflation, Henri Poincaré, high net worth, index card, invisible hand, John von Neumann, Kenneth Arrow, laissez-faire capitalism, Landlord’s Game, Linda problem, loss aversion, market bubble, McDonald's hot coffee lawsuit, mental accounting, meta-analysis, Nash equilibrium, new economy, no-fly zone, Paul Samuelson, payday loans, Philip Mirowski, Potemkin village, power law, price anchoring, price discrimination, psychological pricing, Ralph Waldo Emerson, RAND corporation, random walk, RFID, Richard Thaler, risk tolerance, Robert Shiller, rolodex, social intelligence, starchitect, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, three-martini lunch, ultimatum game, working poor

When losses are likely, reckless gambles become acceptable (lower left cell). At the end of the day, racetrack bettors are willing to “throw good money after bad” in the hope they can recoup their losses. When losses are unlikely (lower right), people are willing to insure themselves against them. Financial advisors tell clients to consider their “risk tolerance” in making money decisions. The trouble is, these four domains of behavior coexist in all of us. A person who is risk-averse in one situation will turn reckless in another. All it takes is a changed reference point. Investors regard bonds as “safe” and stocks as a gamble offering a higher average return.


pages: 421 words: 110,272

Deaths of Despair and the Future of Capitalism by Anne Case, Angus Deaton

Affordable Care Act / Obamacare, basic income, Bertrand Russell: In Praise of Idleness, Boeing 737 MAX, business cycle, call centre, collapse of Lehman Brothers, collective bargaining, company town, Corn Laws, corporate governance, correlation coefficient, crack epidemic, creative destruction, crony capitalism, declining real wages, deindustrialization, demographic transition, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Elon Musk, falling living standards, Fellow of the Royal Society, financial engineering, fulfillment center, germ theory of disease, income inequality, Jeff Bezos, Joseph Schumpeter, Ken Thompson, Kenneth Arrow, labor-force participation, Les Trente Glorieuses, low skilled workers, Martin Wolf, meritocracy, Mikhail Gorbachev, obamacare, opioid epidemic / opioid crisis, pensions crisis, pill mill, randomized controlled trial, refrigerator car, rent-seeking, risk tolerance, shareholder value, Silicon Valley, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Tyler Cowen, universal basic income, working-age population, zero-sum game

But most servicemen who used opioids started very soon after arriving in Vietnam, and those who had seen more combat were no more likely to use. The most plausible story, and that of Lee Robins, one of the investigators, on whose description of events this account is based, is that these men used opioids because “they said it was enjoyable and made life in the service bearable.”28 They used opioids not to make combat risks tolerable—and they knew very well the risks of being high in combat—but because they were bored out of their minds. When they returned home and were no longer in the army, there were other means of enjoyment, and life made sense and was bearable without drugs. The environment matters. The drugs were also extraordinarily cheap in Vietnam.


pages: 461 words: 106,027

Zero to Sold: How to Start, Run, and Sell a Bootstrapped Business by Arvid Kahl

business logic, business process, centre right, Chuck Templeton: OpenTable:, cognitive load, content marketing, continuous integration, coronavirus, COVID-19, crowdsourcing, domain-specific language, financial independence, functional programming, Google Chrome, hockey-stick growth, if you build it, they will come, information asymmetry, information retrieval, inventory management, Jeff Bezos, job automation, Kanban, Kubernetes, machine readable, minimum viable product, Network effects, performance metric, post-work, premature optimization, risk tolerance, Ruby on Rails, sentiment analysis, side hustle, Silicon Valley, single source of truth, software as a service, solopreneur, source of truth, statistical model, subscription business, sunk-cost fallacy, supply-chain management, the long tail, trickle-down economics, value engineering, web application

I sold FeedbackPanda because, among other reasons, I felt the need to diversify my assets. Having the biggest fraction of my wealth locked up in one business seemed more and more dangerous, and it kept me from experimenting and taking certain risks. If you want to keep running your business without projecting your personal risk tolerance onto it, consider the minority share sale or start investing your dividends in unrelated assets. Keeping the business and growing it into an even bigger enterprise is something that many founders who have been through it describe as an intensely rewarding and incredibly taxing experience. The great thing about increasing the value of your business every single day is that should you ever decide to sell it, the amount of money you will walk away with is growing as well.


pages: 357 words: 107,984

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster by Nick Timiraos

"World Economic Forum" Davos, Alan Greenspan, asset-backed security, banking crisis, Bear Stearns, Bernie Sanders, bitcoin, Black Monday: stock market crash in 1987, Bonfire of the Vanities, break the buck, central bank independence, collapse of Lehman Brothers, collective bargaining, coronavirus, corporate raider, COVID-19, credit crunch, cryptocurrency, Donald Trump, fear index, financial innovation, financial intermediation, full employment, George Akerlof, George Floyd, global pandemic, global supply chain, Greta Thunberg, implied volatility, income inequality, inflation targeting, inverted yield curve, junk bonds, lockdown, Long Term Capital Management, low interest rates, managed futures, margin call, meme stock, money market fund, moral hazard, non-fungible token, oil shock, Phillips curve, price stability, pushing on a string, quantitative easing, Rishi Sunak, risk tolerance, rolodex, Ronald Reagan, Savings and loan crisis, secular stagnation, Skype, social distancing, subprime mortgage crisis, Tesla Model S, too big to fail, unorthodox policies, Y2K, yield curve

After hailing the driver, the passenger is informed that this taxi can’t go anywhere due to a local ordinance mandating there always be at least one taxi at the station. A similar dynamic was unfolding with the big banks, which had larger cash reserves but were reluctant to use them because of their own risk-tolerance rules. Even though banks had fortified their balance sheets for a moment like this, a crisis was nevertheless the last moment in which they wanted to take steps that might weaken them. Investors recognized that banks had built cushions of capital to withstand a serious shock, but now were refusing to deploy them.


The Volatility Smile by Emanuel Derman,Michael B.Miller

Albert Einstein, Asian financial crisis, Benoit Mandelbrot, Black Monday: stock market crash in 1987, book value, Brownian motion, capital asset pricing model, collateralized debt obligation, continuous integration, Credit Default Swap, credit default swaps / collateralized debt obligations, discrete time, diversified portfolio, dividend-yielding stocks, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial engineering, fixed income, implied volatility, incomplete markets, law of one price, London Whale, mandelbrot fractal, market bubble, market friction, Myron Scholes, prediction markets, quantitative trading / quantitative finance, risk tolerance, riskless arbitrage, Sharpe ratio, statistical arbitrage, stochastic process, stochastic volatility, transaction costs, volatility arbitrage, volatility smile, Wiener process, yield curve, zero-coupon bond

Unfortunately (from a theoretical point of view), jumps are inconsistent with arbitrage-free risk-neutral pricing, the bedrock of all the modeling we’ve done up to this point. The inconsistency stems from our inability to instantaneously hedge an option whose underlier can undergo many different jumps of different sizes. The alternative to risk-neutral pricing— economic models that depend on an individual’s subjective risk tolerance— are unattractive in that they demand detailed behavioral modeling. To avoid this, most jump-diffusion models simply assume risk-neutral pricing without convincing justification. Though they may be difficult to model, there have been and will be jumps in asset prices. Even if we can’t fully hedge them, we still need to understand how jumps impact option prices and the volatility smile.


pages: 423 words: 118,002

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, activist lawyer, addicted to oil, Alan Greenspan, American energy revolution, Bakken shale, Bernie Sanders, Buckminster Fuller, California energy crisis, Carl Icahn, clean water, corporate governance, corporate raider, cotton gin, electricity market, energy security, energy transition, financial engineering, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), man camp, margin call, market fundamentalism, Mason jar, North Sea oil, off-the-grid, oil shale / tar sands, oil shock, peak oil, precautionary principle, Project Plowshare, risk tolerance, rolling blackouts, Ronald Reagan, seminal paper, shareholder value, Silicon Valley, Upton Sinclair

And that meant he needed to acquire mineral leases to the north of Fort Worth. He didn’t have to wait long. During the day, Mitchell and Houston’s other independent oilmen gathered on the ground floor of the Niels Esperson Building, a peculiar prewar edifice topped with what looks like a stone gazebo. For those with the right combination of money, ambition, risk tolerance, and luck, the Esperson was the first stop on the way to a midcentury career as a wildcatter. There was a bank of pay telephones at the back of the ground floor that functioned as a makeshift office for aspiring oilmen. There was a drugstore that served coffee and sandwiches. Bar stools surrounded several zinc-topped tables.


pages: 289 words: 113,211

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber

affirmative action, Albert Einstein, asset allocation, backtesting, beat the dealer, behavioural economics, Black Swan, Black-Scholes formula, Bonfire of the Vanities, book value, butterfly effect, commoditize, commodity trading advisor, computer age, computerized trading, disintermediation, diversification, double entry bookkeeping, Edward Lorenz: Chaos theory, Edward Thorp, family office, financial engineering, financial innovation, fixed income, frictionless, frictionless market, Future Shock, George Akerlof, global macro, implied volatility, index arbitrage, intangible asset, Jeff Bezos, Jim Simons, John Meriwether, junk bonds, London Interbank Offered Rate, Long Term Capital Management, loose coupling, managed futures, margin call, market bubble, market design, Mary Meeker, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shock, Paul Samuelson, Pierre-Simon Laplace, proprietary trading, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk tolerance, risk/return, Robert Shiller, Robert Solow, rolodex, Saturday Night Live, selection bias, shareholder value, short selling, Silicon Valley, statistical arbitrage, tail risk, The Market for Lemons, time value of money, too big to fail, transaction costs, tulip mania, uranium enrichment, UUNET, William Langewiesche, yield curve, zero-coupon bond, zero-sum game

Even if we assume as a starting point that the stock market is a random walk and 168 ccc_demon_165-206_ch09.qxd 7/13/07 2:44 PM Page 169 T H E B R AV E N E W W O R L D OF HEDGE FUNDS is governed by rational behavior, and even if we assert at the outset that all trades reflect the full consideration of the most up-to-date information, merely the fact that there are winners and losers will lead to booms and busts that have little to do with the rational application of information.1 The simplest market cycle is based on two psychological characteristics of investors. First, their risk tolerance increases as their market winnings pile up. If you are making money, you will be willing to take proportionally more risk in the market.2 This is often termed the house effect, because it is akin to successful gamblers who raise their stakes because they are playing with the casino’s money. Second, the more people win, the smarter they think they are.


pages: 403 words: 119,206

Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith

Alan Greenspan, bank run, banking crisis, book value, business climate, business cycle, buy and hold, capital asset pricing model, compound rate of return, computerized trading, Cornelius Vanderbilt, credit crunch, cuban missile crisis, discounted cash flows, diversified portfolio, Donald Trump, equity risk premium, Eugene Fama: efficient market hypothesis, financial independence, financial innovation, fixed income, full employment, Glass-Steagall Act, income inequality, index arbitrage, index fund, joint-stock company, junk bonds, locking in a profit, Long Term Capital Management, Louis Bachelier, low interest rates, margin call, market clearing, merger arbitrage, Michael Milken, money market fund, Myron Scholes, Paul Samuelson, price stability, prudent man rule, random walk, Richard Thaler, risk free rate, risk tolerance, Robert Bork, Robert Shiller, Ronald Reagan, scientific management, shareholder value, short selling, stocks for the long run, the market place, transaction costs

Greater sophistication on the part of economic policy makers, safety-net regulations like bank deposit insurance, and the ability of the Federal Reserve to act as the lender of last resort in a time of crisis all reduce the chance of exogenous shocks to the market that create instability, and risk. And finally, not to be underestimated, the willingness of many institutional and individual investors to buy into the notion that stocks are sound long-term investments, not to be quickly discarded in the face of temporary volatility, has effectively increased the risk tolerance of market participants. Market bears, of course, reject the Glassman-Hassert argument that stocks are no riskier than government bonds, contending that while the equity risk premium may have been too high in the past, it should certainly not fall to zero. (Some bears argue that the risk premium has fallen too far already.)


pages: 364 words: 112,681

Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back by Oliver Bullough

Alan Greenspan, banking crisis, Bernie Madoff, bitcoin, blood diamond, Bretton Woods, Brexit referendum, BRICs, British Empire, capital controls, central bank independence, corporate governance, cryptocurrency, cuban missile crisis, dark matter, diversification, Donald Trump, energy security, failed state, financial engineering, Flash crash, Francis Fukuyama: the end of history, full employment, Global Witness, high net worth, if you see hoof prints, think horses—not zebras, income inequality, joint-stock company, land bank, liberal capitalism, liberal world order, mass immigration, medical malpractice, Navinder Sarao, offshore financial centre, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rent-seeking, Richard Feynman, risk tolerance, Sloane Ranger, sovereign wealth fund, Suez crisis 1956, WikiLeaks

Nevertheless, CUP decided not to publish the book. ‘The decision has nothing to do with the quality of your research or your scholarly credibility,’ the company’s Executive Publisher John Haslam wrote to her (according to copies of the letters that she provided to the Economist). ‘It’s simply a question of our risk tolerance in light of our limited resources.’ Haslam explained that the nature of English libel law obliged the writer and publisher to prove the truth of what they were saying, which would be extremely difficult, adding that this was one reason why English courts are so favoured by the world’s rich. He pointed out – in almost exactly the same words as I was told in legal comments about my article about the oligarch – that since Putin and his associates had never been convicted of a crime, it was impossible to say whether the allegations were true or not.


pages: 384 words: 118,572

The Confidence Game: The Psychology of the Con and Why We Fall for It Every Time by Maria Konnikova

Abraham Maslow, attribution theory, Bear Stearns, behavioural economics, Bernie Madoff, Bluma Zeigarnik, British Empire, Cass Sunstein, cognitive dissonance, cognitive load, coherent worldview, Daniel Kahneman / Amos Tversky, dark triade / dark tetrad, endowment effect, epigenetics, Higgs boson, higher-order functions, hindsight bias, lake wobegon effect, lateral thinking, libertarian paternalism, Milgram experiment, placebo effect, Ponzi scheme, post-work, publish or perish, Richard Thaler, risk tolerance, seminal paper, side project, Skype, Steven Pinker, sunk-cost fallacy, the scientific method, tulip mania, Walter Mischel

Often, patient, levelheaded people will go a bit crazy in the wake of a major life change—we become more impulsive, less stable, riskier versions of ourselves. And our impulsivity and appetite for risk are some of the only reliable indicators of fraud susceptibility. In one study, risk takers were over six times more likely to fall victim than those whose risk tolerance was low. Given the right circumstances, just about anyone can fit that description. When we’re feeling low, we want to get out of the slump. So, schemes or propositions that would look absurd in another light suddenly seem more attractive. When we’re angry, we want to lash out. Suddenly, something that once seemed like a gamble looks awfully appealing.


pages: 443 words: 116,832

The Hacker and the State: Cyber Attacks and the New Normal of Geopolitics by Ben Buchanan

active measures, air gap, Bernie Sanders, bitcoin, blockchain, borderless world, Brian Krebs, British Empire, Cass Sunstein, citizen journalism, Citizen Lab, credit crunch, cryptocurrency, cuban missile crisis, data acquisition, disinformation, Donald Trump, drone strike, Edward Snowden, fake news, family office, Hacker News, hive mind, information security, Internet Archive, Jacob Appelbaum, John Markoff, John von Neumann, Julian Assange, Kevin Roose, Kickstarter, kremlinology, Laura Poitras, MITM: man-in-the-middle, Nate Silver, operational security, post-truth, profit motive, RAND corporation, ransomware, risk tolerance, Robert Hanssen: Double agent, rolodex, Ronald Reagan, Russian election interference, seminal paper, Silicon Valley, South China Sea, Steve Jobs, Stuxnet, subscription business, technoutopianism, undersea cable, uranium enrichment, Vladimir Vetrov: Farewell Dossier, Wargames Reagan, WikiLeaks, zero day

In 2019, someone with an anonymous Twitter account, who seemed to have intimate knowledge of NSA lingo, claimed that a group of former government insiders was responsible for the Shadow Brokers, but offered no evidence.42 If that tweet was accurate, there was no foreign hand behind the operation. Other well-known cybersecurity analysts suspected that an adversarial foreign government orchestrated the Shadow Brokers’ campaign. Given the Kremlin’s penchant for hacking and leaking operations and the Shadow Brokers’ elevated risk tolerance, Bruce Schneier and Matt Tait both theorized that the Shadow Brokers might be a direct Russian government operation.43 To these and other analysts, the group’s increasingly political statements in the fall of 2016 and into 2017 indicate something beyond just a disgruntled employee. Even if a Russian intelligence agency was not directly controlling the account, leaks from the United States’ investigation suggest some Russian government involvement.44 What form this took is unclear.


pages: 501 words: 114,888

The Future Is Faster Than You Think: How Converging Technologies Are Transforming Business, Industries, and Our Lives by Peter H. Diamandis, Steven Kotler

Ada Lovelace, additive manufacturing, Airbnb, Albert Einstein, AlphaGo, Amazon Mechanical Turk, Amazon Robotics, augmented reality, autonomous vehicles, barriers to entry, Big Tech, biodiversity loss, bitcoin, blockchain, blood diamond, Boston Dynamics, Burning Man, call centre, cashless society, Charles Babbage, Charles Lindbergh, Clayton Christensen, clean water, cloud computing, Colonization of Mars, computer vision, creative destruction, CRISPR, crowdsourcing, cryptocurrency, data science, Dean Kamen, deep learning, deepfake, DeepMind, delayed gratification, dematerialisation, digital twin, disruptive innovation, Donald Shoup, driverless car, Easter island, Edward Glaeser, Edward Lloyd's coffeehouse, Elon Musk, en.wikipedia.org, epigenetics, Erik Brynjolfsson, Ethereum, ethereum blockchain, experimental economics, fake news, food miles, Ford Model T, fulfillment center, game design, Geoffrey West, Santa Fe Institute, gig economy, gigafactory, Google X / Alphabet X, gravity well, hive mind, housing crisis, Hyperloop, impact investing, indoor plumbing, industrial robot, informal economy, initial coin offering, intentional community, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invention of the telegraph, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joseph Schumpeter, Kevin Kelly, Kickstarter, Kiva Systems, late fees, Law of Accelerating Returns, life extension, lifelogging, loss aversion, Lyft, M-Pesa, Mary Lou Jepsen, Masayoshi Son, mass immigration, megacity, meta-analysis, microbiome, microdosing, mobile money, multiplanetary species, Narrative Science, natural language processing, Neal Stephenson, Neil Armstrong, Network effects, new economy, New Urbanism, Nick Bostrom, Oculus Rift, One Laptop per Child (OLPC), out of africa, packet switching, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, Peter Thiel, planned obsolescence, QR code, RAND corporation, Ray Kurzweil, RFID, Richard Feynman, Richard Florida, ride hailing / ride sharing, risk tolerance, robo advisor, Satoshi Nakamoto, Second Machine Age, self-driving car, Sidewalk Labs, Silicon Valley, Skype, smart cities, smart contracts, smart grid, Snapchat, SoftBank, sovereign wealth fund, special economic zone, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steve Jurvetson, Steven Pinker, Stewart Brand, supercomputer in your pocket, supply-chain management, tech billionaire, technoutopianism, TED Talk, Tesla Model S, Tim Cook: Apple, transaction costs, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, urban planning, Vision Fund, VTOL, warehouse robotics, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, X Prize

Since it can take more time to manage small investors than large investors, many wealth managers have investment minimums in the range of hundreds of thousands of dollars. But AI has leveled the playing field. Today, robo-advisors like Wealthfront and Betterment are bringing wealth management to the masses. Via an app, clients answer a series of initial questions about risk tolerances, investment goals, and retirement aims, and then algorithms take over. Actually, algorithms have already taken over. Every day, roughly 60 percent of all market trades are made by computer. When the market turns volatile, this can climb to as high as 90 percent. All robo-advisors have done is make the process available to the customer, and save the customer money as a result.


pages: 370 words: 112,809

The Equality Machine: Harnessing Digital Technology for a Brighter, More Inclusive Future by Orly Lobel

2021 United States Capitol attack, 23andMe, Ada Lovelace, affirmative action, Airbnb, airport security, Albert Einstein, algorithmic bias, Amazon Mechanical Turk, augmented reality, barriers to entry, basic income, Big Tech, bioinformatics, Black Lives Matter, Boston Dynamics, Charles Babbage, choice architecture, computer vision, Computing Machinery and Intelligence, contact tracing, coronavirus, corporate social responsibility, correlation does not imply causation, COVID-19, crowdsourcing, data science, David Attenborough, David Heinemeier Hansson, deep learning, deepfake, digital divide, digital map, Elon Musk, emotional labour, equal pay for equal work, feminist movement, Filter Bubble, game design, gender pay gap, George Floyd, gig economy, glass ceiling, global pandemic, Google Chrome, Grace Hopper, income inequality, index fund, information asymmetry, Internet of things, invisible hand, it's over 9,000, iterative process, job automation, Lao Tzu, large language model, lockdown, machine readable, machine translation, Mark Zuckerberg, market bubble, microaggression, Moneyball by Michael Lewis explains big data, natural language processing, Netflix Prize, Network effects, Northpointe / Correctional Offender Management Profiling for Alternative Sanctions, occupational segregation, old-boy network, OpenAI, openstreetmap, paperclip maximiser, pattern recognition, performance metric, personalized medicine, price discrimination, publish or perish, QR code, randomized controlled trial, remote working, risk tolerance, robot derives from the Czech word robota Czech, meaning slave, Ronald Coase, Salesforce, self-driving car, sharing economy, Sheryl Sandberg, Silicon Valley, social distancing, social intelligence, speech recognition, statistical model, stem cell, Stephen Hawking, Steve Jobs, Steve Wozniak, surveillance capitalism, tech worker, TechCrunch disrupt, The Future of Employment, TikTok, Turing test, universal basic income, Wall-E, warehouse automation, women in the workforce, work culture , you are the product

When I interviewed her, she was Zooming from her living room with two small children playing and doing remote learning in the background. She explained how Pymetrics forgoes what it sees as an archaic differentiator—namely, résumés and traditional markers of prestige—and instead asks applicants to play online games that measure cognitive and emotional attributes like decision-making, focus, generosity, fairness, and risk tolerance, among others.28 The company customizes these games for clients including Boston Consulting Group and JPMorgan Chase. She described how one large investment firm—which previously had hired primarily from a few top local universities and through referrals—shifted its hiring to more than sixty different schools, significantly increasing female and minority hiring as a result.


pages: 400 words: 124,678

The Investment Checklist: The Art of In-Depth Research by Michael Shearn

accelerated depreciation, AOL-Time Warner, Asian financial crisis, barriers to entry, Bear Stearns, book value, business cycle, call centre, Carl Icahn, Clayton Christensen, collective bargaining, commoditize, compensation consultant, compound rate of return, Credit Default Swap, currency risk, do what you love, electricity market, estate planning, financial engineering, Henry Singleton, intangible asset, Jeff Bezos, Larry Ellison, London Interbank Offered Rate, margin call, Mark Zuckerberg, money market fund, Network effects, PalmPilot, pink-collar, risk tolerance, shareholder value, six sigma, Skype, Steve Jobs, stock buybacks, subscription business, supply-chain management, technology bubble, Teledyne, time value of money, transaction costs, urban planning, women in the workforce, young professional

In contrast, if you bought a stock at 150 percent of book value and it earned 12 percent, then you would be receiving only an 8 percent rate of return. Based on valuation alone, which stock would you rather buy? How Is the Acquisition Financed? You need to determine how the acquisition is financed, which will give you an insight into the risk tolerance of the management team. In general, there are four ways an acquisition is financed: A business can issue debt, it can use the cash on its balance sheet, it can issue equity, or some combination of all three. Let’s look at each of these financing methods in more detail. Using Cash to Finance Acquisitions If an acquisition is financed using cash on the balance sheet, then management is highly conservative.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"World Economic Forum" Davos, 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, algorithmic bias, AlphaGo, Amazon Mechanical Turk, Amazon Web Services, Andy Rubin, AOL-Time Warner, artificial general intelligence, asset light, augmented reality, autism spectrum disorder, autonomous vehicles, backpropagation, backtesting, barriers to entry, behavioural economics, bitcoin, blockchain, blood diamond, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, CRISPR, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, data science, Dean Kamen, deep learning, DeepMind, Demis Hassabis, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, Evgeny Morozov, fake news, family office, fiat currency, financial innovation, general purpose technology, Geoffrey Hinton, George Akerlof, global supply chain, Great Leap Forward, Gregor Mendel, Hernando de Soto, hive mind, independent contractor, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, Jim Simons, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, Kiva Systems, law of one price, longitudinal study, low interest rates, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Marc Benioff, Mark Zuckerberg, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Mustafa Suleyman, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Project Xanadu, radical decentralization, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Robert Solow, Ronald Coase, Salesforce, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, synthetic biology, tacit knowledge, TaskRabbit, Ted Nelson, TED Talk, the Cathedral and the Bazaar, The Market for Lemons, The Nature of the Firm, the strength of weak ties, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, Two Sigma, two-sided market, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, ubercab, Vitalik Buterin, warehouse robotics, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

But the value of the Bitcoin, as expressed by its exchange rate against currencies like the dollar, fluctuated wildly, rising to a high of over $1,100 in November 2013 before plummeting 77% to less than $250 in January 2015 and then recovering to more than $830 two years later. This volatility made the digital currency interesting for risk-tolerant investors†† but unsuitable as a mainstream means of exchange or store of value. While the debate about Bitcoin’s ability to ever be a true currency was unfolding, a small group of people began to make a different point: that the truly valuable innovation was not the new digital money, but instead the distributed ledger that it rested on.


Stock Market Wizards: Interviews With America's Top Stock Traders by Jack D. Schwager

Asian financial crisis, banking crisis, barriers to entry, Bear Stearns, beat the dealer, Black-Scholes formula, book value, commodity trading advisor, computer vision, East Village, Edward Thorp, financial engineering, financial independence, fixed income, implied volatility, index fund, Jeff Bezos, John Meriwether, John von Neumann, junk bonds, locking in a profit, Long Term Capital Management, managed futures, margin call, Market Wizards by Jack D. Schwager, money market fund, Myron Scholes, paper trading, passive investing, pattern recognition, proprietary trading, random walk, risk free rate, risk tolerance, risk-adjusted returns, short selling, short squeeze, Silicon Valley, statistical arbitrage, Teledyne, the scientific method, transaction costs, Y2K

But that's not the case, because of risk. As a professional gambler or as a trader, you are constantly walking the line between maximizing edge and minimizing your risk of tapping out. How do you decide what is the right balance? There is no single right answer to that question. It depends on the individual person's risk tolerance. Let's say you saved up enough money to live out your life in relative comfort but without the ability to make extravagant expenditures. I come along and offer to give you ten-to-one odds on the flip of a coin. The only catch is that you have to bet your entire net worth. That bet has a tremendous edge, but it is probably a bet that you wouldn't want to make, because the value of what you can gain, even though it is a much larger sum of money, is much less than the value of what you could lose.


pages: 587 words: 117,894

Cybersecurity: What Everyone Needs to Know by P. W. Singer, Allan Friedman

4chan, A Declaration of the Independence of Cyberspace, air gap, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, bitcoin, blood diamond, borderless world, Brian Krebs, business continuity plan, Chelsea Manning, cloud computing, cognitive load, crowdsourcing, cuban missile crisis, data acquisition, do-ocracy, Dr. Strangelove, drone strike, Edward Snowden, energy security, failed state, fake news, Fall of the Berlin Wall, fault tolerance, Free Software Foundation, global supply chain, Google Earth, information security, Internet of things, invention of the telegraph, John Markoff, John Perry Barlow, Julian Assange, Khan Academy, M-Pesa, military-industrial complex, MITM: man-in-the-middle, mutually assured destruction, Network effects, packet switching, Peace of Westphalia, pre–internet, profit motive, RAND corporation, ransomware, RFC: Request For Comment, risk tolerance, rolodex, Seymour Hersh, Silicon Valley, Skype, smart grid, SQL injection, Steve Jobs, Stuxnet, Twitter Arab Spring, uranium enrichment, vertical integration, We are Anonymous. We are Legion, web application, WikiLeaks, Yochai Benkler, zero day, zero-sum game

But imagine if you had a memo that you needed to get to your boss with absolutely no mistakes, at the risk of losing your job. Would you e-mail it if there were a 50 percent risk of it somehow being lost or changed en route? Or would you just hand-deliver it? What about if the risk were 10 percent? How about just 1 percent, but still at the risk of losing your job? Then apply the same risk tolerances when it’s your life in battle rather than your job. How do your risk numbers change? Computer network operations, though, won’t just be limited to targeting command and control with indirect effects. As more and more unmanned systems are introduced into warfare (the US military has over 8,000 “drones” like the famous Predator and Reaper, while over eighty countries now have military robotics programs), targeting command-and-control networks opens up even more direct avenues of attack.


pages: 402 words: 126,835

The Job: The Future of Work in the Modern Era by Ellen Ruppel Shell

"Friedman doctrine" OR "shareholder theory", 3D printing, Abraham Maslow, affirmative action, Affordable Care Act / Obamacare, Airbnb, airport security, Albert Einstein, AlphaGo, Amazon Mechanical Turk, basic income, Baxter: Rethink Robotics, big-box store, blue-collar work, Buckminster Fuller, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, company town, computer vision, corporate governance, corporate social responsibility, creative destruction, crowdsourcing, data science, deskilling, digital divide, disruptive innovation, do what you love, Donald Trump, Downton Abbey, Elon Musk, emotional labour, Erik Brynjolfsson, factory automation, follow your passion, Frederick Winslow Taylor, future of work, game design, gamification, gentrification, glass ceiling, Glass-Steagall Act, hiring and firing, human-factors engineering, immigration reform, income inequality, independent contractor, industrial research laboratory, industrial robot, invisible hand, It's morning again in America, Jeff Bezos, Jessica Bruder, job automation, job satisfaction, John Elkington, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kickstarter, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, low skilled workers, Lyft, manufacturing employment, Marc Andreessen, Mark Zuckerberg, means of production, move fast and break things, new economy, Norbert Wiener, obamacare, offshore financial centre, Paul Samuelson, precariat, Quicken Loans, Ralph Waldo Emerson, risk tolerance, Robert Gordon, Robert Shiller, Rodney Brooks, Ronald Reagan, scientific management, Second Machine Age, self-driving car, shareholder value, sharing economy, Silicon Valley, Snapchat, Steve Jobs, stock buybacks, TED Talk, The Chicago School, The Theory of the Leisure Class by Thorstein Veblen, Thomas L Friedman, Thorstein Veblen, Tim Cook: Apple, Uber and Lyft, uber lyft, universal basic income, urban renewal, Wayback Machine, WeWork, white picket fence, working poor, workplace surveillance , Y Combinator, young professional, zero-sum game

For example, in Dashi Dash, Knack’s signature game, candidates are asked to play the role of a virtual server in a Japanese restaurant who must predict customers’ food preferences on the basis of their facial expressions while greeting and serving other customers. Halfteck said that one’s performance in Dashi Dash can within ten minutes sort out such attributes as emotional intelligence, risk tolerance, and adaptability to change. And it seems that not a few hiring managers agree: Knack claimed more than two hundred corporate clients in 2017. Yet while Knack and similar efforts are growing in popularity, there’s scant evidence that games offer a genuine improvement over more subjective methods of hiring.


Multicultural Cities: Toronto, New York, and Los Angeles by Mohammed Abdul Qadeer

affirmative action, business cycle, call centre, David Brooks, deindustrialization, desegregation, edge city, en.wikipedia.org, Frank Gehry, game design, gentrification, ghettoisation, global village, immigration reform, industrial cluster, Jane Jacobs, knowledge economy, market bubble, McMansion, megaproject, new economy, New Urbanism, place-making, Richard Florida, risk tolerance, Silicon Valley, Skype, telemarketer, the built environment, The Chicago School, The Death and Life of Great American Cities, the scientific method, urban planning, urban renewal, working-age population, young professional

This approach is called group characteristics.15 Max Weber’s thesis of “the Protestant ethic and the spirit of capitalism” has long ruled over the theories of entrepreneurship.16 Similarly, the fact that Lebanese, Greeks, Syrians, and GujratiIsmailis have dominated local trade in Africa, the Gulf States, and even 94 Multicultural Cities some parts of the Caribbean has given rise to notions of their cultural proclivity for business. They have been given the name “middleman minorities” in contemporary economic sociology. Cultural theory attributes the entrepreneurial propensities of an ethnic group to such values as risk tolerance, family solidarity, frugality, hard work, adventurousness, and faith in one’s destiny as well as community obligations. It is presumed that some cultures cultivate these values and habits more than others. Another theory explaining the entrepreneurial propensity of some ethnic groups is called opportunity structure or the structural approach.17 It suggests that entrepreneurship is a matter of market conditions or opportunity structures.


pages: 428 words: 121,717

Warnings by Richard A. Clarke

"Hurricane Katrina" Superdome, active measures, Albert Einstein, algorithmic trading, anti-communist, artificial general intelligence, Asilomar, Asilomar Conference on Recombinant DNA, Bear Stearns, behavioural economics, Bernie Madoff, Black Monday: stock market crash in 1987, carbon tax, cognitive bias, collateralized debt obligation, complexity theory, corporate governance, CRISPR, cuban missile crisis, data acquisition, deep learning, DeepMind, discovery of penicillin, double helix, Elon Musk, failed state, financial thriller, fixed income, Flash crash, forensic accounting, friendly AI, Hacker News, Intergovernmental Panel on Climate Change (IPCC), Internet of things, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge worker, Maui Hawaii, megacity, Mikhail Gorbachev, money market fund, mouse model, Nate Silver, new economy, Nicholas Carr, Nick Bostrom, nuclear winter, OpenAI, pattern recognition, personalized medicine, phenotype, Ponzi scheme, Ray Kurzweil, Recombinant DNA, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Ronald Reagan, Sam Altman, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, smart grid, statistical model, Stephen Hawking, Stuxnet, subprime mortgage crisis, tacit knowledge, technological singularity, The Future of Employment, the scientific method, The Signal and the Noise by Nate Silver, Tunguska event, uranium enrichment, Vernor Vinge, WarGames: Global Thermonuclear War, Watson beat the top human players on Jeopardy!, women in the workforce, Y2K

We postulate that there were four main reasons: the willingness by TEPCO and the Japanese government to accept an unusually high level of risk; a myth of nuclear safety pushed by the Japanese government; regulatory capture, the collusion of power companies and nuclear regulators; and, as we have seen in each preceding case, Initial Occurrence Syndrome. First, TEPCO’s risk tolerance in building and operating its nuclear facilities was apparently very high. Extensive efforts to conceal safety risks, going back decades, were exposed following the disaster. It became clear that although the events at the power plant had been set into motion by natural causes, human negligence and indifference played a large role in creating the conditions for the nuclear tragedy.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

Abraham Maslow, Alan Greenspan, Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, buy low sell high, capital controls, central bank independence, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, currency risk, diversification, diversified portfolio, family office, financial engineering, fixed income, glass ceiling, Glass-Steagall Act, global macro, Greenspan put, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, inverted yield curve, John Meriwether, junk bonds, land bank, Long Term Capital Management, low interest rates, managed futures, margin call, market bubble, Market Wizards by Jack D. Schwager, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, Nixon triggered the end of the Bretton Woods system, oil shale / tar sands, oil shock, out of africa, panic early, paper trading, Paul Samuelson, Peter Thiel, price anchoring, proprietary trading, purchasing power parity, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, tail risk, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, Vision Fund, yield curve, zero-coupon bond, zero-sum game

If two strategies are in the same market, say different parts of the U.S. yield curve, but are not correlated, we would be very comfortable allocating the maximum of risk to each one independently. Gorton: One of the restrictions of our fund being sold as an RV/macro fund is that we have a very low risk tolerance.We tell people that we will never lose more than 5 percent.To date, touch wood, we have never drawn down more than 3.5 percent.That means that even when we see outstanding opportunities, we cannot concentrate risk in that trade and we will underperform a bit.The portfolio effect of running RV and macro strategies has been quite strong but it also tends to skew performance to the middle of the range.


pages: 537 words: 144,318

The Invisible Hands: Top Hedge Fund Traders on Bubbles, Crashes, and Real Money by Steven Drobny

Albert Einstein, AOL-Time Warner, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, bond market vigilante , book value, Bretton Woods, BRICs, British Empire, business cycle, business process, buy and hold, capital asset pricing model, capital controls, central bank independence, collateralized debt obligation, commoditize, commodity super cycle, commodity trading advisor, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, diversification, diversified portfolio, equity premium, equity risk premium, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, global macro, Greenspan put, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, inverted yield curve, invisible hand, junk bonds, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, low interest rates, market bubble, market fundamentalism, market microstructure, Minsky moment, moral hazard, Myron Scholes, North Sea oil, open economy, peak oil, pension reform, Ponzi scheme, prediction markets, price discovery process, price stability, private sector deleveraging, profit motive, proprietary trading, purchasing power parity, quantitative easing, random walk, Reminiscences of a Stock Operator, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, SoftBank, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, stocks for the long run, stocks for the long term, survivorship bias, tail risk, The Great Moderation, Thomas Bayes, time value of money, too big to fail, Tragedy of the Commons, transaction costs, two and twenty, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Views sometimes count very little, whereas good risk management always counts a lot. The top performers in 2008 were able to put on good risk-versus-reward bets at the right time, and had the liquidity to do so due to good risk management. The old style of risk management suggests establishing a “diversified” portfolio with different asset weightings based on risk tolerance and time profile, which does not really work in this environment. If you are 60 years old, you are theoretically supposed to increase your bond weighting. But if you did that at the beginning of 2009—decreased your equities and increased your bonds—you virtually committed suicide. And if the inflation hawks are right, this may prove to be a really bad trade for a long period, even if your timing is reasonably good.


pages: 517 words: 139,477

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies by Jeremy Siegel

Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset allocation, backtesting, banking crisis, Bear Stearns, behavioural economics, Black Monday: stock market crash in 1987, Black-Scholes formula, book value, break the buck, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, capital asset pricing model, carried interest, central bank independence, cognitive dissonance, compound rate of return, computer age, computerized trading, corporate governance, correlation coefficient, Credit Default Swap, currency risk, Daniel Kahneman / Amos Tversky, Deng Xiaoping, discounted cash flows, diversification, diversified portfolio, dividend-yielding stocks, dogs of the Dow, equity premium, equity risk premium, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Financial Instability Hypothesis, fixed income, Flash crash, forward guidance, fundamental attribution error, Glass-Steagall Act, housing crisis, Hyman Minsky, implied volatility, income inequality, index arbitrage, index fund, indoor plumbing, inflation targeting, invention of the printing press, Isaac Newton, it's over 9,000, John Bogle, joint-stock company, London Interbank Offered Rate, Long Term Capital Management, loss aversion, machine readable, market bubble, mental accounting, Minsky moment, Money creation, money market fund, mortgage debt, Myron Scholes, new economy, Northern Rock, oil shock, passive investing, Paul Samuelson, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price stability, proprietary trading, purchasing power parity, quantitative easing, random walk, Richard Thaler, risk free rate, risk tolerance, risk/return, Robert Gordon, Robert Shiller, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, stocks for the long run, survivorship bias, technology bubble, The Great Moderation, the payments system, The Wisdom of Crowds, transaction costs, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uptick rule, Vanguard fund

Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225-264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk-aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk,’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge, MA: MIT Press, 1991, pp. 181-200. See also Zvi Bodie, Robert Merton, and William Samuelson, “Labor Supply Flexibility and Portfolio Choice in a Lifecycle Model,” Journal of Economic Dynamics and Control, vol. 16, no. 3 (July-October 1992), pp. 427^50.


pages: 601 words: 135,202

Limitless: The Federal Reserve Takes on a New Age of Crisis by Jeanna Smialek

Alan Greenspan, bank run, banking crisis, Bear Stearns, Berlin Wall, Bernie Sanders, bitcoin, Black Lives Matter, blockchain, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, Colonization of Mars, coronavirus, COVID-19, crowdsourcing, cryptocurrency, decarbonisation, distributed ledger, Donald Trump, Fall of the Berlin Wall, fiat currency, financial engineering, financial innovation, financial intermediation, Fractional reserve banking, full employment, George Akerlof, George Floyd, Glass-Steagall Act, global pandemic, Henri Poincaré, housing crisis, income inequality, inflation targeting, junk bonds, laissez-faire capitalism, light touch regulation, lockdown, low interest rates, margin call, market bubble, market clearing, meme stock, Modern Monetary Theory, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Nixon shock, offshore financial centre, paradox of thrift, price stability, quantitative easing, race to the bottom, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, secular stagnation, short squeeze, social distancing, sovereign wealth fund, The Great Moderation, too big to fail, trade route, Tragedy of the Commons, working-age population, yield curve

They started to lend out the gold itself or to write additional paper notes against it, so that their outstanding claims exceeded the gold on reserve in their vaults.[9] Money in the overall economy was multiplied, and more commerce could be undertaken. A deposit pile that was worth ten bills could generate more—maybe fifteen, maybe twenty, maybe thirty—depending on the risk tolerance of the banker and, in some cases, its agreements with its depositors. Unfortunately, fractional reserve arrangements had a destabilizing flaw. Fractional lenders without insurance were susceptible to runs. If people became nervous that a bank could not cover its obligations, they would rush to grab their deposits before there was nothing left.


pages: 69 words: 18,998

Histamine Intolerance: A Comprehensive Guide for Healthcare Professionals by Janice Joneja

microbiome, risk tolerance

No health care provider should indiscriminately advise a patient to avoid foods without (1) Evidence of their role in the condition and (2) Provision of a diet that will supply all nutrients from alternate sources. In my practice, I see this too often and it causes me great concern as it puts the patient at risk for nutritional deficiency and tends to direct attention away from other causes. Furthermore, if a person avoids foods for a prolonged period of time, they run the risk of losing tolerance to those foods and finds that they react adversely when they try to eat them again later. So many “doctors” do not appreciate the fundamental role of food in health and disease, and tend to toss out directives about diet without being adequately qualified to do so. The fact that you have lost 30 lbs. in 6 months is very worrying.


The Beginner's Guide to Histamine Intolerance by Janice Joneja

microbiome, risk tolerance

No health care provider should indiscriminately advise a patient to avoid foods without (1) Evidence of their role in the condition and (2) Provision of a diet that will supply all nutrients from alternate sources. In my practice, I see this too often and it causes me great concern as it puts the patient at risk for nutritional deficiency and tends to direct attention away from other causes. Furthermore, if a person avoids foods for a prolonged period of time, they run the risk of losing tolerance to those foods and finds that they react adversely when they try to eat them again later. So many “doctors” do not appreciate the fundamental role of food in health and disease, and tend to toss out directives about diet without being adequately qualified to do so. The fact that you have lost 30 lbs. in 6 months is very worrying.



pages: 636 words: 140,406

The Case Against Education: Why the Education System Is a Waste of Time and Money by Bryan Caplan

affirmative action, Affordable Care Act / Obamacare, assortative mating, behavioural economics, conceptual framework, correlation does not imply causation, deliberate practice, deskilling, disruptive innovation, do what you love, driverless car, en.wikipedia.org, endogenous growth, experimental subject, fear of failure, Flynn Effect, future of work, George Akerlof, ghettoisation, hive mind, job satisfaction, Kenneth Arrow, Khan Academy, labor-force participation, longitudinal study, low interest rates, low skilled workers, market bubble, mass incarceration, meta-analysis, Peter Thiel, price discrimination, profit maximization, publication bias, risk tolerance, Robert Gordon, Ronald Coase, school choice, selection bias, Silicon Valley, statistical model, Steven Pinker, The Bell Curve by Richard Herrnstein and Charles Murray, the scientific method, The Wisdom of Crowds, trickle-down economics, twin studies, Tyler Cowen, unpaid internship, upwardly mobile, women in the workforce, yield curve, zero-sum game

In recent years, the nominal rate on a 30-year Treasury bond has been about 4%; subtracting forecasted inflation leaves a real return of only 2%.6 The oft-quoted “10% long-run return on stocks,” similarly, falls to around 7% after subtracting long-run inflation. One last question: What’s a good rate of return? A bad rate? The evasive will tell you, “It depends on current interest rates, risk, risk tolerance, liquidity, leverage, the rest of your portfolio, and beyond.” So true, yet so useless. In lieu of this evasive answer, I employ these helpful rules of thumb: An inflation-adjusted return of 10% is excellent. A 7% return is very good—about average for stocks. Five percent is pretty good. Three percent is so-so.


pages: 487 words: 151,810

The Social Animal: The Hidden Sources of Love, Character, and Achievement by David Brooks

"World Economic Forum" Davos, Abraham Maslow, Albert Einstein, asset allocation, assortative mating, Atul Gawande, behavioural economics, Bernie Madoff, business process, Cass Sunstein, choice architecture, classic study, clean water, cognitive load, creative destruction, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, deliberate practice, disintermediation, Donald Trump, Douglas Hofstadter, Emanuel Derman, en.wikipedia.org, fake it until you make it, fear of failure, financial deregulation, financial independence, Flynn Effect, George Akerlof, Henri Poincaré, hiring and firing, impulse control, invisible hand, Jeff Hawkins, Joseph Schumpeter, labor-force participation, language acquisition, longitudinal study, loss aversion, medical residency, meta-analysis, mirror neurons, Monroe Doctrine, Paul Samuelson, power law, Richard Thaler, risk tolerance, Robert Shiller, school vouchers, six sigma, social intelligence, Stanford marshmallow experiment, Steve Jobs, Steven Pinker, tacit knowledge, the scientific method, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Tyler Cowen, Walter Mischel, young professional

He had his group prepare long presentations in which they presumed to lecture people about the industries they’d spent their whole lives mastering. They made presentations deliberately opaque as a way of demonstrating their own expertise. They didn’t understand that different companies have different risk tolerances. They didn’t understand that a particular CFO might be in a power struggle with a particular CEO and they should be careful not to make the latter’s life more difficult. There was no piece of office politics so obvious that they couldn’t be oblivious to it, no attempt at empathic accuracy they could not fail.


pages: 443 words: 51,804

Handbook of Modeling High-Frequency Data in Finance by Frederi G. Viens, Maria C. Mariani, Ionut Florescu

algorithmic trading, asset allocation, automated trading system, backtesting, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business process, buy and hold, continuous integration, corporate governance, discrete time, distributed generation, fear index, financial engineering, fixed income, Flash crash, housing crisis, implied volatility, incomplete markets, linear programming, machine readable, mandelbrot fractal, market friction, market microstructure, martingale, Menlo Park, p-value, pattern recognition, performance metric, power law, principal–agent problem, random walk, risk free rate, risk tolerance, risk/return, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, value at risk, volatility smile, Wiener process

We explore how dynamic default correlation affects the serial correlation and overall distributions of tranche prices. 4.2 Description of the Products and Models 77 4.2 Description of the Products and Models The function of an MBS vehicle is to allocate capital from investors with a spectrum of risk tolerance to borrowers. Suppose there are investors labeled by interest rates r1 < · · · < rI that they seek, and there are borrowers whose risk levels qualify them for loan rates of r1 < · · · < rB . An MBS portfolio pools together the funds from the investors and issues mortgage loans to the borrowers from this pool (of course, the same considerations apply to other asset-backed loans).


pages: 629 words: 142,393

The Future of the Internet: And How to Stop It by Jonathan Zittrain

A Declaration of the Independence of Cyberspace, algorithmic bias, Amazon Mechanical Turk, Andy Kessler, barriers to entry, behavioural economics, book scanning, Brewster Kahle, Burning Man, c2.com, call centre, Cass Sunstein, citizen journalism, Citizen Lab, Clayton Christensen, clean water, commoditize, commons-based peer production, corporate governance, Daniel Kahneman / Amos Tversky, digital divide, disruptive innovation, distributed generation, en.wikipedia.org, end-to-end encryption, Firefox, folksonomy, Free Software Foundation, game design, Hacker Ethic, Howard Rheingold, Hush-A-Phone, illegal immigration, index card, informal economy, information security, Internet Archive, jimmy wales, John Markoff, John Perry Barlow, license plate recognition, loose coupling, mail merge, Morris worm, national security letter, old-boy network, One Laptop per Child (OLPC), OSI model, packet switching, peer-to-peer, post-materialism, pre–internet, price discrimination, profit maximization, radical decentralization, Ralph Nader, RFC: Request For Comment, RFID, Richard Stallman, Richard Thaler, risk tolerance, Robert Bork, Robert X Cringely, SETI@home, Silicon Valley, Skype, slashdot, software patent, Steve Ballmer, Steve Jobs, Ted Nelson, Telecommunications Act of 1996, the Cathedral and the Bazaar, the long tail, The Nature of the Firm, The Wisdom of Crowds, Tragedy of the Commons, web application, wikimedia commons, Yochai Benkler, zero-sum game

This is a variant of Lessig’s idea for a “kid enabled browser,” made much more robust because a tethered appliance is difficult to hack.150 These paternalistic interventions assume that people will be more careful about what they put online once they grow up. And even those who are not more careful and regret it have exercised their autonomy in ways that ought to be respected. But the generational divide on privacy appears to be more than the higher carelessness or risk tolerance of kids. Many of those growing up with the Internet appear not only reconciled to a public dimension to their lives– famous for at least fifteen people—but eager to launch it. Their notions of privacy transcend the Privacy 1.0 plea to keep certain secrets or private facts under control. Instead, by digitally furnishing and nesting within publicly accessible online environments, they seek to make such environments their own.


pages: 467 words: 154,960

Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel

Albert Einstein, Alvin Toffler, Atul Gawande, backtesting, Bear Stearns, beat the dealer, Bernie Madoff, Black Swan, buy and hold, buy low sell high, California energy crisis, capital asset pricing model, Carl Icahn, Clayton Christensen, commodity trading advisor, computerized trading, correlation coefficient, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, diversification, diversified portfolio, Edward Thorp, Elliott wave, Emanuel Derman, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, fiat currency, fixed income, Future Shock, game design, global macro, hindsight bias, housing crisis, index fund, Isaac Newton, Jim Simons, John Bogle, John Meriwether, John Nash: game theory, linear programming, Long Term Capital Management, managed futures, mandelbrot fractal, margin call, market bubble, market fundamentalism, market microstructure, Market Wizards by Jack D. Schwager, mental accounting, money market fund, Myron Scholes, Nash equilibrium, new economy, Nick Leeson, Ponzi scheme, prediction markets, random walk, Reminiscences of a Stock Operator, Renaissance Technologies, Richard Feynman, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, shareholder value, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, survivorship bias, systematic trading, Teledyne, the scientific method, Thomas L Friedman, too big to fail, transaction costs, upwardly mobile, value at risk, Vanguard fund, William of Occam, zero-sum game

A diversified portfolio risking 2 percent on each of five instruments has a total heat of 10 percent, as does a portfolio risking 5 percent on each of two instruments.”16 Chauncy DiLaura, a student of Seykota’s, adds to the explanation, “There has to be some governor so I don’t end up with a whole lot of risk. The size of the bet is small around 2 percent.” Seykota calls his risk-adjusted equity “core equity” and the risk tolerance percentage “heat.” Hcan be turned up or down to suit the trader’s pain tolerance—as the heat gets higher, so do the gains, but only up to a point. Past that point, more heat starts to reduce the gain. The trader must be able to select a heat level where he is comfortable.17 Also critical is how you handle your capital as it grows or shrinks.


Spies, Lies, and Algorithms by Amy B. Zegart

2021 United States Capitol attack, 4chan, active measures, air gap, airport security, Apollo 13, Bellingcat, Bernie Sanders, Bletchley Park, Chelsea Manning, classic study, cloud computing, cognitive bias, commoditize, coronavirus, correlation does not imply causation, COVID-19, crowdsourcing, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, deep learning, deepfake, DeepMind, disinformation, Donald Trump, drone strike, dual-use technology, Edward Snowden, Elon Musk, en.wikipedia.org, end-to-end encryption, failed state, feminist movement, framing effect, fundamental attribution error, Gene Kranz, global pandemic, global supply chain, Google Earth, index card, information asymmetry, information security, Internet of things, job automation, John Markoff, lockdown, Lyft, Mark Zuckerberg, Nate Silver, Network effects, off-the-grid, openstreetmap, operational security, Parler "social media", post-truth, power law, principal–agent problem, QAnon, RAND corporation, Richard Feynman, risk tolerance, Robert Hanssen: Double agent, Ronald Reagan, Rubik’s Cube, Russian election interference, Saturday Night Live, selection bias, seminal paper, Seymour Hersh, Silicon Valley, Steve Jobs, Stuxnet, synthetic biology, uber lyft, unit 8200, uranium enrichment, WikiLeaks, zero day, zero-sum game

What is ironic is that individuals who attribute others’ behavior to deep hostility are quite likely to explain away their own behavior as a result of being “pushed into a corner” by an adversary.63 History is filled with crises in which one country either overestimated the hostile motives of another or underestimated how threatening its own actions could appear to the other side, or both.64 Take, for example, the First Gulf War and the Iraq War, in which both the United States and Iraq largely misunderstood the other’s view. Iraq underestimated the United States’ risk tolerance following the Cold War and 9/11, and the United States failed to see that Saddam was much more concerned about the Iranian threat than the American one. In both 1990 and 2003, an incomplete picture of the other side’s intentions and motives led to costly conflict between the two countries.65 During the Korean War, many U.S. officials believed that marching through North Korea toward the Chinese border would not be seen as threatening to China.


pages: 525 words: 147,008

SuperBetter by Jane McGonigal

autism spectrum disorder, data science, full employment, game design, job satisfaction, Kickstarter, longitudinal study, meta-analysis, Minecraft, mirror neurons, randomized controlled trial, risk tolerance, social intelligence, space junk, stem cell, Stephen Hawking, TED Talk, theory of mind, traumatic brain injury, ultimatum game, Walter Mischel

Juliet Schor, Plenitude: The New Economics of True Wealth (New York: Penguin Press, 2010). 4. John De Graaf, ed., Take Back Your Time: Fighting Overwork and Time Poverty in America (San Francisco: Berrett-Koehler, 2003). 5. Dana R. Carney, Amy J. C. Cuddy, and Andy J. Yap, “Power Posing: Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psychological Science 21, no. 10 (2010): 1363–68. 6. Alice Moon and Serena Chen, “The Power to Control Time: Power Influences How Much Time (You Think) You Have,” Journal of Experimental Social Psychology 54 (2014): 97–101. 7. Cassie Mogilner, Zoë Chance, and Michael I. Norton, “Giving Time Gives You Time,” Psychological Science 23, no. 10 (2012): 1233–38. 8.


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Analysis of Financial Time Series by Ruey S. Tsay

Asian financial crisis, asset allocation, backpropagation, Bayesian statistics, Black-Scholes formula, Brownian motion, business cycle, capital asset pricing model, compound rate of return, correlation coefficient, data acquisition, discrete time, financial engineering, frictionless, frictionless market, implied volatility, index arbitrage, inverted yield curve, Long Term Capital Management, market microstructure, martingale, p-value, pattern recognition, random walk, risk free rate, risk tolerance, short selling, statistical model, stochastic process, stochastic volatility, telemarketer, transaction costs, value at risk, volatility smile, Wiener process, yield curve

Different choices of the threshold η lead to different estimates of the shape parameter k (and hence the tail index −1/k). In the literature, some researchers believe that the choice of η is a statistical problem as well as a financial one, and it cannot be determined purely based on the statistical theory. For example, different financial institutions (or investors) have different risk tolerances. As such, they may select different thresholds even for an identical financial position. For the daily log returns of IBM stock considered in this chapter, the calculated VaR is not sensitive to the choice of η. The choice of threshold η also depends on the observed log returns. For a stable return series, η = −2.5% may fare well for a long position.


pages: 654 words: 191,864

Thinking, Fast and Slow by Daniel Kahneman

Albert Einstein, Atul Gawande, availability heuristic, Bayesian statistics, behavioural economics, Black Swan, book value, Cass Sunstein, Checklist Manifesto, choice architecture, classic study, cognitive bias, cognitive load, complexity theory, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, delayed gratification, demand response, endowment effect, experimental economics, experimental subject, Exxon Valdez, feminist movement, framing effect, hedonic treadmill, hindsight bias, index card, information asymmetry, job satisfaction, John Bogle, John von Neumann, Kenneth Arrow, libertarian paternalism, Linda problem, loss aversion, medical residency, mental accounting, meta-analysis, nudge unit, pattern recognition, Paul Samuelson, peak-end rule, precautionary principle, pre–internet, price anchoring, quantitative trading / quantitative finance, random walk, Richard Thaler, risk tolerance, Robert Metcalfe, Ronald Reagan, Shai Danziger, sunk-cost fallacy, Supply of New York City Cabdrivers, systematic bias, TED Talk, The Chicago School, The Wisdom of Crowds, Thomas Bayes, transaction costs, union organizing, Walter Mischel, Yom Kippur War

Daniel Kahneman and Amos Tversky, “On the Reality of Cognitive Illusions,” Psychological Review 103 (1996): 582–91. offered plausible alternatives: Some examples from many are Valerie F. Reyna and Farrell J. Lloyd, “Physician Decision-Making and Cardiac Risk: Effects of Knowledge, Risk Perception, Risk Tolerance and Fuzzy-Processing,” Journal of Experimental Psychology: Applied 12 (2006): 179–95. Nicholas Epley and Thomas Gilovich, “The Anchoring-and-Adjustment Heuristic,” Psychological Science 17 (2006): 311–18. Norbert Schwarz et al., “Ease of Retrieval of Information: Another Look at the Availability Heuristic,” Journal of Personality and Social Psychology 61 (1991): 195–202.


pages: 631 words: 177,227

The Secret of Our Success: How Culture Is Driving Human Evolution, Domesticating Our Species, and Making Us Smarter by Joseph Henrich

agricultural Revolution, capital asset pricing model, Climategate, cognitive bias, Daniel Kahneman / Amos Tversky, delayed gratification, demographic transition, disinformation, endowment effect, experimental economics, experimental subject, Flynn Effect, impulse control, language acquisition, Monkeys Reject Unequal Pay, Nash equilibrium, nocebo, out of africa, phenotype, placebo effect, profit maximization, randomized controlled trial, risk tolerance, side project, social intelligence, social web, Steven Pinker, sugar pill, sunk-cost fallacy, The Wisdom of Crowds, theory of mind, ultimatum game

Cambridge, MA: Schenkman. Cappelletti, D., W. Guth, and M. Ploner. 2011. “Being of two minds: Ultimatum offers under cognitive constraints.” Journal of Economic Psychology 32 (6):940–950. Carney, D. R., A. J. C. Cuddy, and A. J. Yap. 2010. “Power posing: Brief nonverbal displays affect neuroendocrine levels and risk tolerance.” Psychological Science 21 (10):1363–1368. Carreiras, M., M. L. Seghier, S. Baquero, A. Estevez, A. Lozano, J. T. Devlin, and C. J. Price. 2009. “An anatomical signature for literacy.” Nature 461 (7266):983–986. doi:10.1038/nature08461. Carrier, D. R. 1984. “The energetic paradox of human running and hominid evolution.”


pages: 260 words: 76,223

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Seeking SRE: Conversations About Running Production Systems at Scale by David N. Blank-Edelman

Affordable Care Act / Obamacare, algorithmic trading, AlphaGo, Amazon Web Services, backpropagation, Black Lives Matter, Bletchley Park, bounce rate, business continuity plan, business logic, business process, cloud computing, cognitive bias, cognitive dissonance, cognitive load, commoditize, continuous integration, Conway's law, crowdsourcing, dark matter, data science, database schema, Debian, deep learning, DeepMind, defense in depth, DevOps, digital rights, domain-specific language, emotional labour, en.wikipedia.org, exponential backoff, fail fast, fallacies of distributed computing, fault tolerance, fear of failure, friendly fire, game design, Grace Hopper, imposter syndrome, information retrieval, Infrastructure as a Service, Internet of things, invisible hand, iterative process, Kaizen: continuous improvement, Kanban, Kubernetes, loose coupling, Lyft, machine readable, Marc Andreessen, Maslow's hierarchy, microaggression, microservices, minimum viable product, MVC pattern, performance metric, platform as a service, pull request, RAND corporation, remote working, Richard Feynman, risk tolerance, Ruby on Rails, Salesforce, scientific management, search engine result page, self-driving car, sentiment analysis, Silicon Valley, single page application, Snapchat, software as a service, software is eating the world, source of truth, systems thinking, the long tail, the scientific method, Toyota Production System, traumatic brain injury, value engineering, vertical integration, web application, WebSocket, zero day

For those who work in companies that had an SRE model from inception, the following ideas might be self-evident. For those who work in traditional enterprise IT operations, these ideas often highlight how much of a departure the SRE model is from traditional operations beliefs and practices. Error Budgets There are often tensions in an organization over how much risk is tolerable for a particular service and who is responsible when the Service-Level Objectives (SLOs) are not met. In traditional enterprise divides, the product end of a company is incentivized to go faster, and the operations end is incentivized to avoid downtime and other performance problems. This is the type of mismatch in incentives that encourages silos to form.

A Culture of Database Reliability Engineering The reason I feel there a real need for an emphasis on reliability in not just the job title of the DBRE, but in everything they do, is because the database is one of those places where risk and chaos simply has no place. A lot of what is now commonplace in our day-to-day work came about from innovation in areas of computing where risk could be tolerated. Now that these paradigms are ubiquitous, it is up to the stewards of one of the organization’s most precious resources, the data, to find paths to bring databases into the fold. Much of the work to make persistent data stores a first-class citizen of the world of reliability engineering is still in its early phases.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

affirmative action, Alan Greenspan, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Black-Scholes formula, Bob Litterman, business cycle, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial engineering, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, Glass-Steagall Act, global macro, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, Kickstarter, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, low skilled workers, managed futures, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, Mitch Kapor, money market fund, moral hazard, mortgage debt, Myron Scholes, National best bid and offer, negative equity, Northern Rock, Occupy movement, oil shock, price stability, proprietary trading, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk free rate, risk tolerance, risk-adjusted returns, Robert Shiller, Ronald Reagan, Sam Peltzman, Savings and loan crisis, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, tail risk, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

In April 2007, Kirk e-mailed Gelband: As a heads up our risk of mandated commits is up to 6mm a bp triple our previous high. Also the commits are coming in fast and furious I expect us to be well north of 30B this quarter. This is also unprecedented. In addition we are now seeing commitments that have crossed the risk tolerance so we may need your help with the bank in saying no to some key clients. —Alex Kirk, Head of Credit Business, e-mail to Michael Gelband, April 20, 2007 (Valukas 2010) Soon after that, Lehman fired Gelband.21 Lawrence McCarthy, another important part of fixed-income trading, left shortly thereafter.


The Simple Living Guide by Janet Luhrs

air freight, Albert Einstein, car-free, classic study, cognitive dissonance, Community Supported Agriculture, compound rate of return, do what you love, financial independence, follow your passion, Golden Gate Park, intentional community, job satisfaction, late fees, low interest rates, money market fund, music of the spheres, off-the-grid, passive income, Ralph Waldo Emerson, risk tolerance, telemarketer, the rule of 72, urban decay, urban renewal, Whole Earth Review

If you make it too expensive to dip into, you’ll be more likely to ignore your rationalizing voice when it starts begging you to spend the money. Luckily for you, hands-off accounts pay much higher interest rates than do short-term CDs or money market accounts. There are many types of short- and long-term investments. The kind you choose depends on your risk tolerance level. The higher the risk, the greater return you can earn. If gambling on some high-risk stock causes you to be up at night worrying, then the benefits are lost and you are farther away from that simpler, more peaceful life that you are working toward. The following chart explains these various levels of investments.


pages: 562 words: 201,502

Elon Musk by Walter Isaacson

4chan, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, AltaVista, Apollo 11, Apple II, Apple's 1984 Super Bowl advert, artificial general intelligence, autism spectrum disorder, autonomous vehicles, basic income, Big Tech, blockchain, Boston Dynamics, Burning Man, carbon footprint, ChatGPT, Chuck Templeton: OpenTable:, Clayton Christensen, clean tech, Colonization of Mars, computer vision, Computing Machinery and Intelligence, coronavirus, COVID-19, crowdsourcing, cryptocurrency, deep learning, DeepMind, Demis Hassabis, disinformation, Dogecoin, Donald Trump, Douglas Engelbart, drone strike, effective altruism, Elon Musk, estate planning, fail fast, fake news, game design, gigafactory, GPT-4, high-speed rail, hiring and firing, hive mind, Hyperloop, impulse control, industrial robot, information security, Jeff Bezos, Jeffrey Epstein, John Markoff, John von Neumann, Jony Ive, Kwajalein Atoll, lab leak, large language model, Larry Ellison, lockdown, low earth orbit, Marc Andreessen, Marc Benioff, Mars Society, Max Levchin, Michael Shellenberger, multiplanetary species, Neil Armstrong, Network effects, OpenAI, packet switching, Parler "social media", paypal mafia, peer-to-peer, Peter Thiel, QAnon, Ray Kurzweil, reality distortion field, remote working, rent control, risk tolerance, Rubik’s Cube, Salesforce, Sam Altman, Sam Bankman-Fried, San Francisco homelessness, Sand Hill Road, Saturday Night Live, self-driving car, seminal paper, short selling, Silicon Valley, Skype, SpaceX Starlink, Stephen Hawking, Steve Jobs, Steve Jurvetson, Steve Wozniak, Steven Levy, Streisand effect, supply-chain management, tech bro, TED Talk, Tesla Model S, the payments system, Tim Cook: Apple, universal basic income, Vernor Vinge, vertical integration, Virgin Galactic, wikimedia commons, William MacAskill, work culture , Y Combinator


pages: 371 words: 98,534

Red Flags: Why Xi's China Is in Jeopardy by George Magnus

"World Economic Forum" Davos, 3D printing, 9 dash line, Admiral Zheng, AlphaGo, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bear Stearns, Bretton Woods, Brexit referendum, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, general purpose technology, Gini coefficient, global reserve currency, Great Leap Forward, high net worth, high-speed rail, hiring and firing, Hyman Minsky, income inequality, industrial robot, information security, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, megaproject, middle-income trap, Minsky moment, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, Shenzhen special economic zone , smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, vertical integration, Washington Consensus, women in the workforce, working-age population, zero-sum game

They tend to be driven more by university research activities, small teams, and bottom-up pressure groups. China says that it is developing a greater tolerance for risk but the systems employed to evaluate and promote scientists, projects and methods of learning are not really compatible with at least the kind of risk encouragement and tolerance accepted in the West. China expects its tech companies to play a central role in government industrial policies, and meet quantitative goals. These include specific targets for domestic market share, generally in the range of 70–80 per cent, by 2030. They apply to smart manufacturing, including robotics and components, cloud computing and big data, and information technology.


pages: 282 words: 85,658

Ask Your Developer: How to Harness the Power of Software Developers and Win in the 21st Century by Jeff Lawson

Airbnb, AltaVista, Amazon Web Services, barriers to entry, big data - Walmart - Pop Tarts, Big Tech, big-box store, bitcoin, business process, call centre, Chuck Templeton: OpenTable:, cloud computing, coronavirus, COVID-19, create, read, update, delete, cryptocurrency, data science, David Heinemeier Hansson, deep learning, DevOps, Elon Musk, financial independence, global pandemic, global supply chain, Hacker News, Internet of things, Jeff Bezos, Kanban, Lean Startup, loose coupling, Lyft, Marc Andreessen, Marc Benioff, Mark Zuckerberg, microservices, minimum viable product, Mitch Kapor, move fast and break things, Paul Graham, peer-to-peer, ride hailing / ride sharing, risk tolerance, Ruby on Rails, Salesforce, side project, Silicon Valley, Silicon Valley startup, Skype, social distancing, software as a service, software is eating the world, sorting algorithm, Startup school, Steve Ballmer, Steve Jobs, Telecommunications Act of 1996, Toyota Production System, transaction costs, transfer pricing, two-pizza team, Uber and Lyft, uber lyft, ubercab, web application, Y Combinator

That mindset arises from the way many cultures respond to failure. The norm is that if you launch a big initiative and it fails (in any department, not just tech), it would certainly limit your career. In more agile cultures, failure isn’t punished. Instead, it’s a learning opportunity. The mindset of embracing risk and tolerating failure is a huge part of the software ethos. It’s also one of the biggest things that old companies avoid—even those with leaders who claim, as many do, that they want to become more like a startup. This brings me to an important point: If you want to become a software builder, you need to start by changing the mindset of the entire organization.


pages: 823 words: 220,581

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? by Steve Keen

accounting loophole / creative accounting, Alan Greenspan, banking crisis, banks create money, barriers to entry, behavioural economics, Benoit Mandelbrot, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, book value, business cycle, butterfly effect, capital asset pricing model, cellular automata, central bank independence, citizen journalism, clockwork universe, collective bargaining, complexity theory, correlation coefficient, creative destruction, credit crunch, David Ricardo: comparative advantage, debt deflation, diversification, double entry bookkeeping, en.wikipedia.org, equity risk premium, Eugene Fama: efficient market hypothesis, experimental subject, Financial Instability Hypothesis, fixed income, Fractional reserve banking, full employment, Glass-Steagall Act, Greenspan put, Henri Poincaré, housing crisis, Hyman Minsky, income inequality, information asymmetry, invisible hand, iterative process, John von Neumann, Kickstarter, laissez-faire capitalism, liquidity trap, Long Term Capital Management, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, market microstructure, means of production, minimum wage unemployment, Money creation, money market fund, open economy, Pareto efficiency, Paul Samuelson, Phillips curve, place-making, Ponzi scheme, Post-Keynesian economics, power law, profit maximization, quantitative easing, RAND corporation, random walk, risk free rate, risk tolerance, risk/return, Robert Shiller, Robert Solow, Ronald Coase, Savings and loan crisis, Schrödinger's Cat, scientific mainstream, seigniorage, six sigma, South Sea Bubble, stochastic process, The Great Moderation, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, total factor productivity, tulip mania, wage slave, zero-sum game

(McKibbin and Stoeckel 2009: 584; emphases added) As with Ireland, they manipulate the shocks applied to their model until its short-run deviations from the steady state mimic what occurred during the Great Recession, and as with Ireland, one shock is not enough – three have to be used: 1 the bursting of the housing bubble, causing a reallocation of capital and a loss of household wealth and drop in consumption; 2 a sharp rise in the equity risk premium (the risk premium of equities over bonds), causing the cost of capital to rise, private investment to fall, and demand for durable goods to collapse; 3 a reappraisal of risk by households, causing them to discount their future labor income and increase savings and decrease consumption. (Ibid.: 587) Not even this was enough to replicate the data: they also needed to assume that two of these ‘shocks’ – the risk tolerances of business and households – changed their magnitudes over the course of the crisis. A previous paper had found that ‘a temporary shock to risk premia, as seems to have happened in hindsight, does not generate the large observed real effects,’ so they instead considered an extreme shock, followed by an attenuation of it later: ‘The question is then, what would happen if business and households initially assumed the worst – that is, a long lasting permanent rise in risk premia – but unexpectedly revised their views on risk to that of a temporary scenario 1 year later whereby things are expected to return to “normal”?’


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Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Alan Greenspan, Asian financial crisis, asset-backed security, bank run, banking crisis, Bear Stearns, behavioural economics, Boeing 747, book value, break the buck, Bretton Woods, business cycle, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, Eyjafjallajökull, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, foreign exchange controls, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, junk bonds, Kenneth Rogoff, lateral thinking, Lewis Mumford, London Whale, Long Term Capital Management, market bubble, Michael Milken, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, proprietary trading, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, scientific management, subprime mortgage crisis, tail risk, technology bubble, TED Talk, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game


pages: 310 words: 90,817

pages: 401 words: 115,959

Philanthrocapitalism by Matthew Bishop, Michael Green, Bill Clinton

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, Abraham Maslow, Albert Einstein, An Inconvenient Truth, anti-communist, AOL-Time Warner, barriers to entry, battle of ideas, Bernie Madoff, Big Tech, Bob Geldof, Bonfire of the Vanities, business process, business process outsourcing, Charles Lindbergh, clean tech, clean water, corporate governance, corporate social responsibility, Dava Sobel, David Ricardo: comparative advantage, digital divide, do well by doing good, don't be evil, family office, financial innovation, full employment, global pandemic, global village, Global Witness, God and Mammon, Hernando de Soto, high net worth, Ida Tarbell, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Dyson, John Elkington, John Harrison: Longitude, joint-stock company, junk bonds, knowledge economy, knowledge worker, Larry Ellison, Live Aid, lone genius, Marc Andreessen, Marc Benioff, market bubble, mass affluent, Michael Milken, microcredit, Mikhail Gorbachev, Neil Armstrong, Nelson Mandela, new economy, offshore financial centre, old-boy network, PalmPilot, peer-to-peer lending, performance metric, Peter Singer: altruism, plutocrats, profit maximization, profit motive, Richard Feynman, risk tolerance, risk-adjusted returns, Ronald Coase, Ronald Reagan, Salesforce, scientific management, seminal paper, shareholder value, Silicon Valley, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, SpaceShipOne, stem cell, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade liberalization, transaction costs, trickle-down economics, Tyler Cowen, wealth creators, winner-take-all economy, working poor, World Values Survey, X Prize

The result, in both spheres, is that he takes big risks, moves fast, pursues lots of different strategies at once, and takes controversial positions. He regards as a strength the ability of his foundations to “proceed by way of trial and error.” He says he is “ready to accept errors and to abandon projects when they fail. This gives us a comparative advantage. Bureaucracies find it difficult to admit failure; this makes them risk averse. We can tolerate risks; therefore we can reap greater rewards.” Sometimes Soros gives money to campaigns that he expects to fail simply to send a message by taking a stand. Unlike most traditional foundations, he does not shy away from taking on causes that will win him no friends. “In the social sphere, I take positions because I believe in them, whether I succeed or not.


pages: 920 words: 233,102

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State by Paul Tucker

"Friedman doctrine" OR "shareholder theory", Alan Greenspan, Andrei Shleifer, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Bear Stearns, Ben Bernanke: helicopter money, Berlin Wall, Bretton Woods, Brexit referendum, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, conceptual framework, corporate governance, diversified portfolio, electricity market, Fall of the Berlin Wall, financial innovation, financial intermediation, financial repression, first-past-the-post, floating exchange rates, forensic accounting, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, Greenspan put, incomplete markets, inflation targeting, information asymmetry, invisible hand, iterative process, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, liberal capitalism, light touch regulation, Long Term Capital Management, low interest rates, means of production, Money creation, money market fund, Mont Pelerin Society, moral hazard, Northern Rock, operational security, Pareto efficiency, Paul Samuelson, price mechanism, price stability, principal–agent problem, profit maximization, public intellectual, quantitative easing, regulatory arbitrage, reserve currency, risk free rate, risk tolerance, risk-adjusted returns, road to serfdom, Robert Bork, Ronald Coase, seigniorage, short selling, Social Responsibility of Business Is to Increase Its Profits, stochastic process, subprime mortgage crisis, tail risk, The Chicago School, The Great Moderation, The Market for Lemons, the payments system, too big to fail, transaction costs, Vilfredo Pareto, Washington Consensus, yield curve, zero-coupon bond, zero-sum game

28 Posner and Vermeule, Executive Unbound; Wallach, To the Edge. 29 Hegel, Philosophy of Right, sections 287–297. 30 Wilson, “Study of Administration.” 31 Majone, Regulating Europe, chapter 3; Thatcher, “Delegation”; and Levi-Faur and Gilad, “Transcending the Privatization Debate,” an extended review of three books on regulation. The shift in risk tolerance, together with a preference, novel in the UK, for rules-based regulation and compliance cultures, is the subject of one of those books: Power, Audit Society. 32 Muller, “Triumph of What.” 33 Chief Justice Hewart’s 1929 book The New Despotism, a blistering attack on the burgeoning administrative state, led to a government-sponsored review.


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Culture of Terrorism by Noam Chomsky

anti-communist, Bolshevik threat, Bretton Woods, Caribbean Basin Initiative, centre right, clean water, David Brooks, disinformation, failed state, Farzad Bazoft, guns versus butter model, land reform, Monroe Doctrine, risk tolerance, Robert Bork, Ronald Reagan, Seymour Hersh, union organizing

Still, there is the danger that “the Sandinistas will infiltrate [neighboring] countries with Marxist-trained student, union and peasant leaders promoting Nicaragua’s ‘revolution without frontiers’.”6 The New York Times editors, contemplating the likely failure of the U.S. military option, propose that Washington take a “calculated risk” and “tolerate a Marxist neighbor, if it is boxed in by treaties and commitments to rudimentary human rights.” The Sandinistas would have to agree “to keep Soviet and Cuban bases, advisers and missiles out of Nicaragua,” and to observe human rights, a major issue standing alongside of U.S. security concerns, because Washington and its Central American allies “rightly see a connection between internal and external behavior.”7 One hardly knows which of these two ideas is more bizarre: the demand that Nicaragua adhere to treaty limitations barring foreign bases and advisers and missiles (the missiles added gratuitously by the Times editors to induce the proper hysteria)—agreements that Nicaragua has consistently supported along with controls to prevent cross-border operations, in vain, since the U.S. will accept no such constraints; or the concern over human rights violations in Nicaragua, real enough to be sure, but slight in comparison with those conducted by Times favorites, whose atrocities apparently raise no problem about a “connection between internal and external behavior,” and are of little significance in any event, being directed against the poor majority who are the natural enemy of the Free Press.


pages: 311 words: 99,699

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, asset-backed security, bank run, banking crisis, Bear Stearns, Black-Scholes formula, Blythe Masters, book value, break the buck, Bretton Woods, business climate, business cycle, buy and hold, collateralized debt obligation, commoditize, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, easy for humans, difficult for computers, financial engineering, financial innovation, fixed income, Glass-Steagall Act, housing crisis, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kickstarter, locking in a profit, Long Term Capital Management, low interest rates, McMansion, Michael Milken, money market fund, mortgage debt, North Sea oil, Northern Rock, Plato's cave, proprietary trading, Renaissance Technologies, risk free rate, risk tolerance, Robert Shiller, Satyajit Das, Savings and loan crisis, short selling, sovereign wealth fund, statistical model, tail risk, The Great Moderation, too big to fail, value at risk, yield curve

The ruling attracted almost no attention in the press at the time, since it seemed highly technical, but it had one very considerable consequence: it raised the competitive pressure on the brokerages even further. By 2005, it had become clear that a key reason why Goldman Sachs was producing such stellar earnings was that it had raised its leverage. Merrill Lynch and the others were therefore under intense pressure to follow suit, and, that being the case, the increased leverage of super-senior risk was tolerated. The three other major brokerages—Bear Stearns, Morgan Stanley, and Lehman Brothers—also built up some super-senior exposure. Bear and Lehman had extensive experience in dealing with mortgage-backed bonds, and they prided themselves on running tight risk controls. As they each cranked up their CDO machines, they realized that super-senior risk was becoming like the toxic by-product of a chemical experiment or waste from a nuclear reactor.


pages: 166 words: 53,103

Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency by Tom Demarco

Brownian motion, delayed gratification, Frederick Winslow Taylor, interchangeable parts, knowledge worker, new economy, risk tolerance, scientific management, Silicon Valley, Silicon Valley startup, Steve Jobs, The Soul of a New Machine, Yogi Berra

Change can’t happen without risk, and risk-taking is only possible in an environment that can be tolerant of at least some failure. There is a paradox at work here: Making it okay to take risks and succeed in risky endeavors requires that you also make it okay to fail. If you’re having trouble with the notion that risk-taking requires tolerance for failure, consider the opposite: punishment for failure. Potential punishment is often justified as a way to assure success; it is more often a deterrent to taking any risks at all. Summary: The Requisites of Reinvention Reinvention takes place in the middle of the organization, so the first requisite is that there has to be a middle.


pages: 130 words: 32,279

The Art of SEO by Eric Enge, Stephan Spencer, Jessie Stricchiola, Rand Fishkin

AltaVista, barriers to entry, bounce rate, Build a better mousetrap, business intelligence, cloud computing, content marketing, dark matter, en.wikipedia.org, Firefox, folksonomy, Google Chrome, Google Earth, hypertext link, index card, information retrieval, Internet Archive, Larry Ellison, Law of Accelerating Returns, linked data, mass immigration, Metcalfe’s law, Network effects, optical character recognition, PageRank, performance metric, Quicken Loans, risk tolerance, search engine result page, self-driving car, sentiment analysis, social bookmarking, social web, sorting algorithm, speech recognition, Steven Levy, text mining, the long tail, vertical integration, Wayback Machine, web application, wikimedia commons

Consider this only if you are willing to invest in putting rich original content on the site, and if you are willing to invest the time to promote the site as an independent site. Such a site may gain more links by being separated from the main commercial site. A microsite may also have the added benefit of bypassing some of the legal and PR department hurdles and internal political battles. This could be a key consideration if you’re at a monolithic or low risk-tolerance organization. However, a microsite on a brand new domain may wallow in the Google sandbox for months (for more about the Google sandbox, see Determining Searcher Intent and Delivering Relevant, Fresh Content). So, what to do if you want to launch a microsite? Consider buying an aged, reputable “aftermarket” domain—one that has had a quality site on it for a while (parking pages don’t count!)


pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

"World Economic Forum" Davos, accounting loophole / creative accounting, Alan Greenspan, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bear Stearns, behavioural economics, Bernie Madoff, Bretton Woods, business climate, business cycle, carbon tax, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency risk, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, Glass-Steagall Act, global supply chain, Goldman Sachs: Vampire Squid, Greenspan put, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kaizen: continuous improvement, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, longitudinal study, low interest rates, machine readable, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, Phillips curve, price stability, profit motive, proprietary trading, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Ronald Reagan, Savings and loan crisis, school vouchers, seminal paper, short selling, sovereign wealth fund, tail risk, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

Instead, the risk premium on long-term government bonds—the additional spread that the market demands to take the risk of bond prices fluctuating—fell even as the Fed raised short-term interest rates, with the result that long-term interest rates fell and bond prices rose.7 Indeed, a generally low premium for risk ensured that the prices of all risky or long-term assets, including housing, rose, even as the Fed raised rates slowly. The Fed’s policy seemed to be working because it made risk more tolerable! The Fed did worry about the deteriorating quality of lending and made some supervisory noises over time. But with its foot pressed firmly on the interest-rate accelerator, the supervisory measures were ineffective. Ultimately, it was probably also Fed actions that brought the party to an end.


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Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze

"there is no alternative" (TINA), "World Economic Forum" Davos, Affordable Care Act / Obamacare, Alan Greenspan, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, bond market vigilante , book value, Boris Johnson, bread and circuses, break the buck, Bretton Woods, Brexit referendum, BRICs, British Empire, business cycle, business logic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, company town, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, currency risk, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial engineering, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, high-speed rail, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, low interest rates, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, military-industrial complex, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Nixon triggered the end of the Bretton Woods system, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, opioid epidemic / opioid crisis, paradox of thrift, Peter Thiel, Ponzi scheme, Post-Keynesian economics, post-truth, predatory finance, price stability, private sector deleveraging, proprietary trading, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, Steve Bannon, structural adjustment programs, tail risk, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise

Banks were not so much told what to do as they were invited to demonstrate that they were not in violation of the rule. What exactly would constitute proof of compliance was a matter for further negotiation.54 The best advice the lawyers could offer was that it was up to banks to decide the level of “regulatory risk tolerance” they were comfortable with. After passing the law in July 2010 and issuing the “final” formulation of the Volcker rule in December 2013, 2014 began with a new round of discussions about the “guidance” that would be issued to explain those regulatory risks. The only thing that was clear was that it would generate enormous demand for compliance officers and corporate lawyers.


pages: 864 words: 272,918

Palo Alto: A History of California, Capitalism, and the World by Malcolm Harris

2021 United States Capitol attack, Aaron Swartz, affirmative action, air traffic controllers' union, Airbnb, Alan Greenspan, Alvin Toffler, Amazon Mechanical Turk, Amazon Web Services, Apple II, Apple's 1984 Super Bowl advert, back-to-the-land, bank run, Bear Stearns, Big Tech, Bill Gates: Altair 8800, Black Lives Matter, Bob Noyce, book scanning, British Empire, business climate, California gold rush, Cambridge Analytica, capital controls, Charles Lindbergh, classic study, cloud computing, collective bargaining, colonial exploitation, colonial rule, Colonization of Mars, commoditize, company town, computer age, conceptual framework, coronavirus, corporate personhood, COVID-19, cuban missile crisis, deindustrialization, Deng Xiaoping, desegregation, deskilling, digital map, double helix, Douglas Engelbart, Edward Snowden, Elon Musk, Erlich Bachman, estate planning, European colonialism, Fairchild Semiconductor, financial engineering, financial innovation, fixed income, Frederick Winslow Taylor, fulfillment center, future of work, Garrett Hardin, gentrification, George Floyd, ghettoisation, global value chain, Golden Gate Park, Google bus, Google Glasses, greed is good, hiring and firing, housing crisis, hydraulic fracturing, if you build it, they will come, illegal immigration, immigration reform, invisible hand, It's morning again in America, iterative process, Jeff Bezos, Joan Didion, John Markoff, joint-stock company, Jony Ive, Kevin Kelly, Kickstarter, knowledge worker, land reform, Larry Ellison, Lean Startup, legacy carrier, life extension, longitudinal study, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, Marc Benioff, Mark Zuckerberg, Marshall McLuhan, Max Levchin, means of production, Menlo Park, Metcalfe’s law, microdosing, Mikhail Gorbachev, military-industrial complex, Monroe Doctrine, Mont Pelerin Society, moral panic, mortgage tax deduction, Mother of all demos, move fast and break things, mutually assured destruction, new economy, Oculus Rift, off grid, oil shale / tar sands, PageRank, PalmPilot, passive income, Paul Graham, paypal mafia, Peter Thiel, pets.com, phenotype, pill mill, platform as a service, Ponzi scheme, popular electronics, power law, profit motive, race to the bottom, radical life extension, RAND corporation, Recombinant DNA, refrigerator car, Richard Florida, ride hailing / ride sharing, rising living standards, risk tolerance, Robert Bork, Robert Mercer, Robert Metcalfe, Ronald Reagan, Salesforce, San Francisco homelessness, Sand Hill Road, scientific management, semantic web, sexual politics, Sheryl Sandberg, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, social web, SoftBank, software as a service, sovereign wealth fund, special economic zone, Stanford marshmallow experiment, Stanford prison experiment, stem cell, Steve Bannon, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, stock buybacks, strikebreaker, Suez canal 1869, super pumped, TaskRabbit, tech worker, Teledyne, telemarketer, the long tail, the new new thing, thinkpad, Thorstein Veblen, Tim Cook: Apple, Tony Fadell, too big to fail, Toyota Production System, Tragedy of the Commons, transcontinental railway, traumatic brain injury, Travis Kalanick, TSMC, Uber and Lyft, Uber for X, uber lyft, ubercab, union organizing, Upton Sinclair, upwardly mobile, urban decay, urban renewal, value engineering, Vannevar Bush, vertical integration, Vision Fund, W. E. B. Du Bois, War on Poverty, warehouse robotics, Wargames Reagan, Washington Consensus, white picket fence, William Shockley: the traitorous eight, women in the workforce, Y Combinator, Y2K, Yogi Berra, éminence grise

In other words, these companies got big extremely fast, and these networks tended toward monopoly and oligopoly. Meaning that if these firms could use marketing and low prices to expand their user bases exponentially, they could jump from zero to billion-dollar monopolies in a process that looks more like the flipping of a binary switch than growing a company. Sophisticated and risk-tolerant venture capitalists could take an idea, just a prototype and a few sheets of paper sometimes, and build it into one of these firms in a year or two. (The expansion of consumer credit helped, too, and early start-ups were often financed on a house of founder credit cards.) Of course there were many millions of dollars in public money underlying those ideas, but Bayh-Dole and Stanford’s OTL gave the spin-off model an academic Kosher stamp.


Trade Your Way to Financial Freedom by van K. Tharp

asset allocation, backtesting, book value, Bretton Woods, buy and hold, buy the rumour, sell the news, capital asset pricing model, commodity trading advisor, compound rate of return, computer age, distributed generation, diversification, dogs of the Dow, Elliott wave, high net worth, index fund, locking in a profit, margin call, market fundamentalism, Market Wizards by Jack D. Schwager, passive income, prediction markets, price stability, proprietary trading, random walk, Reminiscences of a Stock Operator, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, Sharpe ratio, short selling, Tax Reform Act of 1986, transaction costs

We provide that with four different programs that strive for returns in the 10 to 20 percent range with lower drawdowns. We’re looking for returns of 20 percent with 10 percent drawdowns. Our clients know that so that’s what they’re getting in terms of their goals. Since you are trading clients’ money, how much risk can they tolerate? When would they be likely to withdraw their money? They expect risk in the 5 to 10 percent range. Any drawdown that is over 15 percent or that lasts over a year is deadly—lots of clients would fire us. For that matter, how much gain can they tolerate before they get too excited? Gains over 25 percent definitely get noticed.

Very sophisticated traders? Institutional clients? What are your clients like? What are their goals? What kind of service do you provide for them? For example, by putting their money with you, are they attempting a special type of diversification? Since you are trading clients’ money, how much risk can they tolerate? When would they be likely to withdraw their money? For that matter, how much gain can they tolerate before they get too excited? What kind of fees do you charge? In other words, what is the total amount extracted from the client’s account each quarter or month? What kinds of returns will you have to make in order to be able to satisfy a client who is subject to those fees?


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The Payoff by Jeff Connaughton

Alan Greenspan, algorithmic trading, bank run, banking crisis, Bear Stearns, Bernie Madoff, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, desegregation, Flash crash, Glass-Steagall Act, locking in a profit, London Interbank Offered Rate, London Whale, Long Term Capital Management, naked short selling, Neil Kinnock, plutocrats, Ponzi scheme, proprietary trading, risk tolerance, Robert Bork, Savings and loan crisis, short selling, Silicon Valley, TED Talk, too big to fail, two-sided market, uptick rule, young professional

Rather than curb its reckless practices, it decided to try to sell a higher proportion of these risky, fraud-tainted mortgages into the secondary market, thereby locking in a profit for itself as it spread the contagion into the capital markets. The second hearing showed that OTS had failed abjectly to regulate WaMu and to protect the public from the consequences of WaMu’s excessive risk-taking and toleration of widespread fraud. Although WaMu accounted for 25 percent of OTS’s regulatory portfolio, OTS adopted a laissez-faire approach. OTS’s front-line bank examiners had identified the high prevalence of fraud and weak internal controls at WaMu, yet the OTS leadership did virtually nothing to address the situation.


pages: 432 words: 124,635

Happy City: Transforming Our Lives Through Urban Design by Charles Montgomery

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Abraham Maslow, accelerated depreciation, agricultural Revolution, American Society of Civil Engineers: Report Card, Apollo 11, behavioural economics, Bernie Madoff, Boeing 747, British Empire, Buckminster Fuller, car-free, carbon credits, carbon footprint, centre right, City Beautiful movement, clean water, congestion charging, correlation does not imply causation, data science, Donald Shoup, East Village, edge city, energy security, Enrique Peñalosa, experimental subject, food desert, Frank Gehry, General Motors Futurama, gentrification, Google Earth, happiness index / gross national happiness, hedonic treadmill, Home mortgage interest deduction, housing crisis, income inequality, income per capita, Induced demand, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, license plate recognition, McMansion, means of production, megacity, Menlo Park, meta-analysis, mortgage tax deduction, New Urbanism, Panopticon Jeremy Bentham, peak oil, Ponzi scheme, power law, rent control, restrictive zoning, ride hailing / ride sharing, risk tolerance, science of happiness, Seaside, Florida, Silicon Valley, starchitect, streetcar suburb, the built environment, The Death and Life of Great American Cities, the High Line, The Spirit Level, The Wealth of Nations by Adam Smith, trade route, transit-oriented development, upwardly mobile, urban planning, urban sprawl, wage slave, white flight, World Values Survey, zero-sum game, Zipcar


pages: 420 words: 121,881

The Birth of the Pill: How Four Crusaders Reinvented Sex and Launched a Revolution by Jonathan Eig

Albert Einstein, experimental subject, feminist movement, Norman Mailer, placebo effect, Richard Thaler, risk tolerance, Rosa Parks, Upton Sinclair, W. E. B. Du Bois, women in the workforce


pages: 1,261 words: 294,715

Behave: The Biology of Humans at Our Best and Worst by Robert M. Sapolsky

autism spectrum disorder, autonomous vehicles, behavioural economics, Bernie Madoff, biofilm, blood diamond, British Empire, Broken windows theory, Brownian motion, car-free, classic study, clean water, cognitive dissonance, cognitive load, corporate personhood, corporate social responsibility, Daniel Kahneman / Amos Tversky, delayed gratification, desegregation, different worldview, domesticated silver fox, double helix, Drosophila, Edward Snowden, en.wikipedia.org, epigenetics, Flynn Effect, framing effect, fudge factor, George Santayana, global pandemic, Golden arches theory, Great Leap Forward, hiring and firing, illegal immigration, impulse control, income inequality, intentional community, John von Neumann, Loma Prieta earthquake, long peace, longitudinal study, loss aversion, Mahatma Gandhi, meta-analysis, microaggression, mirror neurons, Mohammed Bouazizi, Monkeys Reject Unequal Pay, mouse model, mutually assured destruction, Nelson Mandela, Network effects, nocebo, out of africa, Peter Singer: altruism, phenotype, Philippa Foot, placebo effect, publication bias, RAND corporation, risk tolerance, Rosa Parks, selective serotonin reuptake inhibitor (SSRI), self-driving car, Silicon Valley, Skinner box, social contagion, social distancing, social intelligence, Stanford marshmallow experiment, Stanford prison experiment, stem cell, Steven Pinker, strikebreaker, theory of mind, Tragedy of the Commons, transatlantic slave trade, traveling salesman, trickle-down economics, trolley problem, twin studies, ultimatum game, Walter Mischel, wikimedia commons, zero-sum game, zoonotic diseases

., “Chemosensory Anxiety Signals Augment the Startle Reflex in Humans,” Nsci Letters 394 (2006): 127. 26. H. Critchley and N. Harrison, “Visceral Influences on Brain and Behavior,” Neuron 77 (2013): 624; D. Carney et al., “Power Posing Brief Nonverbal Displays Affect Neuroendocrine Levels and Risk Tolerance,” Psych Sci 21 (2010): 1363. Some related findings: A. Hennenlotter et al., “The Link Between Facial Feedback and Neural Activity Within Central Circuitries of Emotion: New Insights from Botulinum Toxin–Induced Denervation of Frown Muscles,” Cerebral Cortex 19 (2009): 357; J. Davis, “The Effects of BOTOX Injections on Emotional Experience,” Emotion 10 (2010): 433. 27.


pages: 1,073 words: 302,361

Money and Power: How Goldman Sachs Came to Rule the World by William D. Cohan

"Friedman doctrine" OR "shareholder theory", "RICO laws" OR "Racketeer Influenced and Corrupt Organizations", Alan Greenspan, asset-backed security, Bear Stearns, Bernie Madoff, Bob Litterman, book value, business cycle, buttonwood tree, buy and hold, collateralized debt obligation, Cornelius Vanderbilt, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency risk, deal flow, diversified portfolio, do well by doing good, fear of failure, financial engineering, financial innovation, fixed income, Ford paid five dollars a day, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Gordon Gekko, high net worth, hiring and firing, hive mind, Hyman Minsky, interest rate swap, John Meriwether, junk bonds, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, managed futures, margin call, market bubble, mega-rich, merger arbitrage, Michael Milken, moral hazard, mortgage debt, Myron Scholes, paper trading, passive investing, Paul Samuelson, Ponzi scheme, price stability, profit maximization, proprietary trading, risk tolerance, Ronald Reagan, Saturday Night Live, short squeeze, South Sea Bubble, tail risk, time value of money, too big to fail, traveling salesman, two and twenty, value at risk, work culture , yield curve, Yogi Berra, zero-sum game

But was this relentless focus on profit a recipe for dispensing with the system of “checks and balances” that was in place to prevent conflicts between client needs and Goldman’s own trading accounts? This question would come back to haunt Goldman with a vengeance in 2010. To Corzine, the lessons of 1994 were clear. “Permanency of capital was essential,” he said. “You could not have everybody’s life at risk because people have different risk tolerances and can take their capital out at a moment’s notice. I didn’t have religious fervor [about an IPO] in 1986, but I was supportive. I had religious fervor after 1994 because you can’t have a two-hundred-and-fifty-billion-dollar balance sheet stretched around the world, operating twenty-four hours a day built on capital that could walk out the door and have no real transparency whatsoever about what you’re doing.”


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Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit From Global Chaos by Sarah Lacy

Asian financial crisis, barriers to entry, Benchmark Capital, BRICs, clean tech, clean water, cloud computing, Deng Xiaoping, digital divide, Donald Trump, Elon Musk, fear of failure, Firefox, Great Leap Forward, Huaqiangbei: the electronics market of Shenzhen, China, income per capita, intangible asset, Jeff Bezos, knowledge economy, knowledge worker, M-Pesa, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, Max Levchin, McMansion, megacity, Network effects, off-the-grid, One Laptop per Child (OLPC), paypal mafia, QWERTY keyboard, risk tolerance, Salesforce, Skype, social web, Steve Jobs, Tony Hsieh, urban planning, web application, women in the workforce, working-age population, zero-sum game

The common answer was a cocktail of elements, including top universities, proximity to venture investors, local professionals like lawyers and accountants skil ed at serving high-growth companies, existing high-tech companies that could create a skil ed workforce, and an environment that encourages risk taking and tolerates failure. Here’s the mystery of Israel: If you take out that last one about risk taking, Israel had none of these advantages and had the added disadvantages of a tiny domestic market surrounded by enemies and embroiled in near-constant violence. Yet in the 1990s, Israel experienced an entrepreneurial miracle.


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Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

Alan Greenspan, Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, behavioural economics, Berlin Wall, Big bang: deregulation of the City of London, Bletchley Park, business cycle, California gold rush, Charles Babbage, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Dr. Strangelove, Dutch auction, Edward Lloyd's coffeehouse, electricity market, equity premium, equity risk premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, Fairchild Semiconductor, financial innovation, flying shuttle, Ford Model T, Francis Fukuyama: the end of history, George Akerlof, George Gilder, Goodhart's law, Great Leap Forward, greed is good, Gunnar Myrdal, haute couture, Helicobacter pylori, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, junk bonds, Kenneth Arrow, Kevin Kelly, knowledge economy, Larry Ellison, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Michael Milken, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, Phillips curve, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, proprietary trading, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, Stuart Kauffman, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, work culture , yield curve, yield management


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A Crack in the Edge of the World by Simon Winchester

Albert Einstein, Apollo 11, Asilomar, butterfly effect, California gold rush, content marketing, Easter island, Elisha Otis, Golden Gate Park, index card, indoor plumbing, lateral thinking, Loma Prieta earthquake, Menlo Park, Neil Armstrong, place-making, risk tolerance, San Francisco homelessness, Silicon Valley, South of Market, San Francisco, supervolcano, The Chicago School, transcontinental railway, wage slave, Works Progress Administration

The National Board of Fire Underwriters had remarked only the year before, after an extensive survey, that the city remained a tinderbox, waiting to be consumed once again as it had been six times already in the half century of its existence. Chief Sullivan concurred, often vehemently. Such was the flammability of its structures, the lack of water, the vulnerability of the supply and the eccentric siting of some of the fire stations that insurers found the risks barely tolerable. There were only thirty-eight steam-powered fire engines in service, and tests had shown they could deliver water at only 70 per cent of their rated capacity – much too low for comfort. The men who manned the engines were poorly trained. There were too few hydrants, and the old cisterns that long before had been built to store water below intersections in the city-centre were rusty and empty and unused.


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Warren Buffett Accounting Book: Reading Financial Statements for Value Investing (Warren Buffett's 3 Favorite Books) by Stig Brodersen, Preston Pysh

accelerated depreciation, book value, discounted cash flows, fixed income, intangible asset, low interest rates, market bubble, money market fund, principal–agent problem, profit maximization, risk tolerance, stock buybacks, time value of money


pages: 526 words: 160,601

A Generation of Sociopaths: How the Baby Boomers Betrayed America by Bruce Cannon Gibney

1960s counterculture, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, Alan Greenspan, AlphaGo, American Society of Civil Engineers: Report Card, Bear Stearns, Bernie Madoff, Bernie Sanders, Black Lives Matter, bond market vigilante , book value, Boston Dynamics, Bretton Woods, business cycle, buy and hold, carbon footprint, carbon tax, Charles Lindbergh, classic study, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate personhood, Corrections Corporation of America, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, dark matter, DeepMind, Deng Xiaoping, Donald Trump, Downton Abbey, Edward Snowden, Elon Musk, ending welfare as we know it, equal pay for equal work, failed state, financial deregulation, financial engineering, Francis Fukuyama: the end of history, future of work, gender pay gap, gig economy, Glass-Steagall Act, Haight Ashbury, Higgs boson, high-speed rail, Home mortgage interest deduction, Hyperloop, illegal immigration, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Carville said: "I would like to be reincarnated as the bond market. You can intimidate everybody.", Jane Jacobs, junk bonds, Kitchen Debate, labor-force participation, Long Term Capital Management, low interest rates, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, McMansion, medical bankruptcy, Menlo Park, Michael Milken, military-industrial complex, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Armstrong, neoliberal agenda, Network effects, Nixon triggered the end of the Bretton Woods system, obamacare, offshore financial centre, oil shock, operation paperclip, plutocrats, Ponzi scheme, price stability, prosperity theology / prosperity gospel / gospel of success, quantitative easing, Ralph Waldo Emerson, RAND corporation, rent control, ride hailing / ride sharing, risk tolerance, Robert Shiller, Ronald Reagan, Rubik’s Cube, Savings and loan crisis, school choice, secular stagnation, self-driving car, shareholder value, short selling, side project, Silicon Valley, smart grid, Snapchat, source of truth, stem cell, Steve Jobs, Stewart Brand, stock buybacks, survivorship bias, TaskRabbit, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, War on Poverty, warehouse robotics, We are all Keynesians now, white picket fence, Whole Earth Catalog, women in the workforce, Y2K, Yom Kippur War, zero-sum game


pages: 345 words: 100,135

Snakes in Suits: When Psychopaths Go to Work by Dr. Paul Babiak, Dr. Robert Hare

business process, computer age, dark triade / dark tetrad, disinformation, fixed income, greed is good, job satisfaction, laissez-faire capitalism, Neil Armstrong, Norman Mailer, old-boy network, risk tolerance, twin studies

Furthermore, not everything changes at the same rate, and interrelated elements become unglued, adding confusion to an already unstable time. Organizations in a constant state of transitioning are characterized by unclear, outdated, unenforceable, or nonexistent work rules and policies; inconsistent risk taking; greater tolerance for controversial, perhaps even abusive, behaviors; and antiquated measurement systems and communication networks. At best, the ideal future states of these organizations are fuzzy. The leader’s job becomes increasingly complex but far less well defined during these times of change—itself a frustrating thing.


pages: 247 words: 63,208

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Drugs Without the Hot Air by David Nutt

British Empire, double helix, drug harm reduction, en.wikipedia.org, Kickstarter, knowledge economy, longitudinal study, meta-analysis, moral panic, offshore financial centre, precautionary principle, randomized controlled trial, risk tolerance, Robert Gordon, selective serotonin reuptake inhibitor (SSRI), War on Poverty

Perhaps in the future we’ll understand anxiety disorders in a more sophisticated way, and be able to treat them much more effectively. In general, although physical dependence on benzodiazepines is common and withdrawal can sometimes be problematic, the psychological cravings that characterise addiction are extremely rare when benzodiazepines are taken as directed by the doctor. Whether it’s worth risking building up tolerance and possibly suffering withdrawal symptoms, depends on individual factors – especially how ill you are and how much the benzodiazepines help you. The decision requires the same sort of weighing up of the harms and benefits as with any drug. Antidepressants and SSRIs Selective serotonin reuptake inhibitors (SSRIs) were first developed in the 1970s.


pages: 612 words: 179,328

Buffett by Roger Lowenstein

Alan Greenspan, asset allocation, Bear Stearns, book value, Bretton Woods, buy and hold, Carl Icahn, cashless society, collective bargaining, computerized trading, corporate raider, credit crunch, cuban missile crisis, Eugene Fama: efficient market hypothesis, index card, index fund, interest rate derivative, invisible hand, Jeffrey Epstein, John Meriwether, junk bonds, Long Term Capital Management, Michael Milken, moral hazard, Paul Samuelson, random walk, risk tolerance, Robert Shiller, Ronald Reagan, Savings and loan crisis, selection bias, Teledyne, The Predators' Ball, traveling salesman, Works Progress Administration, Yogi Berra, young professional, zero-coupon bond

Risk, to Buffett, was the risk of paying more than a business would prove to be worth. And the range of variables was nearly infinite. Was a company dependent on too few customers? Did the chairman drink? Since the sum (or even the number) of such risks could not be figured with precision, Buffett looked for companies—the very few companies—in which the risks seemed tolerable even allowing for error. The theorists recognized no such nuances; risk, in their view, was measurable. Since stock prices were right, they simply assumed that the foreseeable risks in a business were incorporated in its price. Every change in outlook was immediately matched by a change in price.


pages: 661 words: 185,701

The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance by Eswar S. Prasad

access to a mobile phone, Adam Neumann (WeWork), Airbnb, algorithmic trading, altcoin, bank run, barriers to entry, Bear Stearns, Ben Bernanke: helicopter money, Bernie Madoff, Big Tech, bitcoin, Bitcoin Ponzi scheme, Bletchley Park, blockchain, Bretton Woods, business intelligence, buy and hold, capital controls, carbon footprint, cashless society, central bank independence, cloud computing, coronavirus, COVID-19, Credit Default Swap, cross-border payments, cryptocurrency, deglobalization, democratizing finance, disintermediation, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, Elon Musk, Ethereum, ethereum blockchain, eurozone crisis, fault tolerance, fiat currency, financial engineering, financial independence, financial innovation, financial intermediation, Flash crash, floating exchange rates, full employment, gamification, gig economy, Glass-Steagall Act, global reserve currency, index fund, inflation targeting, informal economy, information asymmetry, initial coin offering, Internet Archive, Jeff Bezos, Kenneth Rogoff, Kickstarter, light touch regulation, liquidity trap, litecoin, lockdown, loose coupling, low interest rates, Lyft, M-Pesa, machine readable, Mark Zuckerberg, Masayoshi Son, mobile money, Money creation, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, offshore financial centre, open economy, opioid epidemic / opioid crisis, PalmPilot, passive investing, payday loans, peer-to-peer, peer-to-peer lending, Peter Thiel, Ponzi scheme, price anchoring, profit motive, QR code, quantitative easing, quantum cryptography, RAND corporation, random walk, Real Time Gross Settlement, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, risk/return, Robinhood: mobile stock trading app, robo advisor, Ross Ulbricht, Salesforce, Satoshi Nakamoto, seigniorage, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, smart contracts, SoftBank, special drawing rights, the payments system, too big to fail, transaction costs, uber lyft, unbanked and underbanked, underbanked, Vision Fund, Vitalik Buterin, Wayback Machine, WeWork, wikimedia commons, Y Combinator, zero-sum game


pages: 300 words: 76,638

The War on Normal People: The Truth About America's Disappearing Jobs and Why Universal Basic Income Is Our Future by Andrew Yang

3D printing, Airbnb, assortative mating, augmented reality, autonomous vehicles, basic income, Bear Stearns, behavioural economics, Ben Horowitz, Bernie Sanders, call centre, corporate governance, cryptocurrency, data science, David Brooks, DeepMind, Donald Trump, Elon Musk, falling living standards, financial deregulation, financial engineering, full employment, future of work, global reserve currency, income inequality, Internet of things, invisible hand, Jeff Bezos, job automation, John Maynard Keynes: technological unemployment, Khan Academy, labor-force participation, longitudinal study, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, megacity, meritocracy, Narrative Science, new economy, passive income, performance metric, post-work, quantitative easing, reserve currency, Richard Florida, ride hailing / ride sharing, risk tolerance, robo advisor, Ronald Reagan, Rutger Bregman, Sam Altman, San Francisco homelessness, self-driving car, shareholder value, Silicon Valley, Simon Kuznets, single-payer health, Stephen Hawking, Steve Ballmer, supercomputer in your pocket, tech worker, technoutopianism, telemarketer, The future is already here, The Wealth of Nations by Adam Smith, traumatic brain injury, Tyler Cowen, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, unemployed young men, universal basic income, urban renewal, warehouse robotics, white flight, winner-take-all economy, Y Combinator


pages: 237 words: 74,966

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pages: 265 words: 77,084

Alone on the Wall: Alex Honnold and the Ultimate Limits of Adventure by Alex Honnold, David Roberts

carbon footprint, do what you love, Elon Musk, fixed-gear, income inequality, risk tolerance, short squeeze, side project, trade route


pages: 261 words: 71,349

The Introvert Entrepreneur: Amplify Your Strengths and Create Success on Your Own Terms by Beth Buelow

do what you love, fake it until you make it, fear of failure, independent contractor, Jeff Bezos, Kickstarter, Mark Zuckerberg, place-making, Ralph Waldo Emerson, risk tolerance, Skype, solopreneur, TED Talk, Tony Hsieh


pages: 289 words: 77,532

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The Code: Silicon Valley and the Remaking of America by Margaret O'Mara

A Declaration of the Independence of Cyberspace, accounting loophole / creative accounting, affirmative action, Airbnb, Alan Greenspan, AltaVista, Alvin Toffler, Amazon Web Services, An Inconvenient Truth, AOL-Time Warner, Apple II, Apple's 1984 Super Bowl advert, autonomous vehicles, back-to-the-land, barriers to entry, Ben Horowitz, Berlin Wall, Big Tech, Black Lives Matter, Bob Noyce, Buckminster Fuller, Burning Man, business climate, Byte Shop, California gold rush, Californian Ideology, carried interest, clean tech, clean water, cloud computing, cognitive dissonance, commoditize, company town, Compatible Time-Sharing System, computer age, Computer Lib, continuous integration, cuban missile crisis, Danny Hillis, DARPA: Urban Challenge, deindustrialization, different worldview, digital divide, Do you want to sell sugared water for the rest of your life?, don't be evil, Donald Trump, Doomsday Clock, Douglas Engelbart, driverless car, Dynabook, Edward Snowden, El Camino Real, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Fairchild Semiconductor, Frank Gehry, Future Shock, Gary Kildall, General Magic , George Gilder, gig economy, Googley, Hacker Ethic, Hacker News, high net worth, hockey-stick growth, Hush-A-Phone, immigration reform, income inequality, industrial research laboratory, informal economy, information retrieval, invention of movable type, invisible hand, Isaac Newton, It's morning again in America, Jeff Bezos, Joan Didion, job automation, job-hopping, John Gilmore, John Markoff, John Perry Barlow, Julian Assange, Kitchen Debate, knowledge economy, knowledge worker, Larry Ellison, Laura Poitras, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, Mary Meeker, mass immigration, means of production, mega-rich, Menlo Park, Mikhail Gorbachev, military-industrial complex, millennium bug, Mitch Kapor, Mother of all demos, move fast and break things, mutually assured destruction, Neil Armstrong, new economy, Norbert Wiener, old-boy network, Palm Treo, pattern recognition, Paul Graham, Paul Terrell, paypal mafia, Peter Thiel, pets.com, pirate software, popular electronics, pre–internet, prudent man rule, Ralph Nader, RAND corporation, Richard Florida, ride hailing / ride sharing, risk tolerance, Robert Metcalfe, ROLM, Ronald Reagan, Salesforce, Sand Hill Road, Second Machine Age, self-driving car, shareholder value, Sheryl Sandberg, side hustle, side project, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, skunkworks, Snapchat, social graph, software is eating the world, Solyndra, speech recognition, Steve Ballmer, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, Strategic Defense Initiative, supercomputer in your pocket, Susan Wojcicki, tacit knowledge, tech billionaire, tech worker, technoutopianism, Ted Nelson, TED Talk, the Cathedral and the Bazaar, the market place, the new new thing, The Soul of a New Machine, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas L Friedman, Tim Cook: Apple, Timothy McVeigh, transcontinental railway, Twitter Arab Spring, Uber and Lyft, uber lyft, Unsafe at Any Speed, upwardly mobile, Vannevar Bush, War on Poverty, Wargames Reagan, WarGames: Global Thermonuclear War, We wanted flying cars, instead we got 140 characters, Whole Earth Catalog, WikiLeaks, William Shockley: the traitorous eight, work culture , Y Combinator, Y2K

“All the losers came here,” a tech veteran once told me in wonderment, “and by some miracle they pulled it off.”8 The geographic and psychic separation between the Valley and the hubs of finance and government—not to mention the ivied halls of East Coast academia—was both its great advantage and its Achilles heel. Innovation blossomed within a small, tightly networked community where friendship and trust increased people’s willingness to take professional risks and tolerate professional failures. Yet the Valley’s tight circle, born in an era when the worlds of engineering and finance were all-white and all-male, programmed in sharp gender and racial imbalances—and narrowed the industry’s field of vision about the products it should make and the customers it could serve.


pages: 305 words: 79,303

The Four: How Amazon, Apple, Facebook, and Google Divided and Conquered the World by Scott Galloway

"Susan Fowler" uber, activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Robotics, Amazon Web Services, Apple II, autonomous vehicles, barriers to entry, Ben Horowitz, Bernie Sanders, Big Tech, big-box store, Bob Noyce, Brewster Kahle, business intelligence, California gold rush, Cambridge Analytica, cloud computing, Comet Ping Pong, commoditize, cuban missile crisis, David Brooks, Didi Chuxing, digital divide, disintermediation, don't be evil, Donald Trump, Elon Musk, fake news, follow your passion, fulfillment center, future of journalism, future of work, global supply chain, Google Earth, Google Glasses, Google X / Alphabet X, Hacker Conference 1984, Internet Archive, invisible hand, Jeff Bezos, Jony Ive, Khan Academy, Kiva Systems, longitudinal study, Lyft, Mark Zuckerberg, meta-analysis, Network effects, new economy, obamacare, Oculus Rift, offshore financial centre, passive income, Peter Thiel, profit motive, race to the bottom, RAND corporation, ride hailing / ride sharing, risk tolerance, Robert Mercer, Robert Shiller, Search for Extraterrestrial Intelligence, self-driving car, sentiment analysis, shareholder value, Sheryl Sandberg, Silicon Valley, Snapchat, software is eating the world, speech recognition, Stephen Hawking, Steve Ballmer, Steve Bannon, Steve Jobs, Steve Wozniak, Stewart Brand, supercomputer in your pocket, Tesla Model S, the long tail, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, undersea cable, vertical integration, warehouse automation, warehouse robotics, Wayback Machine, Whole Earth Catalog, winner-take-all economy, working poor, you are the product, young professional


The Disciplined Trader: Developing Winning Attitudes by Mark Douglas

Albert Einstein, conceptual framework, fear of failure, financial independence, prediction markets, risk tolerance, the market place


pages: 278 words: 83,468

pages: 297 words: 84,009

Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen

"Friedman doctrine" OR "shareholder theory", 23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, Big Tech, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, company town, compensation consultant, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, driverless car, Elon Musk, employer provided health coverage, experimental economics, Fairchild Semiconductor, fake news, Filter Bubble, financial innovation, financial intermediation, gentrification, Glass-Steagall Act, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, junk bonds, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator


pages: 389 words: 81,596

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pages: 279 words: 85,552

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Why geography matters: three challenges facing America : climate change, the rise of China, and global terrorism by Harm J. De Blij

agricultural Revolution, airport security, Anton Chekhov, Ayatollah Khomeini, Berlin Wall, British Empire, colonial exploitation, complexity theory, computer age, crony capitalism, demographic transition, Deng Xiaoping, Eratosthenes, European colonialism, F. W. de Klerk, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global village, Great Leap Forward, high-speed rail, illegal immigration, Internet Archive, John Snow's cholera map, Khyber Pass, manufacturing employment, megacity, megaproject, Mercator projection, MITM: man-in-the-middle, Nelson Mandela, Oklahoma City bombing, out of africa, RAND corporation, risk tolerance, Ronald Reagan, social distancing, South China Sea, special economic zone, Thomas Malthus, trade route, transatlantic slave trade, UNCLOS, UNCLOS

Time will soften the rough edges of this problem, and already has: two decades ago it was incon- ceivable that Taiwanese investment in China's Pacific Rim economy would even be possible, let alone reach the dimensions it has. An outbreak of armed conflict would be catastrophic for all three parties. Nothing that increases this risk should be tolerated, and Washington must convince Beijing that this must be a joint objective. Over the longer term, China's economic and geopolitical challenge will be more difficult to accommodate, and the American role in East Asia will undoubtedly have to change. China has unresolved issues with Japan ranging from Japan's failure to acknowledge the atrocities it committed in China during its wartime occupation to disputes over islands and waters in the South China Sea.


pages: 382 words: 120,064

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do by Brett King

3D printing, Abraham Maslow, additive manufacturing, Airbus A320, Albert Einstein, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apollo 11, Apollo 13, Apollo Guidance Computer, asset-backed security, augmented reality, barriers to entry, behavioural economics, bitcoin, bounce rate, business intelligence, business process, business process outsourcing, call centre, capital controls, citizen journalism, Clayton Christensen, cloud computing, credit crunch, crowdsourcing, disintermediation, en.wikipedia.org, fixed income, George Gilder, Google Glasses, high net worth, I think there is a world market for maybe five computers, Infrastructure as a Service, invention of the printing press, Jeff Bezos, jimmy wales, Kickstarter, London Interbank Offered Rate, low interest rates, M-Pesa, Mark Zuckerberg, mass affluent, Metcalfe’s law, microcredit, mobile money, more computing power than Apollo, Northern Rock, Occupy movement, operational security, optical character recognition, peer-to-peer, performance metric, Pingit, platform as a service, QR code, QWERTY keyboard, Ray Kurzweil, recommendation engine, RFID, risk tolerance, Robert Metcalfe, self-driving car, Skype, speech recognition, stem cell, telepresence, the long tail, Tim Cook: Apple, transaction costs, underbanked, US Airways Flight 1549, web application, world market for maybe five computers

As a customer I may very well use the Internet to research my investment options, so before I go to the advisor in the branch, or he comes to see me at my office, I may very well have decided the asset classes I want to invest in, the investment horizon, the level of risk I am prepared to take. I may have gone online and used a risk profile questionnaire to see what level of risk I will tolerate. I may have used websites or magazines on investments to look at whether it is the right time to invest in my local property market, or in blue-chip banking stocks. I may be part of an investment club online; I may even have my own online brokerage account separate from my retail bank. So while I may engage with an advisor in the final stage to execute a transaction, I may have already made the all of the critical decisions long before my meeting with the human advisor.


pages: 346 words: 92,984

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AI Superpowers: China, Silicon Valley, and the New World Order by Kai-Fu Lee

"World Economic Forum" Davos, AI winter, Airbnb, Albert Einstein, algorithmic bias, algorithmic trading, Alignment Problem, AlphaGo, artificial general intelligence, autonomous vehicles, barriers to entry, basic income, bike sharing, business cycle, Cambridge Analytica, cloud computing, commoditize, computer vision, corporate social responsibility, cotton gin, creative destruction, crony capitalism, data science, deep learning, DeepMind, Demis Hassabis, Deng Xiaoping, deskilling, Didi Chuxing, Donald Trump, driverless car, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, fake news, full employment, future of work, general purpose technology, Geoffrey Hinton, gig economy, Google Chrome, Hans Moravec, happiness index / gross national happiness, high-speed rail, if you build it, they will come, ImageNet competition, impact investing, income inequality, informal economy, Internet of things, invention of the telegraph, Jeff Bezos, job automation, John Markoff, Kickstarter, knowledge worker, Lean Startup, low skilled workers, Lyft, machine translation, mandatory minimum, Mark Zuckerberg, Menlo Park, minimum viable product, natural language processing, Neil Armstrong, new economy, Nick Bostrom, OpenAI, pattern recognition, pirate software, profit maximization, QR code, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, risk tolerance, Robert Mercer, Rodney Brooks, Rubik’s Cube, Sam Altman, Second Machine Age, self-driving car, sentiment analysis, sharing economy, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, SoftBank, Solyndra, special economic zone, speech recognition, Stephen Hawking, Steve Jobs, strong AI, TED Talk, The Future of Employment, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, urban planning, vertical integration, Vision Fund, warehouse robotics, Y Combinator


pages: 372 words: 94,153

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next by Andrew McAfee

back-to-the-land, Bartolomé de las Casas, Berlin Wall, bitcoin, Blitzscaling, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon credits, carbon footprint, carbon tax, Charles Babbage, clean tech, clean water, cloud computing, congestion pricing, Corn Laws, creative destruction, crony capitalism, data science, David Ricardo: comparative advantage, decarbonisation, DeepMind, degrowth, dematerialisation, Demis Hassabis, Deng Xiaoping, do well by doing good, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, fake news, Fall of the Berlin Wall, Garrett Hardin, Great Leap Forward, Haber-Bosch Process, Hans Rosling, humanitarian revolution, hydraulic fracturing, income inequality, indoor plumbing, intangible asset, James Watt: steam engine, Jeff Bezos, job automation, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Khan Academy, Landlord’s Game, Louis Pasteur, Lyft, Marc Andreessen, Marc Benioff, market fundamentalism, means of production, Michael Shellenberger, Mikhail Gorbachev, ocean acidification, oil shale / tar sands, opioid epidemic / opioid crisis, Paul Samuelson, peak oil, precision agriculture, price elasticity of demand, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Salesforce, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, Ted Nordhaus, TED Talk, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Tragedy of the Commons, Uber and Lyft, uber lyft, Veblen good, War on Poverty, We are as Gods, Whole Earth Catalog, World Values Survey



Engineering Security by Peter Gutmann

active measures, address space layout randomization, air gap, algorithmic trading, Amazon Web Services, Asperger Syndrome, bank run, barriers to entry, bitcoin, Brian Krebs, business process, call centre, card file, cloud computing, cognitive bias, cognitive dissonance, cognitive load, combinatorial explosion, Credit Default Swap, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Debian, domain-specific language, Donald Davies, Donald Knuth, double helix, Dr. Strangelove, Dunning–Kruger effect, en.wikipedia.org, endowment effect, false flag, fault tolerance, Firefox, fundamental attribution error, George Akerlof, glass ceiling, GnuPG, Google Chrome, Hacker News, information security, iterative process, Jacob Appelbaum, Jane Jacobs, Jeff Bezos, John Conway, John Gilmore, John Markoff, John von Neumann, Ken Thompson, Kickstarter, lake wobegon effect, Laplace demon, linear programming, litecoin, load shedding, MITM: man-in-the-middle, Multics, Network effects, nocebo, operational security, Paradox of Choice, Parkinson's law, pattern recognition, peer-to-peer, Pierre-Simon Laplace, place-making, post-materialism, QR code, quantum cryptography, race to the bottom, random walk, recommendation engine, RFID, risk tolerance, Robert Metcalfe, rolling blackouts, Ruby on Rails, Sapir-Whorf hypothesis, Satoshi Nakamoto, security theater, semantic web, seminal paper, Skype, slashdot, smart meter, social intelligence, speech recognition, SQL injection, statistical model, Steve Jobs, Steven Pinker, Stuxnet, sunk-cost fallacy, supply-chain attack, telemarketer, text mining, the built environment, The Death and Life of Great American Cities, The Market for Lemons, the payments system, Therac-25, too big to fail, Tragedy of the Commons, Turing complete, Turing machine, Turing test, Wayback Machine, web application, web of trust, x509 certificate, Y2K, zero day, Zimmermann PGP

This indicates a notable difference between the anti-spam industry and web browsers, in anti-spam the use of multiple factors in deciding whether something is safe or not is the standard way of doing things, to the extent that a mechanism that uses a mere 2 1 to 26 factors qualifies as sufficiently unusual to merit its own conference paper [119], while for browsers the standard is to use 20 factors. The browser can also choose to automatically apply changes in risk tolerance in a situation-specific manner. For example if your laptop normally connects to the Internet through a home wireless network but is now connected through an unrecognised network (corresponding to the Internet cafe that you’re currently sitting in) then the browser can increase the risk-aversion factor so that extra checking is applied to sites before they’re regarded as being safe (this type of location-based adaptive defensive thinking is covered in more detail in the discussion of locationlimited channels in “Use of Familiar Metaphors” on page 497). 320 Design One distinction that you need to make here is the difference between risks and risk.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

"World Economic Forum" Davos, activist fund / activist shareholder / activist investor, Alan Greenspan, Anthropocene, assortative mating, bank run, barriers to entry, Bear Stearns, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, digital divide, diversification, Dunbar number, East Village, eat what you kill, Elon Musk, eurozone crisis, fake it until you make it, family office, financial engineering, financial repression, Gini coefficient, glass ceiling, Glass-Steagall Act, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, Jim Simons, John Meriwether, junk bonds, Kenneth Arrow, Kenneth Rogoff, Kevin Roose, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, Money creation, money market fund, Myron Scholes, NetJets, Network effects, no-fly zone, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Ponzi scheme, power law, public intellectual, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, rolodex, Satyajit Das, search costs, shareholder value, Sheryl Sandberg, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, subprime mortgage crisis, systems thinking, tech billionaire, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, Tyler Cowen, women in the workforce, young professional

Schwarzman went on to hire strong partners who brought both their business acumen and networks along with them. According to colleagues and business partners, he is incredibly driven, has an uncompromising work ethic, and is as demanding of others as he is of himself. Blackstone did not merely survive the crisis; it flourished, largely due to Schwarzman’s cautious risk management and low tolerance for mistakes. The government even sought his advice because of his turnaround expertise. Despite occasional tone deafness, Schwarzman’s self-awareness and persuasive sales skills have been instrumental in building an empire and elevating him to superhub status. INQUIRING MINDS High intelligence and academic achievements at top schools are indispensable to becoming a network’s nucleus.


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

Alan Greenspan, Alvin Roth, AOL-Time Warner, Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, behavioural economics, Berlin Wall, British Empire, capital controls, carbon tax, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Easter island, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial engineering, flying shuttle, Ford paid five dollars a day, full employment, George Akerlof, Glass-Steagall Act, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, junk bonds, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, longitudinal study, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, Michael Milken, Monkeys Reject Unequal Pay, new economy, New Urbanism, peer-to-peer, pension reform, Peter Singer: altruism, pets.com, placebo effect, precautionary principle, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Ronald Reagan, search costs, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game


pages: 463 words: 105,197

Radical Markets: Uprooting Capitalism and Democracy for a Just Society by Eric Posner, E. Weyl

3D printing, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, anti-communist, augmented reality, basic income, Berlin Wall, Bernie Sanders, Big Tech, Branko Milanovic, business process, buy and hold, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collective bargaining, commoditize, congestion pricing, Corn Laws, corporate governance, crowdsourcing, cryptocurrency, data science, deep learning, DeepMind, Donald Trump, Elon Musk, endowment effect, Erik Brynjolfsson, Ethereum, feminist movement, financial deregulation, Francis Fukuyama: the end of history, full employment, gamification, Garrett Hardin, George Akerlof, global macro, global supply chain, guest worker program, hydraulic fracturing, Hyperloop, illegal immigration, immigration reform, income inequality, income per capita, index fund, informal economy, information asymmetry, invisible hand, Jane Jacobs, Jaron Lanier, Jean Tirole, Jeremy Corbyn, Joseph Schumpeter, Kenneth Arrow, labor-force participation, laissez-faire capitalism, Landlord’s Game, liberal capitalism, low skilled workers, Lyft, market bubble, market design, market friction, market fundamentalism, mass immigration, negative equity, Network effects, obamacare, offshore financial centre, open borders, Pareto efficiency, passive investing, patent troll, Paul Samuelson, performance metric, plutocrats, pre–internet, radical decentralization, random walk, randomized controlled trial, Ray Kurzweil, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Ronald Coase, Rory Sutherland, search costs, Second Machine Age, second-price auction, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, special economic zone, spectrum auction, speech recognition, statistical model, stem cell, telepresence, Thales and the olive presses, Thales of Miletus, The Death and Life of Great American Cities, The Future of Employment, The Market for Lemons, The Nature of the Firm, The Rise and Fall of American Growth, The Theory of the Leisure Class by Thorstein Veblen, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, Tragedy of the Commons, transaction costs, trickle-down economics, Tyler Cowen, Uber and Lyft, uber lyft, universal basic income, urban planning, Vanguard fund, vertical integration, women in the workforce, Zipcar


pages: 391 words: 97,018

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy by Daniel Gross

"World Economic Forum" Davos, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, Alan Greenspan, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, Bear Stearns, BRICs, British Empire, business cycle, business process, business process outsourcing, call centre, carbon tax, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, congestion pricing, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, financial engineering, Frederick Winslow Taylor, high net worth, high-speed rail, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, index fund, intangible asset, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low interest rates, low skilled workers, man camp, Mark Zuckerberg, Martin Wolf, Mary Meeker, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, scientific management, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, zero-sum game, Zipcar


pages: 364 words: 101,286

pages: 368 words: 96,825

Bold: How to Go Big, Create Wealth and Impact the World by Peter H. Diamandis, Steven Kotler

3D printing, additive manufacturing, adjacent possible, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Apollo 11, augmented reality, autonomous vehicles, Boston Dynamics, Charles Lindbergh, cloud computing, company town, creative destruction, crowdsourcing, Daniel Kahneman / Amos Tversky, data science, deal flow, deep learning, dematerialisation, deskilling, disruptive innovation, driverless car, Elon Musk, en.wikipedia.org, Exxon Valdez, fail fast, Fairchild Semiconductor, fear of failure, Firefox, Galaxy Zoo, Geoffrey Hinton, Google Glasses, Google Hangouts, gravity well, hype cycle, ImageNet competition, industrial robot, information security, Internet of things, Jeff Bezos, John Harrison: Longitude, John Markoff, Jono Bacon, Just-in-time delivery, Kickstarter, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, loss aversion, Louis Pasteur, low earth orbit, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, Mars Rover, meta-analysis, microbiome, minimum viable product, move fast and break things, Narrative Science, Netflix Prize, Network effects, Oculus Rift, OpenAI, optical character recognition, packet switching, PageRank, pattern recognition, performance metric, Peter H. Diamandis: Planetary Resources, Peter Thiel, pre–internet, Ray Kurzweil, recommendation engine, Richard Feynman, ride hailing / ride sharing, risk tolerance, rolodex, Scaled Composites, self-driving car, sentiment analysis, shareholder value, Sheryl Sandberg, Silicon Valley, Silicon Valley startup, skunkworks, Skype, smart grid, SpaceShipOne, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Stewart Brand, Stuart Kauffman, superconnector, Susan Wojcicki, synthetic biology, technoutopianism, TED Talk, telepresence, telepresence robot, Turing test, urban renewal, Virgin Galactic, Wayback Machine, web application, X Prize, Y Combinator, zero-sum game


pages: 318 words: 99,524

pages: 516 words: 157,437

Principles: Life and Work by Ray Dalio

Alan Greenspan, Albert Einstein, asset allocation, autonomous vehicles, backtesting, Bear Stearns, Black Monday: stock market crash in 1987, cognitive bias, currency risk, Deng Xiaoping, diversification, Dunning–Kruger effect, Elon Musk, financial engineering, follow your passion, global macro, Greenspan put, hiring and firing, iterative process, Jeff Bezos, Long Term Capital Management, margin call, Market Wizards by Jack D. Schwager, microcredit, oil shock, performance metric, planetary scale, quantitative easing, risk tolerance, Ronald Reagan, Silicon Valley, Steve Jobs, transaction costs, yield curve

Once we had them, we back-tested them over long time frames, using the systems to simulate how the decision rules would have worked together in the past. We were startled by the results. On paper, this new approach improved our returns by a factor of three to five times per unit of risk, and we could calibrate the amount of return we wanted based on the amount of risk we could tolerate. In other words, we could make a ton more money than the other guys, with a lower risk of being knocked out of the game—as I’d nearly been before. I called it the “killer system” because it would either produce killer results for us and our clients or it would kill us because we were missing something important.


pages: 589 words: 147,053

The Age of Em: Work, Love and Life When Robots Rule the Earth by Robin Hanson

8-hour work day, artificial general intelligence, augmented reality, Berlin Wall, bitcoin, blockchain, brain emulation, business cycle, business process, Clayton Christensen, cloud computing, correlation does not imply causation, creative destruction, deep learning, demographic transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, experimental subject, fault tolerance, financial intermediation, Flynn Effect, Future Shock, Herman Kahn, hindsight bias, information asymmetry, job automation, job satisfaction, John Markoff, Just-in-time delivery, lone genius, Machinery of Freedom by David Friedman, market design, megaproject, meta-analysis, Nash equilibrium, new economy, Nick Bostrom, pneumatic tube, power law, prediction markets, quantum cryptography, rent control, rent-seeking, reversible computing, risk tolerance, Silicon Valley, smart contracts, social distancing, statistical model, stem cell, Thomas Malthus, trade route, Turing test, Tyler Cowen, Vernor Vinge, William MacAskill

For example, we should expect more industriousness relative to indulgence, a work relative to a leisure orientation, time orientations that are long term relative to short term and that are tied to clocks instead of relationships, low instead of high context attitudes toward rules and communication, and a loose relative to tight attitude on interpreting social norms. For other standard cultural dimensions, productivity considerations don’t as clearly suggest which direction an em world favors. These dimensions include degree of avoidance of risk and uncertainty, tolerance of inequality, individual or group identity, cooperative or competitive emphasis, and high or low emotional expressiveness. Today, about 70% of the variation in values across nations is captured in just two key factors (Inglehart and Welzel 2010). These two factors also capture much of the variation in individual values (Schwartz et al. 2012).


pages: 354 words: 110,570

pages: 390 words: 108,171

pages: 433 words: 106,048

pages: 338 words: 112,127

pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

"World Economic Forum" Davos, Alan Greenspan, algorithmic trading, asset-backed security, bank run, banking crisis, Bear Stearns, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial engineering, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, Glass-Steagall Act, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, junk bonds, Kenneth Rogoff, large denomination, Long Term Capital Management, low interest rates, market bubble, Martin Wolf, Menlo Park, Michael Milken, military-industrial complex, Minsky moment, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Ponzi scheme, profit maximization, prosperity theology / prosperity gospel / gospel of success, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Ronald Reagan, Satyajit Das, Savings and loan crisis, shareholder value, short selling, sovereign wealth fund, stock buybacks, subprime mortgage crisis, The Chicago School, Thomas Malthus, too big to fail, trade route


pages: 399 words: 114,787

pages: 407 words: 113,198

pages: 296 words: 118,126

pages: 654 words: 120,154

The Firm by Duff McDonald

"World Economic Forum" Davos, Alan Greenspan, AOL-Time Warner, Asian financial crisis, asset light, Bear Stearns, benefit corporation, book value, borderless world, collective bargaining, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, family office, financial independence, Frederick Winslow Taylor, Glass-Steagall Act, income inequality, invisible hand, Jeff Bezos, Joseph Schumpeter, Ken Thompson, Kickstarter, laissez-faire capitalism, Mahatma Gandhi, Nelson Mandela, new economy, pets.com, Ponzi scheme, Ralph Nader, risk tolerance, risk-adjusted returns, Robert Solow, scientific management, shareholder value, Sheryl Sandberg, Silicon Valley, Steve Jobs, supply-chain management, The Nature of the Firm, vertical integration, young professional

Especially from the perspective of the client, who might have a year-long project to contend with? McKinsey has long been enamored with the way it does things—going so far as to tell clients they can take the culture or leave it—but in an era of cautious corporate spending, McKinsey’s idiosyncrasies run the risk of not being tolerated anymore. McKinsey will tell you that there really is no secret to its success—it is based on a relentless focus on recruiting and training, rigorous peer review, hard work, and emphasizing one’s contributions to the firm rather than taking credit for client billings. The firm’s recruiting process has been compared to that for astronauts.


pages: 413 words: 117,782

pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Alan Greenspan, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, Blue Ocean Strategy, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, classic study, Clayton Christensen, Colonization of Mars, commoditize, commodity super cycle, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Dr. Strangelove, driverless car, Elon Musk, Erik Brynjolfsson, Fairchild Semiconductor, fear of failure, financial engineering, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, general purpose technology, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, Greenspan put, Herman Kahn, high net worth, hiring and firing, hockey-stick growth, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, low interest rates, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, middle-income trap, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, precautionary principle, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Robert Solow, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, subprime mortgage crisis, technological determinism, technological singularity, TED Talk, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, vertical integration, Yogi Berra

At least some have woken up to the fact that the old dinosaur theory of innovation does not stand up – and that incumbents instead face growing innovation costs. African innovator and entrepreneur Bright Simons made an apt summary in the Harvard Business Review of the new landscape of innovation: “Technical complexity, social risk management (including lower tolerance for unintended consequences), diminishing returns, and talent challenges have all combined to raise the cost threshold of breakthrough innovation, even as downstream the costs of proliferation – reproducing, replicating, diffusing, disseminating, and indeed hacking innovation – have decreased.”71 Big companies know this by heart.


pages: 621 words: 123,678

Financial Freedom: A Proven Path to All the Money You Will Ever Need by Grant Sabatier

8-hour work day, Airbnb, anti-work, antiwork, asset allocation, bitcoin, buy and hold, cryptocurrency, diversified portfolio, Donald Trump, drop ship, financial independence, fixed income, follow your passion, full employment, Home mortgage interest deduction, index fund, lifestyle creep, loss aversion, low interest rates, Lyft, money market fund, mortgage debt, mortgage tax deduction, passive income, remote working, ride hailing / ride sharing, risk tolerance, robo advisor, side hustle, Skype, solopreneur, stocks for the long run, stocks for the long term, TaskRabbit, the rule of 72, time value of money, uber lyft, Vanguard fund

Whether you live in the city or the country, there are always deals to be found. While it might seem daunting at first, real estate investing, like stock investing, isn’t that complicated. But also, just like stock investing, you should invest only in what you understand and take only as much risk as you can tolerate. The more you know about the market and the neighborhoods, the better an investor you will be. You can either get this market knowledge yourself by keeping an eye on prices online and looking at properties in your target neighborhoods, or you can outsource it and work with a Realtor who knows the neighborhoods and scouts deals for you.


pages: 428 words: 126,013

pages: 531 words: 125,069

pages: 415 words: 123,373

Inviting Disaster by James R. Chiles

air gap, Airbus A320, airline deregulation, Alignment Problem, Apollo 11, Apollo 13, Boeing 747, crew resource management, cuban missile crisis, Exxon Valdez, flying shuttle, Gene Kranz, Maui Hawaii, megaproject, Milgram experiment, Neil Armstrong, North Sea oil, Piper Alpha, Recombinant DNA, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Ted Sorensen, time dilation

Is that kind of advance planning proof that high-reliability organizations have really arrived? Or would it make any difference for the complex and interactive system that Charles Perrow worries about? For myself, I make no arguments that anything can be made perfectly safe, nor do I know what “safe enough” means. In a national emergency the American public eagerly puts up with risks they’d never tolerate otherwise. Put me down as one who thinks we’ll have to settle for systems that have problems on a regular basis. If the systems are resilient and the workers have support from the top, problems will likely stop well short of disaster—most of the time. But where the consequences are irreversible and final, such as an accidental nuclear war, like Scott Sagan I find it hard to believe that we’ll be able to keep our collective finger on this hair trigger indefinitely without twitching even once.


pages: 419 words: 125,977

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pages: 416 words: 124,469

pages: 611 words: 188,732

Valley of Genius: The Uncensored History of Silicon Valley (As Told by the Hackers, Founders, and Freaks Who Made It Boom) by Adam Fisher

adjacent possible, Airbnb, Albert Einstein, AltaVista, An Inconvenient Truth, Andy Rubin, AOL-Time Warner, Apple II, Apple Newton, Apple's 1984 Super Bowl advert, augmented reality, autonomous vehicles, Bill Atkinson, Bob Noyce, Brownian motion, Buckminster Fuller, Burning Man, Byte Shop, circular economy, cognitive dissonance, Colossal Cave Adventure, Computer Lib, disintermediation, Do you want to sell sugared water for the rest of your life?, don't be evil, Donald Trump, Douglas Engelbart, driverless car, dual-use technology, Dynabook, Elon Musk, Fairchild Semiconductor, fake it until you make it, fake news, frictionless, General Magic , glass ceiling, Hacker Conference 1984, Hacker Ethic, Henry Singleton, Howard Rheingold, HyperCard, hypertext link, index card, informal economy, information retrieval, Ivan Sutherland, Jaron Lanier, Jeff Bezos, Jeff Rulifson, John Markoff, John Perry Barlow, Jony Ive, Kevin Kelly, Kickstarter, knowledge worker, Larry Ellison, life extension, Marc Andreessen, Marc Benioff, Mark Zuckerberg, Marshall McLuhan, Maui Hawaii, Menlo Park, Metcalfe’s law, Mondo 2000, Mother of all demos, move fast and break things, Neal Stephenson, Network effects, new economy, nuclear winter, off-the-grid, PageRank, Paul Buchheit, paypal mafia, peer-to-peer, Peter Thiel, pets.com, pez dispenser, popular electronics, quantum entanglement, random walk, reality distortion field, risk tolerance, Robert Metcalfe, rolodex, Salesforce, self-driving car, side project, Silicon Valley, Silicon Valley startup, skeuomorphism, skunkworks, Skype, Snow Crash, social graph, social web, South of Market, San Francisco, Startup school, Steve Jobs, Steve Jurvetson, Steve Wozniak, Steven Levy, Stewart Brand, Susan Wojcicki, synthetic biology, Ted Nelson, telerobotics, The future is already here, The Hackers Conference, the long tail, the new new thing, Tim Cook: Apple, Tony Fadell, tulip mania, V2 rocket, We are as Gods, Whole Earth Catalog, Whole Earth Review, Y Combinator


Making Globalization Work by Joseph E. Stiglitz

"World Economic Forum" Davos, affirmative action, Alan Greenspan, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, benefit corporation, Berlin Wall, blood diamond, business process, capital controls, carbon tax, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Garrett Hardin, Gini coefficient, global reserve currency, Global Witness, Great Leap Forward, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low interest rates, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, negative emissions, new economy, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Seymour Hersh, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, Tragedy of the Commons, trickle-down economics, union organizing, Washington Consensus, zero-sum game


pages: 460 words: 131,579

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge

"Friedman doctrine" OR "shareholder theory", "World Economic Forum" Davos, affirmative action, Alan Greenspan, barriers to entry, behavioural economics, Black Swan, blood diamond, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, clean tech, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, company town, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, do well by doing good, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Ford Model T, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, Golden arches theory, hobby farmer, industrial cluster, intangible asset, It's morning again in America, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, junk bonds, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, meritocracy, Michael Milken, military-industrial complex, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, open immigration, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, radical decentralization, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, scientific management, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, tacit knowledge, technoutopianism, the long tail, The Soul of a New Machine, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, vertical integration, wealth creators, women in the workforce, young professional, Zipcar


pages: 421 words: 128,094

pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

Abraham Wald, Alan Greenspan, Albert Einstein, An Inconvenient Truth, Andrei Shleifer, anti-communist, AOL-Time Warner, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Bear Stearns, behavioural economics, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black Monday: stock market crash in 1987, Black-Scholes formula, Blythe Masters, book value, Bretton Woods, British Empire, business cycle, capital asset pricing model, carbon tax, Carl Icahn, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Garrett Hardin, George Akerlof, Glass-Steagall Act, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, junk bonds, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, low interest rates, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, military-industrial complex, Minsky moment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Nixon triggered the end of the Bretton Woods system, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Phillips curve, Ponzi scheme, precautionary principle, price discrimination, price stability, principal–agent problem, profit maximization, proprietary trading, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Solow, Ronald Coase, Ronald Reagan, Savings and loan crisis, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, subprime mortgage crisis, tail risk, Tax Reform Act of 1986, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, Tragedy of the Commons, transaction costs, Two Sigma, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game


pages: 524 words: 130,909

The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power by Max Chafkin

3D printing, affirmative action, Airbnb, anti-communist, bank run, Bernie Sanders, Big Tech, bitcoin, Black Lives Matter, Black Monday: stock market crash in 1987, Blitzscaling, Boeing 747, borderless world, Cambridge Analytica, charter city, cloud computing, cognitive dissonance, Cornelius Vanderbilt, coronavirus, COVID-19, Credit Default Swap, cryptocurrency, David Brooks, David Graeber, DeepMind, digital capitalism, disinformation, don't be evil, Donald Trump, driverless car, Electric Kool-Aid Acid Test, Elon Musk, Ethereum, Extropian, facts on the ground, Fairchild Semiconductor, fake news, Ferguson, Missouri, Frank Gehry, Gavin Belson, global macro, Gordon Gekko, Greyball, growth hacking, guest worker program, Hacker News, Haight Ashbury, helicopter parent, hockey-stick growth, illegal immigration, immigration reform, Internet Archive, Jeff Bezos, John Markoff, Kevin Roose, Kickstarter, Larry Ellison, life extension, lockdown, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, Maui Hawaii, Max Levchin, Menlo Park, military-industrial complex, moral panic, move fast and break things, Neal Stephenson, Nelson Mandela, Network effects, off grid, offshore financial centre, oil shale / tar sands, open borders, operational security, PalmPilot, Paris climate accords, Patri Friedman, paypal mafia, Peter Gregory, Peter Thiel, pets.com, plutocrats, Ponzi scheme, prosperity theology / prosperity gospel / gospel of success, public intellectual, QAnon, quantitative hedge fund, quantitative trading / quantitative finance, randomized controlled trial, regulatory arbitrage, Renaissance Technologies, reserve currency, ride hailing / ride sharing, risk tolerance, Robinhood: mobile stock trading app, Ronald Reagan, Sam Altman, Sand Hill Road, self-driving car, sharing economy, Sheryl Sandberg, Silicon Valley, Silicon Valley billionaire, Silicon Valley ideology, Silicon Valley startup, skunkworks, social distancing, software is eating the world, sovereign wealth fund, Steve Bannon, Steve Jobs, Steven Levy, Stewart Brand, surveillance capitalism, TaskRabbit, tech billionaire, tech worker, TechCrunch disrupt, techlash, technology bubble, technoutopianism, Ted Kaczynski, TED Talk, the new new thing, the scientific method, Tim Cook: Apple, transaction costs, Travis Kalanick, Tyler Cowen, Uber and Lyft, uber lyft, Upton Sinclair, Vitalik Buterin, We wanted flying cars, instead we got 140 characters, Whole Earth Catalog, WikiLeaks, William Shockley: the traitorous eight, Y Combinator, Y2K, yellow journalism, Zenefits


pages: 575 words: 140,384

pages: 729 words: 195,181

The mote in God's eye by Larry Niven; Jerry Pournelle

British Empire, clean water, gravity well, hydroponic farming, Neil Armstrong, risk tolerance, the market place

"You are a Master but you are not my Master." "Obey," said Ivan. Ivan was not good at argument. Charlie was. As Jock twitched and stammered in internal conflict, Charlie switched to an ancient, half-forgotten language, less for concealment than to remind Jock how much they had to conceal. "If we had many Mediators the risk would be tolerable; but if you should go mad now, policy would be decided by Ivan and me alone, Your Master would not be represented." "But the dangers that threaten our world-" "Consider the record of your sisters. Sally Fowler's Mediator now goes about telling Masters that the world could be made perfect if they would exercise restraint in their breeding.


pages: 935 words: 197,338

The Power Law: Venture Capital and the Making of the New Future by Sebastian Mallaby

"Susan Fowler" uber, 23andMe, 90 percent rule, Adam Neumann (WeWork), adjacent possible, Airbnb, Apple II, barriers to entry, Ben Horowitz, Benchmark Capital, Big Tech, bike sharing, Black Lives Matter, Blitzscaling, Bob Noyce, book value, business process, charter city, Chuck Templeton: OpenTable:, Clayton Christensen, clean tech, cloud computing, cognitive bias, collapse of Lehman Brothers, Colonization of Mars, computer vision, coronavirus, corporate governance, COVID-19, cryptocurrency, deal flow, Didi Chuxing, digital map, discounted cash flows, disruptive innovation, Donald Trump, Douglas Engelbart, driverless car, Dutch auction, Dynabook, Elon Musk, Fairchild Semiconductor, fake news, family office, financial engineering, future of work, game design, George Gilder, Greyball, guns versus butter model, Hacker Ethic, Henry Singleton, hiring and firing, Hyperloop, income inequality, industrial cluster, intangible asset, iterative process, Jeff Bezos, John Markoff, junk bonds, Kickstarter, knowledge economy, lateral thinking, liberal capitalism, Louis Pasteur, low interest rates, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, Marshall McLuhan, Mary Meeker, Masayoshi Son, Max Levchin, Metcalfe’s law, Michael Milken, microdosing, military-industrial complex, Mitch Kapor, mortgage debt, move fast and break things, Network effects, oil shock, PalmPilot, pattern recognition, Paul Graham, paypal mafia, Peter Thiel, plant based meat, plutocrats, power law, pre–internet, price mechanism, price stability, proprietary trading, prudent man rule, quantitative easing, radical decentralization, Recombinant DNA, remote working, ride hailing / ride sharing, risk tolerance, risk/return, Robert Metcalfe, ROLM, rolodex, Ronald Coase, Salesforce, Sam Altman, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, Skype, smart grid, SoftBank, software is eating the world, sovereign wealth fund, Startup school, Steve Jobs, Steve Wozniak, Steven Levy, super pumped, superconnector, survivorship bias, tech worker, Teledyne, the long tail, the new new thing, the strength of weak ties, TikTok, Travis Kalanick, two and twenty, Uber and Lyft, Uber for X, uber lyft, urban decay, UUNET, vertical integration, Vilfredo Pareto, Vision Fund, wealth creators, WeWork, William Shockley: the traitorous eight, Y Combinator, Zenefits

“Now it’s a matter of weeks or even days, because if we don’t somebody else will.”[15] But whatever the risks in this frenetic scramble, the new atmosphere was a tonic. The surge of venture dollars “helped flush the capable entrepreneurs out of their safe nests in the large corporations and into the gutsy and creative new ventures,” as Bill Draper of Sutter Hill put it.[16] The risk-taking and tolerance of failure, often ascribed to some sort of magical potion in the Silicon Valley water, had everything to do with this fillip. When an engineer named Chuck Geschke quit a secure job to found the software company Adobe, he declared himself untroubled by the prospect of failure. He had watched other entrepreneurs navigate the world of venture-backed startups, and he had seen that failure often meant that you raised more venture dollars the next time.[17] With the feeling of risk drowned out by venture capital, and with so many innovative experiments being funded, some were bound to hit it big.


pages: 495 words: 154,046

pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Alan Greenspan, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, bond market vigilante , book value, borderless world, Bretton Woods, British Empire, business cycle, buy the rumour, sell the news, capital asset pricing model, capital controls, Carl Icahn, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, disinformation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial engineering, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, Glass-Steagall Act, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, junk bonds, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, long and variable lags, Louis Bachelier, low interest rates, market bubble, Mexican peso crisis / tequila crisis, Michael Milken, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, planned obsolescence, plutocrats, Post-Keynesian economics, price mechanism, price stability, prisoner's dilemma, profit maximization, proprietary trading, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Savings and loan crisis, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, stock buybacks, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond


pages: 500 words: 146,240

pages: 524 words: 146,798

pages: 488 words: 145,950

pages: 807 words: 154,435

Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

Airbus A320, Alan Greenspan, Albert Einstein, Albert Michelson, algorithmic trading, anti-fragile, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Bear Stearns, behavioural economics, Benoit Mandelbrot, bitcoin, Black Swan, Boeing 737 MAX, Bonfire of the Vanities, Brexit referendum, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, DeepMind, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, Dutch auction, easy for humans, difficult for computers, eat what you kill, Eddington experiment, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Goodhart's law, Hans Rosling, Helicobacter pylori, high-speed rail, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Jim Simons, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Kōnosuke Matsushita, Linda problem, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, military-industrial complex, Money creation, Moneyball by Michael Lewis explains big data, Monty Hall problem, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, nudge theory, oil shock, PalmPilot, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Phillips curve, Pierre-Simon Laplace, popular electronics, power law, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, reality distortion field, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Solow, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Suez crisis 1956, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, world market for maybe five computers, World Values Survey, Yom Kippur War, zero-sum game


pages: 506 words: 151,753

pages: 746 words: 221,583

The Children of the Sky by Vernor Vinge

air gap, combinatorial explosion, epigenetics, indoor plumbing, megacity, MITM: man-in-the-middle, power law, random walk, risk tolerance, technological singularity, the scientific method, Vernor Vinge

On the other hand, Oobii does have an enormous amount of information about coldsleep implementations. If you could devise a search list that uses what you see in the casket manuals and properly feed that to Oobii.…” “You’d really help? Even after…?” Ravna nodded. “One important decision you have to make is what level of medical risk you will tolerate.” Her gaze drifted almost involuntarily to where Timor sat on the other side of the room. “Oh.” Then Øvin seemed to follow her gaze. “Oh!… I remember risk was one of the reasons you wanted to postpone this kind of work.” He watched Timor Ristling for a few moments. Timor had set his workstation display to large, perhaps so it would be easier for Belle to follow what he was doing.


pages: 512 words: 162,977

pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

Alan Greenspan, Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bear Stearns, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, book value, break the buck, business cycle, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial engineering, financial innovation, financial intermediation, fixed income, George Akerlof, Glass-Steagall Act, Growth in a Time of Debt, income inequality, information asymmetry, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, junk bonds, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, Money creation, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, Paul Volcker talking about ATMs, peer-to-peer lending, proprietary trading, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Satyajit Das, Savings and loan crisis, shareholder value, sovereign wealth fund, subprime mortgage crisis, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra


pages: 615 words: 175,905

Dereliction of Duty: Johnson, McNamara, the Joint Chiefs of Staff, and the Lies That Led to Vietnam by H. R. McMaster

anti-communist, Berlin Wall, classic study, colonial rule, cuban missile crisis, guns versus butter model, RAND corporation, risk tolerance, South China Sea


pages: 575 words: 171,599

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pages: 666 words: 181,495

In the Plex: How Google Thinks, Works, and Shapes Our Lives by Steven Levy

"World Economic Forum" Davos, 23andMe, AltaVista, Andy Rubin, Anne Wojcicki, Apple's 1984 Super Bowl advert, autonomous vehicles, Bill Atkinson, book scanning, Brewster Kahle, Burning Man, business process, clean water, cloud computing, crowdsourcing, Dean Kamen, discounted cash flows, don't be evil, Donald Knuth, Douglas Engelbart, Douglas Engelbart, Dutch auction, El Camino Real, Evgeny Morozov, fault tolerance, Firefox, General Magic , Gerard Salton, Gerard Salton, Google bus, Google Chrome, Google Earth, Googley, high-speed rail, HyperCard, hypertext link, IBM and the Holocaust, informal economy, information retrieval, Internet Archive, Jeff Bezos, John Markoff, Ken Thompson, Kevin Kelly, Kickstarter, large language model, machine translation, Mark Zuckerberg, Menlo Park, one-China policy, optical character recognition, PageRank, PalmPilot, Paul Buchheit, Potemkin village, prediction markets, Project Xanadu, recommendation engine, risk tolerance, Rubik’s Cube, Sand Hill Road, Saturday Night Live, search inside the book, second-price auction, selection bias, Sheryl Sandberg, Silicon Valley, SimCity, skunkworks, Skype, slashdot, social graph, social software, social web, spectrum auction, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Levy, subscription business, Susan Wojcicki, Ted Nelson, telemarketer, The future is already here, the long tail, trade route, traveling salesman, turn-by-turn navigation, undersea cable, Vannevar Bush, web application, WikiLeaks, Y Combinator

The mystery was why no one at Google noticed that Street View servers were loaded with gigabytes of data that had no business being there. In any case, collecting the information was a potential violation of data security laws, and the transgression triggered investigations in several countries and states. The incident exposed the risks that arise when tolerance of a company’s information retention policies is at the limit. Even its tiniest mistakes called attention to the larger truth—that Google had a frightening amount of information under its control. And when something major went wrong, like the Street View Wi-Fi debacle, it eroded Google’s main line of defense when justifying its stewardship of the world’s information: trust.


pages: 829 words: 187,394

The Price of Time: The Real Story of Interest by Edward Chancellor

"World Economic Forum" Davos, 3D printing, activist fund / activist shareholder / activist investor, Airbnb, Alan Greenspan, asset allocation, asset-backed security, assortative mating, autonomous vehicles, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Ben Bernanke: helicopter money, Bernie Sanders, Big Tech, bitcoin, blockchain, bond market vigilante , bonus culture, book value, Bretton Woods, BRICs, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cashless society, cloud computing, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, commodity super cycle, computer age, coronavirus, corporate governance, COVID-19, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cryptocurrency, currency peg, currency risk, David Graeber, debt deflation, deglobalization, delayed gratification, Deng Xiaoping, Detroit bankruptcy, distributed ledger, diversified portfolio, Dogecoin, Donald Trump, double entry bookkeeping, Elon Musk, equity risk premium, Ethereum, ethereum blockchain, eurozone crisis, everywhere but in the productivity statistics, Extinction Rebellion, fiat currency, financial engineering, financial innovation, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, full employment, gig economy, Gini coefficient, Glass-Steagall Act, global reserve currency, global supply chain, Goodhart's law, Great Leap Forward, green new deal, Greenspan put, high net worth, high-speed rail, housing crisis, Hyman Minsky, implied volatility, income inequality, income per capita, inflation targeting, initial coin offering, intangible asset, Internet of things, inventory management, invisible hand, Japanese asset price bubble, Jean Tirole, Jeff Bezos, joint-stock company, Joseph Schumpeter, junk bonds, Kenneth Rogoff, land bank, large denomination, Les Trente Glorieuses, liquidity trap, lockdown, Long Term Capital Management, low interest rates, Lyft, manufacturing employment, margin call, Mark Spitznagel, market bubble, market clearing, market fundamentalism, Martin Wolf, mega-rich, megaproject, meme stock, Michael Milken, Minsky moment, Modern Monetary Theory, Mohammed Bouazizi, Money creation, money market fund, moral hazard, mortgage debt, negative equity, new economy, Northern Rock, offshore financial centre, operational security, Panopticon Jeremy Bentham, Paul Samuelson, payday loans, peer-to-peer lending, pensions crisis, Peter Thiel, Philip Mirowski, plutocrats, Ponzi scheme, price mechanism, price stability, quantitative easing, railway mania, reality distortion field, regulatory arbitrage, rent-seeking, reserve currency, ride hailing / ride sharing, risk free rate, risk tolerance, risk/return, road to serfdom, Robert Gordon, Robinhood: mobile stock trading app, Satoshi Nakamoto, Satyajit Das, Savings and loan crisis, savings glut, Second Machine Age, secular stagnation, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, stock buybacks, subprime mortgage crisis, Suez canal 1869, tech billionaire, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Haywood, time value of money, too big to fail, total factor productivity, trickle-down economics, tulip mania, Tyler Cowen, Uber and Lyft, Uber for X, uber lyft, Walter Mischel, WeWork, When a measure becomes a target, yield curve


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, Alan Greenspan, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Bear Stearns, Big bang: deregulation of the City of London, bilateral investment treaty, book value, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon credits, Carmen Reinhart, central bank independence, classic study, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, democratizing finance, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, foreign exchange controls, full employment, Gini coefficient, Glass-Steagall Act, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low interest rates, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, military-industrial complex, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, Nixon triggered the end of the Bretton Woods system, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, proprietary trading, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, Savings and loan crisis, scientific management, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, stock buybacks, structural adjustment programs, subprime mortgage crisis, Tax Reform Act of 1986, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, vertical integration, very high income, Washington Consensus, We are all Keynesians now, Works Progress Administration, zero-coupon bond, zero-sum game

By the 1980s and 1990s the greater mobility of financial capital across sectors, space, and time (especially via derivatives)—that is, financial capital’s quality as general or “abstract” capital—greatly intensified domestic and international competition at the same time as it brought a much greater degree of financial volatility. Thus, while the phenomenal growth of financial markets since the 1980s led to over-leveraging and excessive risk-taking, this was tolerated and in fact encouraged for reasons that went far beyond the competitive dynamics and power of finance itself. It was accepted because financial markets had become so crucial to the domestic and global expansion of capitalism in general. Despite the sheer tenacity of the view, going back to the theories of imperialism a century earlier, that overaccumulation is the source of all capitalist crises, the crisis that erupted in the US in 2007 was not caused by a profit squeeze or collapse of investment due to general overaccumulation in the economy.54 In the US, in particular, profits and investments had recovered strongly since the early 1980s.


pages: 1,737 words: 491,616

Rationality: From AI to Zombies by Eliezer Yudkowsky

Albert Einstein, Alfred Russel Wallace, anthropic principle, anti-pattern, anti-work, antiwork, Arthur Eddington, artificial general intelligence, availability heuristic, backpropagation, Bayesian statistics, behavioural economics, Berlin Wall, Boeing 747, Build a better mousetrap, Cass Sunstein, cellular automata, Charles Babbage, cognitive bias, cognitive dissonance, correlation does not imply causation, cosmological constant, creative destruction, Daniel Kahneman / Amos Tversky, dematerialisation, different worldview, discovery of DNA, disinformation, Douglas Hofstadter, Drosophila, Eddington experiment, effective altruism, experimental subject, Extropian, friendly AI, fundamental attribution error, Great Leap Forward, Gödel, Escher, Bach, Hacker News, hindsight bias, index card, index fund, Isaac Newton, John Conway, John von Neumann, Large Hadron Collider, Long Term Capital Management, Louis Pasteur, mental accounting, meta-analysis, mirror neurons, money market fund, Monty Hall problem, Nash equilibrium, Necker cube, Nick Bostrom, NP-complete, One Laptop per Child (OLPC), P = NP, paperclip maximiser, pattern recognition, Paul Graham, peak-end rule, Peter Thiel, Pierre-Simon Laplace, placebo effect, planetary scale, prediction markets, random walk, Ray Kurzweil, reversible computing, Richard Feynman, risk tolerance, Rubik’s Cube, Saturday Night Live, Schrödinger's Cat, scientific mainstream, scientific worldview, sensible shoes, Silicon Valley, Silicon Valley startup, Singularitarianism, SpaceShipOne, speech recognition, statistical model, Steve Jurvetson, Steven Pinker, strong AI, sunk-cost fallacy, technological singularity, The Bell Curve by Richard Herrnstein and Charles Murray, the map is not the territory, the scientific method, Turing complete, Turing machine, Tyler Cowen, ultimatum game, X Prize, Y Combinator, zero-sum game

And I understood then that even if you constructed an argument showing that something was the best course of action, Nature was still allowed to say “So what?” and kill you. I looked back and saw that I had claimed to take into account the risk of a fundamental mistake, that I had argued reasons to tolerate the risk of proceeding in the absence of full knowledge. And I saw that the risk I wanted to tolerate would have killed me. And I saw that this possibility had never been really real to me. And I saw that even if you had wise and excellent arguments for taking a risk, the risk was still allowed to go ahead and kill you. Actually kill you. For it is only the action that matters, and not the reasons for doing anything.


pages: 901 words: 234,905

The Blank Slate: The Modern Denial of Human Nature by Steven Pinker

affirmative action, Albert Einstein, Alfred Russel Wallace, anti-communist, behavioural economics, belling the cat, British Empire, clean water, cognitive dissonance, Columbine, conceptual framework, correlation coefficient, correlation does not imply causation, cuban missile crisis, Daniel Kahneman / Amos Tversky, Defenestration of Prague, desegregation, disinformation, Dutch auction, epigenetics, Exxon Valdez, George Akerlof, germ theory of disease, ghettoisation, glass ceiling, Gregor Mendel, Hobbesian trap, income inequality, invention of agriculture, invisible hand, Joan Didion, language acquisition, long peace, meta-analysis, More Guns, Less Crime, Murray Gell-Mann, mutually assured destruction, Norman Mailer, Oklahoma City bombing, PalmPilot, Peter Singer: altruism, phenotype, plutocrats, Potemkin village, prisoner's dilemma, profit motive, public intellectual, QWERTY keyboard, Richard Feynman, Richard Thaler, risk tolerance, Robert Bork, Rodney Brooks, Saturday Night Live, Skinner box, social intelligence, speech recognition, Stanford prison experiment, stem cell, Steven Pinker, tacit knowledge, The Bell Curve by Richard Herrnstein and Charles Murray, the new new thing, theory of mind, Thomas Malthus, Thorstein Veblen, Timothy McVeigh, twin studies, Tyler Cowen, ultimatum game, urban renewal, War on Poverty, women in the workforce, Yogi Berra, zero-sum game

In this case, the tradeoff is between minimizing child abuse while stigmatizing stepparents, on one hand, and being maximally fair to stepparents while tolerating an increase in child abuse, on the other.15 If we did not know that people are predisposed to lose patience with stepchildren faster than with biological children, we would implicitly choose one end of this tradeoff—ignoring stepparenting as a risk factor altogether, and tolerating the extra cases of child abuse—without even realizing it. An understanding of human nature with all its weaknesses can enrich not just our policies but our personal lives. Families with stepchildren tend to be less happy and more fragile than families with biological children, largely because of tensions over how much time, patience, and money the stepparents should expend.


pages: 740 words: 236,681

The Portable Atheist: Essential Readings for the Nonbeliever by Christopher Hitchens

Albert Einstein, Alfred Russel Wallace, anthropic principle, Ayatollah Khomeini, Boeing 747, cognitive bias, cognitive dissonance, cosmic microwave background, cuban missile crisis, David Attenborough, Edmond Halley, Georg Cantor, germ theory of disease, index card, Isaac Newton, liberation theology, Mahatma Gandhi, phenotype, Plato's cave, risk tolerance, stem cell, Stephen Hawking, Thales of Miletus, Timothy McVeigh, traveling salesman, trickle-down economics

And whereas taking a leap of faith and acting without further scrutiny of one’s options is often celebrated by religions, it is considered a grave sin in medicine. A doctor whose devout faith in his personal revelations about how to treat aortic aneurysm led him to engage in untested trials with human patients would be severely reprimanded if not driven out of medicine altogether. There are exceptions, of course. A few swashbuckling, risk-taking pioneers are tolerated and (if they prove to be right) eventually honored, but they can exist only as rare exceptions to the ideal of the methodical investigator who scrupulously rules out alternative theories before putting his own into practice. Good intentions and inspiration are simply not enough. In other words, whereas religions may serve a benign purpose by letting many people feel comfortable with the level of morality they themselves can attain, no religion holds its members to the high standards of moral responsibility that the secular world of science and medicine does!


pages: 351 words: 102,379

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To Sleep in a Sea of Stars by Christopher Paolini

back-to-the-land, clean water, Colonization of Mars, cryptocurrency, dark matter, friendly fire, gravity well, heat death of the universe, hive mind, independent contractor, low earth orbit, mandelbrot fractal, megastructure, random walk, risk tolerance, time dilation, Vernor Vinge

I’m giving you a direct order. Change our goddamn course.” “Never I will. Never I might.” The captain slapped the console in front of him. “Seriously? You didn’t object when we went off to Bughunt, but you’re going to mutiny now?” “The expectation of peril thereat was not a certainty. Calculated risks remained within reasonable tolerances given available information. You were not setting forth to plunge yourself into the midst of martial turmoil, and I won’t allow it now. No, I won’t.” The ship mind sounded insufferably self-righteous. “Why?” asked Nielsen. “What is it you’re so afraid of?” The ship mind’s unhinged giggle returned.


pages: 1,202 words: 424,886

Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi

accounting loophole / creative accounting, Alan Greenspan, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Bear Stearns, Black-Scholes formula, book value, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, cross-border payments, currency manipulation / currency intervention, currency risk, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, Dutch auction, financial innovation, financial intermediation, fixed income, flag carrier, foreign exchange controls, full employment, Glass-Steagall Act, Goodhart's law, Greenspan put, guns versus butter model, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, inverted yield curve, junk bonds, land bank, large denomination, locking in a profit, London Interbank Offered Rate, low interest rates, margin call, market bubble, market clearing, market fundamentalism, Money creation, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Phillips curve, Ponzi scheme, price mechanism, price stability, profit motive, proprietary trading, prudent man rule, Real Time Gross Settlement, reserve currency, risk free rate, risk tolerance, risk/return, Savings and loan crisis, seigniorage, shareholder value, short selling, short squeeze, tail risk, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game

In a money market or other fixed-income portfolio, these risks can be defined by portfolio duration, average maturity, convexity, foreign-exchange exposure, or credit ratings, for example. In a large organization, risk exposures will reside in many layers of the bank, making it necessary for asset-liability managers to track the cumulative amount of risk being taken by the bank, particularly as it relates to the total amount or risk the bank will tolerate. For example, if the bank’s foreign-exchange trading operation is exceeding its risk limit, that added risk reduces the amount of risk that other areas of the bank can take—that is, if the bank wants to allow the foreign-exchange department to take the added risk in this instance and for overall risks to stay within the confines of the risks that the bank previously dictated it should take.