selection bias

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pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

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British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, mass immigration, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Philip Mirowski, Plutocrats, plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, selection bias, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus, zero-sum game

Broadly speaking, these two publications argue that there is a slight improvement for producer 115 Sylla T02779 01 text 115 28/11/2013 13:04 the fair trade scandal organisations that have been fortunate enough to sell, but this impact is all but exceptional: ‘Better but not great’, to quote the actual title of the Jaffee (2009) article. However, these results should be interpreted with caution due to the ‘selection bias’ contained in this type of literature. The selection bias problem As a general rule, impact studies have been based on the assumption that the implementation of Fair Trade experienced a 100 per cent success rate. To assess its benefits, these studies focused on organisations for which some of the FT promises could be seen to have been fulfilled. This explains why ‘failures’ were never documented, nor cases where certification was not granted for a number of reasons, nor cases where producer organisations withdrew from the FT system because they saw nothing in it in spite of its promises.

They relate to cooperatives that were well organised before entering the FT system and that benefited from ‘the long-term presence of an “international interlocutor” who has been essential for gaining access to the fair trade network and developing ties with Northern partners’. The interlocutor in question has taken on many guises: Christian missionaries, agricultural technicians, representatives of Fair Trade organisations, NGOs, development agencies, etc.25 The selection bias is the Achilles heel of the literature on the impact of Fair Trade. The results of each study may prove interesting when taken in isolation, but they can in no way be generalised. Due to their individualistic methodology, modern econometric techniques simply cannot correct this selection bias. They certainly enable the pairing of a treatment group with another similar group from the point of view of the characteristics of its members. But this overlooks the fact that this selection borrows from social processes and that the whole is not the sum of its parts.

Some suggest that Fairtrade needs to be supplemented by other development policies and initiatives to raise rural livelihoods to a more sustainable level. (Nelson and Pound, 2009: 10) Second illustration: The Impact of Fair Trade (Ruben, 2009) This book, whose results were included in the previous summary document, starts by underscoring the methodological weaknesses of most existing studies, namely that they do not conduct baseline studies, do away with the use of reference groups and do not take into account the possible selection bias involved in participation in the FT system. Several studies have tried to capture the impact of Fair Trade for local producers and households, but sound empirical evidence regarding social, economic and ecological impact remains scattered and sometimes contradictory. Due to the notable absence of base-line studies and reference groups, it remains difficult to precisely assess the welfare impact at household and cooperative level.


pages: 337 words: 89,075

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

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accounting loophole / creative accounting, airline deregulation, Andrei Shleifer, asset allocation, Bretton Woods, buy low sell high, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, fixed income, frictionless, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, price mechanism, purchasing power parity, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, selection bias, shareholder value, Sharpe ratio, short selling, statistical arbitrage, survivorship bias, the market place, transaction costs, Y2K, yield curve, zero-sum game

These are somewhat surprising results based on the conventional wisdom—one would expect to find the opposite result, which would be a 60 percent allocation to large-cap stocks in both cases. The question now becomes whether 30 years is a long enough span to 26 UNDERSTANDING ASSET ALLOCATION generate a long-run result. If the sample period is not long enough to establish long-run returns, the results can suffer from sample-selection bias. Indeed, there are some reasons to question the impact of the sample period on the results. First, on theoretical grounds, one can argue that if markets are reasonably efficient, the market portfolio that buys the market should be on the efficient frontier—that owning a historically proven asset class mix is the best bet for every investor. Hence, growth stocks, although not the historical high performers value stocks are, should be included in such a portfolio.

I believe one style’s predominance over another for the past 30 years reflects changes in the economic environment. My analysis suggests that, during the bulk of the 1970s and part of the 1980s, the economic environment favored value stocks over growth stocks. It is, therefore, not surprising to see that most empirical literature has found that value stocks outperform growth stocks. It seems increasingly clear, however, that the results reported in the literature suffer from sample-selection bias. Value stocks did well because of the economic policies adopted over the past three decades. If this is in fact the case—as I believe it is—there is no guarantee the overall economic environment in the future will favor value stocks at all times. My analysis suggests it behooves investors to pay attention to the economic environment and suggests growth stocks—when the environment warrants—can have an important impact on the total return of a style-based asset-allocation strategy. 30 UNDERSTANDING ASSET ALLOCATION Size Cycles Size cycles also matter.

If the sample period is too short, it could include some temporary deviations from the long-run trends. This could be dangerous, as the sampleselection bias could result in a strategic asset allocation mistakenly overweighing or underweighing some asset classes. Because the mean-reversion hypothesis—as most people articulate it—assumes random disturbances around the mean (assuming no fundamental change in the process generating the returns), the solution to the sample-selection bias is to use the longest time period possible.9 Table 2.11 Optimal allocation based on the Sharpe ratio produced by the historical returns: 1975–2004. Size Style Location Equity/Fixed 40 Small Large 80.0% 20.0% Value Growth 100.0% 0.0% USA Rest of the World 100.0% 0.0% Equity Fixed Income 60.0% 40.0% UNDERSTANDING ASSET ALLOCATION Figures 2.6 through 2.10 show that, when one looks at the relative performance of the various asset classes, distinct patterns emerge.


pages: 300 words: 77,787

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

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

In reality the odds are much worse in the financial markets as fees and costs eat into the returns. However, ask the manager who has outperformed five years in a row (every 50th coin flipper …) and she will disagree with the argument that she was just lucky, even as some invariably are. Likewise some managers underperform the market several years in a row simply due to bad luck, but those disappear from the scene and thus introduce a selection bias as only the winners remain. This sometimes makes the industry appear more successful than it has been. Outside stock markets The discussion of edge is not exclusive to stock markets. You can have an investment edge in many areas other than the stock market and profit greatly from that edge, for example: Will Greece default on its loans? Will the price of oil increase further? Will the USD/GBP exchange rate reach 2 again?

Table 5.1 Returns 1900–2011 (%) Source: Credit Suisse Global Returns Handbook 2012 A criticism of using historical returns to predict future returns is that this predicts higher returns at market peaks and lower returns at market lows.4 Historical returns looked a lot better on 1 July 2008 than on 1 July 2009 (after the crash), and perhaps because you were attracted by the high historical returns in mid–2008 this was exactly the time that you invested in equities. Combining high historical returns with low expected risk at the time made equity markets look very attractive at precisely the wrong moment. I understand why some criticise the expected return, but think that the length of data mitigates this. With hundreds of years of data across many countries (some have used only US data in the past, but that introduces selection bias by excluding markets that have performed poorly), incorporating great spectacular declines, great rises, and everything in between, I think historical data is the best guide to the kind of risk and return we can expect from equity markets in future. Practically speaking, investors have been unable to buy the whole world of equities for many years. One of the leading index providers, MSCI, only started tracking a ‘world index’ in late 1960s, but finding liquid products that actually followed this or similar indices did not start in earnest until decades after that.

People often use the US stock market for data analysis as it is not only the place with the most comprehensive data sets but it has, at least historically, dominated financial academic circles. Until only a couple of decades ago it was not as simple to get international data seamlessly and even if you did get the data it was not easy to analyse. One of the problems with using US-based data is the large selection bias that is introduced. The twentieth century was the American century and the stock market reflected this success. But just because we use data from a very successful century in a very successful geographical area does not mean that things will be like that in future. Imagine if you were an investor in the Russian stock markets or government bonds just before the 1917 revolution. You would have lost everything without hope or recourse.

Everydata: The Misinformation Hidden in the Little Data You Consume Every Day by John H. Johnson

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Affordable Care Act / Obamacare, Black Swan, business intelligence, Carmen Reinhart, cognitive bias, correlation does not imply causation, Daniel Kahneman / Amos Tversky, Donald Trump, en.wikipedia.org, Kenneth Rogoff, labor-force participation, lake wobegon effect, Long Term Capital Management, Mercator projection, Mercator projection distort size, especially Greenland and Africa, meta analysis, meta-analysis, Nate Silver, obamacare, p-value, PageRank, pattern recognition, publication bias, QR code, randomized controlled trial, risk-adjusted returns, Ronald Reagan, selection bias, statistical model, The Signal and the Noise by Nate Silver, Thomas Bayes, Tim Cook: Apple, wikimedia commons, Yogi Berra

One statistician found that “­ninety-​­seven per cent of all published psychological studies with statistically significant data found the effect they were looking for,” making it perhaps less likely that future studies would be able to replicate these results.37 The Journal of Epidemiology and Community Health published a paper finding no evidence that reduced street lighting at night increased traffic collisions or crime in England and Wales. But the authors (rightfully) acknowledged the possibility of selection ­bias—​­they didn’t get data from approximately ­one-​­third of the local authorities, and said, “It is possible that local authorities may have declined to participate because of expected or known increases in collisions or crime in their areas due to lighting changes.”38 Just because something is statistically significant doesn’t make all the other issues go away. How to Be a Good Consumer of Data by Knowing If What You’re Seeing Matters Just because you’re surrounded by data doesn’t mean you should use that data to make decisions about your life.

There are more than 1.3 million lawyers in the U.S.5 This survey is based on responses from 300 of them. But it’s the makeup of the sample that concerns us more than the sample size. Because the results appear to be based on a ­self-​­selected group of attorneys who responded to the survey, according to the Law360 articles. When you have a group of people opting into a study, there’s an opportunity for selection bias. The results may be biased toward those who chose to participate. Are the attorneys who responded any different from those who were too busy to answer, or chose not to respond for whatever ­reason—​­and would those differences be related to the survey’s findings? For example, is it possible that­ 221158 i-xiv 1-210 r4ga.indd  146 2/8/16  5:58:50 PM It’s a Jungle Out There 147 non-​­equity partners who are happy are also the busiest, and therefore didn’t have time to respond to the survey?

., the set of Challenger launches with O‑ring failures) Sample selection—A potential statistical problem that arises when the way a sample has been chosen is directly related to the outcomes one is studying; also, sometimes used to describe the process of determining a sample from a population Sampling error—The uncertainty of not knowing if a sample represents the true value in the population or not Selection bias—A potential concern when a sample is comprised of those who chose to participate, a factor which may bias the results Spurious correlation—A statistical relationship between two factors that has no practical or economic meaning, or one that is driven by an omitted variable (e.g., the relationship between murder rates and ice cream consumption) Statistic—A numeric measure that describes an aspect of the data (e.g., a mean, a median, a mode) Statistical impact—Having a statistically significant effect of some undetermined size Statistical significance—A ­probability-​­based method to determine whether an observed effect is truly present in the data, or just due to random chance Summary statistic—Metric that provides information about one or more aspects of the data; averages and aggregated data are two examples of summary statistics Weighted average—An average calculated by assigning each value a weight (based on the value’s relative importance) 221158 i-xiv 1-210 r4ga.indd  160 2/8/16  5:58:50 PM No t e s Preface 1.


pages: 297 words: 91,141

Market Sense and Nonsense by Jack D. Schwager

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3Com Palm IPO, asset allocation, Bernie Madoff, Brownian motion, collateralized debt obligation, commodity trading advisor, computerized trading, conceptual framework, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, fixed income, high net worth, implied volatility, index arbitrage, index fund, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, negative equity, pattern recognition, performance metric, pets.com, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, short selling, statistical arbitrage, statistical model, survivorship bias, transaction costs, two-sided market, value at risk, yield curve

A number of indexes now correct for this bias, so while this bias is significant if present, it has become less important. Selection bias. Hedge funds decide whether to report their numbers to databases. Insofar as better-performing funds will be more likely to report their numbers, the self-selection process will create an upward bias. However, in this instance there is an offsetting effect in that funds that do particularly well and close to new investment may decide to stop reporting their numbers to avoid inquiries from new investors. Although it is difficult to say how these two offsetting effects balance out, from the perspective of a new investor, selection bias also creates an upward bias, since the universe of potential investments does not include closed funds. Backfilling bias (or “instant history” bias).

If a fund of funds was invested in a fund that blew up, the fund may disappear from some databases, but the losses incurred by the fund will remain reflected in the fund of funds track record. Although there may still be a survivorship bias at the fund of funds level (that is, defunct fund of funds), the effect will be much more muted than for single funds because the difference between a defunct and an active fund of funds is much smaller. Selection bias. This bias is eliminated for single funds at the fund of funds level because a fund’s result will be reflected in fund of funds data even if it chooses not to report. At the fund of funds level, both positive and negative selection bias effects are far more moderate. The negative bias effect is probably negligible for a fund of funds because most funds of funds will continue to report their numbers even if closed, in order to aid the marketing of other fund of funds products under the same umbrella. Backfilling bias.

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pages: 302 words: 83,116

SuperFreakonomics by Steven D. Levitt, Stephen J. Dubner

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agricultural Revolution, airport security, Andrei Shleifer, Atul Gawande, barriers to entry, Bernie Madoff, call centre, clean water, cognitive bias, collateralized debt obligation, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, deliberate practice, Did the Death of Australian Inheritance Taxes Affect Deaths, disintermediation, endowment effect, experimental economics, food miles, indoor plumbing, Intergovernmental Panel on Climate Change (IPCC), John Nash: game theory, Joseph Schumpeter, Joshua Gans and Andrew Leigh, loss aversion, Louis Pasteur, market design, microcredit, Milgram experiment, oil shale / tar sands, patent troll, presumed consent, price discrimination, principal–agent problem, profit motive, randomized controlled trial, Richard Feynman, Richard Feynman, Richard Thaler, selection bias, South China Sea, Stephen Hawking, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, ultimatum game, urban planning, William Langewiesche, women in the workforce, young professional

And, because it collects data in real time from all over the country, the system can serve as a Distant Early Warning Line for disease outbreaks or even bioterrorism. It also allows other, non-medical people—people like us, for instance—to repurpose its data to answer other kinds of questions, such as: who are the best and worst doctors in the ER? For a variety of reasons, measuring doctor skill is a tricky affair. The first is selection bias: patients aren’t randomly assigned to doctors. Two cardiologists will have two sets of clientele who may differ on many dimensions. The better doctor’s patients may even have a higher death rate. Why? Perhaps the sicker patients seek out the best cardiologist, so even if he does a good job, his patients are more likely to die than the other doctor’s. It can therefore be misleading to measure doctor skill solely by looking at patient outcomes.

List had painstakingly worked his way up from truck driver’s son to the center of an elite group of scholars who were rewriting the rules of economic behavior. Now, in order to stay true to his scientific principles, he had to betray them. As word of his findings began to trickle out, he suddenly became, as he puts it, “clearly the most hated guy in the field.” List can at least be consoled by knowing that he is almost certainly correct. Let’s consider some of the forces that make such lab stories unbelievable. The first is selection bias. Think back to the tricky nature of doctor report cards. The best cardiologist in town probably attracts the sickest and most desperate patients. So if you’re keeping score solely by death rate, that doctor may get a failing grade even though he is excellent. Similarly, are the people who volunteer to play Dictator more cooperative than average? Quite likely yes. Scholars long before John List pointed out that behavioral experiments in a college lab are “the science of just those sophomores who volunteer to participate in research and who also keep their appointment with the investigator.”

Now you are asked if you’d like to give some of your money to an anonymous student who didn’t get $20 for free. You didn’t really want to keep all that money, did you? You may not like this particular professor; you might even actively dislike him—but no one wants to look cheap in front of somebody else. What the heck, you decide, I’ll give away a few of my dollars. But even a cockeyed optimist wouldn’t call that altruism. In addition to scrutiny and selection bias, there’s one more factor to consider. Human behavior is influenced by a dazzlingly complex set of incentives, social norms, framing references, and the lessons gleaned from past experience—in a word, context. We act as we do because, given the choices and incentives at play in a particular circumstance, it seems most productive to act that way. This is also known as rational behavior, which is what economics is all about.


pages: 1,088 words: 228,743

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

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Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, Bretton Woods, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, George Akerlof, 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, invisible hand, Kenneth Rogoff, laissez-faire capitalism, law of one price, Long Term Capital Management, loss aversion, 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, performance metric, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, Robert Shiller, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, survivorship bias, systematic trading, 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

This was not a foregone conclusion at all times, so it is little wonder that realized equity returns were boosted by the absence of catastrophes and then by a repricing effect by the end of the 20th century, when the perceived likelihood of catastrophe had fallen. The comprehensive global studies by Dimson, Marsh, and Staunton address these questions by analyzing the performance of equity markets in 19 countries since 1900. Table 8.2 shows that the (market cap or GDP-weighted) global equity premium is about 0.5% to 0.8% lower than the U.S. premium for 1900–2009—consistent with mild selection bias. The authors argue that use of their world premium captures the bulk of any survivorship or selection bias given that the 19 countries in their database may have accounted for 90% of world equity market capitalization at the start of the 20th century [3]. Equity returns are a tad lower outside the U.S. but the broad patterns are similar. Table 8.2. Compound annual (geometric) equity returns and premia, 1900–2009 Source: Dimson–Marsh–Staunton (2010).

Finally, some market inefficiencies have arguably transformed into systematic risk factors; for example, equity value style and currency carry style alphas have over time morphed into betas, which may imply more persistent rewards. 7.2 DATA MINING AND OTHER “MIRAGE” EXPLANATIONS There are several explanations for market regularities besides the above two. Data mining is the best known, but I also mention peso problems, learning, market frictions, and the changing world. I call all of these explanations mirages because whatever predictability was observed in the past was sample specific and/or has no investment value for the future. Here is some color on each explanation. Data mining (also called data snooping, overfitting, or selection bias) Any interesting empirical regularities could be spurious (which does not mean that they all are). When thousands of academics and practitioners study the same historical dataset, all motivated to find profitable strategies, they (we) are bound to uncover many empirical relations that just happened to work well in sample and fail miserably out of sample. Overfitting can be unintentional—the summed outcome of many apparently minor choices in developing, refining, and combining trading strategies—but the cumulative impact can be large.

When funds submit performance histories to the database for the first time, they can include as much of their earlier history as they want. Given this option, funds with superior histories are more likely to report them. It is also natural that among many incubated funds the more successful ones will eventually be reported while poorer performers will not. Empirically, it is clear that average returns are lower if backfill filters are used. • Selection bias. Funds mainly report for marketing reasons. They may opt out not only because of poor performance but also because an established fund is closed and has no need to attract new capital. Because many large funds do not report to databases and are among the most successful, the sign of the bias, net of these two effects, is ambiguous. • Liquidation bias. Funds often stop reporting before shutting down.


pages: 369 words: 128,349

Beyond the Random Walk: A Guide to Stock Market Anomalies and Low Risk Investing by Vijay Singal

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3Com Palm IPO, Andrei Shleifer, asset allocation, capital asset pricing model, correlation coefficient, cross-subsidies, Daniel Kahneman / Amos Tversky, diversified portfolio, endowment effect, fixed income, index arbitrage, index fund, information asymmetry, liberal capitalism, locking in a profit, Long Term Capital Management, loss aversion, margin call, market friction, market microstructure, mental accounting, merger arbitrage, Myron Scholes, new economy, prediction markets, price stability, profit motive, random walk, Richard Thaler, risk-adjusted returns, risk/return, selection bias, Sharpe ratio, short selling, survivorship bias, transaction costs, Vanguard fund

The small sample bias is especially relevant to anomalies that do not have a reasonable explanation, especially if it appears that the mispricing has occurred just by chance. SELECTION BIAS Another bias that may creep into the discovery of mispricings is selection bias, that is, the sample may be biased in favor of finding the desired result. Assume you want to measure the ownership of cell phones in the general American population. If you polled only people working in Manhattan, your estimate will be biased upward because the sample is biased and the result is falsely attributed to the entire American population, including rural and less urban areas. In the case of stock market studies, a selection bias can creep in when the results arise from a certain part of the sample but seem to be representative of the entire market. For example, consider the January effect.

. • Efficient markets are desirable for the society because prices determine allocation of resources. • Markets cannot be fully efficient because of the cost of collecting and analyzing information, cost of trading, and limits on the capital available to arbitrageurs. • All anomalies must be viewed with caution and skepticism, as spurious mispricings can surface for a variety of reasons, such as errors in defining normal return, data mining, survivorship bias, small sample bias, selection bias, nonsynchronous trading, and misestimation of risk. • Though anomalies should disappear in an efficient market, they may persist because they are not well understood, arbitrage is too costly, the profit potential is insufficient, trading restrictions exist, and behavioral biases exist. • Documented and valid anomalies may still be unprofitable because the evidence is based on averages (and may include a large fraction of losers), conditions responsible for the anomaly may change, and trading by informed investors may cause the anomaly to disappear.

On S&P 500 Index Replication Strategies. Working paper, Department of Finance, Wharton School, University of Pennsylvania. Bos, Roger. 2000. Quantifying the Effect of Being Added to an S&P Index. Standard and Poor’s report, September. 193 194 Beyond the Random Walk Chan, Louis K. C., Narasimhan Jegadeesh, and Josef Lakonishok. 1995. Evaluating the Performance of Value Versus Glamour Stocks: The Impact of Selection Bias. Journal of Financial Economics 38(3), 269–96. Chen, Honghui, Greg Noronha, and Vijay Singal. 2004. The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation. Forthcoming in the Journal of Finance. Chordia, Tarun. 2001. Liquidity and Returns: The Impact of Inclusion into the S&P 500 Index. Working paper, Department of Finance, Emory University.


pages: 743 words: 189,512

The Big Fat Surprise: Why Butter, Meat and Cheese Belong in a Healthy Diet by Nina Teicholz

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Albert Einstein, correlation coefficient, correlation does not imply causation, Gary Taubes, Indoor air pollution, meta analysis, meta-analysis, phenotype, placebo effect, randomized controlled trial, Robert Gordon, selection bias, the scientific method, Upton Sinclair

The effects of low cholesterol are still not well understood. When I mentioned all this to Stamler, he didn’t remember any part of this cancer-cholesterol debate. In this way, he is a microcosm of a larger phenomenon that allowed the diet-heart hypothesis to move forward: inconvenient results were consistently ignored; here again, “selection bias” was at work. An Extreme Case of Selection Bias There has been a lot of selective reporting and ignoring of the methodological problems over the years. But probably the most astonishing example of selection bias was the near-complete suppression of the Minnesota Coronary Survey, which was an outgrowth of the National Diet Heart Study. Also funded by NIH, the Minnesota Coronary Survey is the largest-ever clinical trial of the diet-heart hypothesis and therefore certainly belongs on the list along with Oslo, the Finnish Mental Hospital Study, and the LA Veterans Trial, but it is rarely included, undoubtedly because it didn’t turn out the way nutrition experts had hoped.

A large number of psychological studies have shown that people respond to scientific or technical evidence in ways that justify their preexisting beliefs. “Selection bias,” as it’s called, is the danger of becoming overly attached to one’s own hypothesis or belief system. Resisting these “idols of the mind,” as the great seventeenth-century theorist Francis Bacon dubbed them, is exactly what the scientific method tries to do. A scientist must always try to disprove his or her own hypothesis. Or, as one of the great science philosophers of the twentieth century, Karl Popper, described, “The method of science is the method of bold conjectures and ingenious and severe attempts to refute them.”V In seeing how these early studies from Roseto, Pennsylvania to North Dakota were overlooked or dismissed out of hand, it’s hard, as a student of the history of the diet-heart hypothesis, not to conclude that selection bias has consistently been practiced for decades.

Dozens of trials either were forgotten or had their findings distorted. The ones we have reviewed here were early and relatively small. As we’ll see, the studies ignored or willfully misinterpreted later on were some of the biggest and most ambitious trials of diet and disease ever undertaken in the history of nutrition science. Alternative Ideas and the Opposition One of the hallmarks of selection bias is that people—even scientists trained to look for it—often don’t realize that they, themselves, might be suffering from it. This is the innocent part of the explanation about what was at work among any number of researchers during these formative years of the diet-heart hypothesis. It can justifiably be said, however, that Keys was not on the lookout for his own biases. He considered the burden of proof to be on those opposing him.


pages: 459 words: 123,220

Our Kids: The American Dream in Crisis by Robert D. Putnam

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assortative mating, correlation does not imply causation, deindustrialization, demographic transition, desegregation, ending welfare as we know it, epigenetics, full employment, George Akerlof, helicopter parent, impulse control, income inequality, index card, jobless men, low skilled workers, manufacturing employment, mass incarceration, meta analysis, meta-analysis, mortgage tax deduction, new economy, Occupy movement, Ralph Waldo Emerson, randomized controlled trial, school choice, selection bias, Socratic dialogue, The Bell Curve by Richard Herrnstein and Charles Murray, the built environment, upwardly mobile, Walter Mischel, white flight, working poor

Duncan, “The Quality of Toddler Child Care and Cognitive Skills at 24 Months: Propensity Score Analysis Results from the ECLS-B,” Early Childhood Research Quarterly 29 (January 2014): 12–21; Julia Torquati, Helen Raikes, Catherine Huddleston-Casas, James A. Bovaird, and Beatrice A. Harris, “Family Income, Parent Education, and Perceived Constraints as Predictors of Observed Program Quality and Parent Rated Program Quality,” Nebraska Center for Research on Children, Youth, Families and Schools (Lincoln, NE: CYFS, 2011). Methodologists are steadily improving measures of day care quality and methods for dealing with selection bias (mothers who choose higher-quality day care may be better mothers in other respects, too, so we can’t be sure it’s the day care that matters). The summary given in the text is our best judgment, given all the evidence available today. 65. Lisa Gennetian, Danielle Crosby, Chantelle Dowsett, and Aletha Huston, “Maternal Employment, Early Care Settings and the Achievement of Low-Income Children,” Next Generation Working Paper No. 30 (New York: MDRC, 2007). 66.

While racial segregation continues to be a major national problem, virtually all relevant studies have concluded that class segregation is at least as pernicious in its effects on student achievement. See Richard D. Kahlenberg, “Socioeconomic School Integration,” North Carolina Law Review 85 (June 2007): 1545–94. 29. As with any discussion of contextual effects, this literature is fraught with methodological issues, especially selection bias. For example, since poor kids are not randomly assigned to schools, something about those who end up in high-income schools may predispose them to higher achievement, quite apart from the schools or their fellow students. Douglas Lee Lauen and S. Michael Gaddis, “Exposure to Classroom Poverty and Test Score Achievement: Contextual Effects or Selection?,” American Journal of Sociology 118 (January 2013): 943–79.

In our discussion of mentoring, “rich” and “poor” refer to the top and bottom quartiles of a composite measure of socioeconomic status. 28. Robert J. Sampson, Great American City: Chicago and the Enduring Neighborhood Effect (Chicago: University of Chicago Press, 2012), 356, emphasis in original. The study of neighborhood effects has been tormented by complicated methodological concerns, especially what is termed “selection bias.” Since people generally choose where to live, if people in a given neighborhood have distinctive characteristics, it is possible that they brought those traits with them to the neighborhood, rather than those traits being “caused” by the neighborhood context. The best contemporary studies, however, have been attuned to that risk, and our discussion here is based on findings that seem robust in the face of that methodological issue.

Commodity Trading Advisors: Risk, Performance Analysis, and Selection by Greg N. Gregoriou, Vassilios Karavas, François-Serge Lhabitant, Fabrice Douglas Rouah

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Asian financial crisis, asset allocation, backtesting, capital asset pricing model, collateralized debt obligation, commodity trading advisor, compound rate of return, constrained optimization, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, discrete time, distributed generation, diversification, diversified portfolio, dividend-yielding stocks, fixed income, high net worth, implied volatility, index arbitrage, index fund, interest rate swap, iterative process, linear programming, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, p-value, Pareto efficiency, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk-adjusted returns, risk/return, selection bias, Sharpe ratio, short selling, stochastic process, survivorship bias, systematic trading, technology bubble, transaction costs, value at risk, zero-sum game

Thus, the coefficient of −0.004 means that firms with all trading in options have monthly returns 0.4 percentage points lower than a CTA that did not trade options. Both the time in existence and the year trading began had negative coefficients. The negative sign is at least partly due to selectivity bias. Some CTAs were added to the database after they began trading. CTAs with poor performance may not have provided data. This could cause CTAs to have higher returns in their first years of trading. A negative sign on the first-year variable suggests that the firms entering the database in more recent years have lower returns. Thus, selectivity bias may be less in more recent years. CTA returns also may genuinely erode over time. If CTAs do not change their trading system over time, others may discover the same inefficiency through their own testing. Also, the way the CTA trades may be imitated if the CTA tells others about his or her system.

This result is consistent with those formula used was rit = ln (1 + dit /100) × 100, where, dit is the discrete time return. The adjustment factor of 100 is used since the data are measured as percentages. 1The 33 Performance of Managed Futures in previous literature. The conventional wisdom as to why CTAs have higher returns is that they incur lower costs. However, CTA returns may be higher because of selectivity or reporting biases. Selectivity bias is not a major concern here, because the comparison is among CTAs, not between CTAs and some other investment. Faff and Hallahan (2001) argue that survivorship bias is more likely to cause performance reversals than performance persistence. The data used show considerable kurtosis (see Table 3.1). However, this kurtosis may be caused by heteroskedasticity (returns of some funds are more variable than others).

CHARACTERISTICS OF CTA Before we engage in a detailed analysis of the risk-return properties of the CTA, a word of caution is necessary: Unlike traditional asset classes (bonds and equity), where performance data and benchmarks are readily and reliably available, the infrastructure and reliability of performance data for alternative investments, in general, and CTAs, in particular, are still rather underdeveloped. In this chapter, the CTA Qualified Universe index3 (CTA QU) is used to give an overall picture of CTA, as it is more representative of the performance of trading advisors as a whole and cannot be criticized as having selection bias. The sample portfolio is made up of CTA, Canadian, U.S., and international equities as well as domestic bonds. Canadian equities are represented by the Standard & Poor’s (S&P)/Toronto Stock Exchange index, the CTA by the CTA QU Index (from CISDM database), the U.S. equities asset by the S&P 500 Index, the international equities asset by the Morgan Stanley Capital Index for Europe, Asia, and the Far East (MSCI EAFE), and the bonds by the Scotia McLeod universe bond index.


pages: 222 words: 60,207

Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup by Andrew Zimbalist

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airline deregulation, carbon footprint, East Village, en.wikipedia.org, full employment, Gini coefficient, income inequality, New Urbanism, principal–agent problem, race to the bottom, selection bias, urban planning, young professional

A subsequent study by Wolfgang Maennig and Felix Richter, however, effectively critiqued Rose and Spiegel on the grounds that their sample of countries was not representative: We challenge the empirical findings of Rose and Spiegel because they compare Olympic nations such as the United States, Japan, Germany, Canada, Italy, Spain, and Australia, which have been among the leading export nations for centuries, to all other nations. Their comparison of structurally different, nonmatching groups might suffer from a selection bias.18 When Maennig and Richter corrected for this bias by using only structurally similar countries, they found that the positive trade-signaling effect completely disappeared. Thus, we are left without any empirical evidence to confirm the touted benefit. Qualitative and Other Benefits The list of alleged qualitative benefits associated with hosting the Olympics is long and reaches in many directions: improved management practices and business culture, uplifted mood, reduced crime, higher real estate values, increased exercise and participation in sports, better sustainability practices, and improved values.

Interestingly, another 2011 study by Billings and Holladay found that Olympic host cities between 1950 and 2005 did not experience any increase in trade openness (or real GDP) as a result of hosting. S. Billings and J. Holladay, “Should Cities Go for the Gold? The Long-Term Impacts of Hosting the Olympics,” Economic Inquiry 50, no. 3 (2012): 754–72. 17. Wonho Song, using the Rose and Spiegel data set, found increases to exports and to tourism. However, these findings suffer from the same selection bias found in Rose and Spiegel. W. Song, “Impacts of Olympics on Exports and Tourism,” Journal of Economic Development 35, no. 4 (2010). 18. W. Maennig and F. Richter, “Exports and Olympic Games: Is There a Signal Effect?,” Journal of Sports Economics 13, no. 6 (2012): 636. 19. Robert Baumann, T. Ciavarra, and B. Engelhardt, “An Examination of Spectator Sports and Crime Rates,” Economics and Labour Relations Review 23, no. 2 (2012): 83–97. 20.

Economic Gangsters: Corruption, Violence, and the Poverty of Nations by Raymond Fisman, Edward Miguel

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, barriers to entry, blood diamonds, clean water, colonial rule, congestion charging, crossover SUV, Donald Davies, European colonialism, failed state, feminist movement, George Akerlof, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Live Aid, mass immigration, megacity, oil rush, prediction markets, random walk, Scramble for Africa, selection bias, Silicon Valley, South China Sea, unemployed young men

Also, the very fact that we were able to conduct a detailed statistical analysis of Vietnam’s economic recovery makes it, almost by definition, a success story: collecting reliable household surveys and censuses of the type required for the studies of bombing in Vietnam and Japan is a luxury that the poorest nations can rarely afford. Countries with good data are almost never basket cases. This may lead to what economists call “selection bias”: countries where the economy and institutions have collapsed after wars (like Chad, Afghanistan, or Congo) lack reasonable data, so we don’t get to study the persistence of war’s negative effects, while we are able to study the success stories in greater detail. The postwar recoveries of Japan and Vietnam prove that rapid recovery is possible, but they could still be more the exception than the rule.

See specific countries and issues Agnelli, Giovanni, 49 Amassalik Inuit, 138 Amazon (company), 25 Angola, 96, 120b, 175; diamond mining and, 181b–85b; economic revival of, 184b antiparasitic drugs, school attendance and, 193–95 armed conflict, 148–55; Africa and, 114–16, 174–78; civil versus foreign, 173–74; disarmament and, 175–76; economic factors and, 116–17, 120–22; GDP and, 124; government stability and, 176–78; infrastructure investment and, 162–63, 170–71; OECD and, 120–21; political transformation and, 163–64; rainfall and, 122–27, 149; reconciliation and, 179–81; selection bias and, 174; technological inno- vation and, 164; tribal hatreds and, 116–17 Bakrie, Aburizal, 34, 38 behavioral economics, 96–97, 222n8 Bellow, Adam: In Praise of Nepotism, 30 Bimantara Citra, 33–40 Blood Diamond, 183b Bloomberg, Michael, 104 Bono, 9 Borsuk, Rick, 37–38 Botswana, 20–21; Drought Relief Program, 152–53, 199–200 bribery, commerce and, 66–67 Bush, George W., 32, 73–74, 174, 217n4 Busia (Kenya), 193–95, 232n9 Canada: corruption in, 95; United States and, 94–95 Capone, Al, 5–7 Chad, 17–18; corruption and, 156; economic decline of, 111–12; I N DEX Chad (continued) global warming and, 131; Lake Chad, 111–12; paperwork delays in, 66–67; petroleum deposits in, 155–58; political turmoil in, 112–13; rainfall and, 114; violence in, 175; World Bank and, 156–58 cheap talk, 18–20; violence and, 118b–19b Cheney, Dick, 29, 51–52 China: 1998 anticorruption campaign and, 70–73; global warming and, 127–29; smuggling and, 55–57; tariffs and, 60–64, 221n4, 221n6 China National Petroleum Company (CNPC), 185b Clodfelter, Michael, 160–61 coffee, 117–18, 149–50 Collier, Paul, 215n9, 228n20, 230n13 Colombia, 76–78, 102–3, 142 commodity prices, 117–18, 149–50, 227n15 conflict traps, Chad and, 113–14 containerization, 56–57 corruption: bottom line on, 102–3; cheap talk and, 18–20; culture and, 80–81, 87, 102–3; definition of, 18, 83, 216n12; economic growth and, 41–46; income level and, 91–92; mea sur ing, stock markets and, 24–29; national pride and, 100–102; outsiders and, 41–43; poverty and, 15–17; “Scramble for Africa” and, 101–2; stock markets and, 24–27; wages and, 189, 230n3.


pages: 511 words: 148,310

Winning the War on War: The Decline of Armed Conflict Worldwide by Joshua S. Goldstein

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Albert Einstein, Ayatollah Khomeini, Bartolomé de las Casas, Berlin Wall, Black Swan, colonial rule, cuban missile crisis, Doomsday Clock, failed state, immigration reform, income inequality, invention of writing, invisible hand, land reform, long peace, microcredit, Mikhail Gorbachev, purchasing power parity, RAND corporation, selection bias, Steven Pinker, Tobin tax, unemployed young men, Winter of Discontent, Y2K

Third, there are no official statistics on wars and casualties, so international organizations and governments “have had no way of determining whether things are getting better or worse. . . . The dearth of official statistics on security issues stands in stark contrast to the vast amount of government data (on development, health, education, etc.) that track progress . . . toward meeting the 2015 Millennium Development Goals. . . .” The headlines and news stories from particular wars cannot be trusted to show trends, because of what social scientists call “selection bias.” This means that we study something by looking more at one of the outcomes we are studying than at another. War reporting suffers from such a bias. Whenever a war breaks out, the world’s journalists flock there to tell us of its horrors. From the perspective of that time and place, war is an unmitigated disaster. And as globalization shrinks the world, making information more and more accessible to us from distant locations, journalists expose us to the horrors of war more completely and more directly than ever before.

If, for example, the number of people killed in wars declined from 1 million in a certain time period to 100,000, over several generations, “reporters are still able to find plenty of images of violence, for . . . 100,000 people are still dying.” Thus, “the public will never suspect this change” to a dramatically more peaceful world. Indeed, as more reporters with better technology cover the world’s extremes more completely, violence will seem to be increasing. Selection bias is a serious problem. It is hard to make rational policies based on large numbers since we are drawn to the few dramatic cases. It is, on the contrary, easy to presume that war is inescapable. Editors, for their part, play up the horrors of war because dramatic conflicts bring in readers and capture our attention. In the news business, they say, “If it bleeds, it leads.” This is not a fault of journalists.

Melander, Öberg, and Hall 2009; see also Sarkees and Wayman 2010: 559; Lacina and Gleditsch 2005: 154. 236 Quickly defies: Lacina and Gleditsch 2005: 148; see also Collier 2009: 4. 237 Have become rare: Wallensteen and Sollenberg 1996: 356; Harbom and Wallensteen 2009: 578, 579. 237 Djibouti: BBC News 2008a. 237 Georgia and its breakaway: Harbom and Wallensteen 2009: 579–80. 237 Diminished as well: Levy 2002: 351. 238 Trend has flattened out: Hewitt, Wilkenfeld, and Gurr 2007; Harbom and Wallensteen 2009. 238 Ripple of interest: Easterbrook 2005; Mack 2005; Tierney 2005; Noah 2005; Sands 2005; Kaplan 2006; Traub 2006b; Arquilla 2006. 239 Steady downward trend: Wilson and Gurr 1999; see also Goldstein 2002. 239 Not seem to get through: Mack 2007: 523, 524; see also Human Security Centre 2005: 18. 239 Selection bias: Licklider 2005: 37. 239 Reporting the worst: Boulding 1978: 83. 240 Plenty of images: Payne 2004: 13; see also Taleb 2007: 112, 55, 80, 100. 240 Bleeds, it leads: See Boulding 1978: 83. 240 Progress Paradox: Easterbrook 2003: 35, 36. 240–41 Much more peaceful: Payne 2004: 7. 241 Chronological bias: He used this nice phrase at a conference, but calls it “presentism” in Payne 2004: 8. 241 Tendency to assume: Payne 2004: 68, 8, 9. 241 Takes to task: Payne 2004: 14, 9, 69, 267 n.3; Richardson 1960: 112, 128; Luard 1986: 23. 242 Glorify violence: Pinker 2007: 20. 242 Lack moral concern: Payne 2004: 10–11. 242 High-decibel: Easterbrook 2003: 100. 242 Followers and donations: Pinker 2007: 20. 242 The generation: Toynbee 1954: 322. 243 Researchers in Vancouver: Human Security Centre 2005: 17, 36, 28, 41, 42, 44. 244 One area where things: Human Security Report Project 2007: 28, 38–39, 35, 36, 42, 43. 244 Number of terrorist attacks: Human Security Report Project 2007: 2–3.

The Panic Virus: The True Story Behind the Vaccine-Autism Controversy by Seth Mnookin

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Albert Einstein, AltaVista, British Empire, Cass Sunstein, cognitive dissonance, correlation does not imply causation, Daniel Kahneman / Amos Tversky, en.wikipedia.org, illegal immigration, index card, Isaac Newton, loss aversion, meta analysis, meta-analysis, mouse model, neurotypical, pattern recognition, placebo effect, Richard Thaler, Saturday Night Live, selection bias, Solar eclipse in 1919, Stephen Hawking, Steven Pinker, the scientific method, Thomas Kuhn: the structure of scientific revolutions

There were serious problems with its entire premise: Hundreds of millions of children had received the measles vaccine since it was first introduced and the vast majority of them had no chronic bowel or behavioral problems; the “syndrome” Wakefield purported to have discovered was already well documented and was nonspecific to patients with autism; autism was a well-known condition long before the MMR vaccine became available; and despite hypothesizing that the MMR vaccine led to IBD led to autism, in most of the cases Wakefield cited, the behavioral changes preceded the bowel problems. There were methodological problems, the most glaring of which was selection bias: The parents who came to Wakefield, who was not a pediatrician and had never been clinically trained to work with children, did so because he was known as someone interested in connecting the MMR vaccine with inflammatory bowel disease. There were concerns about the reliability of the paper’s data: Wakefield was dependent on parents’ post-facto recollections about the temporal connection between vaccination and onset of their children’s symptoms, and in the three years since Wakefield first reported finding the measles virus in patients with IBD, “other investigators using more sensitive and specific assays, have not been able to reproduce these findings.”

Since there was no definitive data about ethylmercury’s half-life (the time it takes for half the amount of a given substance to be eliminated from the bloodstream), Verstraeten used previously established half-life figures for methylmercury in order to estimate the aggregate amount of thimerosal in infants’ bodies at any given point.36 Because of the privacy concerns inherent with using HMO patient records, he’d been unable to question (or even identify) the people whose data he was using—which meant he had no way of accounting for possible selection bias on the part of parents (it was possible that “the same parents that bring their children for vaccination would be the same parents that bring their children for assessment of potential developmental disorders”), or doctors (there was “a potential that certain health care providers use more hepatitis B [vaccine] at birth and would also be more likely to diagnose some of the outcomes”), or both.

Pattern recognition and the clustering illusion are just two of literally dozens of cognitive biases that have been identified over the past several decades. Some of the others have been alluded to earlier in this book: When SafeMinds members set out to write an academic paper about a hypothesis they already believed to be true, they set themselves up for expectation bias, where a researcher’s initial conjecture leads to the manipulation of data or the misinterpretation of results, and selection bias, where the meaning of data is distorted by the way in which it was collected. In addition to being a natural reaction to the experience of cognitive dissonance, the hardening conviction on the part of vaccine denialists in the face of studies that undercut their theories is an example of the anchoring effect, which occurs when we give too much weight to the past when making decisions about the future, and of irrational escalation, which is when we base how much energy we’ll devote to something on our previous investment and discount new evidence indicating we were likely wrong.


pages: 288 words: 16,556

Finance and the Good Society by Robert J. Shiller

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Alvin Roth, bank run, banking crisis, barriers to entry, Bernie Madoff, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, cognitive dissonance, collateralized debt obligation, collective bargaining, computer age, corporate governance, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Donald Trump, Edward Glaeser, eurozone crisis, experimental economics, financial innovation, financial thriller, fixed income, full employment, fundamental attribution error, George Akerlof, income inequality, information asymmetry, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, loss aversion, Louis Bachelier, Mahatma Gandhi, Mark Zuckerberg, market bubble, market design, means of production, microcredit, moral hazard, mortgage debt, Myron Scholes, Occupy movement, passive investing, Ponzi scheme, prediction markets, profit maximization, quantitative easing, random walk, regulatory arbitrage, Richard Thaler, Right to Buy, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, self-driving car, shareholder value, Sharpe ratio, short selling, Simon Kuznets, Skype, Steven Pinker, telemarketer, The Market for Lemons, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, Vanguard fund, young professional, zero-sum game, Zipcar

But somehow it is thought that bankers must know what they are doing. This distinction must in part have to do with the fact that bankers typically stay out of the most volatile, headline-grabbing markets. But perhaps too it is because bankers, in contrast to hedge fund managers and the like, are following a long and time-honored tradition, extending back hundreds of years, which has evolved to solve certain problems—including liquidity, moral hazard and selection bias, and transaction service problems—to the satisfaction of most people most of the time. The anger toward bankers takes a very di erent form. It seems to be anger at their power and presumption, at their single-minded pursuit of money. And the anger ares up whenever there is a banking crisis and the governments of the world come to the rescue of these wealthy interests. But the public also has a sense of the centrality, sobriety, and safety of banks, and they must know that those who manage banks are highly in uential in determining the economic outcomes in our society.

The public perception is that banks are adept at sni ng out and avoiding such bad investments. And even if they do make the occasional bad call, they have numerous other investments in their portfolios, a strategy that generally helps them maintain their integrity and reputations—except for the occasional severe financial crisis, during which, admittedly, some may fail or be bailed out. Banks solve yet another problem that less-skilled investors face: a selection bias problem. Those who are paying less attention to researching their investments will tend to be the more easily victimized; they will wind up with the “lemons” among investments because more skilled investors will snap up the better ones. Most individuals have no way of evaluating the trustworthiness of businesses in which they might invest. They can try to read published reports on the businesses in newspapers or magazines, or reports issued by rating agencies.

Hence banking plays an even bigger role in the economies of less-developed countries.5 In contrast, the role of traditional banks in the economies of more advanced countries has been in decline for decades: the fraction of these countries’ debt that is accounted for by traditional bank loans has been falling.6 This is so because the quality of publicly available information about securities is improving, and so the moral hazard and selection bias problems are reduced. Banks will increasingly be transformed into more complex institutions, but their traditional banking business will not go away entirely. Such banking meets too many of society’s needs, and banks’ public persona—current events notwithstanding—is too strong. The Evolution and Future of Banking Indeed the severe nancial crisis that began in 2007 was not due to any failures in the traditional banking business model, but instead to certain new kinds of business models, in which loans made to homeowners were not retained on the books of banks and other mortgage originators but bundled together into securities and sold o to other investors, including other banks—reintroducing the very problem of moral hazard that banks were supposed to solve.


pages: 651 words: 180,162

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb

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Air France Flight 447, Andrei Shleifer, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, Chuck Templeton: OpenTable, commoditize, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discrete time, double entry bookkeeping, Emanuel Derman, epigenetics, financial independence, Flash crash, Gary Taubes, George Santayana, Gini coefficient, Henri Poincaré, high net worth, hygiene hypothesis, Ignaz Semmelweis: hand washing, informal economy, invention of the wheel, invisible hand, Isaac Newton, James Hargreaves, Jane Jacobs, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, knowledge economy, Lao Tzu, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, Marc Andreessen, meta analysis, meta-analysis, microbiome, money market fund, moral hazard, mouse model, Myron Scholes, Norbert Wiener, pattern recognition, Paul Samuelson, placebo effect, Ponzi scheme, principal–agent problem, purchasing power parity, quantitative trading / quantitative finance, Ralph Nader, random walk, Ray Kurzweil, rent control, Republic of Letters, Ronald Reagan, Rory Sutherland, selection bias, Silicon Valley, six sigma, spinning jenny, statistical model, Steve Jobs, Steven Pinker, Stewart Brand, stochastic process, stochastic volatility, The Great Moderation, the new new thing, The Wealth of Nations by Adam Smith, Thomas Bayes, Thomas Malthus, too big to fail, transaction costs, urban planning, Vilfredo Pareto, Yogi Berra, Zipf's Law

Perhaps Voltaire’s charm was in that he did not know how to save his wit. So the same hidden antifragilities apply to attacks on our ideas and persons: we fear them and dislike negative publicity, but smear campaigns, if you can survive them, help enormously, conditional on the person appearing to be extremely motivated and adequately angry—just as when you hear a woman badmouthing another in front of a man (or vice versa). There is a visible selection bias: why did he attack you instead of someone else, one of the millions of persons deserving but not worthy of attack? It is his energy in attacking or badmouthing that will, antifragile style, put you on the map. My great-grandfather Nicolas Ghosn was a wily politician who managed to stay permanently in power and hold government positions in spite of his numerous enemies (most notably his archenemy, my great-great-grandfather on the Taleb side of the family).

Didn’t he realize that these Chicago pit traders respond to supply and demand, little more, in competing to make a buck, with no need for the Girsanov theorem, any more than a trader of pistachios in the Souk of Damascus needs to solve general equilibrium equations to set the price of his product? For a minute I wondered if I was living on another planet or if the gentleman’s PhD and research career had led to this blindness and his strange loss of common sense—or if people without practical sense usually manage to get the energy and interest to acquire a PhD in the fictional world of equation economics. Is there a selection bias? I smelled a rat and got extremely excited but realized that for someone to be able to help me, he had to be both a practitioner and a researcher, with practice coming before research. I knew of only one other person, a trader turned researcher, Espen Haug, who had to have observed the same mechanism. Like me, he got his doctorate after spending time in trading rooms. So we immediately embarked on an investigation about the source of the option pricing formula that we were using: what did people use before?

This made me focus on what an intelligent antistudent needed to be: an autodidact—or a person of knowledge compared to the students called “swallowers” in Lebanese dialect, those who “swallow school material” and whose knowledge is only derived from the curriculum. The edge, I realized, isn’t in the package of what was on the official program of the baccalaureate, which everyone knew with small variations multiplying into large discrepancies in grades, but exactly what lay outside it. Some can be more intelligent than others in a structured environment—in fact school has a selection bias as it favors those quicker in such an environment, and like anything competitive, at the expense of performance outside it. Although I was not yet familiar with gyms, my idea of knowledge was as follows. People who build their strength using these modern expensive gym machines can lift extremely large weights, show great numbers and develop impressive-looking muscles, but fail to lift a stone; they get completely hammered in a street fight by someone trained in more disorderly settings.


pages: 398 words: 86,855

Bad Data Handbook by Q. Ethan McCallum

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Amazon Mechanical Turk, asset allocation, barriers to entry, Benoit Mandelbrot, business intelligence, cellular automata, chief data officer, Chuck Templeton: OpenTable, cloud computing, cognitive dissonance, combinatorial explosion, commoditize, conceptual framework, database schema, en.wikipedia.org, Firefox, Flash crash, Gini coefficient, illegal immigration, iterative process, labor-force participation, loose coupling, natural language processing, Netflix Prize, quantitative trading / quantitative finance, recommendation engine, selection bias, sentiment analysis, statistical model, supply-chain management, survivorship bias, text mining, too big to fail, web application

administrative data, compared to survey data, Subtle Sources of Bias and Error–Subtle Sources of Bias and Error bottomcoding in, Subtle Sources of Bias and Error, Other Sources of Bias, Topcoding/Bottomcoding–Topcoding/Bottomcoding CityGrid API for, Getting Reviews flaws in, Example 1: Defect Reduction in Manufacturing–Example 1: Defect Reduction in Manufacturing imputation bias in, Subtle Sources of Bias and Error, Imputation Bias: General Issues–Imputation Bias: General Issues proxy reporting in, Other Sources of Bias, Proxy Reporting reporting errors in, Reporting Errors: General Issues–Reporting Errors: General Issues sample selection bias in, Other Sources of Bias, Sample Selection seam bias in, Other Sources of Bias, Seam Bias topcoding in, Subtle Sources of Bias and Error, Other Sources of Bias, Topcoding/Bottomcoding–Topcoding/Bottomcoding understanding, importance of, A Very Nerdy Body Swap Comedy–A Very Nerdy Body Swap Comedy web-scraping, Other Formats–Other Formats, (Re)Organizing the Web’s Data–(Re)Organizing the Web’s Data, Can You Get That?

(see RPM) reviews and ratings data, Getting Reviews, Getting Reviews–Sentiment Classification, Sentiment Classification, Polarized Language–Polarized Language, Corpus Creation–Corpus Creation, Training a Classifier–Lessons Learned collecting, Getting Reviews corpus for classification of, Sentiment Classification, Corpus Creation–Corpus Creation polarized language in, Polarized Language–Polarized Language sentiment classification of, Getting Reviews–Sentiment Classification, Training a Classifier–Lessons Learned robots.txt file, robots.txt–robots.txt RPM (Revenue Per 1,000 Impressions), Is It Just Me, or Does This Data Smell Funny? S S expressions, File Formats sample selection, bias in, Other Sources of Bias, Sample Selection Schwabish, Jonathan A. (author), Subtle Sources of Bias and Error–Conclusions ScraperWiki, Can You Get That? screen-scraping, Other Formats (see web-scraping) seam bias, Other Sources of Bias, Seam Bias search referral data example, Search Referral Example–Search Referral Example sentiment classification, Weotta, Getting Reviews–Sentiment Classification, Training a Classifier–Training a Classifier, Validating the Classifier–Validating the Classifier, Designing with Data, Lessons Learned training classifier for, Training a Classifier–Training a Classifier, Lessons Learned using results of, Weotta, Designing with Data validating classifier for, Validating the Classifier–Validating the Classifier SIPP (Survey of Income and Program Participation) data example, Imputation Bias: General Issues, Proxy Reporting social media, Can You Get That?


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

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asset allocation, backtesting, Bernie Madoff, Black Swan, capital asset pricing model, collateralized debt obligation, commodity trading advisor, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fixed income, high net worth, implied volatility, index fund, interest rate swap, invisible hand, market microstructure, merger arbitrage, moral hazard, Myron Scholes, passive investing, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, risk-adjusted returns, risk/return, selection bias, Sharpe ratio, short selling, statistical model, 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

Since, in most cases, only funds with superior historical returns report their returns to databases, the returns before their database entry date may be biased upward relative to all those funds that do not report) and (2) survivorship bias: Funds that used to exist historically in 192 THE NEW SCIENCE OF ASSET ALLOCATION the database are removed from it when they stop reporting. Often these funds stop reporting because of poor returns. The often lower returns of these funds are not contained in the live portion of most databases and one must ask for the dead fund databases in order to measure the actual returns to investment in funds that may have existed in the past. Other biases may also exist in any single database, such as selection bias (databases differ on their requirements for reporting) and reporting bias (managers may be in one strategy but report as in another). The extent of these biases may differ by strategy, time period, and database. Thus, proper due diligence must be used in understanding the actual performance characteristics of a fund before considering investment. For example, research (Fung and Hsieh, 2006) has shown that, if the first year or so of performance is removed from a fund reporting to a database, the impact of backfill bias is removed dramatically.

See Modern Portfolio Theory (MPT) MSCI Emerging Markets, 257, 258 Multi-asset allocation, 70–71, 133 performance, 148, 153, 158 principal concerns, 167 Multi-factor model, 41, 42, 43, 44, 50–54 Multi-factor regression model, 51 Multivariate linear regression, 198 Mutual funds, 129 NAREIT Domestic Real Estate Index, 179 NASDAQ, 250, 251 NCREIF National Property Index (NPI), 173, 175 Non-linear payoffs, 197 Old Portfolio Theory (OPT), 3 Operational risk, 197 Opportunity cost risk, 210 Optimization models, 92–98, 200 Options, 11, 197 and return distribution, 27 and risk management, 206 trading, 12 Option theory, 10–11, 231, 238, 246 Order, definition of, 242–245 Oversight, 243–244 Parameter estimation error, 25 Peer group creation, 126–132 Performance alpha, 46–47 Performance attribution, 34 Performance evaluation, conditional, 53–54 Political risk, 197 Portfolio insurance strategy, 92, 107 Portfolio management: active versus passive, 46–47 convexity of returns, 49–50 market segment weightings, 70–71 performance comparison between aggressive and conservative, 72–73 risk based, 66 Portfolio returns: differences in aggressive and conservative management, 86–87 ranked by BarCap US Aggregate, 83 ranked by S&P 500, 81 weightings, 84–85 Portfolio risk, 11, 30–34 Portfolios: bootstrapped or resampled, 94 measuring exposure, 198 model, 102 quantitative construction models, 93 rebalancing, 15, 107, 201 return volatility, 99 292 Portfolios (Continued) risk based, 106 risk decomposition of, 202–203 tactical asset, 106 Portfolio weights, 94 Price risk, 33, 219 Private equity, 61, 65, 118, 148–153 benchmarks, 170–173, 174, 275 performance of indices, 171 return and risk performance, 151–153 returns ranked by S&P 500, 154, 172 sources of return, 151 Probability, 2, 20 Product development, 15–16 Pro forma performance, 167, 169 Protected investment strategy, 107 Pure security, 62 Purity, style, 126–132 Put-Call Parity Model, 11 Put option, 11 Put protected investment strategy, 107 Quantitative model, 102–103 Rate of return: annualized S&P 500, 93 excess break-even rate, 43–44 and risk, 197–198 Real estate, 61, 65, 129, 153–160, 176 benchmarks, 173–179, 274 comparison benchmark performance, 157 correlation with S&P 500 indices, 178, 181 international and FTSE returns, 177 prices, 155–156 return and risk performance, 156–158 sources of return, 155–156 Real estate investment companies (REITs), 155 Reallocation strategy, 103 Reasonable man theory, 60 Rebalancing, 15, 107, 201 Regression coefficients, 52 Regression model, 51, 52 Regulations, governmental, 127, 197, 244–245, 247–248 REITs (real estate investment companies), 155, 157–158, 179 Replication-based indices, 122–126, 223 Reporting bias, 192 INDEX Return and risk: of asset classes through business cycles, 251–270 characteristics of alternative investments, 61–62 characteristics of indices, 169 commodities, 162–163 differences among similar asset class benchmarks, 167–194 hedge funds, 140–143 historical attributes and strategy allocation, 66–70 historical comparisons, 71–74 managed futures, 146–148 models post-1980, 11–13 multi-factor estimation, 50–54 performance results, 66 predictability of, 95–96 private equity, 151–153 real estate, 156–158 sources in alternative investments, 134–166 and strategic asset allocation, 99 Return estimation models, 50–54 Return generating models, 46 Return intervals, 36 Returns: benchmark, 136 CISDM hedge funds, 145 commodities, 160–162 hedge funds, 139–140 and managed futures, 146 and performance of investment managers, 215 real estate, 155–156 Return to risk, 2, 18, 19 Return volatility, 61, 99 Risk, 1–2 absolute, 65 and alternative investments, 134–166 assessment, 28–30 aversion, 98, 100, 133 budgeting and asset allocation, 195–211 decomposition, 34, 202–203 determinants, 23 and expected return, 230 factor weightings, 54–55 individual vs. portfolio, 69 and liabilities, 96 management of (See Risk management) 293 Index measurements of, 20–38, 96–97 measures of exposure, 63 qualitative, 63 and rate of return, 197–198 tolerance, 89, 117–119 and tracking error, 97–98 what it is, 22–24 Risk factor sensitivity analysis, 34 Risk-free assets, 4 Risk hedge ratio, 204 Riskless rate of interest, 7 Risk management, 1–2, 3, 11, 107, 214, 247 benefits of reduction, 74 goal of, 199 models, 247 multi-factor approach to, 195–200 using futures, 203–206 using options, 206 and volatility, 200–202 Risk premia, 7, 214 Robertson, Julian, 222 Rogers International Commodity Index (RICI), 182 Roll returns, 166 Rosenberg, Barr, 10 Russell Growth, 120, 207, 251 volatility, 254, 255, 256, 257 Salomon Brothers Bond Indices, 168 Sample selection, 38 Satellite allocation, 110–133 Scholes, Myron, 11 Securities: fixed income, 12, 24, 63, 65, 272 investable, 123 pure, 62 Securities and Exchange Commission (SEC), 229 Securitization, 155 Security market line, 6 Seed capital, 153 Selection bias, 192 Semi-standard deviation, 97 Semi-variance, 30 Sensitivity, market, 74–82, 82–84, 89 Sharpe Ratio, 18, 26–28, 37, 43 Skewness, 29, 62, 97, 223 Slope of the yield curve, 101 Small minus big (SMB) factor, 45 Smoothing, 28, 175 S&P 500, 36, 37, 185 annualized rate of return, 93, 168 annualized standard deviation, 93 benchmark returns, 79, 138 CISDM CTA indices, 150 commodity benchmarks, 165 correlations with real estate indices, 175, 178, 181 correlation with Barclays Capital U.S.

All About Asset Allocation, Second Edition by Richard Ferri

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activist fund / activist shareholder / activist investor, asset allocation, asset-backed security, barriers to entry, Bernie Madoff, capital controls, commoditize, commodity trading advisor, correlation coefficient, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, equity premium, estate planning, financial independence, fixed income, full employment, high net worth, Home mortgage interest deduction, implied volatility, index fund, intangible asset, Long Term Capital Management, Mason jar, money market fund, mortgage tax deduction, passive income, pattern recognition, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, survivorship bias, too big to fail, transaction costs, Vanguard fund, yield curve

Some monitoring companies are paid by the hedge funds to promote the funds they report on. Other monitoring companies use flawed data collection methodologies. For instance, they do not include the performance of funds that have closed or merged. This produces an upward survivorship bias in the hedge fund indexes. When a hedge fund has a bad quarter, the managers may simply choose not to report the results. This leads to a selection bias in the index performance. Most monitoring companies allow a newly reporting fund to “backfill” performance with simulated historic returns that no investor actually earned. That creates a backfill bias in the indexes. Finally, most monitoring companies allow the hedge fund managers to price their own illiquid securities, thus introducing a pricing bias into the indexes. When all the inconsistencies of the published hedge fund indexes are eliminated from the data, the total return of the indexes drops dramatically.

., 88–89 “your age in bonds,” 243–244, 266–270, 295–296 (See also specific bond types) Bulletin-board stocks, 104, 104t C Canadian stocks, 138–139 Cash/cash-type investments, 10 Changing allocation, 291–299 guidelines for, 298–299 just before retirement, 294–295 and periodic market data, 296–297, 297f reasons for, 292 when goals are within reach, 293–294, 293f when investing for others, 295–296 Collectibles, 211–214, 212f, 213f Commercial real estate investments, 173–175 331 332 Commodities, 30, 189–195, 193f, 195f, 200–206, 201f, 202f, 204t, 224 indexes for, 194–195, 200–201 in portfolios, 201–203 real return on, 94 and supply and demand, 192–194 Commodity funds, 89 Commodity futures, 196–201, 197f, 200f, 203 Computer simulations, 81–82 Corporate bonds, 72–75, 151, 157–159, 229t, 230f Correlation, 47–53, 51t inconsistency of, 57–61, 95 low or varying, 95–97 measuring, 50 negative and positive, 48, 95 for real estate investments, 179–183 with U.S. stocks and bonds, 89 in well-diversified portfolios, 62 Costs of investing (see Fees and costs) Credit risk, 152–155, 153t, 154f, 155f Currency risk, 128–129, 128f, 133t D Default risk (bonds), 158–159 Deflation, 239 Developed markets, 130, 163 Developed-market indexes, 132–134 Diversification, 41, 43f, 55f, 59f, 60f, 60t, 62, 90 within funds, 97 with microcap stocks, 110, 113 rebalancing for, 45 with small-cap value stocks, 121–125 (See also Multi-asset-class investing) Dividends, 235–238 Dollar cost averaging, 309–311 E EAFE Index, 132–138, 133t, 134f, 136f, 138t, 140f Early savers, 244, 247–251, 250f, 250t, 251t Economic factor forecasting, 233–235 Efficient frontier, 54, 54f, 58–59, 66, 123, 124 Index Efficient market theory (EMT), 43 Emerging markets, 98–99, 130–131, 139–141, 140f, 140t, 141f, 163 Equity REITs, 176–183 Exchange-traded funds (ETFs), 311–313 of alternative assets, 214 capital gains on, 305–306 costs and fees with, 303, 304 for global diversification, 99 international, 144 in investment plan, 11–13, 21–22 low cost of, 97 Expectations for returns, 219 (See also Forecasting) F Factor performance analysis: in forecasting, 233–235 international equities, 142–143 U.S. equities, 109–121 Fad investing, 13–14 Fear of regret, 274–275 Federal Reserve, 235 Fees and costs, 301–315, 302t comparing fund expenses, 303–305 cost of taxation, 305–308 index funds and ETFs, 304f, 311–313 low-fee advisors, 313–315 and performance, 302–303 and tax swaps, 308–311 Fixed-income investments, 147–169, 150f, 156t, 167f, 167t, 168t, 223f bond market structure, 148–149 corporate bonds, 72–75 credit risk, 152–155 example of, 166–167 forecasting returns, 238–240 foreign market debt, 163–165 high-yield corporate bonds, 157–159 investment-grade bonds, 155–157 list of, 167–168 maturity structure, 151–152 risk and return with, 149–151 tax-exempt municipal bonds, 165–166 TIPS, 28, 29, 159–163 (See also specific investments) Index Forecasting, 13, 219–242, 234f, 236f, 241t creating forecasts, 240–241 and dividends, 235–238 economic factor, 233–235 Federal Reserve and GDP growth, 235 fixed income returns, 238–240 and inflation, 225–226 market returns, 220–221 risk-adjusted returns, 221–225 stacking risk premiums, 226–232 Foreign market debt, 163–165 Foreign stocks (see International equity investments) Frontier markets, 132 Fund expenses, 303–305 Fundamental differences, 90–93 G Global markets, 98–99, 98f, 129–132, 131f, 135f, 137f Government bonds, 151, 164f, 165f (See also Treasury bonds) Gross domestic product (GDP), 234f, 235 Growth stocks, 108, 114–116, 119–121 H Hedge funds, 190–191, 206–211, 208t High-yield corporate bonds, 157–159, 158f Home ownership, 173, 183–186, 259 I Index funds, 21–22, 304f, 311–313 commodities, 203–206 costs and fees with, 303–304 for global diversification, 99 low cost of, 97 U.S. equity, 125–126 value vs. growth, 92–93 Indexes, 106, 116–121, 118t, 119f, 120f bond, 155–157, 163–164 collectibles, 212–214 commodities, 194–195, 200–201 developed-market, 132–134 EAFE, 132–138 333 emerging market, 139–141 hedge fund, 209–210 international, 68–70 microcap, 111–113 midcap, 111 REIT, 177–178, 180–182 U.S. equities, 105 Inflation, 103, 221 and forecasting, 225–226 and interest rates, 238–240, 239f and real expected return, 94 and rental properties, 173 Inflation-protected securities, 28, 29, 162–163 [See also Treasury Inflation-Protected Securities (TIPS)] International equity investments, 127–145, 142t, 144t allocation of, 137–138, 143 Canadian stocks, 138–139 currency risk, 128–129, 128f, 133t developed-market indexes, 132–134 EAFE Index, 132–138, 133t, 134f, 136f, 138t, 140f emerging markets, 139–141, 140f, 140t, 141f global markets, 129–132, 131f, 135f, 137f list of, 143–144 in multi-asset-class investing, 68–72 size and value factors, 142–143 Investment plan, 3–23 academics’ views of, 19–20 asset allocation in, 15–16 asset classes in, 18–19 avoiding bad advice, 14–15 characteristics of, 4–6 and fad investing, 13–14 monitoring and adjusting, 16–18 mutual funds and ETFs in, 11–13 and overanalysis of market data, 22 and professional advice, 8 selection of investments, 21–22 and shortcuts, 6–7 types of assets in, 9–11 Investment policy statement (IPS), xiii, 5 334 Investment pyramid, 9–11, 9f, 245–247, 246f Investment risk, 25–39 defining, 29–31 and myth of risk-free investments, 26–29 as running out of money in retirement, 31–32 volatility as, 32–38 Investment styles, 19 Investment-grade bonds, 152–157 L Large-cap stocks, 107–109, 117t, 119 Large-cap style indexes, 117 Liability matching, 253–254 Life-cycle investing, 17–18, 243–270 early savers, 247–251, 250f, 250t, 251t investment pyramid in, 245–247, 246f and life phases, 244–245 mature retirees, 263–266, 265f, 265t, 266t midlife accumulators, 252–256, 255f, 255t, 256t modified “your age in bonds” for, 266–270 transitional retirees, 256–262, 261f, 262t Limited partnerships (real estate), 174 Long-term investments, 10 Low-cost asset classes, 97–98 Low-fee advisors, 313–315 M Market data, 22, 296–297 Market returns, forecasting, 220–221 Market risk factor, 116, 272 Markets: bear, 276–277, 294–295 bond, 148–149 developed-market indexes, 132–134 and dividends, 235–238 emerging, 139–141 foreign market debt, 163–165 global, 98–99, 129–132 Index overanalysis of market data, 22 periodic market data, 296–297 stock, 103–105 (See also specific markets) Markowitz, Harry, 41–43 Mature retirees, 244–245, 263–266, 265f, 265t, 266t Microcap stocks, 107–113, 110t, 111f, 124f Midcap stocks, 107–109, 111–113, 111f Midlife accumulators, 244, 252–256, 255f, 255t, 256t Modern portfolio theory (MPT), viii, 43–44, 79, 171, 189, 271 Morningstar classifications, 106–109, 107f, 108t, 109f Morningstar ratings, 14 Multi-asset-class investing, 65–83, 67f corporate bonds, 72–75, 73t, 74f example of, 75–79, 76f, 76t, 78–79f for expanding the envelope, 66–67 international stocks, 68–72, 69t, 70f, 71f Municipal bonds, tax-exempt, 148, 165–166 Mutual funds, 30, 92f, 93f, 148 of alternative assets, 214 capital gains on, 305–306 commodities, 203–206 costs and fees with, 303–305 emerging market, 131 global equity, 130 high-yield bonds, 159 international, 144 in investment plan, 11–13 in late 1990s, 92–93 low-cost fixed-income, 167–168 no-load actively managed, 97 REIT, 174, 175, 187 swapping, 308–309 (See also Index funds) N Nasdaq, 103, 104, 104t New York Stock Exchange (NYSE), 103, 104, 104t No-load actively managed funds, 97 Index Noncorrelation, 48–53, 51f Northwest quadrant, 54, 55f, 66, 80 P Passive funds, 21 Pension plans, 30, 258–259 Performance: factor performance analysis, 109–121 and fees, 302–303 and future results, 14 and investment cost, 302–303 long-term, 16 (See also Forecasting; Returns) Portfolio building (see Investment plan; Life-cycle investing) Portfolio risk, 26, 275 Price-to-earnings (P/E) ratio, 236–238, 237f Pricing bias, 209 Primary market, 103 Professional advisor(s), 8, 14–15, 313–315 R Real estate investment trusts (REITs), 174–182f, 186–187, 187t Real estate investments, 171–187, 172t commercial, 173–175 correlation analysis, 179–183 home ownership, 183–186, 259 list of, 186–187 REITs, 174–182f, 186–187, 187t Real return, 161 on commodities, 94 on U.S. stocks and bonds, 102–103 Rebalancing, 44–47, 46t, 55, 59, 67, 284–285 Regression to the mean, 45 Retirement: bear markets just before, 294–295 and life-cycle investing, 256–266 running out of money in, 31–32 Returns, 35–38, 35t, 56t, 222t and asset allocation, 20 expectations for (see Forecasting) fixed-income, 149–151, 238–240 on international investments, 68–70 335 market, 220–221 with multi-asset-class investing, 75–77 real, 94, 161 on real estate investments, 171–173 on REITs, 180–183 and risk, 35, 53–57, 61f, 223f risk-adjusted, 221–225, 221t on U.S. equity investments, 102–103, 102t Risk: credit, 152–155, 153t, 154f, 155f currency, 128–129, 128f, 133t default, 158–159 with fixed-income investments, 149–151 investment, 25–39 perceived, 26 rebalancing, 284–285 with REITs, 180–183 and return, 35, 53–57, 61f, 221–225, 223f with small-cap value stocks, 121–125 volatility as, 32–38 Risk avoidance, 285–286, 286t Risk diversification, 90, 121–125 Risk premiums, stacking, 226–232, 232t Risk tolerance, 17, 275 Risk tolerance questionnaires, 16–17, 277–278, 287–289 Risk-adjusted returns, 221–225, 221t Risk-free investments, myth of, 26–29 Rolling correlations, 58f, 96, 96f S Secondary market, 103 Selecting investments, 21–22, 87–100 four-step process for, 88 with fundamental differences, 90–93 in global markets, 98–99 guidelines for, 89–98 with low or varying correlation, 95–97 with low-cost availability, 97–98 with real expected return, 94 U.S. stocks and bonds, 88–89 Index 336 Selection bias, 209 Size factor: international equity investments, 142–143 U.S. equity investments, 106, 107 Size risk factor, 116 Small-cap stocks, 107–109, 118t, 121–125, 122t, 123f, 124f, 230–231, 231f Small-cap style indexes, 117–118 Social Security, 10, 11, 258–259 Speculative capital, 11 Stacking risk premiums, 226–232, 232t Standard deviation, 33–38, 34f, 37t, 38t Stock markets, 105 1987 crash, 30–31 in 1990s, 276 in 2007–2009, 276–277 during crises, 89 Stocks, 19, 89–90, 229–230 Canadian, 138–139 international, 68–72 (See also International equity investments) small-cap value, 121–125 U.S., 88–89 (See also U.S. equity investments) Style factor, 107–109 Survivorship bias, 209 T Tax swaps, 308–311, 309f, 310t Tax-deferred accounts, 306–307 Taxes, 19 and after-inflation returns, 225–226 on bonds, 165–166 on commodity funds, 205–206 as investment expense, 305–308 on T-bill returns, 27–28 Tax-exempt municipal bonds, 148, 165–166 Total risk, xi–xii, 43f Transitional retirees, 244, 256–262, 261f, 262t Treasury bills (T-bills), 26–28, 27f, 28f, 151–152, 152f, 225–227, 226f Treasury bonds, 72–75, 151–152, 160–163, 161f, 229t Treasury iBonds, 162–163 Treasury Inflation-Protected Securities (TIPS), 28, 29, 156, 159–163, 161f, 162f, 227–228, 228f, 240 Treasury notes, 152f Two-asset-class model, 53 U Unit investment trusts (IUTs), 97 U.S. bond investments, 88–89 U.S. equity investments, 101–126, 125t, 140f, 141f, 230f and broad stock market, 105 and currency risk, 128–129 factor performance analysis, 109–121 history of returns on, 102–103 list of, 125–126 and market structure, 103–104 Morningstar classification methods, 106–109 selecting, 88–89 sizes and styles of, 106–109 small-cap value and risk diversification, 121–125 V Value risk factor, 116, 142–143 Value stocks, 108, 114–116, 119–125, 231f Volatility, 222, 224, 225f of commodity prices, 94 of foreign stocks, 127–128 of international stocks, 71, 72 as investment risk, 29, 32–38 measuring, 32–34, 33f, 34f price, 29–30 Y Yield spread, 74 “Your age in bonds” approach, 243–244, 266–270, 295–296


pages: 321 words: 97,661

How to Read a Paper: The Basics of Evidence-Based Medicine by Trisha Greenhalgh

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call centre, complexity theory, conceptual framework, correlation coefficient, correlation does not imply causation, deskilling, knowledge worker, meta analysis, meta-analysis, microbiome, New Journalism, p-value, personalized medicine, placebo effect, publication bias, randomized controlled trial, selection bias, the scientific method

A more objective analysis showed that whilst one of two did indeed suggest an effect, a true estimate based on all the available studies suggested that vitamin C had no effect at all on the course of the common cold. Pauling probably did not deliberately intend to deceive his readers, but because his enthusiasm for his espoused cause outweighed his scientific objectivity, he was unaware of the selection bias influencing his choice of papers. Evidence shows that if you or I were to attempt what Pauling did—that is, hunt through the medical literature for ‘evidence’ to support our pet theory—we would make an equally idiosyncratic and unscientific job of it [3]. Some advantages of the systematic review are given in Box 9.1. Experts, who have been steeped in a subject for years and know what the answer ‘ought’ to be, were once shown to be significantly less able to produce an objective review of the literature in their subject than non-experts [4].

Index absolute risk reduction (ARR) absolutism absorptive capacity (organisations) academic detailing accessible standards ‘accountability culture’ accuracy ACP PIER additional risk adult learning advertising, DTCA advice for patients AGREE instrument allocation concealment, CONSORT checklist analysis of variance anecdotes DTCA anti-inflammatory drugs, non-steroidal anticoagulant therapy applicability clinical guidelines appraisal, critical, see critical appraisal ARR (absolute risk reduction) aspirin, meta-analyses assessment ‘blind’ clinical guidelines methodological quality needs assumptions, unquestioned avoidable suffering baseline data, CONSORT checklist baseline differences behavioural learning bias expectation selection systematic work-up (verification) biological markers of disease ‘blind’ assessment blinding, CONSORT checklist blobbogram, see forest plot bluffing, deliberate boundaries fuzzy organisational break-even point browsing, informal Caesarean section, see induced delivery CardioSource care, quality of care pathways, integrated (critical) case systematic bias case reports case studies ‘caseness’ causation tests for CBT (cognitive behaviour therapy) Centre for Evidence-Based Medicine (CEBM) CHAIN (Contact, Help, Advice and Information Network) ‘champions’ cheating with statistical tests checklist CONSORT context-sensitive QADAS systematic reviews data sources choice, informed cholesterol hypercholesterolaemia Cinderella conditions citation chaining classical management theory clinical applicability clinical decision-making clinical disagreement clinical evidence clinical freedom clinical guidelines implementation clinical heterogeneity clinical prediction rules ‘clinical queries’ clinical questions clinical trials non-randomised controlled RCT, see randomised controlled trials CME (continuing medical education) Cochrane, Archie Cochrane Collaboration Cochrane EPOC, see EPOC group cognitive behaviour therapy (CBT) cohort studies systematic bias collection of data collective knowledge common sense comparable groups COMPASEN format completeness of follow-up complex interventions complexity theory confidence intervals diagnostic tests conflict of interest consistency CONSORT statement RCTs Contact, Help, Advice and Information Network (CHAIN) context context-sensitive checklist context-specific psychological antecedents quality improvement case studies receptive context for change continuing medical education (CME) continuous results control group controlled clinical trials, non-randomised controlled trials, randomised, see randomised controlled trials correlation correlation coefficient Pearson cost analysis cost cost-minimisation ‘cost per case’ counting-and-measuring perspective covariables criteria, stringent critical appraisal pre-appraised sources qualitative papers critical care pathways cross-sectional surveys cumulative meta-analyses current practice cut-off point DALY (disability-adjusted life year) data baseline collection dredging paired pooled skewed databases DARE EPOC primary studies systematic reviews TRIP see also sources, resources decision-making evidence-based evidence-based practice shared therapy deduction deep venous thrombosis (DVT) deliberate bluffing delivery, induced design complex interventions RCT research studies ‘detailers’ detailing, academic diabetes qualitative research shared decision-making yoga control diagnosis diagnostic sequence diagnostic tests validation ‘dice therapy’ dichotomy qualitative direct costs direct-to-consumer-advertising (DTCA) disability-adjusted life year (DALY) disagreement, clinical discourse analysis ‘doing nothing’ Donald, Anna ‘dose dredging, data ‘drug reps’ drug treatments drugs, see also therapy, treatments duration of follow-up DVT (deep venous thrombosis) DynaMed EBM, see evidence-based medicine economic analyses editorial independence education for patients educational intervention, specific effective searching efficacy analysis eligibility criteria embodied knowledge endpoints, surrogate epilepsy EPOC Group ethical considerations drug trials QALYs RCTs ethnography Evans, Grimley evidence application on patients formalisation hierarchy of level of ‘methodologically robust’ evidence-based decision-making evidence-based guidelines evidence-based medicine (EBM) criticisms essential steps reading papers web-based resources ‘evidence-based organisation’ evidence-based policymaking evidence-based practice expectation bias ‘expert opinion’ harmful practices explanation of results surrogate endpoints explanatory variables explicit methods explicit standards external validity ‘eXtra’ material Eysenck, Hans F-test falsifiable hypotheses federated search engines ‘female hypoactive sexual desire’ focus groups focusing, progressive follow-up forest plot formalisation of evidence formulation of problems freedom, clinical fuzzy boundaries ‘geeks’ general health questionnaire, SF-36 general psychological antecedents generalisability CONSORT checklist GIDEON (Global Infectious Diseases and Epidemiology Network) GIGO (garbage in, garbage out) GOBSAT (good old boys sat around a table) ‘gold standard’ test good clinical questions Google Scholar Grimshaw, Jeremy Grol, Richard group relations theory groups comparable focus subgroups guidelines as formalised evidence implementation practice SQUIRE guiding principles Guyatt, Gordon hands-on information hanging comparative harmful practices ‘expert opinion’ health professionals evidence-based practice shared decision-making health-related lifestyle Helman, Cecil ‘here and now’ heterogeneity hierarchy of evidence pharmaceutical industry traditional histogram holistic perspective human factor human resources HYE (Healthy Years Equivalent) hypercholesterolaemia ‘hypoactive sexual desire’, female hypothesis, null ‘illness scripts’ implementation clinical guidelines guidelines IMRAD format inadequate optimisation inception cohort incremental cost independence, editorial indirect costs individualised approaches induced delivery inductive reasoning industry, pharmaceutical, see pharmaceutical industry infertility informal browsing information ‘jungle’ information needs informed choice ‘informed consent’ intangible costs integrated care pathways ‘integrated’ EBM teaching inter-rater reliability internet-accessible format interventions complex CONSORT checklist cost analysis effect of meta-analyses organisational simple specific educational interview qualitative research see also questionnaire invited review items (questionnaire) iterative approach journalistic review ‘jungle’, information Kappa score knowledge, collective knowledge managers laboratory experiments learning organisation least-squares methods ‘length of stay’ level of evidence lifestyle, health-related likelihood ratio nomogram literature searching long-term effects longitudinal survey looking for answers ‘lumpers and splitters’ mammogram management theory, classical Marinker, Marshall marketing masking, see blinding Maskrey, Neal McMaster Health Utilities Index Questionnaire mean inhibitory concentration (MIC) mean (statistical) measurements mechanistic approach mediator/moderator effect medicine evidence-based, see evidence-based medicine ‘narrative-based’ Medline systematic reviews meta-analyses aspirin interventions methodological quality assessment problematic descriptions systematic reviews ‘methodologically robust’ evidence mixed method case study motorcycle maintenance multiple interacting components n of 1 trial ‘narrative-based medicine’ narrative interview NAHA (National Association of Health Authorities and Trusts) National Guideline Clearinghouse needs assessment negative predictive value ‘negative’ trials neonatal respiratory distress syndrome NICE (National Institute for Health and Care Excellence) NNT (number needed to treat) nomogram, likelihood ratio non-diseases non-medical factors non-medical treatments non-normal data, see skewed data non-parametric tests non-randomised controlled clinical trials non-significant results, relevant non-steroidal anti-inflammatory drug (NSAID) normal distribution ‘normal range’ normative orientation Nottingham Health Profile null hypothesis 30 objective of treatment one-stop shopping online material online tutorials, effective searching operational orientation opinion leader opportunity samples, questionnaire research option grids organisation, evidence-based organisational boundaries organisational case studies organisational interventions original studies original study protocol CONSORT checklist OSIRIS patient trial other-language studies outcome measures ‘outcomes research’ outliers p-value paired data papers economic analyses guidelines meta-analyses methodological quality qualitative research quality improvement case studies questionnaire research reading rejection systematic reviews ‘trashing’ participants qualitative research spectrum of patient-reported outcome measures (PROMs) patients advice or education for evidence application patient’s perspective ‘typical’ viewpoint withdrawal from studies Pearson correlation coefficient peer review per-protocol analysis personal digital assistants (PDAs) personal experiences perspective counting-and-measuring holistic patient’s researcher’s pharmaceutical industry evidence-based practice ‘grey literature’ pharmacokinetic measurements pharmacotherapy (PHA), see drug treatments philosophical-normative orientation PIER, see ACP PIER pilot trial piloting, questionnaire research ‘placebo’ effect clinical research studies methodological quality point-of-care resources policymaking evidence-based pooled data populations cohort studies guidelines qualitative research questionnaire research sub- positive predictive value post-test probability postal questionnaire practical-operational orientation practice, evidence-based practice guidelines pre-appraised sources pre-test probability precision prediction rules, clinical preliminary statistical questions prenatal steroid treatment press cutting prevalence primary studies PRISMA statement probability pre-/post-test problem formulation process evaluation professional behaviour prognosis progressive focusing PROMs (patient-reported outcome measures) prostate-specific antigen (PSA) test protocols original study protocol per-protocol analysis protocol-driven approach Psychiatry Online psychological antecedents, context-specific psychometric studies psychometric validity PubMed purposive sample Q-TWIST QADAS (Quality in Diagnostic and Screening tests) checklist QALY (quality-adjusted life year) QOF (Quality and Outcomes Framework) qualitative research quality methodological trial design quality improvement case studies quality improvement cycle ‘quality of care’ quality of life PROMs ‘queries’, clinical questionnaire ‘questionnaire mugger’ questionnaire research SF-36 general health questions good clinical preliminary statistical QUORUM statement quota sampling frame r-value random samples, questionnaire research randomised controlled trials (RCTs) checklist CONSORT statement cumulative meta-analyses hierarchy of evidence systematic bias rating scale measurements reading papers ‘real-life’ circumstances receptive context for change recruitment dates, CONSORT checklist reflexivity regression (statistical) rejection, papers relevant non-significant results reliability, inter-rater reporting format, structured reports, case reproducible tests research design ‘outcomes’ qualitative questionnaire research question researcher’s perspective secondary resources, Point-of-care respiratory distress syndrome, neonatal response rate retrospective subgroup analysis reviews clinical guidelines peer systematic Richard, Cliff risk, additional risk risk difference, see absolute risk reduction role preference safety improvement case studies sample size CONSORT checklist sciatica scientific jargon screening mammogram tests SD (standard deviation) search engines, federated searching effective literature secondary research clinical guidelines selection bias semi-structured interview sensitivity sensitivity analysis sequence generation, CONSORT checklist SF-36 general health questionnaire shared decision-making significance, statistical simple interventions skewed data snowball samples, questionnaire research social cognition social movement ‘social stigma’ ‘soft’ science Someren, Van sources pre-appraised synthesised specialised resources specific educational intervention specificity spectrum of participants ‘splitters and lumpers’ sponsors and stakeholders SQUIRE guidelines stages of change models stakeholders standard current practice standard deviation (SD) standard gamble measurements standardisation standards, explicit and accessible statin therapy statistical questions, preliminary statistical significance statistical tests appropriate evaluation statistics STEP (safety, tolerability, efficacy, price) steroid treatment, prenatal stratified random samples stringent criteria stroke anticoagulants meta-analyses methodological quality structured reporting format studies case cohort design in-/exclusion of participants organisational case original protocol other-language ‘patients’ primary process evaluation psychometric research question (un)original validation withdrawal of patients subgroups, complex interventions retrospective analysis subjective judgements subpopulations surfactant treatment surrogate endpoints surveys cross-sectional literature longitudinal Swinglehurst, Deborah synopses synthesised sources systematic bias systematic reviews databases evaluation evidence-based practice systematically skewed samples t-test table, two-by-two tails target population target variable X2-test tests diagnostic ‘gold standard’ non-parametric PSA reproducible screening statistical theoretical sampling therapy anticoagulant CBT decision-making ‘dice’ NSAID statin see also treatments therapy studies, trial design thrombosis, DVT time trade-off measurements traditional hierarchy of evidence transferable results ‘trashing’ papers Treasury’s viewpoint treatments drug non-medical objective of prenatal steroid see also therapy trials design n of ‘negative’ non-randomised controlled clinical pilot randomised controlled, see randomised controlled trials triangulation TRIP tutorials, online TWIST two-by-two table ‘typical’ patients underfunding ‘unoriginal’ studies unquestioned assumptions validation clinical guidelines diagnostic tests validity external psychometric variables explanatory statistical regression verification bias viewpoint of economic analyses ‘washout’ periods web-based resources, EBM Whole Systems Demonstrator work-up bias WTP/WTA (Willingness to Pay/Accept)


pages: 128 words: 35,958

Getting Back to Full Employment: A Better Bargain for Working People by Dean Baker, Jared Bernstein

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, Asian financial crisis, collective bargaining, declining real wages, full employment, George Akerlof, income inequality, inflation targeting, mass immigration, minimum wage unemployment, new economy, price stability, publication bias, quantitative easing, Report Card for America’s Infrastructure, rising living standards, selection bias, War on Poverty

“A Rising Natural Rate of Unemployment: Transitory or Permanent.” Working Paper No. 2011-05. San Francisco: Federal Reserve Bank of San Francisco. http://www.frbsf.org/economic-research/files/wp11-05bk.pdf Davis, Steven J., R. Jason Faberman, and John C. Haltiwanger. 2013. “The Establishment-Level Behavior of Vacancies and Hiring.” Quarterly Journal of Economics, Vol. 128, No. 2, pp. 581-622. Doucouliagos, Hristos, and T. D. Stanley. 2009. “Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis.” British Journal of Industrial Relations, Vol. 47, No 2, pp. 406-28. Feldstein, Martin. 1997. “The Costs and Benefits of Going From Low Inflation to Price Stability.” In Christina D. Romer and David H. Romer, eds., Reducing Inflation: Motivation and Strategy (Chicago: University of Chicago Press). http://www.nber.org/chapters/c8883.pdf Fischer, Stanley. 1981.


pages: 436 words: 141,321

Reinventing Organizations: A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness by Frederic Laloux, Ken Wilber

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Albert Einstein, augmented reality, blue-collar work, Buckminster Fuller, call centre, carbon footprint, conceptual framework, corporate social responsibility, crowdsourcing, failed state, future of work, hiring and firing, index card, interchangeable parts, invisible hand, job satisfaction, Johann Wolfgang von Goethe, Kenneth Rogoff, meta analysis, meta-analysis, pattern recognition, post-industrial society, quantitative trading / quantitative finance, randomized controlled trial, selection bias, shareholder value, Silicon Valley, the market place, the scientific method, Tony Hsieh, zero-sum game

Firms of Endearment: How World-Class Companies Profit from Passion and Purpose?came to similar conclusions in 2007. The “firms of endearment” studied by the authors obtained a cumulative return to shareholders of 1,025 percent over the 10 years leading up to the research, as compared to 122 percent for the S&P 500. From a methodological point of view, these results should be taken with a grain of salt. There is an obvious selection bias, as only exceptional companies that one would expect to outperform their peers were handpicked into the sample. The benchmark of the S&P 500 wasn’t adjusted for industry, size, or other criteria. Furthermore, criteria other than the organization model, such as patents, innovative business models, and asset utilizations that could explain the superior result, were not filtered out. Raj Sisodia’s latest book, written with John Mackey, has a whole chapter with references of similar studies to which interested readers can refer.

., 208. 134 Deborah Boyar, “Living Holacracy: The Tip of the Iceberg,” blog post, August 12, 2012, http://holacracy.org/blog/living-holacracy-the-tip-of-the-iceberg, accessed August 22, 2013. Chapter 3.3: Transforming an existing organization 135 Bakke, Joy at Work, 176-177. 136 Zobrist, La belle histoire de FAVI, 38. 137 Anthony S. Bryk and Barbara Schneider, Trust in Schools: A Core Resource for School Reform (New York : Russell Sage Foundation, 2002). Chapter 3.4: Results 138 Of course, we should be careful about the possibility of a selection bias. While I have researched all the organizations I have found that corresponded to the research criteria (more than 100 employees, operating for at least five years on principles and practices inspired to some significant degree by the Evolutionary-Teal paradigm), it could well be that only particularly success-ful organizations caught my attention. 139 For instance A. J. E. de Veer, H. E. Brandt, F.


pages: 506 words: 152,049

The Extended Phenotype: The Long Reach of the Gene by Richard Dawkins

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Alfred Russel Wallace, assortative mating, Douglas Hofstadter, Drosophila, epigenetics, Gödel, Escher, Bach, impulse control, Menlo Park, Necker cube, p-value, phenotype, quantitative trading / quantitative finance, selection bias, stem cell

If, on the other hand, the difference in survival consequences between a putative replicator and its alleles is almost negligible, the replicators under discussion would have to be quite small if the difference in their survival values is to make itself felt. This is the rationale behind Williams’s (1966, p. 25) definition: ‘In evolutionary theory, a gene could be defined as any hereditary information for which there is a favorable or unfavorable selection bias equal to several or many times its rate of endogenous change.’ The possibility of strong linkage disequilibrium (Clegg 1978) does not weaken the case. It simply increases the size of the chunk of genome that we can usefully treat as a replicator. If, which seems doubtful, linkage disequilibrium is so strong that populations contain ‘only a few gametic types’ (Lewontin 1974, p. 312), the effective replicator will be a very large chunk of DNA.

May be defined in different ways for different purposes (see page 85). Molecular biologists usually employ it in the sense of cistron (q.v.). Population biologists sometimes use it in a more abstract sense. Following Williams (1966, p. 24), I sometimes use the term gene to mean ‘that which segregates and recombines with appreciable frequency’, and (p. 25) as ‘any hereditary information for which there is a favorable or unfavorable selection bias equal to several or many times its rate of endogenous change’. gene-pool The whole set of genes in a breeding population. The metaphor on which the term is based is a happy one for this book, for it de-emphasizes the undeniable fact that genes actually go about in discrete bodies, and emphasizes the idea of genes flowing about the world like a liquid. genetic drift Changes in gene frequencies over generations, resulting from chance rather than selection.


pages: 410 words: 114,005

Black Box Thinking: Why Most People Never Learn From Their Mistakes--But Some Do by Matthew Syed

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Airbus A320, Alfred Russel Wallace, Arthur Eddington, Atul Gawande, Black Swan, British Empire, call centre, Captain Sullenberger Hudson, Checklist Manifesto, cognitive bias, cognitive dissonance, conceptual framework, corporate governance, creative destruction, credit crunch, crew resource management, deliberate practice, double helix, epigenetics, fear of failure, fundamental attribution error, Henri Poincaré, hindsight bias, Isaac Newton, iterative process, James Dyson, James Hargreaves, James Watt: steam engine, Joseph Schumpeter, Lean Startup, mandatory minimum, meta analysis, meta-analysis, minimum viable product, publication bias, quantitative easing, randomized controlled trial, selection bias, Silicon Valley, six sigma, spinning jenny, Steve Jobs, the scientific method, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Toyota Production System, US Airways Flight 1549, Wall-E, Yom Kippur War

Those who didn’t respond were entirely absent from the data. Consider how that might have distorted the result. It is possible that only the parents of children whose behavior improved bothered to respond. Parents whose kids continued to behave badly might have thrown the questionnaire in the bin, or at least responded in fewer numbers. This could have skewed the stats beyond recognition. This is a type of so-called “selection bias” and it should sound familiar. It is pretty much the same problem that bedeviled medieval medicine when only those who recovered from bloodletting were able to testify to its effectiveness. The evidence sounded terrific but that is because it was dangerously incomplete. Those who did not recover from bloodletting were never given a chance to express an opinion. Why? Because they were already dead.

20 Years Later (documentary), 159 Scared Straight program, 150–54, 159–67 Campbell Corporation’s systematic review of, 164–65 Finnckenauer’s randomized control trial (RCT) of, 160, 162–64 Scheck, Barry, 67, 68, 70, 77, 78, 80, 82, 84, 85, 117 Schulz, Kathryn, 78–79, 81 Schumpeter, Joseph, 130 science, 41–45, 48 ancient Greeks and, 278–79 Bacon’s criticism of medieval, 279–80, 283 failure and, 266 history of, 277–82 Lysenko and, 108–10 method and mindset of, 51–52 scurvy, 56 second victim, 239 selection bias, 161–62 self-esteem, 74, 75–76, 82, 90, 97, 98, 101, 274 self-handicapping, 272–74 self-justification, 18, 87, 88–89, 90, 97–99 and Iraq War decisions, 92–93 Shapiro, Arnold, 153, 166 Shepherd-Barron, John, 196 Shirley, Michael, 69 Shoemaker, Paul, 102 Shoesmith, Sharon, 236, 239 signatures, 11, 18, 24, 52 Simeone, Diego, 274 Simons, Daniel, 117 Sims, Peter, 139–40, 144 Singer, Paul, 95 Skiles, Jeffrey, 38, 39 Slemmer, Mike, 138–40 soccer, 135–36, 253–55, 274–76, 289–90 social hierarchies, as inhibiting assertiveness, 28–29 Social Science and Medical Journal, 89 social tolerance, 285 social workers, 236–38, 239 social world, 283–87 Socrates, 278 software design, 138–40 South Korean ferry disaster, 12 Soyfer, Valery, 109 speed-eating, 187–88 Spelling Bees, 263 Speziale, Angelo, 165–67 sports, 132n, 135–36, 266, 289–90.


pages: 209 words: 63,649

The Purpose Economy: How Your Desire for Impact, Personal Growth and Community Is Changing the World by Aaron Hurst

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3D printing, Airbnb, Atul Gawande, barriers to entry, big-box store, business process, call centre, carbon footprint, citizen journalism, commoditize, corporate social responsibility, crowdsourcing, disintermediation, Elon Musk, Firefox, glass ceiling, greed is good, housing crisis, informal economy, Jane Jacobs, jimmy wales, Khan Academy, Kickstarter, Lean Startup, means of production, new economy, pattern recognition, Peter Singer: altruism, Peter Thiel, QR code, Ray Oldenburg, remote working, Richard Feynman, Ronald Reagan, selection bias, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, TaskRabbit, Tony Hsieh, too big to fail, underbanked, women in the workforce, young professional, Zipcar

In founding Lenddo, he not only saw the opportunity to create a more sustainable and sane form of banking, but also to serve the 2 billion people around the world who are currently “under-banked.” The future of personal and small business finance is social. By making banking social again and using technology to make it efficient, we can not only boost demand, but also increase the efficiency and reliability of underwriting and collections. By involving the community in deciding who gets a loan, it creates a selection bias, as people are more self-aware about the debt they should be taking on when it is transparent to their community. And when people’s repayments impact the ability of their friends and family to borrow, they are much more likely to make their payments. Lenddo now focuses on lending to the middle class in developing countries, a population that is under-banked but also lives in regions with flexible government regulations that enable the innovation.


pages: 190 words: 53,409

Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, attribution theory, availability heuristic, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, carried interest, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, en.wikipedia.org, endowment effect, experimental subject, framing effect, full employment, hindsight bias, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, invisible hand, labor-force participation, labour mobility, lake wobegon effect, loss aversion, minimum wage unemployment, Network effects, Paul Samuelson, Report Card for America’s Infrastructure, Richard Thaler, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Rory Sutherland, selection bias, side project, sovereign wealth fund, Steve Jobs, The Wealth of Nations by Adam Smith, Tim Cook: Apple, ultimatum game, Vincenzo Peruggia: Mona Lisa, winner-take-all economy

Gavin Weightman, The Frozen Water Trade, New York: Hyperion, 2003. 15. Gladwell, Outliers, chap. 1. 16. Some authors have suggested that the success of players born earlier in the year results less from the fact that they are actually better than from the fact that NHL teams perceive them as better. See, for example, Robert O. Deaner, Aaron Lowen, and Stephen Cobley, “Born at the Wrong Time: Selection Bias in the NHL Draft,” PLOS One, February 27, 2013, http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0057753. But even if this is true, Gladwell’s claim still holds that an aspiring hockey star is lucky to have been born earlier in the year. 17. Elizabeth Dhuey and Stephen Lipscomb, “What Makes a Leader? Relative Age and High School Leadership,” Economics of Education Review 27 (2008): 173–83. 18.


pages: 209 words: 13,138

Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck

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Alvin Roth, barriers to entry, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, price discovery process, price discrimination, quantitative trading / quantitative finance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game

Additionally, execution costs might be regressed against characteristics of the stock, market conditions, and/or the order. The results might then be used to guide customers in directing their orders and other aspects of trading strategy. One might, for example, use regression estimates to project the execution cost of a contemplated order strategy. Although these sorts of analyses are sensible first steps, they are based on samples that are generated with a selection bias. The source of this bias lies in the decisions of the traders who submitted the orders. Corrections to deal with this bias have been implemented by Madhavan and Cheng (1997) and Bessembinder (2004). 15 Prospective Trading Costs and Execution Strategies In this chapter we discuss minimization of expected implementation cost in two stylized dynamic trading problems. Both analyses are set in discrete time, and in each instance a trader must achieve a purchase by a deadline.


pages: 254 words: 72,929

The Age of the Infovore: Succeeding in the Information Economy by Tyler Cowen

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Albert Einstein, Asperger Syndrome, Cass Sunstein, cognitive bias, David Brooks, en.wikipedia.org, endowment effect, Flynn Effect, framing effect, Google Earth, impulse control, informal economy, Isaac Newton, loss aversion, Marshall McLuhan, Naomi Klein, neurotypical, new economy, Nicholas Carr, pattern recognition, phenotype, placebo effect, Richard Thaler, selection bias, Silicon Valley, the medium is the message, The Wealth of Nations by Adam Smith, theory of mind

To date Vernon is probably the highest-status person to make such a public admission. For the most part it fell upon a stony silence and many people don’t believe that someone as successful as Vernon could possibly be autistic. Often outsiders don’t see the cognitive strengths along the autism spectrum because they focus excessively on what is highly or easily visible. Autism in the modern world is often about “diagnosis” and “treatment,” and that creates a selection bias. Medical professionals control the familiar definitions of autism and they meet those people or parents who come to them for help. It’s no surprise that these people and their doctors are focused on life problems. At the same time, many of the autistics with relatively high social status don’t want to affiliate with the concept or, more frequently, they are genuinely unaware that they might qualify as autistic in some manner.


pages: 221 words: 64,080

Different: Escaping the Competitive Herd by Youngme Moon

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AltaVista, Atul Gawande, commoditize, creative destruction, Richard Feynman, Richard Feynman, Saturday Night Live, selection bias, The Wisdom of Crowds, Thorstein Veblen, young professional

And in the process, they are attempting to bring to life a counterfactual, which, if you think about it, is either crazy or quixotic or both. On the other hand, this is why I believe these brands are deserving of study: Because they are, at the very least, trying to play the story forward in a different way. They are trying to envision the market through the lens of alternative future possibility. Of course, the problem with pointing to certain brands as positive examples of anything is that there is an obvious selection bias. Great brands are experiential and personal, which means that the only legitimate arbiter of whether a brand is great is anyone who happens to experience it. Put another way, I’m no more an expert on what makes a brand praiseworthy than you are, and it would be hubris for me to presume otherwise. But keep in mind my objective here. My intention is to start a conversation—not only about what it means to differentiate in this day and age, but about what it means to offer a group of jaded, cynical, bored citizens something that they wil in some way regard as special.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

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activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, light touch regulation, London Whale, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

Maybe they are some of the ones who have been weeded out?’ Criticism of this sort appeared under virtually every interview, always from people presenting themselves as insiders and often accompanied by the suggestion that the blog was a cheap attempt by the Guardian to score points with lefty readers. Obviously, I was concerned about the reliability and representativeness of the sort of people who risk their job for an interview – ‘selection bias’ in social science-speak. Whether interviewees were who they said they were was quite easy to check on social media such as LinkedIn. Verifying their stories was a different matter, frustratingly, because I was not allowed to observe anyone working in the banks. However, the most important things in their stories could be substantiated: the existence of caveat emptor, zero job security, the dangerous logic of ‘too big to fail’ and the implications and pressures of a listing on the stock exchange.


pages: 211 words: 69,380

The Antidote: Happiness for People Who Can't Stand Positive Thinking by Oliver Burkeman

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experimental subject, fear of failure, Kibera, Lao Tzu, meta analysis, meta-analysis, Mikhail Gorbachev, science of happiness, selection bias, Steve Jobs, traveling salesman, World Values Survey

Steven Pritzker and Mark Runco (Waltham, Massachusetts: Academic Press, 1999): 1379-84; available at utsc.utoronto.ca/~dunbarlab/pubpdfs/DunbarCreativityEncyc99.pdf ‘If you’re a scientist and you’re doing an experiment’: From a PopTech conference talk by Kevin Dunbar, ‘Kevin Dunbar on Unexpected Science’, accessible online at poptech.org/popcasts/kevin_dunbar_on_unexpected_science As he told the neuroscience writer Jonah Lehrer: See Jonah Lehrer, ‘Accept Defeat: The Neuroscience of Screwing Up’, Wired, January 2010. ‘Think about it’: All quotations from Jerker Denrell are from my interview with him or from Jerker Denrell, ‘Vicarious Learning, Undersampling of Failure, and the Myths of Management’, Organization Science 2003 (14): 227-43; and Jerker Denrell, ‘Selection Bias and the Perils of Benchmarking’, Harvard Business Review, April 2005. research into media commentators who make predictions: Jerker Denrell and Christina Fang, ‘Predicting the Next Big Thing: Success as a Signal of Poor Judgment’, Management Science 56 (2010): 1653-67; see also Joe Keohane, ‘That Guy Who Called the Big One? Don’t Listen to Him’, Boston Globe, 9 January 2011. ‘The Dome has a clear brand’: Ros Coward, ‘Wonderful, Foolish Dome’, Guardian, 12 March 2001.


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 process, carried interest, digital map, discounted cash flows, hiring and firing, Jeff Bezos, Marc Andreessen, Mark Zuckerberg, Menlo Park, moveable type in China, pattern recognition, Paul Graham, performance metric, Peter Thiel, pets.com, risk tolerance, rolodex, Ronald Reagan, Sand Hill Road, selection bias, shareholder value, Silicon Valley, Skype, software as a service, sovereign wealth fund, Steve Jobs, technology bubble, The Wisdom of Crowds

It will mean lower rates of return for limited partners, as time is the enemy of all illiquid investments. But it should result in creating more sustainable, valuable, and important companies at the end of the development cycle. Venture-backed start-ups have something magic about them. Whether it’s because of the discipline that an outside investor imposes on a start-up, the value and experience that VCs bring to the table, or simply a selection bias, venture-backed start-ups outperform all other forms of entrepreneurial ventures. “With forty or fifty years of venture capital investing, why are these companies still growing jobs at twice the rate of the other members of the private sector?” asks Polaris’s McGuire. “You have to go back to the core. We back great people. Combine that with smart, patient, and experienced capital. When you put those two forces together, you have this enormous engine for growth.


pages: 1,016 words: 283,960

Aftermath: Following the Bloodshed of America's Wars in the Muslim World by Nir Rosen

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Ayatollah Khomeini, failed state, glass ceiling, Google Earth, liberal capitalism, Parag Khanna, selection bias, unemployed young men, urban sprawl, éminence grise

The American military and policy establishments were institutionally incapable of doing COIN. They lacked the curiosity to understand other cultures and the empathy to understand what motivated other people. In the military in particular, Afghans were still viewed as “hajjis.” Alternative viewpoints were not considered. Many journalists failed to understand that when you’re with the military you’re changing your selection bias. By showing up with the white guys with guns, you are eliminating all the people who don’t want to talk to the military, or talking to those who have an interest in engaging the foreign occupier. Regular people won’t relate to you in a natural or honest way. For the U.S. military, seeing something from a reporter’s or Afghan’s perspective is an exception. Even the media were perceived as the enemy.

McCain, John McChrystal, Stanley McCollough, William McDonalds McFarland, Sean McGurk, Brett McKiernan, David McMullen, Chris Mecca Media in Afghanistan Arab, resentment toward and the battle of Nahr al-Barid camp and the COIN manual conduct of the embedding with the American military, criticism of freedom of the, issue of holed up in Lebanon importance of the, realizing the kidnapping involving the killing of a member of the Lebanese, blaming the local Lebanese attitude towards perceived as the enemy Saudis use of the and selection bias and the surge U.S., focus of the, since the beginning of the occupation, issue with Media blackout Medical City Medina al-Meis, Khalil Meshal, Khalid Mesopotamia, capture of Mexico Middle East euphemism for American-backed militias in the failed U.S. policies in, effect of identity politics in the, resurgence of impact on the largest refugee crisis in the perceived Jewish and Zionist strategy in the perception of Al Qaeda and Americans in the Shiite vs.

See Abu Risha, Sheikh Sattar Satterfield, David Saudi Arabia and Afghanistan and Al Qaeda aligning with Jordan apprehension of and Fatah al-Islam ignoring involvement of interference and money from, effect of and Lebanon and the March 14 coalition regional rivalry between Iran and sectarianism in Saudi proxies Sayyaf, Abdul Rasul al-Sayyid, Ridwan Schools ban on attending religious, in Pakistan teaching jihad ideas in Schwarzenegger, Arnold Secret prisons Sectarian cleansing See also Iraqi civil war Sectarianism artificial, in Lebanon and Basra blaming Americans for continued slaughter due to, aspects of the degree of, diminished descent into dividing the militias, effect of in the Education Ministry in Egypt elections that enshrined frustration over, potential for continued in the government history of and identity politics of the Iraqi Security Forces and Jordan and Lebanon as more covert overt, receding of perceptions based on in the police force provoking in the regional, possibility of regional, rise in rise in and Saddam sign of shift away from during the surge Syria and in universities towards students U.S. occupation promoting See also specific geographical areas Sects, religious. See specific sects Secure Plus security company Seidiya Guard Selection bias Sepp, Kalev September 11 attacks Sermons, impact of Shaab Shab-e-Barat holiday Shah of Iran al-Shahal, Sheikh Dai al-Islam Shallaq, Fadil Sham See also Jund al-Sham (Soldiers of Sham/Levant) al-Shami, Abu Anas Shanshal, Falah Hassan Shaqis, recruitment of Sharikat al-Sadr (Rays of Sadr) newspaper al-Sharman, Muhamad Mahmud Sharon, Ariel Sharqiya television Shatila refugee camp Shawish, Zuheir Shawkat, Asef Shehab, Fouad al-Sheikh, Fattah “Shiite crescent,” Shiite Hizballah-Iranian model Shiite House Shiite militias accusations against in Amriya cease-fire of depending on Al Qaeda for protection from and ease of integration into the ISF Hizballah training, media accusation of linked to Iraqi Security Forces other targets of and the road to civil war treatment of Palestinians See also specific militia groups and leaders Shiite mosques See also specific mosques Shiite pilgrims Shiite Political Council Shiite revival Shiite shrines See also specific shrines “Shiite south” label Shiites actual representation of Sunnis and American perception of beliefs held by common epithet involving divided, and U.S. strategic interests empowerment of failed uprising against Saddam by in the first outbreaks of civil war as the first target of AQI important holidays of moderate, losing and mosque attendance new Saddam of the periphery vs. center preferred burial site for reported missing on the Internet Salafi view of secular as the winners Zarqawi’s warning to See also specific Shiite leaders/people and organizations Shiite-Sunni conflict/violence.


pages: 936 words: 252,313

Good Calories, Bad Calories: Challenging the Conventional Wisdom on Diet, Weight Control, and Disease by Gary Taubes

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Albert Einstein, California gold rush, cognitive dissonance, collaborative editing, Drosophila, Everything should be made as simple as possible, experimental subject, Gary Taubes, invention of agriculture, John Snow's cholera map, meta analysis, meta-analysis, phenotype, placebo effect, Ralph Nader, randomized controlled trial, Richard Feynman, Richard Feynman, Robert Gordon, selection bias, the scientific method, Thomas Kuhn: the structure of scientific revolutions, unbiased observer, Upton Sinclair

This is why the practice of science requires an exquisite balance between a fierce ambition to discover the truth and a ruthless skepticism toward your own work. This, too, is the ideal albeit not the reality, of research in medicine and public health. In 1957, Keys insisted that “each new research adds detail, reduces areas of uncertainty, and, so far, provides further reason to believe” his hypothesis. This is known technically as selection bias or confirmation bias; it would be applied often in the dietary-fat controversy. The fact, for instance, that Japanese men who lived in Japan had low blood-cholesterol levels and low levels of heart disease was taken as a confirmation of Keys’s hypothesis, as was the fact that Japanese men in California had higher cholesterol levels and higher rates of heart disease. That Japanese men in California who had very low cholesterol levels still had more heart disease than their counterparts living in Japan with similarly low cholesterol was considered largely irrelevant.

If Keys’s hypothesis was incorrect, it was only the negative evidence that could direct investigators to the correct explanation. By the 1970s, it was as if the two sides had lived through two entirely different decades of research. They could not agree on the dietary-fat hypothesis; they could barely discuss it, as Henry Blackburn had noted, because they were seeing two dramatically different bodies of evidence. Another revealing example of selection bias was the reanalysis of a study begun in 1957 on fifty-four hundred male employees of the Western Electric Company. The original investigators, led by the Chicago cardiologist Oglesby Paul, had given them extensive physical exams and come to what they called a “reasonable approximation of the truth” of what and how much each of these men ate. After four years, eighty-eight of the men had developed symptoms of coronary heart disease.


pages: 846 words: 232,630

Darwin's Dangerous Idea: Evolution and the Meanings of Life by Daniel C. Dennett

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Albert Einstein, Alfred Russel Wallace, anthropic principle, assortative mating, buy low sell high, cellular automata, combinatorial explosion, complexity theory, computer age, conceptual framework, Conway's Game of Life, Danny Hillis, double helix, Douglas Hofstadter, Drosophila, finite state, Gödel, Escher, Bach, In Cold Blood by Truman Capote, invention of writing, Isaac Newton, Johann Wolfgang von Goethe, John von Neumann, Murray Gell-Mann, New Journalism, non-fiction novel, Peter Singer: altruism, phenotype, price mechanism, prisoner's dilemma, QWERTY keyboard, random walk, Richard Feynman, Richard Feynman, Rodney Brooks, Schrödinger's Cat, selection bias, Stephen Hawking, Steven Pinker, strong AI, the scientific method, theory of mind, Thomas Malthus, Turing machine, Turing test

Hume's Philo toyed with this idea, as we saw in chapter 1: And what surprise must we entertain, when we find him a stupid mechanic, who imitated others, and copied an art, which, through a long succession of ages, after multiplied trials, mistakes, corrections, deliberations, and controversies, had been gradually improving? Many worlds might have been botched and bungled, throughout an eternity, ere this system was struck out: Much labour lost: Many fruitless trials made: And a slow, but continued improvement carried on during infinite ages of world-making. [Pt. V.] Hume imputes the "continued improvement" to the minimal selective bias of a "stupid mechanic," but we can replace the stupid mechanic with something even stupider without dissipating the lifting power: a purely algorithmic Darwinian process of world-trying. Though Hume obviously didn't think this was anything but an amusing philosophical fantasy, the idea has recently been developed in some detail by the physicist Lee Smolin (1992). The basic idea is that the singularities known as black holes are in effect the birthplaces of offspring universes, in which the fundamental physical constants would differ slightly, in random ways, from the physical constants in the parent universe.

But as we have already seen, it is a mistake to identify genes with their vehicles in DNA. The idea that evolution is an algorithmic process is the idea that it must have a useful description in substrate-neutral terms. As George Williams proposed many years ago (1966, p. 25): "In evolutionary theory, a gene could be defined as any hereditary information [emphasis added] for which there is favorable or unfavorable selection bias equal to several or many times its rate of endogenous change." The importance of the separation between information and vehicle is even easier to discern in the case of memes.5 The obvious problem noted by all is that it is very unlikely — but not quite impossible — that there is a uniform "brain language" in which information is stored in different human brains, and this makes brains very different from chromosomes.


pages: 400 words: 94,847

Reinventing Discovery: The New Era of Networked Science by Michael Nielsen

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Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, Donald Knuth, double helix, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Erik Brynjolfsson, fault tolerance, Fellow of the Royal Society, Firefox, Freestyle chess, Galaxy Zoo, Internet Archive, invisible hand, Jane Jacobs, Jaron Lanier, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, publish or perish, Richard Feynman, Richard Feynman, Richard Stallman, selection bias, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social web, statistical model, Stephen Hawking, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, The Nature of the Firm, The Wisdom of Crowds, University of East Anglia, Vannevar Bush, Vernor Vinge

Not long after receiving Dezenhall’s advice, the publishers’ association launched an organization called PRISM, the Partnership for Research Integrity in Science and Medicine. PRISM began a publicity initiative arguing against open access policies such as the NIH policy, claiming that open access would threaten “the economic viability of journals and the independent system of peer review” and potentially introduce “selective bias into the scientific record.” The Dezenhall-PRISM story is just one skirmish of many in the battle between some traditional scientific publishers and the open access movement. On the one hand, we have a situation where open access poses a threat to the profits and ultimately the jobs of both the traditional scientific publishing companies and the not-for-profit scientific societies. But balanced against this is a marvelous opportunity: as examples such as the arXiv and PLoS and the NIH open access policy show, it’s now feasible to make all scientific knowledge freely available to all of humanity.


pages: 278 words: 83,468

The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries

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3D printing, barriers to entry, call centre, Clayton Christensen, clean water, cloud computing, commoditize, Computer Numeric Control, continuous integration, corporate governance, experimental subject, Frederick Winslow Taylor, Lean Startup, Marc Andreessen, Mark Zuckerberg, Metcalfe’s law, minimum viable product, Network effects, payday loans, Peter Thiel, pets.com, Ponzi scheme, pull request, risk tolerance, selection bias, Silicon Valley, Silicon Valley startup, six sigma, skunkworks, stealth mode startup, Steve Jobs, the scientific method, Toyota Production System, transaction costs

It wasn’t supposed to turn out that way. In magazines and newspapers, in blockbuster movies, and on countless blogs, we hear the mantra of the successful entrepreneurs: through determination, brilliance, great timing, and—above all—a great product, you too can achieve fame and fortune. There is a mythmaking industry hard at work to sell us that story, but I have come to believe that the story is false, the product of selection bias and after-the-fact rationalization. In fact, having worked with hundreds of entrepreneurs, I have seen firsthand how often a promising start leads to failure. The grim reality is that most startups fail. Most new products are not successful. Most new ventures do not live up to their potential. Yet the story of perseverance, creative genius, and hard work persists. Why is it so popular? I think there is something deeply appealing about this modern-day rags-to-riches story.


pages: 322 words: 107,576

Bad Science by Ben Goldacre

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Asperger Syndrome, correlation does not imply causation, experimental subject, hygiene hypothesis, Ignaz Semmelweis: hand washing, John Snow's cholera map, Louis Pasteur, meta analysis, meta-analysis, offshore financial centre, p-value, placebo effect, publication bias, Richard Feynman, Richard Feynman, risk tolerance, Ronald Reagan, selection bias, selective serotonin reuptake inhibitor (SSRI), the scientific method, urban planning

OK, back to an easy one There are also some perfectly simple ways to generate ridiculous statistics, and two common favourites are to select an unusual sample group, and to ask them a stupid question. Let’s say 70 per cent of all women want Prince Charles to be told to stop interfering in public life. Oh, hang on—70 per cent of all women who visit my website want Prince Charles to be told to stop interfering in public life. You can see where we’re going. And of course, in surveys, if they are voluntary, there is something called selection bias: only the people who can be bothered to fill out the survey form will actually have a vote registered. There was an excellent example of this in the Telegraph in the last days of 2007. ‘Doctors Say No to Abortions in their Surgeries’ was the headline. ‘Family doctors are threatening a revolt against government plans to allow them to perform abortions in their surgeries, the Daily Telegraph can disclose.’


pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

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4chan, airport security, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, commoditize, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, Edward Snowden, failed state, financial independence, Firefox, full text search, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, informal economy, intangible asset, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mass immigration, mass incarceration, mega-rich, mutually assured destruction, Naomi Klein, national security letter, new economy, New Urbanism, Occupy movement, offshore financial centre, packet switching, patent troll, peak oil, pre–internet, private military company, race to the bottom, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Feynman, Richard Stallman, Satoshi Nakamoto, security theater, selection bias, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, union organizing, wealth creators, web application, WikiLeaks, Y2K, zero day, Zipf's Law

All this makes it possible for interesting strangers to walk up and look at your work and, if they like it and feel challenged by it, get involved little by little. You want to be working on your seed in public view, and talking about your new project, from the very start. This means people can make suggestions, and feel involved, from day one. If we, as founders of a group, choose those we work with, we're building in "selection bias." It is much easier to work with those nice, smart people who agree with us, than the idiots and critics who disagree. And when you agree with me, you just confirm all of my biases and assumptions and I know from experience that those can be wrong in the most amazing ways. Over time, collecting people who share the same broken assumptions and biases can kill a project. For example, when making software protocols, the requirements for large firms can be very different from those for small open source teams.


pages: 397 words: 102,910

The Idealist: Aaron Swartz and the Rise of Free Culture on the Internet by Justin Peters

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4chan, Any sufficiently advanced technology is indistinguishable from magic, Bayesian statistics, Brewster Kahle, buy low sell high, corporate governance, crowdsourcing, disintermediation, don't be evil, global village, Hacker Ethic, hypertext link, index card, informal economy, information retrieval, Internet Archive, invention of movable type, invention of writing, Isaac Newton, John Markoff, Lean Startup, moral panic, Paul Buchheit, Paul Graham, profit motive, RAND corporation, Republic of Letters, Richard Stallman, selection bias, semantic web, Silicon Valley, social web, Steve Jobs, Steven Levy, Stewart Brand, strikebreaker, Vannevar Bush, Whole Earth Catalog, Y Combinator

“What was the consideration, the inducement to the Copyright Office to enter into this conspiracy?”33 the learned gentleman asked in frustration after a particularly pernicious attack on his probity. There was no conspiracy—or, at least, none of the tinfoil-hat variety. The law’s framers’ narrow conception of what constituted the public’s best interest was less a function of malice or sedition than of selection bias. The bill had been conceived and written by “the most representative organizations that we could think of or that were brought to our attention as having practical concern in the amelioration of the law, but especially, of course, those concerned in an affirmative way—that is to say, in the protection of the right,” Putnam acknowledged at the outset of the hearings.34 One man’s right is another’s wrong.


pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

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Andrei Shleifer, business climate, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, Gini coefficient, Gunnar Myrdal, Hernando de Soto, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

More generally, this story helps explain why there was such a bias in economic discussions for so longtoassume convergence of national incomes. Economists looked mainly at those that were winners at the end, because those were the countries thathad the good-quality data. (Also, economists Solow’s Surprise 65 from rich countries prefer to talk aboutand visit other rich countries.) The winners write economic history. EvenMaddison’s sample suffered alot from the selection bias toward winners, as it includes only eight countries that the World Bank today classifies as poor-less than a third of the sample. Since poor nations makeup the vast majority of all countries in the world, this is still a severe bias in favor of those that have wound up rich today. The Maddison sample whose1820 income can be guessedhas no country from Africa, for example. This Africa data shortage has everything to do with Africa’s poverty.


pages: 416 words: 106,582

This Will Make You Smarter: 150 New Scientific Concepts to Improve Your Thinking by John Brockman

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23andMe, Albert Einstein, Alfred Russel Wallace, banking crisis, Barry Marshall: ulcers, Benoit Mandelbrot, Berlin Wall, biofilm, Black Swan, butterfly effect, Cass Sunstein, cloud computing, congestion charging, correlation does not imply causation, Daniel Kahneman / Amos Tversky, dark matter, data acquisition, David Brooks, delayed gratification, Emanuel Derman, epigenetics, Exxon Valdez, Flash crash, Flynn Effect, hive mind, impulse control, information retrieval, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jaron Lanier, John von Neumann, Kevin Kelly, lifelogging, mandelbrot fractal, market design, Mars Rover, Marshall McLuhan, microbiome, Murray Gell-Mann, Nicholas Carr, open economy, Pierre-Simon Laplace, place-making, placebo effect, pre–internet, QWERTY keyboard, random walk, randomized controlled trial, rent control, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Satyajit Das, Schrödinger's Cat, security theater, selection bias, Silicon Valley, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, the scientific method, Thorstein Veblen, Turing complete, Turing machine, Vilfredo Pareto, Walter Mischel, Whole Earth Catalog, zero-sum game

The double-blind, randomized, controlled study, the gold standard of clinical design, was developed in an attempt to nullify its influence. We live in the world, however, not in a laboratory, and bias cannot be eliminated. Bias, critically utilized, sharpens the collection of data by knowing when to look, where to look, and how to look. It is fundamental to both inductive and deductive reasoning. Darwin didn’t collect his data randomly or disinterestedly to formulate the theory of evolution by natural selection. Bias is the nose for the story. Truth needs continually to be validated against all evidence that challenges it fairly and honestly. Science, with its formal methodology of experimentation and the reproducibility of its findings, is available to anyone who plays by its rules. No ideology, religion, culture, or civilization is awarded special privileges or rights. The truth that survives this ordeal has another burden to bear.


pages: 397 words: 109,631

Mindware: Tools for Smart Thinking by Richard E. Nisbett

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affirmative action, Albert Einstein, availability heuristic, big-box store, Cass Sunstein, choice architecture, cognitive dissonance, correlation coefficient, correlation does not imply causation, cosmological constant, Daniel Kahneman / Amos Tversky, dark matter, endowment effect, experimental subject, feminist movement, fixed income, fundamental attribution error, glass ceiling, Henri Poincaré, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, job satisfaction, lake wobegon effect, libertarian paternalism, loss aversion, low skilled workers, Menlo Park, meta analysis, meta-analysis, quantitative easing, Richard Thaler, Ronald Reagan, selection bias, Socratic dialogue, Steve Jobs, Steven Levy, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, William of Occam, Zipcar

The long-term unemployed may have poor employment records, or be lackadaisical in job hunting, or be too picky about the kind of job they would do. Politicians routinely invoked these alleged causes during the Great Recession. But you can’t know whether these explanations are correct by conducting a multiple regression analysis. No amount of “controlling” for such variables will get rid of self-selection bias and tell you whether there is hiring prejudice. The only way to answer the question is with an experiment. And the experiment has been done; we know the answer. The economists Rand Ghayad and William Dickens sent out 4,800 fictitious applications for six hundred job openings.14 Even when applications were identical except for alleged length of unemployment, the short-term unemployed were twice as likely to get an interview as the long-term unemployed.


pages: 326 words: 97,089

Five Billion Years of Solitude: The Search for Life Among the Stars by Lee Billings

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Albert Einstein, Arthur Eddington, California gold rush, Colonization of Mars, cosmological principle, cuban missile crisis, dark matter, Dava Sobel, double helix, Edmond Halley, full employment, hydraulic fracturing, index card, Isaac Newton, Kuiper Belt, Magellanic Cloud, music of the spheres, out of africa, Peter H. Diamandis: Planetary Resources, planetary scale, profit motive, quantitative trading / quantitative finance, Ralph Waldo Emerson, RAND corporation, random walk, Search for Extraterrestrial Intelligence, Searching for Interstellar Communications, selection bias, Silicon Valley, Solar eclipse in 1919, technological singularity, the scientific method, transcontinental railway

Data from RV surveys and from Kepler is now starting to show that stars with a Jupiter-mass planet in something like a ten-year orbit like our own system are fairly rare. This is something that I think at most only ten percent of surveyed stars can now support. At least as far as Jupiter is concerned, our solar system is somewhat unusual. Right now, the data are telling us that the archetypal planetary system is a Neptune-like planet in a warm, short-period orbit, but part of that is selection bias—those planets are easier to detect.” He began to deliberately pace the floor, regaining the rhythm of his presentation by walking back and forth between the podium and a window. “We really don’t know much yet about the distribution of Earth-size planets in Earth-like orbits, but the expectation is that they will be abundant. Kepler’s going to tell us soon, I think—it’s easier to validate transits, even though they reveal small fractions of total populations.


pages: 407 words: 109,653

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

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Asperger Syndrome, Berlin Wall, conceptual framework, crowdsourcing, delayed gratification, deliberate practice, Edward Glaeser, experimental economics, Fall of the Berlin Wall, fear of failure, game design, industrial cluster, Jean Tirole, knowledge worker, loss aversion, Mark Zuckerberg, meta analysis, meta-analysis, Mikhail Gorbachev, phenotype, Richard Feynman, Richard Feynman, risk tolerance, school choice, selection bias, shareholder value, Silicon Valley, six sigma, Steve Jobs, zero-sum game

Domain-Specific Intellectual Success on ‘Jeopardy,’ ” Sex Roles, vol. 38(314), pp. 269-285 (1998) Cadsby, Charles Bram, Maroš Serváa, & Fei Song, “How Competitive Are Female Professionals? A Tale of Identity Conflict,” http://d.doiorg/102139/ssrn1907727 (2012) Cárdenas, Juan-Camilo, Anna Dreber, Emma von Essen, & Eva Ranehill, “Gender Differences in Competitiveness and Risk Taking: Comparing Children in Colombia and Sweden,” Journal of Economic Behavior & Organization, vol. 83(1), pp. 11–23 (2012) Casari, Marco, John C. Ham, & John H. Kagel, “Selection Bias, Demographic Effects, and Ability Effects in Common Value Auction Experiments,” American Economic Review, vol. 97(4), pp. 1278–1304 (2007) Cotton, Christopher, Frank McIntyre, & Joseph Price, “Gender Differences in Competition: A Theoretical Assessment of the Evidence,” The Selected Works of Christopher Cotton, http://bit.ly/Q654OM (2011) Dargnies, Marie-Pierre, “Men Too Sometimes Shy Away from Competition: The Case of Team Competition,” http://d.doiorg/102139/ssrn1814989 (2011) Dreber, Anna, Interview with Author (2011) Dreber, Anna, Christer Gerdes, & Patrik Gränsmark, “Beauty Queens and Battling Knights: Risk Taking and Attractiveness in Chess,” IZA Discussion Paper No. 5314, Institute for the Study of Labor (2010) Dreber, Anna, Emma von Essen, & Eva Ranehill, “Outrunning the Gender Gap—Boys and Girls Compete Equally,” Experimental Economics, vol. 14(4), pp. 567–582 (2011) Eckel, Catherine C., & Philip J.


pages: 111 words: 1

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

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Antoine Gombaud: Chevalier de Méré, availability heuristic, backtesting, Benoit Mandelbrot, Black Swan, commoditize, complexity theory, corporate governance, corporate raider, currency peg, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, endowment effect, equity premium, fixed income, global village, hindsight bias, Kenneth Arrow, Long Term Capital Management, loss aversion, mandelbrot fractal, mental accounting, meta analysis, meta-analysis, Myron Scholes, Paul Samuelson, quantitative trading / quantitative finance, QWERTY keyboard, random walk, Richard Feynman, Richard Feynman, road to serfdom, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, Steven Pinker, stochastic process, survivorship bias, too big to fail, Turing test, Yogi Berra

But, again, why would anybody advertise if he didn’t happen to outperform the market? There is a high probability of the investment coming to you if its success is caused entirely by randomness. This phenomenon is what economists and insurance people call adverse selection. Judging an investment that comes to you requires more stringent standards than judging an investment you seek, owing to such selection bias. For example, by going to a cohort composed of 10,000 managers, I have 2/100 chances of finding a spurious survivor. By staying home and answering my doorbell, the chance of the soliciting party being a spurious survivor is closer to 100%. Reverse Survivors We have so far discussed the spurious survivor—the same logic applies to the skilled person who has the odds markedly stacked in her favor, but who still ends up going to the cemetery.


pages: 276 words: 93,430

Animal: The Autobiography of a Female Body by Sara Pascoe

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Albert Einstein, Berlin Wall, Julian Assange, Kickstarter, meta analysis, meta-analysis, presumed consent, rolodex, selection bias, WikiLeaks

It places us somewhere between the complete polyamory of chimpanzees and the definite monogamy of gibbons; human pair bonds are not the end of our mating life, nor are they as sexually exclusive as we might like – which the next chapter will explore. ‘But please,’ you beg me, with a thirst for summary and conclusion, ‘tell us, Sara, what is LOVE?’ It’s so complicated and obviously we all experience it differently, but here you are – for your quote book: ‘Love is a compulsive motivation towards a certain person ruled by evolutionary selection bias and a neurochemical reward system’ (Pascoe 2016). Let me know if you want that printed up on a baseball cap. * I’m worried this reference is too old. You see, Julia Roberts once made a movie called The Runaway Bride. It reunited her with Richard Gere after that successful film they made about how fun and sexy it is to be a prostitute. It was different in the olden days, you wouldn’t remember, anyway, just insert a film reference from your generation in here – perhaps ‘Miley Cyrus’ has been in a film?


pages: 294 words: 87,986

4th Rock From the Sun: The Story of Mars by Nicky Jenner

3D printing, Alfred Russel Wallace, Astronomia nova, cuban missile crisis, Elon Musk, game design, hive mind, invention of the telescope, Kickstarter, On the Revolutions of the Heavenly Spheres, placebo effect, Pluto: dwarf planet, retrograde motion, selection bias, silicon-based life, Skype, Stephen Hawking, technoutopianism

For many years other scientists probed this apparent correlation, with results coming out both in favour of Gauquelin’s hypothesis and in strong disagreement. Unfortu­nately, it turns out that we can’t track Mars’s motion through the sky in order to produce a super-athletic brood of children. In 1997, a team of researchers concluded, ‘after persistent and painstaking examination’, that ‘there is insufficient evidence for the “Mars effect” … this effect may be attributed to Gauquelin’s selective bias in either discarding or adding data post hoc. It is time to move on to other more productive topics’. The 1970s saw the arrival of the New Age movement, and with it the now-unavoidable flood of tabloid horoscope columns and television astrologers. These columns, while (hopefully) very rarely regarded as rigorous, draw on our established astrological perceptions of Mars. It’s likely that your first opinion of Mars relates to masculinity or war and, in general, we do still perceive Mars as a stereotypically aggressive concept – although perhaps not quite as explicitly so as we once did.


pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, 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, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, Plutocrats, plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, 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

"The Internationalization of Trading," speech delivered to a Financial Times conference, London, April 22. Cockburn, Alexander (1995). The Golden Age Is In Us (New York and London: Verso). Cohen, Darrel, Kevin Hassett, and Jim Kennedy (1995). "Are U.S. Investment and Capital Stocks at Optimal Levels?," Federal Reserve Board, Finance and Economics Discussion Series No. 95-32 Quly)- Cohen, Randolph B., and Christopher K. Polk (1996). "COMPUSTAT Selection Bias in Tests of the Sharpe-Lintner-Black CAPM," unpublished paper. University of Chicago, Graduate School of Business (January). Collins, Joseph, and John Lear (1995). Chile's Free Market Miracle: A Second Look (San Francisco: Food First Books). Community Investment Monitor (1995). "Member Profile: Institute for Community Economics Revolving Loan Fund," Community Investment Monitor (yf/inter), p. 3- Corbett, Jenny, andTimJenkinson (1993)- "The Financing of Industry, 1970-89: An International Comparison," mimeo, Oxford University.


pages: 482 words: 117,962

Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan

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Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, creative destruction, demographic transition, Deng Xiaoping, endogenous growth, failed state, Fall of the Berlin Wall, Gini coefficient, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, Lao Tzu, life extension, low skilled workers, low-wage service sector, Malacca Straits, mass immigration, microcredit, Network effects, new economy, New Urbanism, old age dependency ratio, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, selection bias, Silicon Valley, Silicon Valley startup, Skype, spice trade, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, women in the workforce, working-age population

Incidents of infant mortality, breast and cervical cancer, sexually transmitted infections, heart disease, diabetes, teen pregnancy, suicide, tobacco use, and alcohol use were all found to be generally lower among immigrants than native-born U.S. citizens.174 A study by the Canadian government finds that recent immigrants, particularly from non-European countries, are in better health than their Canadian-born counterparts.175 These effects are achieved through a combination of selection bias (people healthier than the norm are more likely to migrate) and recent migrants taking advantage of the higher incomes and health facilities that accompany moving to a more developed country. The longer migrants stay in destination countries, however, the more their “health advantage” appears to dissipate. These short-lived dramatic health gains for migrants are explained by the adoption of unhealthy lifestyles and eating habits, the conditions of precarious and risky work, and the mental strains of being far from home.


pages: 289 words: 113,211

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

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

In contrast, anyone who is fortunate 191 ccc_demon_165-206_ch09.qxd 7/13/07 2:44 PM Page 192 A DEMON OF OUR OWN DESIGN enough to buy a good new car will be more likely to hold on to it: If the owner sells it to buy another car, he or she once again goes into the good car/bad car lottery and may not be as lucky the next time around.5 Just as a car buyer can never be sure whether information is being withheld by the seller, in the financial markets a buyer can never be sure whether there is something going on with a stock that is beyond his purview. The person on the other side of the trade might have insider information on the company, or he might know that there is a much larger overhang of potential selling, the demand the buyer sees being a first trickle in what will emerge as a flood of selling. Even beyond the problem of adverse selection, if somebody waves a white flag and tries to overcome the adverse selection bias by announcing who they are—confirming to everyone’s satisfaction that they are trading strictly because of a liquidity need and have no special information or view of the market and are willing to discount the price an extra point to get someone to take the position off their hands—the trader who buys the position still faces a risk because there is no guarantee the price will not fall further between the time the trader takes on the position and the time he seeks to resell it.


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

We describe below how these ideas can be put into concrete form for the prediction of financial crashes. The different models will correspond to different implementations of the theory of critical points with log-periodic power laws. Different scenarios will be generated for each model by the different solutions obtained by the fitting procedure. HOW TO DEVELOP AND INTERPRET STATISTICAL TESTS OF LOG-PERIODICITY Before studying the issue of prediction, the question of a possible selection bias of the fitted financial time series presented in chapters 7 and 8 must be addressed. By selecting time windows on the basis of the existence of (1) a change of regime and acceleration of the market price and of (2) a crash or large correction at their end, we may have pruned the data so that, by chance alone, the fits with the log-periodic power law formula may have been qualified. This issue has to be raised each time a pattern is proposed as an indicator with some predictive skill.


pages: 480 words: 138,041

The Book of Woe: The DSM and the Unmaking of Psychiatry by Gary Greenberg

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Albert Einstein, Asperger Syndrome, back-to-the-land, David Brooks, impulse control, invisible hand, Isaac Newton, John Snow's cholera map, late capitalism, Louis Pasteur, McMansion, meta analysis, meta-analysis, neurotypical, phenotype, placebo effect, random walk, selection bias, statistical model, theory of mind, Winter of Discontent

He didn’t ask Moscicki if she thought it was kosher to make up a diagnostic entity called trauma, which she acknowledged she had teased out of the anxiety disorders and which looked suspiciously like a category she had cooked up so she could parade its 62 percent favorable rating. He didn’t point out the lunacy of spending all that time (including mine) and money to find out not whether the criteria or the cross-cutting measures were reliable or valid, but rather only whether clinicians liked the DSM-5, as if the APA were looking for Facebook friends. He didn’t raise the question of selection bias, that is, whether or not the same factors that motivated the few volunteers who actually followed through also predisposed them to give the DSM a Like. He didn’t have to do any of this. Nor did he have to deconstruct propaganda or slog through weedy statistics. He just did the simple math and came to the obvious conclusion. “This is totally appalling,” he said. “It’s okay, it’s okay,” Moscicki replied.

Common Knowledge?: An Ethnography of Wikipedia by Dariusz Jemielniak

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Andrew Keen, barriers to entry, Benevolent Dictator For Life (BDFL), citation needed, collaborative consumption, collaborative editing, conceptual framework, continuous integration, crowdsourcing, Debian, deskilling, digital Maoism, en.wikipedia.org, Filter Bubble, Google Glasses, Guido van Rossum, Hacker Ethic, hive mind, Internet Archive, invisible hand, Jaron Lanier, jimmy wales, job satisfaction, Julian Assange, knowledge economy, knowledge worker, Menlo Park, moral hazard, online collectivism, pirate software, RFC: Request For Comment, Richard Stallman, selection bias, Silicon Valley, Skype, slashdot, social software, Stewart Brand, The Nature of the Firm, The Wisdom of Crowds, transaction costs, WikiLeaks, wikimedia commons, zero-sum game

As research on other virtual communities shows, many users participate to elevate their communal social status (Lampel & Bhalla, 2007) or simply feel that they belong (Lampe, Wash, Velasquez, & Ozkaya, 2010). Other motivations may be ideological (e.g., a strong belief that information should be free) and driven by principle (Nov, 2007; E. G. Coleman, 2013). Incidentally, even as beginners, those who become die-hard Wikipedians differ in how they participate in the community and edit (Panciera, Halfaker, & Terveen, 2009). This could indicate a significant selection bias in the Wikipedia community. Long-standing Wikipedians are sometimes perceived as a different kind of person by newcomers, and this perception adversely affects retention of new editors (Antin, 2011). They also take the role of gatekeepers in the eyes of the newcomers, especially in the case of breaking news articles (Keegan & Gergle, 2010). At the same time, high user retention in the Wikipedia community does not have exclusively positive effects, contrary to popular belief.


pages: 504 words: 139,137

Efficiently Inefficient: How Smart Money Invests and Market Prices Are Determined by Lasse Heje Pedersen

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activist fund / activist shareholder / activist investor, algorithmic trading, Andrei Shleifer, asset allocation, backtesting, bank run, banking crisis, barriers to entry, Black-Scholes formula, Brownian motion, buy low sell high, capital asset pricing model, commodity trading advisor, conceptual framework, corporate governance, credit crunch, Credit Default Swap, currency peg, David Ricardo: comparative advantage, declining real wages, discounted cash flows, diversification, diversified portfolio, Emanuel Derman, equity premium, Eugene Fama: efficient market hypothesis, fixed income, Flash crash, floating exchange rates, frictionless, frictionless market, Gordon Gekko, implied volatility, index arbitrage, index fund, interest rate swap, late capitalism, law of one price, Long Term Capital Management, margin call, market clearing, market design, market friction, merger arbitrage, money market fund, mortgage debt, Myron Scholes, New Journalism, paper trading, passive investing, price discovery process, price stability, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, systematic trading, technology bubble, time value of money, total factor productivity, transaction costs, value at risk, Vanguard fund, yield curve, zero-coupon bond

(2) is the current level of the predictor high or low? and (3) how does variation in the predictor translate into future predicted returns? Each of these steps is difficult to do in real time, and backtests are often subject to biases with respect to some or all of them. First, choosing the predictor is not easy, and backtests often tend to look at variables that have worked in the past, a selection bias as they may not work in the future. Second, knowing whether a predictor is high or low is based on limited historical evidence or guidance from judgment and economic theory. This is easy, however, in an in-sample (i.e., cheating) backtest, but in 1932 investors did not know that this dividend was at an all-time high compared to the next 80 years, and in 2000 investors did not know that the dividend yield would not get any lower in the next decade (even if judgment might have suggested that these values were extreme).


pages: 467 words: 116,094

I Think You'll Find It's a Bit More Complicated Than That by Ben Goldacre

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call centre, conceptual framework, correlation does not imply causation, crowdsourcing, death of newspapers, Desert Island Discs, en.wikipedia.org, experimental subject, Firefox, Flynn Effect, jimmy wales, John Snow's cholera map, Loebner Prize, meta analysis, meta-analysis, moral panic, placebo effect, publication bias, selection bias, selective serotonin reuptake inhibitor (SSRI), Simon Singh, statistical model, stem cell, the scientific method, Turing test, WikiLeaks

Huff sets up his headline: ‘The Average Yaleman, Class of 1924, Makes $25,111 a Year!’ said Time magazine, half a century ago. That figure sounded pretty high: Huff chases it, and points out the flaws. How did they find all these people they asked? Who did they miss? Losers tend to drop off the alma mater radar, whereas successful people are in Who’s Who and the College Record. Did this introduce ‘selection bias’ into the sample? And how did they pose the question? Can that really be salary rather than investment income? Can you trust people when they self-declare their income? Is the figure spuriously precise? And so on. In the intervening fifty years this book has sold one and a half million copies. It’s the greatest-selling stats book of all time (tough market), and it remains in print, at just £8.99.


pages: 537 words: 144,318

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

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Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, backtesting, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business process, 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, family office, fiat currency, fixed income, follow your passion, full employment, George Santayana, Hyman Minsky, implied volatility, index fund, inflation targeting, interest rate swap, inventory management, invisible hand, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, market microstructure, 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, purchasing power parity, quantitative easing, random walk, reserve currency, risk tolerance, risk-adjusted returns, risk/return, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, special drawing rights, statistical arbitrage, stochastic volatility, survivorship bias, The Great Moderation, Thomas Bayes, time value of money, too big to fail, transaction costs, unbiased observer, value at risk, Vanguard fund, yield curve, zero-sum game

Similarly, look at Bear Stearns or Citibank and their internal hedge funds as another example of institutions failing in the hedge fund space. A hedge fund is a very entrepreneurial business. Very talented managers and risk takers will typically want to run their own business their own way, or work in a small group with like-minded partners. They do not want to work for big, bureaucratic institutions, even if they are able to start with much larger amounts of capital. Because of this, institutions have a huge negative selection bias on hiring and trying to build out hedge fund platforms. Further, if you are successful, you will have the Harvard compensation problem of portfolio managers making multiples of what the president makes. What is your outlook for the hedge fund business over the next 5 to 10 years? Although we are in the midst of a necessary shakeout in the broader hedge fund industry, the returns for hedge funds as a whole were better than most other investing categories during 2008.


pages: 479 words: 113,510

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, asset-backed security, bank run, barriers to entry, Basel III, Bernie Sanders, break the buck, Bretton Woods, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, greed is good, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, liquidity trap, London Whale, Long Term Capital Management, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, negative equity, new economy, Northern Rock, obamacare, price stability, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

Geithner’s new job had previously been held by people with robust egos like Benjamin Strong (the first president of the New York Fed), Gerry Corrigan (at the helm during the crash of 1987), and Paul Volcker (from 1975 to August 1979, when he became chairman). Wrist twisters and ear biters to a man. Though compulsively profane, flinging obscenities at the drop of a hat, Geithner was gracious and professional with colleagues. Rubin described Geithner as “elbow-less,” with a calm and easy manner. Geithner later admitted that his previous jobs “mostly exposed me to talented senior bankers and selection bias probably gave me an impression that the U.S. financial sector was more capable and ethical than it really was.” An understatement if there ever was one. A lawyer at the New York Fed, who at times played basketball with Geithner on the Fed’s fourteenth-floor court, described his boss as a fantastic player with a notable lack of nerve when it came to making the big shot. “At the moment of truth, his gaze often became curiously unsteady, his hands seemingly shaky,” wrote Andrew Huszar, who worked at the New York Fed nine years.


pages: 406 words: 115,719

The Case Against Sugar by Gary Taubes

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Albert Einstein, British Empire, cuban missile crisis, epigenetics, Everything should be made as simple as possible, Gary Taubes, Isaac Newton, meta analysis, meta-analysis, microbiome, phenotype, pre–internet, Ralph Nader, RAND corporation, randomized controlled trial, selection bias, the new new thing, the scientific method, Works Progress Administration

* * * *1 Much of the content in this chapter about the Sugar Association and its defense of sugar was first published as an article in the November–December 2012 issue of Mother Jones, which I co-authored with Cristin Kearns. Cristin unearthed all the sugar industry documents on which the article and this chapter rely. *2 This study was completed in 1973 but not officially published until 1989, because, as the lead investigator told me, “We never saw the results that we thought we would.” This kind of selection bias was all too common in this research. *3 This same comparison would be made by Campbell and others between the disease spectrum in black Africans and in blacks in the United States, who had been (forcibly) removed from Africa only a few hundred years earlier. The comparison strongly implied that something other than genetics was involved in these chronic diseases; some aspect of diet or lifestyle had to be triggering the disease that was present in the United States and relatively absent in Africa

The Singularity Is Near: When Humans Transcend Biology by Ray Kurzweil

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additive manufacturing, AI winter, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, anthropic principle, Any sufficiently advanced technology is indistinguishable from magic, artificial general intelligence, Asilomar, augmented reality, autonomous vehicles, Benoit Mandelbrot, Bill Joy: nanobots, bioinformatics, brain emulation, Brewster Kahle, Brownian motion, business intelligence, c2.com, call centre, carbon-based life, cellular automata, Claude Shannon: information theory, complexity theory, conceptual framework, Conway's Game of Life, cosmological constant, cosmological principle, cuban missile crisis, data acquisition, Dava Sobel, David Brooks, Dean Kamen, disintermediation, double helix, Douglas Hofstadter, en.wikipedia.org, epigenetics, factory automation, friendly AI, George Gilder, Gödel, Escher, Bach, informal economy, information retrieval, invention of the telephone, invention of the telescope, invention of writing, Isaac Newton, iterative process, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John von Neumann, Kevin Kelly, Law of Accelerating Returns, life extension, lifelogging, linked data, Loebner Prize, Louis Pasteur, mandelbrot fractal, Mikhail Gorbachev, mouse model, Murray Gell-Mann, mutually assured destruction, natural language processing, Network effects, new economy, Norbert Wiener, oil shale / tar sands, optical character recognition, pattern recognition, phenotype, premature optimization, randomized controlled trial, Ray Kurzweil, remote working, reversible computing, Richard Feynman, Richard Feynman, Robert Metcalfe, Rodney Brooks, Search for Extraterrestrial Intelligence, selection bias, semantic web, Silicon Valley, Singularitarianism, speech recognition, statistical model, stem cell, Stephen Hawking, Stewart Brand, strong AI, superintelligent machines, technological singularity, Ted Kaczynski, telepresence, The Coming Technological Singularity, Thomas Bayes, transaction costs, Turing machine, Turing test, Vernor Vinge, Y2K, Yogi Berra

Theodore Modis, professor at DUXX, Graduate School in Business Leadership in Monterrey, Mexico, attempted to develop a "precise mathematical law that governs the evolution of change and complexity in the Universe." To research the pattern and history of these changes, he required an analytic data set of significant events where the events equate to major change. He did not want to rely solely on his own list, because of selection bias. Instead, he compiled thirteen multiple independent lists of major events in the history of biology and technology from these sources: Carl Sagan, The Dragons of Eden: Speculations on the Evolution of Human Intelligence (New York: Ballantine Books, 1989). Exact dates provided by Modis. American Museum of Natural History. Exact dates provided by Modis. The data set "important events in the history of life" in the Encyclopaedia Britannica.


pages: 666 words: 181,495

In the Plex: How Google Thinks, Works, and Shapes Our Lives by Steven Levy

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23andMe, AltaVista, Anne Wojcicki, Apple's 1984 Super Bowl advert, autonomous vehicles, 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, El Camino Real, fault tolerance, Firefox, Gerard Salton, Gerard Salton, Google bus, Google Chrome, Google Earth, Googley, HyperCard, hypertext link, IBM and the Holocaust, informal economy, information retrieval, Internet Archive, Jeff Bezos, John Markoff, Kevin Kelly, Mark Zuckerberg, Menlo Park, one-China policy, optical character recognition, PageRank, Paul Buchheit, Potemkin village, prediction markets, recommendation engine, risk tolerance, Rubik’s Cube, Sand Hill Road, Saturday Night Live, search inside the book, second-price auction, selection bias, Silicon Valley, skunkworks, Skype, slashdot, social graph, social software, social web, spectrum auction, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Levy, Ted Nelson, telemarketer, trade route, traveling salesman, turn-by-turn navigation, Vannevar Bush, web application, WikiLeaks, Y Combinator

Still, anyone visiting the Google campus during the election year could not miss a fervid groundswell of Obama-love. While some commentators wrung hands over the Spock-like nature of the senator’s personality, Googlers swooned over the dispassionate, reason-based approach he took to problem solving. Google employees, through the company PAC, contributed more than $800,000 to his campaign, trailing only Goldman Sachs and Microsoft in total contributions. “It’s a selection bias,” says Eric Schmidt of the unofficial choice of most of his employees. “The people here all have been selected very carefully, so obviously there’s going to be some prejudice in favor of a set of characteristics—highly educated, analytic, thoughtful, communicates well.” Sitting among the Googlers packed in Charlie’s Café on November 14 was one of the company’s brightest young product managers, Dan Siroker.


pages: 456 words: 185,658

More Guns, Less Crime: Understanding Crime and Gun-Control Laws by John R. Lott

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affirmative action, Columbine, crack epidemic, Donald Trump, Edward Glaeser, gun show loophole, income per capita, More Guns, Less Crime, selection bias, statistical model, the medium is the message, transaction costs

[Lott’s and Mustard’s] sample contains all counties, regardless of size, and this problem of dropping counties with no reported crimes is particularly severe in small counties with few crimes. T H E P O L I T I C A L A N D A C A D E M I C D E B AT E BY 1 9 9 8 | 159 The frequencies of missing data are 46.6% for homicide, 30.5% for rape, 12.2% for aggravated assault, and 29.5% for robbery. Thus, the [Lott and Mustard] model excludes observations based on the realization of the dependent variable, potentially creating a substantial selection bias. Our strategy for finessing the missing data problem is to analyze only counties maintaining populations of at least 100,000 during the period 1977 to 1992. . . . Compared to the sample [comprising] all counties, the missing data rate in the large-county sample is low: 3.82% for homicide, 1.08% for rape, 1.18% for assault, and 1.09% for robberies. (Dan Black and Daniel Nagin, “Do ‘Right-to-Carry’ Laws Deter Violent Crime?”


pages: 593 words: 189,857

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

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Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, selection bias, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

I then watched more financial booms blow up in Latin America, Asia, and Russia. I learned how vulnerable markets could be to herd behavior, to uninformed, indiscriminate shifts in sentiments. Many financiers who lent money in Asia did not seem to know much about the risks they were taking or the countries they were playing in. But I did not view Wall Street as a cabal of idiots or crooks. My jobs mostly exposed me to talented senior bankers, and selection bias probably gave me an impression that the U.S. financial sector was more capable and ethical than it really was. I spent more time with smart executives such as Deryck Maughan, a Salomon Brothers banker I knew in Japan who later became CEO, and smart investors such as Stan Druckenmiller, a hedge fund billionaire I sometimes consulted about markets, than I spent with the sordid elements of the financial industry.


pages: 641 words: 182,927

In Pursuit of Privilege: A History of New York City's Upper Class and the Making of a Metropolis by Clifton Hood

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affirmative action, British Empire, David Brooks, death of newspapers, deindustrialization, family office, Golden Gate Park, Google Earth, jitney, mass immigration, new economy, New Urbanism, Plutocrats, plutocrats, Ray Oldenburg, ride hailing / ride sharing, Scientific racism, selection bias, Steven Levy, The Great Good Place, Thorstein Veblen, trade route, urban planning, We are the 99%, white flight

The vital statistics of the full population were entered into a SPSS-based computer program that explored seventy-five variables related to sociological factors such as personal background, education, occupation, place of residence, business affiliations, social associations, and recreational activities. It should be noted that the results of this statistical analysis are not advanced with the view, once commonplace in historical scholarship, that quantification is an infallible method free of the selection bias of qualitative evidence; rather, my belief is that all historical evidence has its uses and its strengths and weaknesses and should be scrutinized and used in tandem with other evidentiary sources. The findings of an interrogation of this data are consistent with other evidence and confirm that this was indeed a privileged group. Four-fifths were college graduates (N = college graduates, 1,922 [78.2%], not college graduates, 424 [17.2%], unknown, 112 [4.6%], HHEP).


pages: 669 words: 210,153

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

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Airbnb, Alexander Shulgin, artificial general intelligence, asset allocation, Atul Gawande, augmented reality, back-to-the-land, Bernie Madoff, Bertrand Russell: In Praise of Idleness, Black Swan, blue-collar work, Buckminster Fuller, business process, Cal Newport, call centre, Checklist Manifesto, cognitive bias, cognitive dissonance, Colonization of Mars, Columbine, commoditize, correlation does not imply causation, David Brooks, David Graeber, diversification, diversified portfolio, Donald Trump, effective altruism, Elon Musk, fault tolerance, fear of failure, Firefox, follow your passion, future of work, Google X / Alphabet X, Howard Zinn, Hugh Fearnley-Whittingstall, Jeff Bezos, job satisfaction, Johann Wolfgang von Goethe, John Markoff, Kevin Kelly, Kickstarter, Lao Tzu, life extension, lifelogging, Mahatma Gandhi, Marc Andreessen, Mark Zuckerberg, Mason jar, Menlo Park, Mikhail Gorbachev, Nicholas Carr, optical character recognition, PageRank, 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, premature optimization, QWERTY keyboard, Ralph Waldo Emerson, Ray Kurzweil, recommendation engine, rent-seeking, Richard Feynman, Richard Feynman, risk tolerance, Ronald Reagan, selection bias, sharing economy, side project, Silicon Valley, skunkworks, Skype, Snapchat, social graph, software as a service, software is eating the world, stem cell, Stephen Hawking, Steve Jobs, Stewart Brand, superintelligent machines, Tesla Model S, The Wisdom of Crowds, Thomas L Friedman, Wall-E, Washington Consensus, Whole Earth Catalog, Y Combinator, zero-sum game

In other words, if you’re 40 years old and you care about this, you’re probably not going to die in a car accident or homicide, because you’re out of that demographic. You’re less likely to die of X, Y, and Z. It turns out that when you look at the mortality tables, there’s an 80% chance you’re going to die from cardiovascular disease, cerebrovascular disease, cancer, or neurodegenerative disease, period. “If you remember nothing else, remember this: If you’re in your 40s or beyond and you care about living longer, which immediately puts you in a selection bias category, there’s an 80% chance you’re going to die of [one of] those four diseases. So any strategy toward increasing longevity has to be geared toward reducing the risk of those diseases as much as is humanly possible. “[For those who don’t know,] cerebrovascular disease would be stroke, and there’s two ways you can have a stroke. One is through an occlusion; the other one is through bleeding, usually due to elevated blood pressure and things like that.


pages: 623 words: 448,848

Food Allergy: Adverse Reactions to Foods and Food Additives by Dean D. Metcalfe

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active measures, Albert Einstein, bioinformatics, epigenetics, hygiene hypothesis, impulse control, life extension, meta analysis, meta-analysis, mouse model, pattern recognition, phenotype, placebo effect, randomized controlled trial, selection bias, statistical model, stem cell

.), failure to thrive, or respiratory complications (aspiration, persistent wheeze, stridor, apneic episodes). In three retrospective series of infants with severe persistent distress, abnormally frequent acid reflux was demonstrated by esophageal 24-hour pH monitoring in 15–25% of infants studied [18,22,86]. This exceeds the expected prevalence of 5–10% in young infants [87] and may in part be explained by selection bias in infants referred for gastroenterological investigation. Abnormally frequent or prolonged GER on pH monitoring usually presented with overt regurgitation and non-regurgitant “silent” GER was uncommon [18,22]. The duration of crying and fussing per day did not correlate with the severity of GER [18]. In a randomized clinical trial of infants with colic or persistent crying, treatment with ranitidine and cisapride was no better than placebo [88].

Additional limitations of the surrogate markers used for the diagnosis of food allergy include inconsistencies in nomenclature and difficulties in accurately diagnosing these conditions in infants and young children. For example, different terms are used to describe the “eczematous” condition. This results not only in disease misclassification, but may describe different immunological conditions. Indeed, the role of atopic sensitization in childhood eczema remains obscure as it is neither a prerequisite nor a uniform cause of the disease. Nutritional studies are prone to selection bias and reverse causality. Such bias may arise when atopic families – if aware of public health recommendations – are increasingly motivated to alter dietary practices, either in their own diet or in the diet of their infants. The effects of reverse causality are highlighted in various studies and for different allergic outcomes. For example, in the Avon Longitudinal Study of Parents and Children (ALSPAC), a history of an allergic reaction to peanut was associated with prolonged breast-feeding [5].


pages: 1,087 words: 325,295

Anathem by Neal Stephenson

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anthropic principle, cellular automata, Danny Hillis, double helix, interchangeable parts, nuclear winter, pattern recognition, phenotype, selection bias, Stewart Brand, trade route

At a moment when we were about to lose our tempers, throw the table off the Praesidium, consign Fraa Bolo’s useless instructions to the fires of Hell, and run out the Decade Gate in search of strong drink, Fraa Arsibalt and I agreed to sit down for a moment and take a break. That was when I told Arsibalt about my conversation with Varax and Onali—as the male and female Inquisitors were called, according to the grapevine. “Inquisitors in disguise, hmm, I don’t think I’ve heard of that,” Arsibalt said. Gazing worriedly at the look on my face, he added: “Which means nothing. It is selection bias: Inquisitors who can’t be distinguished from the general populace would of course go unnoticed and unremarked on.” Somehow I didn’t find that very comforting. “They have to move about somehow,” Arsibalt insisted. “It never occurred to me to wonder how exactly. They can’t very well have their own special aerocraft and trains, can they? Much more sensible for them to put on normal clothing and buy a ticket just like anyone else.


pages: 1,199 words: 332,563

Golden Holocaust: Origins of the Cigarette Catastrophe and the Case for Abolition by Robert N. Proctor

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bioinformatics, carbon footprint, clean water, corporate social responsibility, Deng Xiaoping, desegregation, facts on the ground, friendly fire, germ theory of disease, index card, Indoor air pollution, information retrieval, invention of gunpowder, John Snow's cholera map, language of flowers, life extension, New Journalism, optical character recognition, pink-collar, Ponzi scheme, Potemkin village, publication bias, Ralph Nader, Ronald Reagan, selection bias, speech recognition, stem cell, telemarketer, Thomas Kuhn: the structure of scientific revolutions, Triangle Shirtwaist Factory, Upton Sinclair, Yogi Berra

On March 22, 1965, Huff testified at hearings on cigarette labeling and advertising, accusing the recent Surgeon General’s report of myriad failures and “fallacies.” Huff peppered his attack with amusing asides and anecdotes, lampooning spurious correlations like that between the size of Dutch families and the number of storks nesting on the rooftops—which proves not that storks bring babies but rather that people with large families tend to have large houses (which therefore attract more storks). Huff also pointed to the selection bias in the high rate of breast cancer among Chinese men compared to Chinese women—explainable by the reluctance of females to report their maladies. Senator Neuberger moderated the hearings and was flabbergasted by Huff’s remarks: “Do you honestly think there is as casual a relationship between statistics linking smoking with disease as there is about storks and Chinese and so on?”44 Neuberger probably had no idea how carefully lawyered Huff’s words were, or how much he was being paid for his debunkery.


pages: 945 words: 292,893

Seveneves by Neal Stephenson

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clean water, Colonization of Mars, Danny Hillis, digital map, double helix, epigenetics, fault tolerance, Fellow of the Royal Society, Filipino sailors, gravity well, Isaac Newton, Jeff Bezos, kremlinology, Kuiper Belt, microbiome, phenotype, Potemkin village, pre–internet, random walk, remote working, selection bias, side project, Silicon Valley, Skype, statistical model, Stewart Brand, supervolcano, the scientific method, Tunguska event, zero day, éminence grise

So in the rare cases when actual settlements of that type were constructed de novo, as here, they tended to be built so as to meet the expectations of people who their whole lives had been watching fiction serials about their Second Millennium precursors. Even so, there were some surprises. Not so much the fact that it was female-owned. That wasn’t uncommon in the adult entertainment industry, and anyway some selection bias was at work—they had chosen to sit down in this place because it didn’t feel as creepy to Kath Two and Ariane as some of the others. More unexpected was the fact that as many as half of the people in there were Indigens. Those who weren’t—ones who had come across the water from the ice slab floating offshore—were identifiable by haircut, clothing, and bearing. But their numbers were matched by shaggier and more colorful characters whose professions and reasons for being in Qayaq could only be guessed at.


pages: 1,157 words: 379,558

Ashes to Ashes: America's Hundred-Year Cigarette War, the Public Health, and the Unabashed Triumph of Philip Morris by Richard Kluger

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air freight, Albert Einstein, California gold rush, cognitive dissonance, corporate raider, desegregation, double entry bookkeeping, family office, feminist movement, full employment, ghettoisation, Indoor air pollution, medical malpractice, Mikhail Gorbachev, Plutocrats, plutocrats, publication bias, Ralph Nader, Ralph Waldo Emerson, RAND corporation, rent-seeking, risk tolerance, Ronald Reagan, selection bias, The Chicago School, the scientific method, Torches of Freedom, trade route, transaction costs, traveling salesman, union organizing, upwardly mobile, urban planning, urban renewal, War on Poverty

Jacob funded [a scientific study], it was a privileged relationship, and couldn’t come into court … So they could do projects that they could bury if they chose.” Examples of such undertakings were a small grant to a radiologist at the University of Cape Town in South Africa to investigate “population pockets” with a high incidence of lung cancer and low consumption of cigarettes and a $5,000 grant to Yale Medical School biostatistician Alvan Feinstein, who had investigated what he said was a selection bias in hospital diagnoses of cancer patients who smoked. Feinstein now solicited money to pursue a “multi-variable analysis” of disease, contending in his grant application to Jacob, “If cigarette smoking is as harmful as has been alleged, it should not only ‘cause’ these diseases but should also make their manifestations and outcome worse” in smokers, but his preliminary findings did not show that.