Otsog
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Here are the reasons relying on human self interest as the sole regulatory measure is doomed to fail:
1. Reward & Punishment Superresponse Tendency: The power that incentives and disincentives have on the actions of others cannot be overstated. Munger says this should be obvious but so many people don’t understand the how important incentives are for shaping people’s motivation to complete a task.
2. Liking/Loving Tendency: We ignore the faults of other people, products or companies that we admire.
3. Disliking/Hating Tendency: We also ignore the virtues of those things we dislike and distort the facts to facilitate that hatred while putting on blinders to other options and opinions.
4. Doubt/Avoidance Tendency: If we are unsure about a decision we try to quickly remove any doubt by making an ill-informed, quick decision.
5. Inconsistency-Avoidance Tendency: We have a reluctance to change. Eliminating bad habits is a rare trait.
6. Curiosity Tendency: There is not enough curiosity to learn, even though you receive so many benefits from a continuous learning process. Munger says, “the curious are also provided with much fun and wisdom once formal education has ended.”
7. Kantian Fairness Tendency: Life isn’t fair, but many can’t accept his. Tolerating a little unfairness should be okay if it means a greater fairness for all. The example Munger uses is letting in other drivers on the freeway knowing they will reciprocate in the future.
8. Envy/Jealously Tendency: Self-explanatory, but Munger makes an interesting point that envy and jealously are surprisingly absent from most psych textbooks.
9. Reciprocation Tendency: We tend to want to return the favor when someone helps us, which can be a good thing at times, but it can also lead to poor decisions if you reciprocate business deals based on these minor favors.
10. Influence-From-Mere-Association Tendency: We can be easily manipulated by mere association. It can be a group of people, the quality of a product, advertising, etc.
11. Simple, Pain-Avoiding Psychological Denial: We have a habit of distorting the facts until they become bearable for our own views.
12. Excessive Self-Regard Tendency: We all think we’re above average. This is where overconfidence comes from. Munger says the greatest type of pride should be taking pride in being trustworthy to avoid developing an ego.
13. Over–Optimism Tendency: Greed.
14. Deprival–Superreaction Tendency: Loss aversion.
15. Social-Proof Tendency: This is when we tend to think and act like those around us. It’s the herd mentality.
16. Contrast-Misreaction Tendency: Our problem here is a misunderstanding of comparisons and missing out on the magnitude of decisions. This gets to Phillip Fisher’s point when he once said, “the stock market is filled with individuals who know the price of everything but the value of nothing.”
17. Stress-Influence Tendency: Adrenaline tends to produce faster and more extreme reactions. Some stress can improve performance but heavy stress often leads to dysfunction.
18. Availability-Misweighing Tendency: We overweight what’s easily available. A checklist or set of rules can help with this tendency.
19. Use-It-or-Lose-It Tendency: Too many learn a skill to simply cram for a test or presentation instead of trying to actually understand it fluently.
20. Drug-Misinfluence Tendency: Self-explanatory.
21. Senescence-MisinfluenceTendency: As we age there is a natural loss of certain skills and abilities. Continuous thinking and learning helps to slow the decay.
22. Authority-MisinfluenceTendency: Following orders just because someone says so.
23. Twaddle Tendency: Basically, spending too much time on nonsense.
24. Reason-Respecting Tendency: Some people just want the answers, not the reasons or a better understanding.
And finally Munger says there’s one more psychological issue which is the lollapalooza effect — the tendency to get extreme consequences when you combine a number of these misjudgements when trying for a particular outcome.
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The thing I find most interesting about it is that it's pretty different than communism, but suffers from the same downfall, the idealized notion that people are better than they are.
The only true premise is that people are inherently selfish and will act in their own best interest. That's it.
People are pretty damn good at not acting in their own best interest. That's basically Munger's entire thesis on human psychology.
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I can't recall who came up with the 4% withdrawal rate but that, IMO, is rather high for the following reasons:
The Trinity Study is the most referenced source (but not the original source iirc) http://en.wikipedia.org/wiki/Trinity_study
Update: http://www.bogleheads.org/wiki/Trinity_study_update
* Inflation is benign right now, but if someone retires now at 65 and lives to 90, it's almost a sure thing that they will see a period or two of inflation, potentially rampant, so that 4% will not buy squat at some point.
The 4% is based off your starting balance and then adjusted for inflation.
* The unknowns are plentiful when projecting out a 25 year retirement with the surprises tending to be negative (health costs, potential illness/injury, previously mentioned inflation).
Contingency savings can be budgeted in. Insurance coverage can be budgeted in.
* If one is going to be wrong in withdrawal rate, it is far better to have estimated more "have" compared to "need" than to have estimated more "need" compared to "have".
There are several factors which will drive my ultimate retirement time, but one that I am looking at is whether I can live on a 3% withdrawal rate. Right now, I can't. I do think that the 3% provides enough margin of safety for an individual considering retirement.
It's fluid though as well. There is plenty of time to make adjustments as necessary if the situation warrants.
If you want $75,000 per year in retirement:
3% - $2,500,000.00 - 97% success rate
4% - $1,875,000.00 - 87% success rate
$625,000.00 is a lot more to save. 33.33% more savings for 10.00% more chance of success. Which doesn't account for your ability to add income or reduce expenses over the years.
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Didn't have it for years.
Moved to employer owned housing and it just works. Wouldn't pay for it though.
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He's not even 1 yet? I'd just call it payback for room and board. What the hell is he gonna do about it?
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Timely update by Michael Lewis:
http://www.vanityfair.com/news/2015/03/michael-lewis-flash-boys-one-year-later
'The Invisible Scalp'
That's awesome
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Tks for posting. I x-posted to MMM.
Man I love Frontline.
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Could we get an example so we can check out the FS? What does their note on revenue recognition say?
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Here is my summary version. Scott had an unconventional childhood. He dropped out of school in 4th grade to play video games. [...]
As an aside and because it ties in with the theme of unconventionality, today there are many people who play and live stream video games for a living. The most popular site (I think) for watching these streams is Twitch.tv. Some of the most popular streamers draw tens of thousands of viewers every day. The streamers make money from people who subscribe to their channel, from donations and from ads. Some of them make a very good living. The most popular ones probably also get paid by game studios looking for a channel to promote their newly launched games. Twitch takes a cut of subscription revenues and also makes money of the ads. Amazon bought Twitch last year for about $1 billion.
To me it is amazing how a site like this pops out of the ground and becomes an alternative to television for many (young) people looking for entertainment. It has allowed some entertaining gamers to make a career out of their hobby.
In South-Korea, pro-gamers can be stars. The Starcraft scene, for example, has many teams with coaches who all live together and train all day long, with matches being shown on TV and streamed online.
This type of thing will only keep getting more popular over time.
Starcraft is so 2000's. LoL/Dota2 are where it's at.
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Yes, I believe he was talking about goodwill recorded from acquisitions.
Has Warren ever said what his preferred method would be to record the excess of price paid over GAAP assets received?
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Does anyone know? I think he is doing an interview on CNBC on Monday, which would suggest the letter will be released this weekend.
Should be great reading, whenever it comes out!
I wrote to Berkshire, and I was informed that the letter comes out on the 28th.
House of Cards Season 3 on the 27th. Special 50th Anniversary Annual Letters from Buffett and Munger on the 28th. Oh man, next weekend is going to be awesome.
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I think some of the folksy stories aren't that folksy. I doubt he'd be doing handshake deals without a ridiculous margin of safety. The Nebraska Furniture Mart story is a classic, but he's not doing it on principle or some romantic notion of honest business. He's a genius at analyzing risk-adjusted returns in his head, he is an astute judge of character and figured out that operating without conventional DD can put him a step ahead in certain instances (NFM, financial crisis). Us plebes will have to stick with Audited Financials, lawyers and the rest of the conventional DD process. We couldn't give it up if we tried as the counter party would need to have faith in our reputation.
I don't find much to be cynical about in that approach though, and even though Buffett isn't operating that way because of principle I can understand how it becomes romanticized in the press. I believe Buffett/Munger prefer to be honest in their dealings, I don't think they are only honest because they figured out how to make money with it. I think it's more likely they decided to be honest first and because they are so damn smart they figured out how to turn it into a huge competitive advantage. They obviously are very different people now than 50 years ago so this process would have evolved over time. Maybe they did sketchier (or just plain more conventional) stuff when they were younger; but, I find it telling the lack of incriminating evidence after all these decades. The way humans love to simultaneously lionize/tear-down celebrities you'd almost expect there to be more click-baity press on how evil Buffett is.
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I had a friend ask me "Why hasn't Bill Gates done some of the amazing things Elon Musk has?" The answer I don't think has anything to do with brilliance (Gates would easily hold his ground against Musk) but with the ambition & risk appetite (aka mild insanity).
I think the answer is that he has.
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If your thesis is that payment to avoid criminal prosecution is wrong then no amount of indulgence would really be acceptable.
It's interesting how different our takeaways are from that article. I didn't at all get the impression that Taibbi was calling for larger fines, I think he was fully aware that $9 Billion is a lot of money and used that to make the point that JPM was willing to pay so much to avoid criminal charges.
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I don't think the amount was really the point of the article. The fine was announced nearly ago, there has been coverage on whether the amount was appropriate (http://dealbook.nytimes.com/2013/11/20/in-13-billion-settlement-jpmorgan-may-have-gotten-a-good-deal/). The point is that you can buy your way out of criminal prosecutions. The substance of the article is the same subbing X for 9 in the title.
I didn't get the impression Fleischmann was chasing recognition or money. If she was, you're right, she went about it stupidly. Her actions seem pretty inline with someone who preferred to stay under the radar, honor her NDA and be of service in criminal investigations.
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http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106?page=6
Long, but rly good.
tl;dr Holder bends over backwards to keep bank employees out of jail
I wonder if it wouldn't have been better for shareholders if the DOJ had gone after criminal prosecutions instead of civil settlements. I don't think Main Street/Occupy cares as much about the fines and they would have been far more sated with people who committed fraud going to jail. White collar crimes being as hard as they are to get a conviction, only the most blatant and deserving fraud would get caught, which as a shareholder you would want out of the bank anyway. Or may criminal convictions would have exposed the banks to more liability, idk.
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Wait, so 'Graham & Doddsville' isn't a new sitcom airing on CBS this Fall?
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well make counterpoints then. Why are they not convincing? That is what bothers me about this discussion, if you try to use logic your automatically sexist.
Also this all started when I said something that was clearly not sexist, and was somehow seen as sexist by Liberty. Basicly discrimination against women and women being opressed is not really a problem anymore and my point is that men are treated more unfairly then women in the western world. And the law is more biased against men. Please come with counterpoints if you disagree.
Liberty's comment was benign, I don't see where anyone has called you a sexist?
I'm not sure where to begin, why don't you think rape is a problem?
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So basicly I name a lot of examples about why there is no such thing as a systematic problem of sexism against women, but it is more the other way around. And I prove and miss your point at the same time?
Your post was not very convincing at all. It sounds like you just hang around /r/redpill and picked up some 'woe is me' white male entitlement talking points that lack anything substantive.
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Ah... Thanks!
I found it through sedi.ca, search for insider activity of corner market capital.
Also, it looks like the company that was the subject of Sanjeev's amazing idea thread (totally forget what the actual name of the thread is) that everyone was trying to guess is Russell Breweries.
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I found it through sedi.ca, search for insider activity of corner market capital.
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How big of an investor do you need to be? :)
Accredited, but as LC said, you will be able to buy shares in the open market...maybe not at the same price as the private placement though. Cheers!
Do current shareholders have to be accredited to take part?
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Congrats!
SILK ROAD Creator's Plea for Leniency.
in General Discussion
Posted
How would society progress? If everyone was acting in their own self-interest how would complex and long term areas like scientific research, medical care and infrastructure be addressed?