Latest Stories

• Isildur1 and the Week That Changed Online Poker
• The Rise and Fall of Empires
• Everything is Viral -- Even the Things That Aren’t
• Readings: Zero, Forgeries, Yeast, and Climate Change
• Research Roundup: Debt and Innovation, Short-selling, Creativity, & Subways

 

Readings: Lawyers, Wealth, and Rare Earths

• How Much Is Enough? (Skidelsky)
• Rare earth: The New Great Game (BBC)
• Mamas Don't Let Your Babies Grow Up To Be...Lawyers (SSRN)

 

Isildur1 and the Week That Changed Online Poker

This has been an epochal week in online poker. A new playing force has emerged, someone named Isildur1, and his arrival has shaken up this world of massive cash pots in an unprecedented way.

…we have just witnessed a monumental event in the history of online poker – the entrance of Isildur into our world of online poker. A number of other commentators have offered their insight on this event, and there’s no doubt that the commotion over him has rocked the world of high stakes online poker. I felt that given the huge amount of speculation, misinformation, and downright stupidity that has flooded twoplustwo and other forums, it wouldn’t hurt to give the less informed half of the poker world a more accurate glimpse of the high stakes poker world.

Read the whole thing here.

 

The Rise and Fall of Empires

 

Everything is Viral -- Even the Things That Aren’t

With virality continuing to be all the rage, whether it’s swine flu, happiness, or Internet services, it’s worth considering whether many things that seem viral actually are. Here is a 2008 BMJ paper on the subject that deserves wider attention:

Detecting implausible social network effects in acne, height, and headaches: longitudinal analysis

Results
Significant network effects were observed in the acquisition of acne, headaches, and height. A friend’s acne problems increased an individual’s odds of acne problems (odds ratio 1.62, 95% confidence interval 0.91 to 2.89). The likelihood that an individual had headaches also increased with the presence of a friend with headaches (1.47, 0.93 to 2.33); and an individual’s height increased by 20% of his or her friend’s height (0.18, 0.15 to 0.26). Each of these results was estimated by using standard methods found in several publications. After adjustment for environmental confounders, however, the results become uniformly smaller and insignificant.

Source: Ethan Cohen-Cole and Jason M Fletcher, “Detecting implausible social network effects in acne, height, and headaches: longitudinal analysis,” BMJ 337, no. dec04_2 (December 4, 2008): a2533.

 

Readings: Zero, Forgeries, Yeast, and Climate Change

• Coxe on the power of zero (ZeroHedge)
• Vermeer forgeries and AD shocks (Money Illusion)
• The Fate of the Yeast People (Kunstler)
• Climate change catastrophe took just months (Times)

 

Research Roundup: Debt and Innovation, Short-selling, Creativity, & Subways

• A debtor-friendly bankruptcy system is better for innovation (Review of Financial Studies)
• Short-selling bans around the world in 2007-09: All bad (CEPR)
• How Creative Should Creators Be To Optimize the Evolution of Ideas? A Computational Model (arXiv)
• On the Efficiency of Underground Systems in Large Cities (arXiv)
  

 

Readings: Chocolate, Trends, Trade, and Roger Federer

• U.S. Import Trends for chocolate (Panjiva)
• The World in 2010: forecasting the year ahead (Economist)
• South African gold on final deathwatch as top grade scientist finds residual gold is more than 90% less than claimed (Mineweb)
• Roger Feder on loving winning vs. hating losing (Times)
• Tear down this wall: The Berlin Wall as a natural experiment in trade (Voxeu)

 

The Best F**king Book About the Financial Crisis?

I get asked all the time what the best fucking book is about the financial crisis. Well, here it is: A (partial)  list of books about the past year’s financial crisis, sorted in decreasing order of the number of times the word “fuck” appears. In the spirit of rigorous scientific inquiry, I have also provided the number of fucks per page.

Book	Author	# fucks	#/page
Too Big to Fail	Sorkin	20	.03
The Sellout	Gasparino	10	.02
The Greatest Trade Ever	Zuckerman	2	.01
The Two Trillion Dollar Meltdown	Morris	0	0
This Time is Different	Reinhart/Rogoff	0	0

 

QOTD: Poker and Capitalism

Poker exemplifies the worst aspects of capitalism that have made our country so great.
   -- Walter Matthau (cited in NYT 11/15/09)

 

Books of the Week

A few books that are newly on my reading list this week:

• The day Wall Street exploded: A story of America in its first age of terror (Amazon)
• Cowboys full: The story of poker (Amazon)
• Power struggles: Scientific authority and the creation of practical electricity before Edison (Amazon)

 

Detroit vs. Rest of U.S. in Unemployed Per Job Posting

Unemployed per job posting in the top 50 U.S. metros. Click for a larger version.

[via Indeed]

 

The Price of Gold in Gold

Apropos my recent post about the price of yo-yos in meerkats, Barry sent me this graph of the price of gold in gold. This is awfully suspicious. Where is the outrage?

 

Surprise (Not): Madoff’s Results Were Generated Via a Randomizer

I’m so clever. Back in December I wrote here that Bernie Madoff’s results, far from being pulled from his hat, showed every sign of having been generated by a randomizing algorithm. My analysis suggested that – based on Benford’s Law fit – his results would have passed muster in terms of looking sufficiently random to be real.

Here is the original chart again:

Now, let’s flip forward to today. We see the following in a new SEC complaint against two of Bernie’s programmers:

Defendants knew that all of this data was, for all intents and purposes,
randomly generated and assigned to purported trades by programs they created.
Defendants knew that this was unlike the [internal] House 5 system, on which trade blotter
came from actual executed trades and was verified through data received from
counterparties and clearing agencies. Some of the House 17 programs even included
randomness checks, i.e., code that analyzed program results to ensure they were
sufficiently random.

Defendants' extensive use of random selection arose from two related
facts. First, there were no real trades from which to draw actual data. Second, Madoff
and DiPascali were concerned that investor representatives and/or regulators would
closely examine the data and notice implausible correlations ~, all fake trades with a
certain counterparty were for a certain share volume, or were executed at uniform time
intervals), which could lead to greater scrutiny. In fact, when Madoff, DiPascali, or
Defendants reviewed the programs' results and found suspicious correlations and
patterns, Defendants would have to make further revisions to the programs.

[Emphasis mine]

Surprise, surprise. Or not.

 

Where the Jobs Aren’t: Everywhere Except Education

While U.S. jobs are few and far between in many sectors, this year-over-year data shows that if you really want to be sure your applications get no response you need be sure to avoid education.

[via Indeed]

 

Superstar CEOs Suck

From a new Quarterly Journal of Economics paper:

Superstar CEOs

Compensation, status, and press coverage of managers in the United States follow a highly skewed distribution: a small number of “superstars” enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs. At the same time, they extract more compensation following the awards, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak corporate governance. Our results suggest that the ex post consequences of media-induced superstar status for shareholders are negative. [Emphasis mine]

Source: Ulrike Malmendier and Geoffrey Tate, “Superstar CEOs*,” Quarterly Journal of Economics 124, no. 4 (November 1, 2009): 1593-1638.