Morality, Religion & Philosophy: October 2011 Archives
This piece on overconfident predictions is required reading for everyone in any sort of leadership position.
No one in the firm seemed to be aware of the nature of the game that its stock pickers were playing. The advisers themselves felt they were competent professionals performing a task that was difficult but not impossible, and their superiors agreed. On the evening before the seminar, Richard Thaler and I had dinner with some of the top executives of the firm, the people who decide on the size of bonuses. We asked them to guess the year-to-year correlation in the rankings of individual advisers. They thought they knew what was coming and smiled as they said, "not very high" or "performance certainly fluctuates." It quickly became clear, however, that no one expected the average correlation to be zero.What we told the directors of the firm was that, at least when it came to building portfolios, the firm was rewarding luck as if it were skill. This should have been shocking news to them, but it was not. There was no sign that they disbelieved us. How could they? After all, we had analyzed their own results, and they were certainly sophisticated enough to appreciate their implications, which we politely refrained from spelling out. We all went on calmly with our dinner, and I am quite sure that both our findings and their implications were quickly swept under the rug and that life in the firm went on just as before. The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry. Facts that challenge such basic assumptions -- and thereby threaten people's livelihood and self-esteem -- are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.
The next morning, we reported the findings to the advisers, and their response was equally bland. Their personal experience of exercising careful professional judgment on complex problems was far more compelling to them than an obscure statistical result. When we were done, one executive I dined with the previous evening drove me to the airport. He told me, with a trace of defensiveness, "I have done very well for the firm, and no one can take that away from me." I smiled and said nothing. But I thought, privately: Well, I took it away from you this morning. If your success was due mostly to chance, how much credit are you entitled to take for it?
Illusions of validity and skill are certainly not unique to the financial world. I expect that almost any person-versus-person decision-making contest with enough participants will yield essentially random results. (Excluding highly structured games with mathematical constraints and complexity, like chess.)
Lots of international busybodies have their panties in a bunch over the summary execution of Muammar Gaddafi, but let's be adults: justice doesn't always require a courtroom.
Libya's rebel army has been accused of executing both Colonel Muammar Gaddafi and his son Mutassim in cold blood as the United Nations suggested their deaths amounted to war crimes.Human rights groups and Gaddafi's wife Safia called for an independent investigation into the deaths, which robbed victims' families of the chance to see Gaddafi put on trial for his murderous acts.
Both Gaddafi and his son were filmed or photographed alive and relatively uninjured after their capture on Thursday, before both died of multiple gunshot wounds.
Unless there's doubt about the identities of men, there's absolutely no reason that Gaddafi or his sons need to be tried before their are executed. Their evil is well-known, and they reveled in it for decades. If there were trials, everyone knows that the outcomes would be preordained anyway.
Good riddance to some of the most evil people on earth.
Wow: if this doesn't touch your heart then you have no soul. Mother forgoes cancer treatment to save unborn child.
She sent 159 text messages about her pregnancy to her brother in the months that followed. Many were joyful but then the bone-chilling messages came in during the predawn hours. She said severe headaches and double vision tortured her while tremors wracked her entire body."I'm worried about this baby," she texted.
"I hope I live long enough to have this baby," said another message. "Bubba, if anything happens to me, you take this child." ...
At her family's encouragement, she visited a number of doctors. In July, a CT scan revealed that she had head and neck cancer.
Now she had to choose between her life and her baby's life. Phillips said she agonized only for a while before deciding against taking potentially lifesaving chemotherapy in hopes that she would soon hold a healthy baby in her arms.
Read the rest.
(HT: Townhall.)
