Saturday, May 27, 2017

Wealth is the adult version of magic

Wealth, I realized, is the adult version of magic: an incredibly powerful but ultimately arbitrary resource that transfers primarily through inheritance. It has some logic to it— but also enough randomness that those without can hope for a spontaneous windfall in the form of an improbably lucrative investment or a secret inheritance. (Harry Potter and Rachel Chu were both thrust into lands of glittering palaces and gem-studded talismans after discovering secret inheritances.) Particularly in the rapidly growing economies of post-WWII Asia and post-communist China, the acquisition [of] wealth has, at times, taken on a sort of magical quality — with all the confusion and trauma that can imply.
--Maureen O'Connor, New York, on the popularity of Crazy Rich Asians and other books/shows about rich people

Thursday, May 25, 2017

Why are MLB pitchers taking longer between pitches?

Compared with 2007, the average MLB pitcher now holds the ball a full two seconds longer between consecutive pitches. ...

...in terms of baseball’s most valuable currency — fastball velocity — pitchers do benefit from a slower pace of delivery. I found this using a model that compared every pitch to the pitcher’s own average velocity, while normalizing for the count and number of pitches he had thrown in the game. ...
For every additional second they spend (up to 20 seconds), pitchers throw about .02 miles per hour harder.

Such a small difference in fastball velocity might seem too insignificant to chase. But every mile per hour matters: According to a 2010 study by Mike Fast (now employed in the Houston Astros’ front office), a single tick of fastball velocity is worth 0.3 runs per nine innings for a starter, and even more (0.45 runs per mph) for relievers. ...

If a team’s entire pitching staff took an average of 10 extra seconds, the resulting 0.2-mile per hour increase would equate to about 10 extra runs saved per season. Using the classic sabermetric rule of 10 runs per win, that’s one whole extra victory — something general managers have been willing to pay upwards of $7 million to acquire. ...

Across baseball, the average four-seam fastball velocity has spiked a full mile per hour since 2010, and that jump has coincided with the drop in pace. ... All in all, declining pace could be responsible for about 20 percent of the leaguewide increase in fastball velocity since 2010.
--Rob Arthur, FiveThirtyEight, on why baseball games last more than three hours

Revenge of the nerds on Wall Street

When Michael Savini came to Wall Street in 2006, banks and brokers had stocked their annual recruiting classes with a preponderance of new hires who shared at least one thing in common: They’d played college sports. ...

Ex-jocks had the right stomach for risk-taking, the theory went, and the ideal temperament to win clients’ trust and business. ...

As an economics major at Columbia University, where he was a four-year starter and co-captain of the wrestling team, Mr. Savini followed two older brothers, also college athletes, into finance. There, he believed, his background gave him an edge. “Athletes are better equipped at knowing you’re not always going to win,” he said. “In sales, you’re going to get a lot of doors slammed in your face. It’s how you bounce back from those losses that define us.”

Yet these days, when he attends mixers for former wrestlers in finance, Mr. Savini, 42 years old, says he hears more gripes than enthusiasm. If college athletes asked him for advice in pursuing a career on the trading floor, he said, his message would be a simple one.

Don’t. ...

Two years ago, after nearly a decade working as an equity salesman, Mr. Savini left for 303 Capital Markets, a boutique investment-banking firm. “The business is changing,” he said. “It’s all going electronic.”

“These guys are on the wrong side of Moore’s Law,” said Rett Wallace, a former investment banker, referring to the axiom on the exponential growth of computing power. ...

The industry started to shift away from athletes in the 1990s as derivatives grew in number and complexity. That necessitated a hiring spree for Ph.D.s who could understand and price them. More recently, the advent of electronic trading and quantitative investing called for many more recruits with math or computer-programming skills.
--Justin Baer, WSJ, on brains over brawn

The astronomical improbability of life

Nor do we know how life began. At some point, the Earth made the transition from chemistry to biology, yes, but we cannot “agree on a definition that separates the nonliving chemistry from life,” as the geneticist Johnjoe McFadden puts it. (He then paraphrases the astronomer Fred Hoyle, who famously said that the odds of assembling something like a bacterium out of the primordial ooze were akin to the odds of a tornado’s assembling a jumbo jet out of a junkyard heap as it sweeps through.)

There are scientists who will go so far as to say that life is a spectacular fluke. Not everyone, mind you: Researchers now estimate that there are one billion Earthlike exoplanets in the Milky Way. “To my mathematical brain, the numbers alone make thinking about aliens perfectly rational,” Stephen Hawking has said.

But a powerful essay by the evolutionary biologist Matthew Cobb will make you wonder whether any form of multicellular life is far less likely than one in a billion. He points out that “there are more single-celled organisms alive on Earth than there are Earthlike planets in the observable universe”; that the number of single-celled organisms that have lived on this planet over the course of 3.8 billion years is beyond calculation; that these organisms have interacted “gazillions” of times (I love it when words of the appropriate magnitude desert even the experts). Yet we’ve never had a second instance of eukaryogenesis — that remarkable moment when one unicellular life form lodged inside another, forming something much more complex — in all this time.
--Jennifer Senior, NYT, on the uniqueness of life as we know it

Saturday, May 13, 2017

Maybe macroeconomic forecasts aren't so bad

Macroeconomists... are asked to routinely produce forecasts to guide fiscal and monetary policy, and are perhaps too eager to comply. ...

...the supposedly most embarrassing forecast errors come with regards to large crises. Yet, these crises are rare events that happen once every many decades. Since typical economic time series only extend over a little more than one hundred years, statistically forecasting the eruption of a crisis will always come with large imprecision.

Compare how economics does relative to the medical sciences. ...

Imagine going to your doctor and asking her to forecast whether you will be alive 2 years from now. That would sound like a preposterous request to the physician, but perhaps having some actuarial mortality tables in her head, she would tell you the probability of death for someone of your age. For all but the older readers of this article, this will be well below 50%. Yet, one year later, you have a heart attack and die. Should there be outrage at the state of medicine for missing the forecast, with such deadly consequences?

One defense by the medical profession would be to say that their job is not to predict time of death. They are driven to understand what causes diseases, how to prevent them, how to treat them, and altogether how to lower the chances of mortality while trading this off against life quality and satisfaction. ... This argument applies, word for word, to economics once the word disease is replaced by the words financial crisis. ...

A more sophisticated defense would note that medical sciences are about making conditional forecasts: if you make some lifestyle choices, then your odds of dying change by this or that much. These forecasts are at best probabilistic. ...

Economics is not so different, even in 2007-08. Within days or weeks of the failure of Bear Sterns or Lehman Brothers, economists provided diagnoses of the crisis, and central banks and finance ministries implemented aggressive measures to minimize the damage, all of which were heavily influenced by economic theory. ... The economy did not die, and a Great Depression was avoided, in no small part due to the advances on economics over many decades.

Too many people all over the world are today being unexpectedly diagnosed with cancer, undergo enormously painful treatment, and recover to live for many more years. This is rightly hailed as a triumph of modern oncology, even if so much more remains to be done. After suffering the worst shock in many decades, the global economy’s problems were diagnosed by economists, who designed policies to respond to them, and in the end we had a painful recession but no melt down. Some, somehow, conclude that economics is at fault. ...

Macroeconomists are... asked to predict what will happen to the changes in the CPI or GDP over the next 1-5 years. The comparison of forecast quality must be made for the same time horizon and for a similar level of aggregation. The fairer comparison would be to ask doctors to predict what will be the percentage change in the annual number of patients that eventually die after being admitted to an emergency room due to a stroke. For these similar units, my guess is that medical forecasts will look almost as bad as macroeconomic forecasts.
--Ricardo Reis on comparing apples to apples

Why do dads tell dad jokes?

But now I know why dads tell dad jokes. You have this captive audience that laughs at 100% of your jokes for eight straight years, so your jokes just get worse and worse. And then one day, the laughter stops.
--MEL on the fate of the monopolist

Why do your sports teams suck? Taxes

Between 1989, when the team entered the N.B.A., and this season, the [Minnesota] Timberwolves have the worst record in the league. ...

In a state synonymous with hockey, neither the Wild nor the Stars (while in Minnesota) has won the Stanley Cup. Same for the Vikings and the Super Bowl. The Twins did win the World Series, but that’s the exception to the losing rule. ...

Minnesota has one of the highest top marginal income tax rates for any state at 9.85 percent. ...

It’s unclear how much professional athletes value these public goods, but the Timberwolves still have to pay extra to offset those taxes. And given the competition under a salary cap, it means Minnesota teams spend almost 10 percent less than teams from Florida or Texas, which have no income tax. This could be enough money to upgrade from an average player to an All-Star.

To test my theory, I gathered data on the outcomes of every professional sports game over the past 40 years as well as data on state and local tax rates each team member faces. I then computed how much taxes predict winning for each league in every year while controlling for other factors such as population, income, franchise age and local amenities (i.e., weather).

Results of the analysis show that higher taxes consistently predict worse performance in every league — not just the N.B.A. but also Major League Baseball, the N.H.L., and the N.F.L. over the past 20 years. ...

Several other factors connect the income tax effect to my theory. Comparing player salary to player value measures provides evidence that higher-taxed teams in baseball and basketball pay more for players of similar quality, suggesting tax compensation is real. The income tax effect also relies on the assumption that players and teams are responding to income tax rates when negotiating contracts. This explains why the effect arises only in the wake of collective bargaining agreements in the late 1980s and early 1990s that allowed players to become unrestricted free agents and have teams compete to sign them.

The income tax effect could also be explained if people in low-tax states such as Texas and Florida just enjoy sports more and support their teams more and this translates to more winning. But I found that in college football and basketball, where athletes are not paid and should not care about income tax rates, teams from lower-tax states do not perform better than teams in higher-tax states.
--Erik Hembre, NYT, on the tax elasticity of labor supply

Wednesday, April 26, 2017

Does education make people less religious?

The idea is peppered through the writings of scholars, great thinkers, and New Atheist-types: Education is the cure for religion. ...

New data from the Pew Research Center doesn’t disprove these claims, but it does challenge them. ...

There are at least two different ways to think about the relationship between education and religiosity: how schooling affects belief, and how it affects practice. Pew’s researchers looked at data from a number of recent surveys, including their 35,000-person study of American religion from 2014. They found that educated people are generally less likely to believe in God: Among all U.S. adults, only 83 percent of college grads said they think God exists, while 92 percent of people with only a high-school degree or less said the same.

Within Christianity, though, the difference all but disappears. Among educated mainline Protestants, 96 percent said they believe in God, compared to 97 percent among the less educated; among Catholics, 98 percent of both groups said the same. Among Mormons, black Protestants, and evangelical Protestants, there was effectively no difference at all, because virtually everyone in those groups said they believe in God.

Educational differences had a much bigger effect on religious practice. Sixty-eight percent of college-educated evangelical Protestants go to church every week, compared to 55 percent of those who only went to high school. In fact, college grads show up in the church pews more often in nearly every kind of Christian tradition: Among mainline Protestants, weekly attendance was 36 to 31 percent, more educated to less; among black Protestants, 59 to 52 percent; and among Catholics, 45 to 39 percent. The effect was perhaps greatest among Mormons: 85 percent of Mormon college graduates go to church at least once a week, compared to 66 percent of their peers with a high-school education or less.
--Emma Green, The Atlantic, on religiosity among the knowledgable

Monday, April 24, 2017

Who has buyer's remorse? Hillary voters, not Trump voters

I argued last week that anecdotal stories about disillusioned Trump supporters were overdone. The fact is that, on a broad scale, Trump supporters say they aren't disappointed. In fact, a poll showed they were more pleased than disappointed, by about 5 to 1:
...The Pew Research Center released a poll showing very little buyer's remorse among Trump voters. The poll showed just 7 percent of Republicans and Republican-leaning independents say Trump has performed worse than they expected him to. Fully 38 percent — five times as many — say he has performed better.
A new Washington Post-ABC News poll confirms this — in spades. And, in fact, it shows more buyer's remorse for Trump's opponent in the 2016 election, Hillary Clinton. And were the 2016 election held again today, it shows Trump would avenge his popular-vote loss.

While just 4 percent of Trump's supporters say they would back someone else if there was a redo of the election, fully 15 percent of Clinton supporters say they would ditch her. Trump leads in a re-do of the 2016 election 43 percent to 40 percent after losing the popular vote 46-44. ...

Just 2 percent of those who voted for Trump say he has been a worse president than they expected. Only 1 percent say he has been “much worse,” and 1 percent say he has been “somewhat worse.”

In contrast, 62 percent say he has been better than expected, with one-third (33 percent) saying he has been “much better.”
--Aaron Blake, Washington Post, on happenings outside the liberal bubble

Thursday, April 20, 2017

Correlation between likability and status is nearly zero for teenage girls

“In elementary school, the kids who are really well-liked and who are nice are also the kids who are popular,” said Amanda Rose, a psychology researcher at the University of Missouri. “But in middle school, this starts to change.” By the time high school starts, there are two kinds of popularity: There are the well-liked students, and then there is the emergence of a new group, which researchers call the high-status students — these are the ones who dominate their social groups, who are perhaps voted to the homecoming court, or are captain of the soccer team.

This distinction — between status and likability — is especially important in understanding the alpha girl over her teenage-boy counterpart. Alpha boys tend to be aggressive in physical ways, starting fights or pushing each other around, while alpha girls are more likely to act in relationally aggressive ways, spreading rumors or using the silent treatment. ...

For girls, “the more aggressive you are, the less likable you will be. But it will make you more popular,” said Mitch Prinstein, a psychologist at the University of North Carolina at Chapel Hill and the author of the upcoming book Popular: The Power of Likability in a Status-Obsessed World. “For boys, a lot of them can be [high-status] and also well-liked at the same time. But that is so not the case for girls. The correlation between likability and status approaches zero for girls.” Alpha girls are admired and feared, but they’re not often liked. ...

For teenagers, as you’ll no doubt recall, their peers’ opinions mean everything. Their parents’ opinions, on the other hand, means nothing — less than nothing. The farther they can get from anything adults approve of, the better. ...

Hence the allure of the alpha girl. High-status teenagers, the research suggests, tend to behave in ways adults find inappropriate, which other teenagers find exhilarating. ... They skip class, they dabble in drugs, they go to parties. They are, in a word, cool. ...

One might assume, as I did, that your high school’s alpha girl grew up to be the office alpha girl, too. But every researcher I talked to said the opposite; several of them, for that matter, pointed me toward a fascinating study led by Allen and published in 2014 in the journal Child Development, titled: “What ever happened to the ‘cool’ kids?” For that paper, Allen and his colleagues interviewed a group of teenagers — including the “high-status” ones, otherwise known as the popular kids — when they were seniors in high school, and then tracked them down and reinterviewed them ten years later. “And a decade later,” Allen tells me, “they’re not doing so well. They’re doing less well in romantic relationships, they’re more likely to have problems with alcohol use and criminal behavior.”

Saturday, April 15, 2017

Do diets make you fat?

...in a 2012 study, researchers followed over 4,000 twins aged 16 to 25. Dieters were more likely to gain weight than their non-dieting identical twins, suggesting that dieting does indeed increase weight gain even after accounting for genetic background...

The causal relationship between diets and weight gain can also be tested by studying people with an external motivation to lose weight. Boxers and wrestlers who diet to qualify for their weight classes presumably have no particular genetic predisposition toward obesity. Yet a 2006 study found that elite athletes who competed for Finland in such weight-conscious sports were three times more likely to be obese by age 60 than their peers who competed in other sports.

To test this idea rigorously, researchers could randomly assign people to worry about their weight, but that is hard to do. One program took the opposite approach, though, helping teenage girls who were unhappy with their bodies to become less concerned about their weight. In a randomized trial, the eBody Project, an online program to fight eating disorders by reducing girls’ desire to be thin, led to less dieting and also prevented future weight gain. Girls who participated in the program saw their weight remain stable over the next two years, while their peers without the intervention gained a few pounds. ...

If dieting doesn’t work, what should we do instead? I recommend mindful eating — paying attention to signals of hunger and fullness, without judgment, to relearn how to eat only as much as the brain’s weight-regulation system commands.

Relative to chronic dieters, people who eat when they’re hungry and stop when they’re full are less likely to become overweight, maintain more stable weights over time and spend less time thinking about food. Mindful eating also helps people with eating disorders like binge eating learn to eat normally. Depending on the individual’s set point, mindful eating may reduce weight or it may not. Either way, it’s a powerful tool to maintain weight stability, without deprivation.
--Sandra Aamodt, NYT, on winning by letting go

Friday, April 14, 2017

Reporting bias drives half of the starting MBA gender pay gap

Women MBAs are at a salary disadvantage from the onset of their post-business school careers, new data shows. According to self-reported data from MBAs graduating from top U.S. business schools, women earn an average total compensation package of $14,000 less than men in their first year of work. The data has been compiled by Transparent Career, an online MBA job reporting platform founded by an MBA team from the University of Chicago Booth School of Business. ...

[Transparent Career CEO Mitch] Kirby continued, after running multiple regressions, “roughly $4.5K of the gap was driven by this difference in job function choice, or about 33% of the total.”

To go even further still, Kirby honed in on consulting, because of its “notoriously standardized compensation packages.” Yet, in the data, there was still a wage gap of more than $12,000. How could this be? ...

“We used data from a set of top consulting firms, which we know to offer completely standardized compensation to MBAs regardless of gender,” Kirby wrote of their methodology to examine the hypothesis. “We looked to see if there was a difference in how women and men reported these offers.”

While men and women both reported salaries around $144,400, men reported earning $8,000 more in “bonus” and “other compensation.” Of the $12,000 gap in consulting, Kirby reasoned at least two-thirds of it was due to men inflating their projected bonuses and overall compensation. According to the report, an additional 43% of the overall wage gap was a result of this phenomenon.

“What’s noteworthy here is that offered salary is an objective, immutable number,” Kirby wrote. “Performance bonuses and other compensation, however, can be interpreted more subjectively — based on a range candidates are given in an offer letter. Its likely that men are estimating they will achieve higher performance bonuses than women, which leads to a larger reported wage gap.”

--Nathan Allen, Poets and Quants, on self-confidence in pay estimates. Next step is to see how much of the forecasted bonus gap materializes in actual bonuses.

Sunday, April 9, 2017

Job interviews are useless

...interviewers typically form strong but unwarranted impressions about interviewees, often revealing more about themselves than the candidates.

People who study personnel psychology have long understood this. In 1979, for example, the Texas Legislature required the University of Texas Medical School at Houston to increase its incoming class size by 50 students late in the season. The additional 50 students that the school admitted had reached the interview phase of the application process but initially, following their interviews, were rejected. A team of researchers later found that these students did just as well as their other classmates in terms of attrition, academic performance, clinical performance (which involves rapport with patients and supervisors) and honors earned. The judgment of the interviewers, in other words, added nothing of relevance to the admissions process.

Research that my colleagues and I have conducted shows that the problem with interviews is worse than irrelevance: They can be harmful, undercutting the impact of other, more valuable information about interviewees.

In one experiment, we had student subjects interview other students and then predict their grade point averages for the following semester. The prediction was to be based on the interview, the student’s course schedule and his or her past G.P.A. (We explained that past G.P.A. was historically the best predictor of future grades at their school.) In addition to predicting the G.P.A. of the interviewee, our subjects also predicted the performance of a student they did not meet, based only on that student’s course schedule and past G.P.A.

In the end, our subjects’ G.P.A. predictions were significantly more accurate for the students they did not meet. The interviews had been counterproductive. ...

What can be done? One option is to structure interviews so that all candidates receive the same questions, a procedure that has been shown to make interviews more reliable and modestly more predictive of job success. Alternatively, you can use interviews to test job-related skills, rather than idly chatting or asking personal questions.

Thursday, April 6, 2017

Does a life of radical generosity bring moral satisfaction?

The “do-gooders” in Larissa MacFarquhar’s new book, “Strangers Drowning,” make these kinds of calculations every day. Obsessively. They sacrifice little luxuries and add up the lives they’ve saved. Then they wonder if they should give up more things they don’t need: cable television, having children, a new winter coat, that extra kidney they’ve been carrying around forever.

After Julia Wise allowed her boyfriend to buy her a $4 candy apple, she was overwhelmed with tortured thoughts. “With her selfish, ridiculous desire for a candy apple,” MacFarquhar writes, “she might have deprived a family of an ­anti-malarial bed net or deworming medicine that might have saved the life of one of its ­children.”

Wise became a social worker and married Jeff Kaufman, a young professional who was just as focused on giving. Their shared mission is to send money to people in distant countries and thus reduce the world’s suffering. To do so, they labor and scrimp and save — having lived at one point on a self-­imposed weekly allowance of $38 — so that they can give away tens of thousands of dollars to charity. ...

Martyrdom doesn’t seem to be the point, not even for the man who donates his kidney to a complete stranger. Without exception, MacFarquhar’s do-gooders are as messed up and conflicted as the rest of us, if not more so. They long for connectedness and a sense of purpose. ...

The stories in “Strangers Drowning” all have open-ended conclusions. After decades of giving, many of MacFarquhar’s do-gooders feel strangely unsettled. They’ve discovered that sacrificing for others doesn’t make them feel as if they’ve earned a spot in heaven. All it does is see them through one more day.
--Hector Tobar, NYT, on rediscovering Martin Luther's rediscovery that salvation is not by works. HT: CG

Why is victimhood all the rage?

We’re living in an age of great moral pressure, even if we lack the words to articulate it. In fact, as Wilfred McClay points out in a brilliant essay called “The Strange Persistence of Guilt” for The Hedgehog Review, religion may be in retreat, but guilt seems as powerfully present as ever.

Technology gives us power and power entails responsibility, and responsibility, McClay notes, leads to guilt: You and I see a picture of a starving child in Sudan and we know inwardly that we’re not doing enough. ...

McClay is describing a world in which we’re still driven by an inextinguishable need to feel morally justified. Our thinking is still vestigially shaped by religious categories.

And yet we have no clear framework or set of rituals to guide us in our quest for goodness. Worse, people have a sense of guilt and sin, but no longer a sense that they live in a loving universe marked by divine mercy, grace and forgiveness. There is sin but no formula for redemption.

The only reliable way to feel morally justified in that culture is to assume the role of victim. As McClay puts it, “Claiming victim status is the sole sure means left of absolving oneself and securing one’s sense of fundamental moral innocence.”

“If one wishes to be accounted innocent, one must find a way to make the claim that one cannot be held morally responsible. This is precisely what the status of victimhood accomplishes.”

I’d add that this move takes all moral striving and it politicizes it. Instead of seeing moral struggle as something between you and God (the religious version) or as something that happens between the good and evil within yourself (the classical version), moral struggle now happens primarily between groups.

We see events through the lens of moral Marxism, as a class or ethnic struggle between the evil oppressor and the supposedly innocent oppressed. The moral narrative of colonialism is applied to every situation. The concept of inherited sin is back in common currency, only these days we call it “privilege.”
--David Brooks, NYT, on our need for redemption

Wednesday, March 22, 2017

The shortcomings of affirmative consent policies

The main problem with affirmative consent policies is that they don't match how people have sex in the real world, including on college campuses. They are a classic example of policies that sound good in theory but break down in practice.

After all, isn’t it important that people make sure that they have consent for sex? How could it be bad to codify that requirement in the clearest possible terms?

The problem is that what seems clear in principle is often decidedly less so in practice. Most affirmative consent policies, for example, say that consent may only be expressed through unambiguous words or actions. On its face, that is clear enough. Expressing unambiguous verbal consent only takes one word: “Yes.”

Requiring verbal consent seems that it would simplify proof in sexual assault accusations, but it doesn’t. We have seen multiple cases where the complainant acknowledged that they said yes, but claimed that they did not mean it, or that they non-verbally withdrew the consent later. The accused was found responsible for sexual assault in these cases. ...

This brings us to consent through actions. This is where, as most communist nations eventually discovered, what sounds great in theory can be a disaster in practice.

What does unambiguous consent through actions look like? Consider, for example, the last time you had intercourse without verbal consent. How did you know the other person wanted to do it? ...

If you point to any one thing and say that’s what made me think I had consent, you’re going to be found responsible for sexual misconduct. That’s because most sexual misconduct policies explicitly say that consent for one sexual act does not imply consent for another sexual act. So if you say, “I thought because she put my hand on X, she wanted Y,” you’re toast. ...

The problem is that consent through actions is all about context. It’s not any single thing, especially when the participants are in a romantic relationship. ...

But universities, in our experience, default to punishing the accused in these ambiguous cases. Breaking down how consent-through-actions was communicated, in the cold light of a conference room months or even years later, is impossible. The practical result is that the affirmative consent policy allows any student to get his or her former sex partners expelled or suspended.
--Justin Dillon and Hanna Stotland, Harvard Crimson, on a failure of social engineering

Friday, March 17, 2017

The case for tipping generously

[Steve Ross] was also well known in [New Haven’s] restaurants and was a generous tipper, [Rick] Antle said. “He said that extra that you give, that’s where all the action is, and it’s not that much money,” he said.
--Ed Stannard, New Haven Register, on the everyday wisdom of Steve Ross


A great bon viveur, [Steve Ross] would baffle friends with his ability to find tiny ethnic restaurants tucked into obscure corners of southern Connecticut, where the food was delicious and the staff invariably seemed to know and love him.

He was also a great aficionado of wine. At dinners he held for peers, it was decided to put a cap on the price of the wine, to make sure that the meal was within everyone’s budget. “Why would we want constrained optimisation like that?” Ross complained, in the language of economic theory.

He avoided the problem by bringing in ever more exquisite wines — and politely lying about their price.
--John Authers, Financial Times, on the generosity of Steve Ross

Steve Ross and Bernie Madoff

When Stephen Ross went to perform due diligence on the investment firm run by Bernard Madoff, he found himself baffled. His client, an investment group, was unsure Madoff’s great returns could be sustained — and the more the Madoff representatives talked to Ross in generalities about their options trading strategies, the less he understood what they actually did.

As he pressed them, they protested that options pricing was complicated. “I know it’s complicated,” said Ross. “I invented your model for pricing options.” He did not in the end recommend investment in Madoff’s funds.
--John Authers, Financial Times, on the limits of BS

Monday, March 13, 2017

Why professors should ask only tough Ph.D. oral exam questions

My second memory of Steve Ross is of the oral exam that he administered along with Jim Tobin. At that time, Yale students talked in whispers of the "Tobin spiral," caused when Tobin asked an easy question, the student assumed there must be a catch and froze up, prompting Tobin to ask an even easier question, and so on towards failure. I was actually more intimidated by Steve than by Jim, but escaped a Ross spiral when Steve asked what seemed to me abundantly difficult questions.
--John Campbell, a member of my dissertation committee, on a great man and scholar