Saturday, February 27, 2016

Many mutual funds now hold ETFs

Picking stocks has become so hard that some stock pickers have given up pretending to try.

Pry open the hood of a mutual fund, and you might be startled by what you find. In the past, you would have seen roughly 100 stocks, each painstakingly selected by a portfolio manager passionate about beating the market. Today, you increasingly are likely to find a few handfuls of exchange-traded funds, those autopilot portfolios that seek to mimic the market rather than beat it. ...

According to Morningstar, the investment research firm, 18% of stock, bond or “allocation” funds—which include the target-date funds popular in 401(k) plans and own a blend of assets—hold ETFs, up from 13% in 2010. The funds that own ETFs have an average of 20% of their assets in them.

Allocation funds that hold more than half their assets in ETFs charge an average of 0.6% in annual management fees, not much less than the 0.7% average for active U.S. stock funds, Morningstar says. That means some allocation managers are charging almost as much to buy a few ETFs as active stock pickers researching hundreds of individual securities.

USAA Asset Management Co., which runs about $66 billion in mutual funds, holds at least $4 billion of ETFs, says Lance Humphrey, a portfolio manager at the San Antonio-based firm.

As of 2013, USAA Global Managed Volatility Fund, which seeks to capture the returns of stocks around the world but with less risk during downturns, owned more than 600 stocks and bonds. Now, the nearly $200 million portfolio has all its money invested in 19 ETFs. ...

Global Managed Volatility is run “tactically,” shifting its holdings based on shorter-term considerations. Its management fees—0.6%—haven’t changed...

Yes, there are more ads on TV than before

For years, networks crammed in more ads, in part to offset lower ratings, said Brian Wieser, a media analyst at Pivotal Research. Commercials on broadcast networks accounted for 17.3 percent of programming time last year, from 16.8 percent in 2012 according to Mr. Wieser’s analysis of Nielsen data. On cable networks, commercials accounted for 20.6 percent of program time, from 19.3 percent in 2012.

Friday, February 26, 2016

What Google discovered makes a team good

In 2012, the company embarked on an initiative — code-named Project Aristotle — to study hundreds of Google’s teams and figure out why some stumbled while others soared. ... [Julia] Rozovsky, by then, had decided that what she wanted to do with her life was study people’s habits and tendencies. After graduating from Yale [School of Management], she was hired by Google and was soon assigned to Project Aristotle. ...

In 2008, a group of psychologists from Carnegie Mellon and M.I.T. began to try to answer a question very much like this one. ... As the researchers studied the groups, however, they noticed two behaviors that all the good teams generally shared. First, on the good teams, members spoke in roughly the same proportion, a phenomenon the researchers referred to as ‘‘equality in distribution of conversational turn-taking.’’ On some teams, everyone spoke during each task; on others, leadership shifted among teammates from assignment to assignment. But in each case, by the end of the day, everyone had spoken roughly the same amount. ‘‘As long as everyone got a chance to talk, the team did well,’’ Woolley said. ‘‘But if only one person or a small group spoke all the time, the collective intelligence declined.’’

Second, the good teams all had high ‘‘average social sensitivity’’ — a fancy way of saying they were skilled at intuiting how others felt based on their tone of voice, their expressions and other nonverbal cues. One of the easiest ways to gauge social sensitivity is to show someone photos of people’s eyes and ask him or her to describe what the people are thinking or feeling — an exam known as the Reading the Mind in the Eyes test. People on the more successful teams in Woolley’s experiment scored above average on the Reading the Mind in the Eyes test. They seemed to know when someone was feeling upset or left out. People on the ineffective teams, in contrast, scored below average. They seemed, as a group, to have less sensitivity toward their colleagues. ...

Within psychology, researchers sometimes colloquially refer to traits like ‘‘conversational turn-taking’’ and ‘‘average social sensitivity’’ as aspects of what’s known as psychological safety — a group culture that the Harvard Business School professor Amy Edmondson defines as a ‘‘shared belief held by members of a team that the team is safe for interpersonal risk-taking.’’ Psychological safety is ‘‘a sense of confidence that the team will not embarrass, reject or punish someone for speaking up,’’ Edmondson wrote in a study published in 1999. ‘‘It describes a team climate characterized by interpersonal trust and mutual respect in which people are comfortable being themselves.’’

When Rozovsky and her Google colleagues encountered the concept of psychological safety in academic papers, it was as if everything suddenly fell into place. ...

What Project Aristotle has taught people within Google is that no one wants to put on a ‘‘work face’’ when they get to the office. No one wants to leave part of their personality and inner life at home. But to be fully present at work, to feel ‘‘psychologically safe,’’ we must know that we can be free enough, sometimes, to share the things that scare us without fear of recriminations. We must be able to talk about what is messy or sad, to have hard conversations with colleagues who are driving us crazy. We can’t be focused just on efficiency. Rather, when we start the morning by collaborating with a team of engineers and then send emails to our marketing colleagues and then jump on a conference call, we want to know that those people really hear us. We want to know that work is more than just labor.
--Charles Duhigg, NYT Magazine, on my former student Julia Rozovsky doing Yale proud

The tension between helping the working class and cutting healthcare costs

Go to a Rust Belt city or a medium-size town somewhere and start talking to folks about how they’re doing. There’s something you’ll quickly notice about the people who tell you their family is doing OK: a whole lot of them work in health care. They are the registered nurses, the LPNs, the physical therapists, the home-health-care aides, the X-ray technicians, the phlebotomists. ...

Their jobs are well-paid for their educational level and the local cost of living. The work is also very stable, for an aging society needs a lot of health care, and since it is generally reimbursed by third parties, demand does not fluctuate with the business cycle as strongly as, say, demand for hairdressing or construction. And if one employer should close down, there will always be another hospital or doctor’s office somewhere that needs workers.

Health-care jobs are for today what manufacturing jobs were for our grandparents: a guarantee that you’d never get rich, but never go hungry, either. (OK, some cardiac surgeons may get rich, but the majority of people working in the health-care field are doing something much less glamorous and well-remunerated.) ...

Much as we’d love to think that it’s all insurance company profits and outrageously priced “me too” drugs, the main reason that American health care costs so much is the number of procedures we do, and the price of those procedures. And health-care labor is a huge portion of those costs. For example, it makes up about half of hospital costs, despite the fact that hospitals are enormous buildings containing an awful lot of high-tech equipment and pricey medicines.

For the working class, cutting health-care costs would mean badly eroding one of the last islands of opportunity in an otherwise storm-tossed labor market.
--Megan McArdle, BloombergView, on one man's cost being another man's revenue

Tuesday, February 23, 2016

Why millennials don't eat cereal

On Monday, the New York Times published a story about the breakfast favorite, and the most disconcerting part was this:
Almost 40 percent of the millennials surveyed by Mintel for its 2015 report said cereal was an inconvenient breakfast choice because they had to clean up after eating it.
The industry, the piece explained, is struggling — sales have tumbled by almost 30 percent over the past 15 years, and the future remains uncertain. ...

A large contingent of millennials are uninterested in breakfast cereal because eating it means using a bowl, and bowls don't clean themselves (or get tossed in the garbage). Bowls, kids these days groan, have to be cleaned. ...

But there is something different about the backlash against cereal bowls, something more foundational about it that seems to speak to a greater truth about American households today.

A 2014 national survey, conducted by Braun Research, found that 82 percent of parents said they were asked to do chores as children. But when they were asked if they required their children to do chores, only 28 percent of them said yes.

Is a generational shift in how families raise their kids turning even the most mundane of responsibilities, like doing the dishes, into unthinkable nuisances? 
--Roberto Ferdman, Wonkblog, on the death of cereal

Monday, February 22, 2016

Hedonic editing in the 16th century

Injuries, therefore, should be inflicted all at once, that their ill savour being less lasting may the less offend; whereas, benefits should be conferred little by little, that so they may be more fully relished.
--Niccolo Machiavelli, The Prince, anticipating Richard Thaler's work on loss aversion and mental accounting four centuries in advance

Wednesday, February 17, 2016

Astronauts didn't eat astronaut ice cream

Any space-enthused kid has endured the crumbly, chalky agglomeration of flavors known as "astronaut ice cream." We deal with it because of the supposed connection to the lives of real space explorers.

The only problem is that astronaut ice cream is a lie. ...

Apollo 7 is identified by Wikipedia (and most other sources) as the only flight to harbor the chalky ice cream.

When I asked astronaut Walt Cunningham, the sole surviving member of the crew, about it, he said, "We never had that stuff." ...

That matches with the complete absence of ice cream from mission transcripts as well. ...

That fits with the technical obstacles to space ice cream — as Canadian astronaut Chris Hadfield explained (along with Buzz Aldrin and many other astronauts), crumbly food like astronaut ice cream would be a major hazard in space. ...

That might be what makes astronaut ice cream so disconcerting — it teaches kids that something terrible for space travel is what astronauts eat. If kids want to eat astronaut ice cream, they should just enjoy delicious, real ice cream, as real astronauts have many times since the 1970s, when refrigerators became available in space.
--Phil Edwards, Vox, on the lies we tell our kids

Tuesday, February 9, 2016

So what if science explains religion?

In recent years, the scientists and polemicists known as the New Atheists have been telling a certain type of evolutionary story. It goes like this:

Once upon a time, when our ancestors were struggling for survival on the African savanna, it was good to see ghosts. What was that rustle in the grass? What was that passing shadow? If your instinct was to detect agency, even in lifeless features of the natural world, you did well for yourself. Sure, you made some silly mistakes, sometimes fleeing from what turned out to be a gust of wind. But you didn’t overlook any genuine threats, and in the end you survived.

The result is a human population hard-wired to detect agency. ... And grown-ups everywhere ascribe purposefulness to the world at large, understanding the workings of the universe in terms of divine agency — another silly mistake! ...

These narratives, in which prehistoric habits of survival become today’s intellectual liabilities, are supposed to undermine religion by scientifically demonstrating the irrationality at its core. But for the psychologist and religion professor (and Episcopal priest) James W. Jones, the author of CAN SCIENCE EXPLAIN RELIGION?: The Cognitive Science Debate (Oxford University, $24.95), they do no such thing.

Suppose, Jones suggests, that someone were to advance a similar argument against the field of biology. Back in the Paleolithic days, the story would go, it was advantageous to differentiate living from nonliving things, to assume that things had causes, to see patterns in nature. But today, far removed from the wilds of East Africa, these cognitive tendencies, detectable in children, drive our biological beliefs. As the “misfiring” of faculties developed for another purpose, these beliefs should be discredited, or at least strongly distrusted.

If presented with this argument, Jones imagines, we would surely make several objections: that the origin of a belief entails nothing about its truth or falsity (if you learn that the earth is round from your drunk uncle, that doesn’t mean it’s not); that biology is not a handful of simple beliefs that a child can possess but rather a complex social practice; and that even if we do have a natural inclination for certain beliefs, they can still be subject to rational scrutiny and confirmed or refuted.
--James Ryerson, NYT, on explanations that don't refute

Thursday, February 4, 2016

Woolly mammoth was not on the dinner menu in 1951

A Yale-led analysis has shown that a famous morsel of meat from a 1951 Explorers Club dinner is not, in fact, a hunk of woolly mammoth. It is green sea turtle meat, most likely set aside from the soup course.

The event, held Jan. 13, 1951 in the Grand Ballroom of the Roosevelt Hotel, featured a dinner of Pacific spider crabs, green turtle soup, bison steaks, and portions of a 250,000-year-old woolly mammoth that had been preserved in glacial ice. At least, that’s the menu that entered popular lore. Others in attendance at the dinner thought the main entrĂ©e was meat from an extinct giant ground sloth.

“I’m sure people wanted to believe it. They had no idea that many years later, a Ph.D. student would come along and figure this out with DNA sequencing techniques,” said Jessica Glass, a Yale graduate student in ecology and evolutionary biology, and co-lead author of a study published Feb. 3 in the journal PLOS ONE. ...

The banquet’s promoter, Commander Wendell Phillips Dodge, was a noted impresario and former agent for film star Mae West. He sent out press notices saying the annual dinner would feature “prehistoric meat.” Some attendees took this to mean woolly mammoth meat, while others believed they were being served meat from the giant ground sloth known as Megatherium. ...

A club member unable to attend the dinner, Paul Griswold Howes of the Bruce Museum in Greenwich, Conn., requested that a piece of meat be saved for him to display at the museum. Dodge personally filled out the specimen label for the fibrous chunk of muscle, saying it was Megatherium.

Yet over the years, the idea persisted that woolly mammoth had been served. The notion fit neatly with other stories in popular culture that imagined prehistoric mammoths found in blocks of glacial ice. That image remains iconic even today. ...

Glass was able to extract DNA, purify it and conduct mitochondrial gene sequencing. The results matched the genetic profile for green sea turtle.

Meanwhile, [Yale graduate student Matt] Davis found an item in the Explorers Club archives that pointed in the same direction. It was a published statement from Dodge soon after the banquet, joking that he may have discovered a “potion” that turns green sea turtle into giant sloth meat.
--Jim Shelton, YaleNews, on another legend debunked by DNA analysis