Fed driver distraction guidelines make navigation unusable by Wayne Cunningham details how strict federal laws will make car based navigation systems much worse. I wonder about the unintended consequences. Car navigation systems are large (in-dash devices have 5 inch or larger screens) and clear (utilizing the car stereo). If we cripple them, we’ll see even more people moving to small screened and tinny phone based navigation systems. It is easy to imagine that on net this could endanger lives.
Money Magazine has a great article on why dollar cost averaging isn’t a good idea. Unfortunately, as far as I can tell it isn’t online. I’ll summarize the major points
- Dollar cost averaging is like putting your investment portfolio into a mix of cash and whatever your eventual full investment portfolio is. Call these the MIX and FULL portfolios.
- That means you start off with a very low risk portfolio and move into a riskier one.
- If you cannot stomach the risky returns of FULL today, what makes you think you will be ready for it in a year? Maybe you should invest in a less risky portfolio today and go in fully.
- Dollar cost averaging makes sense if the returns depend on the number of units you hold. You need a story like mean reversion, where when you buy at low prices you expect high returns and high prices low returns, but cannot tell exactly which is which. Unfortunately for dollar-cost-averagers, returns don’t seem to depend on prices. Therefore, dollar-cost averaging doesn’t actually hedge any important risk.
Basically, dollar cost averaging attempts to mitigate the risk of miss-timing the market. Unfortunately, timing the market is difficult. The way you hedge that timing risk is by reducing your exposure to the market. For most workers, the loss in expected returns from reduced market exposure is large while the reduced risk from timing the market is likely nothing.
I enjoyed both How To Be Creative By Jonah Lehrer and the send up of the book from which that article was drawn, It’s All in Your Head: The Problems With Jonah Lehrer’s Imagine By TIM REQUARTH AND MEEHAN CRIST. Even if we don’t know a lot about how creativity works what we do know is awfully interesting.
Why Government Bragging over TARP Doesn’t Pay by Francesco Guerrera has a nice review of why it is difficult or even impossible to assess on a program by program basis if a bailout has been repaid. At a minimum you need to consider the cost of all the bailouts, the stimulus, the new incentives, and the tax effects of the losses because the complex interactions between programs makes their individual success meaningless.
Is Homeopathy A Sham? by Alva Noe has a lovely and (to me) novel point about the difference between an effect and a side effect:
The difference between effects and side-effects is not a difference in the effect, but in our interests and aims. Throw a stone in a pond. What are the effects and what the side effects?
The stone hits the water. This makes a noise; there is a splash; there are ripples; the bird is startled and takes flight, and on and on. Maybe my purpose in throwing the stone is to make it skip; this is the effect at which I aim; relative to this aim, all the rest are just side-effects.
To give an example (due originally to the philosopher H.L.A. Hart), if a Martian were to come to Earth, he might explain a house fire as caused by the superabundance of oxygen in the environment. We, on the other hand, who take oxygen for granted as a background condition, are likely to cite the action of the arsonist, even though we know that the arsonist’s action would have been ineffective without the presence of oxygen. (Imagine the arsonist’s defense in court: Yes, judge, I lit the match, but it was the oxygen that caused the fire; I’m innocent!)
The general discussion of the philosophy of causality is also excellent.