tag:unpleasantfacts.com,2013:/posts Unpleasant Facts and Other Musings 2016-09-19T02:52:33Z Jeff Lonsdale tag:unpleasantfacts.com,2013:Post/1091391 2016-09-19T02:52:33Z 2016-09-19T02:52:33Z The Falling Stock Holding Period Myth

One common financial fallacy is for people to divide the stocks outstanding by their volume and call that the average holding time. This makes today's average holding period of a stock seem very small, and the resulting chart can be used by those who want to paint today’s stock market as more short term than ever. 

The below tweet is not an atypical example of this phenomena. 

When I found the source of this chart, a newsletter by Alan Newman, the argument that it was buttressing was not surprising. 

“Thus, we are making the case that every year from 1997 may fairly be presumed manic in nature.”

Except that these charts are absolutely the wrong way to look at things. The rise of high frequency trading and the decrease in trading costs thanks to electronic trading has meant that market makers are trading a lot more than they have in the past. Thanks to the improvement in technology, transaction costs for investors have fallen across the board. Measured stock market volatility has also gone down, though there are likely tail risks associated with this volatility decrease such that the worrywarts are not completely wrong. But either way, the rise of high frequency trading says nothing about the changing time preference of today’s investors.

So how should we measure the time horizon of today’s investors? One way is to look at the median holding period of non-market making investors. It turns out that someone has already done this work, it just doesn’t get as much airtime as the average holding period because the data doesn’t tell a crazy story about investors. Martijn Cremers and Ankur Pareek have saved us a lot of trouble, because in 2014 they published a paper introducing the concept of Stock Duration. 

Stock Duration is a measure of how long institutional investors, who have to report their quarterly holdings to the SEC, have held a stock. The paper focuses more on quantitative investment strategy, but they included a measure of Stock Duration over time at the end.

 Source: Martijn Cremers and Ankur Pareek, Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance April 17, 2014. Figure 1, Panel A.

Their sample looked at the median duration of the largest 1300 stocks most commonly held by institutional investors. And the median stock duration increased during the period when high frequency traders started drastically increasing trading volume.

In another duration focused paper, they analyzed how duration and other factors drove the returns of US mutual funds with over $10 million AUM. In order to accomplish this, they calculated a Fund Duration metric. Fund Duration measures the average holding period of each stock in a fund and requires that a fund have at least two years of history. The aggregate of this metric again counters the narrative that investors are becoming more short term oriented.

Source: Martijn Cremers and Ankur Pareek, Patient Capital Outperformance: The Investment Skill of High Active Share Managers Who Trade Infrequently, 2015. Appendix A, Table A3

When we look directly at mutual funds, they are if anything becoming more long term oriented.

Source: Martijn Cremers and Ankur Pareek, Patient Capital Outperformance: The Investment Skill of High Active Share Managers Who Trade Infrequently, 2015. Appendix A, Table A3

It’s possible that mutual funds are now furiously trading in and out of their stocks between SEC quarterly reporting periods, but the relatively stable fund turnover ratio suggests otherwise. So while investors will always do many stupid short sighted things and many still have incentives driving them towards short term oriented thinking, the somewhat widespread idea that more investors than ever are thinking short term is probably not correct. 

Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1091364 2016-09-19T01:11:47Z 2016-09-19T02:07:44Z When Contrarianism Works

I recently came across a paper by Cremers, Pareek and Sautner on Stock Duration, Analyst Recommendations, and Overvaluation.  In this paper they look at how stock duration, the holding period of institutional investors, interacts with analyst recommendations.

One of many interesting findings was a twist on the classic finding of stock underperformance or outperformance driving the analyst rating, rather than vice versa:

But interestingly enough, when stock analysts are late to the party of a stock with long term holders, the stocks still tend to do well.

However, when fast money is holding the stock then an analyst's extreme buy recommendation has on average marked the peak of the stock’s outperformance. The return of fading these optimistic short term investors were found to be larger if positions are not entered for at least 3 months after the signal.

On the downside, extremely bearish analysts are often too pessimistic, but the effect is larger when there is a lot of fast money involved. 

So while investors have many reasons to value contrarianism, it’s important to note that fighting against long term bulls does not necessarily result in a favorable outcome. It’s better to be bullish in the face of pessimists. But if you must be bearish make sure that the people on the other side of the trade are the types who are trying to make a quick buck.

Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1077547 2016-07-30T23:21:00Z 2016-07-30T23:21:01Z Jury Nullification and Camera Credibility
I almost had jury duty this week. I called in the day before and I was told my pool wasn't yet needed. I called in again and eleven in the morning and found out that I was excused from jury duty. This was convenient, but also a little disappointing. I've never had jury duty before and I was hoping that I'd either see what it takes to get out of jury duty or get on a jury and be able to apply jury nullification. 

For those who don't know, jury nullification is the simple concept that if you are sitting on a jury and think that someone might be punished by a stupid law that you don't have to find them guilty. It can also mitigate harm to people who broke the law for a good reason. Maybe Jack Bauer shouldn't be guilty of torture if he stopped that nuclear weapon from detonating. Maybe the man who plots the murder of his daughter's killer should be found guilty of a lesser charge than first degree murder. Or perhaps that patent troll isn't entitled to millions of dollars from a popular company because the patent office screwed up and granted someone an obvious patent*.  In these cases the jurors don't have to tell the judge why they are deciding as they do (infact they probably shouldn't if they don't want a mistrial declared), they just have to find the defendant innocent of the relevant charges. 

There are downsides to jury nullification. Jurors can prevent the implementation of just laws through the same mechanism that jurors use to prevent unjust laws. One negative example is how jury nullification can perpetuate institutionalized bigotry. A jury of racist white people might not convict someone obviously guilty of murdering a minority or vice versa. But as long as the jury system is used according to the US Constitution each juror has the option to apply the principles of jury nullification. It's better if it is applied deliberately by principled citizens. Because in the right hands, jury nullification is one of the final vetoes that citizens have on the actions of an out of control or overly rigid government. 

Recent protests against police behavior have added another way for jurors to make a dent in bad governance. Historically, juries have often trusted police testimony more than that of accused criminals. Giving officers of the law the benefit of the doubt has been historically necessary to allow them to do their jobs.

But today's environment has a very important difference. Body cameras are cheap, ubiquitous and are becoming more widely available to police officers. More importantly, police officers have significant control over when their cameras are turned on or off. So body cameras were somehow not turned on when police officers raided the wrong house and shot a dog. When the Baton Rouge police shot and killed a DVD seller, their body cameras supposedly accidentally fell off. If police officers are acting properly, they should want the cameras on. If police officers would be harmed by what is shown on the camera, then they have an incentive to prevent the emergence of any body camera footage. 

Jurors everywhere need to push back against these incentives and create new ones. Jurors should assume that a police officer's testimony of events that occurred while they were in the field is worthless if their body camera footage is not also available. I'll call this "Camera Credibility" for lack of a better term and because alliteration is fun.

If enough people view cop testimony under the lens of camera credibility then there will be no way prosecutors to keep people with these beliefs off of juries. Police officers will be incentivized to make sure their cameras are operational and will be more likely to release footage that shows shades of grey in order to preserve their overall credibility.

While the proposed policy is implemented by jurors not trusting police officer testimony under certain conditions, this isn't an anti-cop idea. Body cameras are a way for cops to maximize their credibility and protect themselves against false accusations. The word of a police officer backed up by body camera footage will be held with the highest respect. The proposed camera credibility juror strategy would only really impact the small percentage of officers who need to be reigned in as other cops will have a good reason to make sure their unadulterated footage makes it to the courtroom.

Jury nullification applies everywhere that citizens serve on juries, though a juror discussing this idea openly in California will result in the judge removing them from the jury pool. Before jurors are selected, they are questioned in a process known as voir dire. Those who want to actively apply jury nullification need to somehow get through this process and onto a jury while those who want to get out jury duty can enthusiastically discuss their beliefs on the benefits of jury nullification. Either way, it's a good thing to remember.

*Commercial law decisions by juries who disagree with the law have a greater chance of being reversed in a process commonly known as Judgement Notwithstanding the Verdict
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1076009 2016-07-25T20:51:13Z 2016-07-26T11:03:42Z Third Parties should think about selling out
If this election season has taught those watching US national elections one thing, it's that it would be nice to have another option. But in a country with a voting system where the candidate with a plurality takes all, the equilibrium number of parties is two.

Just because that number is the equilibrium doesn't mean that this is always the case. And 2016 certainly looks like a year where the political institutions are not in equilibrium. With the population becoming more politically polarized, appealing to both centrists* and fringe elements is getting harder than ever. But the incumbent two parties have economies of scale, ballot access laws and established network effects which provide them with a significant advantage against challengers.

Their biggest advantage of Democrat and Republican party officials is that the challenging parties don't understand the game they are playing. Most people interested in third parties believe the lie that their parties are all about their ideology. 

Politics are as much about ideology as corporations are about making customers happy. It can be important, but there are other variables that matter much more. An ideologically consistent third party is not playing to win. They are playing to convince the major parties that they need to change their policies on the margin to convince people not to cast a protest vote for the third party. 

Third parties are pretty serious about maintaining their ideological consistency. The Green Party has repeatedly fractured in an attempt to remain true to its values. The Libertarian Party is famous for its attempt to excommunicate its members for impurity or extremism even though its members generally agree on the direction that politics should be moving.

In order to play to win a third party would need to start thinking like a major party. They will have to make compromises to bring people that they only partially agree with into their tent. They will need to make compromises with some types of interest groups even as they take the fight to others. They will have to acknowledge the political reality that it takes more than a promised pure application of their favored ideology to sustainably win elections.

This year the Libertarian Party took baby steps towards this view when they nominated Bill Weld as the vice presidential candidate against the desires of some libertarian purists.

In order to stand a chance this election or going forward they are going to have to take stances that are more libertarian than the status quo, but more status quo than what libertarians generally prefer. Most parents will not vote for a group who wants the blanket legalization of an 18 year old's ability to purchase of crack, meth or heroin, but replacing prison with treatment isn't as scary. Baby steps in the right direction should be preferable to giant leaps never taken. And this type of stance will have to be sustained over multiple election cycles without splintering the Libertarian Party.

No third party stands a chance at long term relevance as long as they keep thinking and acting like a third party who just wants some attention for their ideology from the major parties. This is why any potential replacement to the GOP or the Democratic Party is more likely to come from splinter groups within the party than from third parties built around ideological purity. And considering the value of the party's institutions, network and brand, major changes are still more likely to come from a new group achieving internal control of the party than from one of the parties being replaced.

Take the above with a grain of salt. In this political season I should know better than to make an predictions at all about politics. I should probably just directly predict egg on my face. But the main takeaway here is that the people who put ideology first aren't playing the game to win and few people are incentivized to tell them this. Fortunately for Trump and Clinton, neither one of them seems to have this weakness.

*It would be nice to come up with a term that differentiates those with views that aren't clearly left or right from the business interests who support whoever can ensure the continuation of their favored specific rent seeking policies. Both of these groups are called centrist but I hold on to an irrational hope that they might one day be separate.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1068750 2016-07-01T04:54:24Z 2016-07-01T05:01:03Z Did Kleiner Really Already Raise $1.4 Billion?
A lot of news articles are commenting on how Kleiner raised $1.4 billion dollars in two new funds. This is a very believable event as they are a major VC firm who has had their share of success. However, the evidence the news stories point to make the claim of a completed fundraise seem a little bit premature.

The New York Times story, released on June 29, links to the SEC Form D filings of these two new funds as its main proof after stating the following:

On Wednesday, the venture firm Kleiner Perkins Caufield & Byers disclosed in a filing with the Securities and Exchange Commission that it had raised a total of $1.4 billion across two investment funds over the last couple of months.

But clicking through the links gives a different story. The Form D of the $1 billion dollar fund that was filed on 6/29.

The $400 million dollar fund filed on 6/29:

For reference, this is what the Form D of a fund that has definitely finished the process of raising over a billion dollars looks like:

The amount sold equals the offering amount, and there is nothing left to be sold.

The New York Times wasn't alone in their statement. Bloomberg covered the story the same way, Tech Crunch said "It's Official" and the WSJ called the funds closed. Basically everyone who covers tech has called the funds closed.

A few things could be going on here. One possibility is that some larger firms don't disclose their target size until they have a good idea that their limited partners will be willing to come on board with that amount of capital. While fundraising for a fund without filing Form D with the SEC is likely problematic, there are probably types of almost fundraising behaviors that are technically legal. So when a news organization sees this filing from a major VC firm it knows they have basically raised the capital.

Another possibility is that the news organizations got this story wrong and Kleiner is not able to correct the press during their quiet period. Also, because making LPs think that they are missing out on the fund isn't necessarily a bad thing they have no incentive to risk breaking the law to correct the story. This seems more likely.

Maybe media is right because the person in charge of filling out Kleiner's Form D's never likes to admit that the total amount is sold, even when it is. I looked at a 2014 filing of a fund that definitely closed at some point and could not find an updated Form D to indicate that fact (That's also possibly due to my inability to search through Edgar effectively). Still, when news leaked of the 2014 fund closing after those filings it was at least backed up by leaks from limited partner investors and not by a form in which they admit that $0 of the fund is sold.

If there is a better explanation, please let me know. Because right now it seems like the media has followed each other in a herd like behavior and declared two funds closed which are not really closed.

Thanks to my brother, Jonathan Lonsdale, for initially showing me something weird was going on and talking me through what filing a Form D meant. Any errors are my own.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1067831 2016-06-28T08:45:29Z 2016-06-28T16:43:37Z Uber and Lyft's Missed Austin Opportunity
The taxi-driver lobby has been unsuccessful in their fight against ridesharing companies across the country. People have come to be dependant on low cost, reliable and convenient transportation provided by ride sharing companies.

But when the Austin City Council passed an ordinance requiring fingerprinting for their drivers, Uber and Lyft stumbled. They fought it tooth and nail when they could have tried to show how they could make government work better.

They initiated an $8 million dollar campaign against this ordinance where they tried to replace fingerprinting with background checks. On top of this, their proposition wanted to disregard a requirement for Uber and Lyft cars to be identified by markets and legalize the practice picking up passengers in travel lanes and bus stops.

Citizens of Austin felt like they were being bullied by rich outside companies. People pointed out that Houston required fingerprinting from 2014 and Uber and Lyft still operate there. Others felt that the companies were asking too much of the city. Uber and Lyft's attempt to overturn the city council at the ballot box failed with 56% of the people voting against it.

Since then, Uber and Lyft called the voter's bluff and are no longer operating in the city. Some makeshift websites that operate under the table have popped up to provide drivers with income and passengers with rides, but it is less convenient and less safe. And since hailing a ride has gotten less accessible, more people are making bad decisions about drinking and driving.

So the ridesharing companies have made Austin a warning to other cities: Interfere with our business at your own risk. But this didn't have to be the message. Uber often calls itself a logistics company. Fingerprinting new drivers is a simple logistics problem. If their biggest problem with Austin's ordinance was actually being banned from stopping in travel lanes, then they could have made the proposition about that and campaigned accordingly. If electronic fingerprint readers are more efficient and easier to apply to their drivers, they could have lobbied to let them help modernize Austin's government while giving new drivers a grace period before they had to be officially fingerprinted.

If they had turned the Austin situation into one in which Uber and Lyft took an inefficient government regulation and made it more convenient for everyone, we would be talking about why Uber doesn't replace or supplement the provision of other quasi-government services. More people would be talking about how Uber is going to take over the world. 

Instead they are attempting to maximize profits and status in the short term as they attempt to scare governments into compliance. Maybe the people of Austin will realize their mistake and try to welcome Uber and Lyft back into the city in one of the next few elections. It will be a short term victory, preserving their status quo as the incumbent transportation providers. But with self driving cars around the corner, Uber and Lyft are not necessarily the companies who will own that technology. Disruption will come for current transportation company incumbents sooner than it came for the taxi cartels. Austin could have been an opportunity to show that they will succeed in areas outside of ridesharing, but they made it a problem instead. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1067474 2016-06-27T10:45:37Z 2016-06-27T20:09:25Z The Implications of a Full English Brexit
Britain's decision to leave the Eurozone has already sent waves through the markets. It taught traders too young to remember the 2004 US presidential election that the first few election night polls are not always accurate. (In 2004, markets relying on faulty exit polls gave Kerry a 70% chance to win at one point.) But traders predicting another vote incorrectly is not the story. The story is about an upcoming massive institutional change that no one is quite sure how to interpret.

In order to leave, the UK has to actually petition to leave the Eurozone. This won't happen until a new prime minister replaces David Cameron in three months time. Intraparty battles will occur over this time period as politicians position themselves in the aftermath of a referendum. If there is an attempt to ignore the referendum and keep the UK in the EU it will occur during this time period. Supporters of Remain recognize that after the European Council is notified by the UK under article 50 there is no way to reverse the process short of jumping through all of the hoops required of countries wishing to join the European Union. 

One way supporters of Remain might go about ignoring the referendum if they get into power is by indefinitely delaying any notification under article 50. This would extend the period of uncertainty indefinitely and would not be helpful to the UK or world economy.

After the UK issues their petition, the rest of the EU will have to come to an agreement with the UK about the terms of their exit within two years.

If during this turmoil the UK voters and EU members decide that they don't want the UK to leave the EU quite yet, there is a way to kick the can down the road for more than two years. They can indefinitely extend exit talks as long as the UK and European Council unanimously agree to extend withdrawal negotiations. However, any pro-Leave UK party or anti-UK EU member from that point onwards could cause even worse disruption as any dissenter would have the power to force an immediate exit. The UK would have either too little or too much leverage for this scenario to be stable. So any news about definite plans to initiate article 50 makes an exit more likely and might cause another mini-panic.

If the UK and EU keep it simple and retain relatively open trade and freedom of movement both sides will benefit. This seems to be Merkel's preferred approach.

"The negotiations must take place in a businesslike, good climate," she said. "Britain will remain a close partner, with which we are linked economically."

She has no separatist movement within Germany to worry about scaring away from EU exit. However, other members of the EU realize that there is a risk that the UK will not be the only one to leave, so signaling that leaving does not come without consequences will be a very tempting idea. And some will be tempted to punish the UK for choosing to leave them, as is the case of the Mayor of Calais. Fortunately for all of those in favor of prosperity, that particular mayor does not hold much sway in international negotiations.

The more EU officials sound like Merkel, the better the economic outcome. If they start sounding like the Mayor of Calais, the short and medium term economic damage will likely be significant.

But there will be economic impacts either way. There will be a hit to business confidence. Jamie Dimon, CEO of JPMorgan, seems to expect that they will have to change the location of some roles to comply with European laws. Other companies expecting to move may be reluctant to increase headcount and investment in the near term and when this happens on a large scale a recession is almost inevitable. 

Then there will be capital flight as the volatility of the British pound and uncertainty of the political situation scares away certain classes of slow moving investors. Foreign direct investment inflows for the United Kingdom have fluctuated between one and two percent of GDP in recent years. It is likely to be much lower over the next couple years. The large fall in the GBP after the results of the referendum occurred was in anticipation of these flows and economic weakness in the UK.

Weak economic growth is widely expected to be countered by central banks to the best of their ability. The Bank of England's base rate is already close to zero at 0.5%.  And sometimes the best thing a central bank can do to stimulate the economy is weaken a country's currency to boost exports. In this case, the GBP has already weakened considerably and further weakness may be interpreted as a further loss of confidence.

Part of the problem is that central banks influence demand more than supply. To the extent that Brexit is a hit to confidence, demand matters and central bank actions are important. But if there are permanent business relocations from regulatory change or economic damage from trade barriers going up, Brexit becomes a supply shock. This means that there is not much that the Bank of England can do even if it was in a position to do something. If a central bank tries to fight a supply shock, stagflation is a likely outcome. In light of this, it is heartening that Mark Carney's statement on Brexit focused on the stability of the financial system and not on what the bank might do to support growth.

For Europe, the uncertainty is not going to be helpful, though the impact will be lighter than in the UK. A larger worry is what might happen as other EU members push for the right to hold their own referendums on leaving the EU. Gary Kasparov makes the interesting argument that Brexit will not only help Putin face a divided Europe, but the absence of the UK will lead to far worse policy being made in Brussels. Long term, this could be worse for Europe than the UK.

In the US, many people see the election of Donald Trump as analogous to a Brexit. Both are decision that were been deemed to be very unlikely well before voting day in part because elites regard Trump or Brexit as very destructive. The referendum resulting in a Brexit doesn't mean Trump's victory is any more likely than it was before the vote, but it does suggest that some forecasters might not be able to accurately forecast populist movements like Trump's.

Gold rose significantly on the day of the Brexit. The general theory is that uncertainty causes people to flee to gold. Gold is also helped by the general hit to economic growth expectations. Central banks who shift towards easing to counter the hit to global confidence should also benefit the irrationally valuable metal while also keeping government benchmark interest rates lower longer than previously expected.

The full implications of Brexit really are too many to cover in a short space. This is even more the case when some of the things people pretend are implications of Brexit are really just one of the many political impacts of long term trends like the stagnation of real income growth for many people in developed countries. A fuller picture would also look at Scotland and other parts of the UK who might favor leaving to try to stay in the EU. What it would take for London to remain a global financial center and whether any European city is likely to emerge as the obvious alternative is another interesting question. 

And there is still more to write about other countries. China's enigma of an economy will take a hit when Europe economic weakness reduces their Chinese imports. The Japanese yen is now just above 100 after the panic over Brexit and this yen strength puts extra pressure on Kuroda and Shinzo Abe.

But the biggest thing to track will be whether the world starts turning protectionist. Nasty exit negotiations would be a bad sign. Many people are tempted to constantly make bad analogies between our economic circumstances and the Great Depression. But the Brexit negotiations have the potential to create the closest thing to a modern Smoot-Hawley Tariff bill. And that's why it has the potential to be very scary.

Disclosure: I stole the post title.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1064649 2016-06-18T06:57:18Z 2016-06-19T00:32:52Z Disturbing Future Tech
The expected future is economic growth. Humanity invents and improves many things and people will live better lives. But even in upside scenarios not everything will be getting better. There is a subset of future use cases for technology out there that are both practically inevitable and at the very least disquieting to imagine. 

Also, it will be fun to write about them before they become too mainstream.

First, we have the inevitable results of improving drone technology combined with parental paranoia. The combination leads to children tracking drones. The ability to watch children 24/7 without actually having to follow them wherever they go will be a luxury at first only claimed by the upper middle class. They are too poor for full time nannies but rich enough to afford the latest gadget. A drone that follows their kids can let parents watch them from afar, notify the parents when the kids interact with strangers or even give automatic verbal warnings to children who are playing too close to traffic.

Now, given that we already have children on leashes this might not seem like such a big step. Infact, a drone following a child from a safe distance is probably preferable to a leash in every single way. But beyond desensitizing a generation to the surveillance state, these drones are only going to make helicopter parents more paranoid. This is because everything happening will be videotaped, and this will include the inevitable tragedies. In 15 years, if an alligator gets a toddler it won't just be national news, there will be video of the attack itself. The unecessary culture of paranoia that surrounds child rearing in our society is only going to get worse. And drone cameras stalking kids will have a part in that.

Next, we have personal bots. Right now, bots are being automated to do all sorts of customer relationship management. It is only a matter of time until bots are available that are designed to mimic your writing patterns and interact with your friends for when you don't have time. Maybe it will only be to keep social media profiles active - wishing people happy birthday or commenting on life events to help those who find themselves with less time for social media. But its use will eventually spread.

Some conversations might end up feeling like fake voicemail hoaxes, or at the very least there will be some people who use bots to an extent where we won't we won't know for sure if we've gotten through to the real person. But perhaps worse than either of those will be the friends who use their bots to spam their network far too frequently. Today we get spam email from there people, but tomorrow we'll get personalized spam that if treated as spam will desensitize us to text conversation that we would consider to be very real today. (Hat tip to @garvinandrew)

Finally, we have virtual reality and augmented reality. Just like Brazil has been the country of the future, virtual reality has been the entertainment technology of the future. Unlike Brazil, many people are starting to think that virtual reality's time is near.  If not with this generation, then we are only a few generations away. This brings us a step closer to Nozick's thought experiment of the Experience Machine. Infact, good virtual reality would be more addictive than Nozick's machine since it would not have to be preprogrammed. People already choose to shut themselves off from the physical world, and as the "Shut out reality" option gets more advanced more and more people will choose this option.

Augmented reality holds a lot of promise. The ability to overlay information will make many jobs much easier. Skilled workers will save time and make fewer mistakes while inexperienced workers who know how to interface with augmented reality will be able to replicate the work of the highly skilled. 

Once the technology to discreetly utilize augmented reality in social settings is available then improving facial recognition technology means forgetting names or the context by which you know someone will be a thing of the past. But that's not the only thing that you will know about other strangers in the room. Not only might it be possible to know someone's employment history, but those interested in filtering people based on which political candidates they've donated to or whether they have made comments that are deemed not acceptable can avoid undesirables  without having to talk to them. 

Our society is getting more and more partisan. There aren't many Trump supporters trying to make friends with Clinton supporters in today's world, and Clinton supporters are more likely to boycott the Trump fan's business than try to befriend a stranger who is a known fan. If this pattern doesn't change before ubiquitous augmented reality combines with facial recognition software then our social lives will get far more tribal.

In the midst of all of these bleak predictions, I can only be sure of one thing: There is something worse that I left out.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1051941 2016-05-17T00:09:12Z 2016-05-17T00:09:12Z The Ethics of Self Driving Cars Aren't That Confusing
One of the things that it has become popular for the commentariat to wring their hands over is the ethics of self driving cars. What if there is a trolley problem* where the car can save the lives of many by sacrificing or risking the life of its driver?

The solution isn't simple, in the sense that our modern system of rules and regulations and common practices for an automobile based society aren't simple. But given that this infrastructure will remain in place, the ethical questions of self driving cars are not hard.

Cars should be programmed to follow the rules of the road, and change their behavior in light of people violating the rules only to the extent as it is currently expected.

These rules were made for a reason. If a car was known to react selflessly they will be taken advantage of. Google found this out first hand when they had to adjust their cars to make them more aggressive. This was in part to avoid scenarios in which cars were cutting off Google's cars consistently in heavy traffic. If people knew that they could take advantage of a car, some proportion of the population will react to those incentives.

So if a person jumps out in front of a car on the bridge and the car has an option of trying to brake while hitting the person or driving off the bridge, the person who jumped out in front of the car is going to suffer.

The ethics of traffic laws make for interest conversation. But adding self driving cars to the mix doesn't change the basic behaviors. 

The legality of self driving cars, such as who gets sued if there is an accident where the self driven car is at fault, is still an unsolved problem and is more productive topic of discussion and debate.

While on the topic:

*The Trolley Problem is confusing. My main issue with it is that it doesn't analogize very well onto relevant real world situations where estimated costs and benefits are uncertain and may be incorrect**. The situation is also muddied when various actors have different levels of culpability. What if the crowd of people are willingly on an track with a big sign that says "Trains coming" and the single person is standing on a track with a "Track closed" sign? It should change things.

**This is also one of the biggest problems with "The ends justify the means" thinking. People are bad at probability and more often than not are wrong about the beneficial ends, while the horrible means they utilized to attain those ends still happened.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1019423 2016-03-25T07:00:50Z 2016-03-25T07:00:50Z The Video Blog Ghetto
One of the more disturbing trends on the internet is the ghettoization of extreme cultures. People don't have to interact with each other if they don't want to. Liberals can read the Huffington Post, conservatives check Drudge Report. More extreme people all have their websites, each equipped with specific ideological blinders.

Sometimes there is some cross pollination, but people are usually only exposed to members of other groups through quotes provided by their preferred sources. This happens when there is a debate around a current partisan issue, or more often when an author is trying to make a point that people on the other side sure are stupid/racist/sexist/etc.

Either way, the statements from the other side are at least quoted and links to their original location are generally provided. A reader can browse through the respective articles and come away with a conclusion as to how the evidence seems to stack up. People are still biased and will likely stick with their own ideological champions, but at least it is feasible to get a fuller picture of the debate in a relatively short amount of time.

But a new trend has been emerging. We don't see many new blogs, but there are now a lot of video bloggers on all parts of the spectrum. Though more often than not the political vloggers are on one of the more extreme sides or they would not have started a political video blog. In some sense, arguments in video format should be more persuasive. Videos can more fully utilize sarcasm, humor, body language and can utilize graphics in ways a blogger writing an article cannot. But while they may be very convincing to a subset of people, they are also isolating themselves from the general debate.

Part of this is because watching a video is a bigger commitment than reading an article. A two minute read becomes an eight minute video. Skimming a video is much less effective than skimming a post. Hoping someone takes the time to watch a video is a bigger ask.

Vloggers are also isolated from mainstream debate because citing and responding to inaccurate parts of the video is more difficult. You can't just copy and paste the questionable arguments into a paragraph in order to expose where the vlogger is mistaken. You either have to type out the relevant transcript, describe the vlogger's arguments in your own words (increasing the chance of misstatements), link to the point in time of the most egregious part of the video, or have the people observing the discussion watch the whole video themselves and potentially waste the time of their readers.

Given the most ideological video bloggers have relatively niche audiences, this is a lot of work to have a dispute. And it's already work when a person who disagrees with you has a very different ideological perspective. And since vloggers are generally not yet high status people, there is even less reason to engage. (We will see more critiques of documentaries or of people who appear on television). Most people would reasonably choose not to start or follow up on an argument with someone who communicates primarily through video (or for that matter, a podcast without a transcript). The most likely person to respond would be another vlogger (or podcaster).

This creates a dynamic where vloggers start dialogue with people who are on the other side, but never receive feedback from anyone outside their ecosystem. They end up shouting into the wind. 

But it's not just the wind, they have some followers. And these followers see how their relatively articulate vlogger is rarely countered by people with opposing ideas. These viewers and the vlogger themselves are at high risk of thinking they don't get responses because the videos make incontrovertible arguments, and not because it's too much trouble to call bullshit on long winded videos.

And that's why we can expect video bloggers to be relatively extreme, they are engaging people in a medium where debate is far more inconvenient. This format is far more popular among younger internet users, so it is somewhat scary to think about how political discourse will evolve under these dynamics.

Note: Maybe a simpler hypothesis is that most video blogs are the new long winded disorganized blog or forum posts. Generally, no one with the relevant knowledge would take the time to counter them. Yes, I appreciate the irony. This is post getting a bit long winded. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1007916 2016-03-05T21:59:10Z 2016-03-05T22:18:37Z Ted Cruz's Game of Chicken
It looks more and more like Trump is going to run away with enough delegates to become the GOP candidate. There aren't many polls where Trump doesn't have a plurality of GOP voters in upcoming states.

And yet, Trump rarely has the support of a majority of GOP primary voters. If this were a one on one competition Trump's position would be considerably weaker. Fortunately for Trump, GOP candidates have a coordination problem. 

Kasich and Rubio are staying in the race because they hope that between them and Cruz they get enough votes to force a brokered convention in which they might emerge victorious. Recently Cruz came out against the idea of a brokered convention.

"Any time you hear someone talking about a brokered convention, it is the Washington establishment in a fevered frenzy, they are really frustrated because all their chosen candidates, their golden children, the voters keep rejecting," Cruz said Friday at the Conservative Political Action Conference (CPAC).
"So they seize on this plan of a brokered convention, and the D.C. power brokers will drop someone in who is exactly to the liking of the Washington establishment. If that would happen, we would have a manifest revolt on our hands all across this country."

This is a message to the establishment and to Rubio and Kasich. He will not play their game. If they want to stop Trump the only way is through him. If they stay in the race, they will all lose. He's shown his intransigence in the Senate. He's hoping that they know that he will not back down.

He's followed up his words with actions. The path to a brokered convention where Cruz might still come out on top is easier if Rubio beats Trump in the winner take all state of Florida. But Cruz has recently started campaigning in Florida, potentially splitting the Trump vote and reducing Rubio's chances of winning.

It will be interesting to see if the establishment and their candidates back down before Trump's victory is ultimately assured. So far it looks like they will refuse to budge and both sides will lose this game of chicken.

Ted Cruz's only hope is that the signal of a few unexpected victories will be enough to convince others of his strength, determination and ability to win. The establishment is not going to blink in a game of chicken if they think giving in to another extremist doesn't even have a chance of working. But when you involve the egos of people who think they should be the president, it's likely that everyone will lose in a game of chicken.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/1001355 2016-02-25T21:35:20Z 2016-02-25T21:35:20Z Today's Negative Nominal Interest Rates Won't Work
A lot of central banks have moved towards negative interest rates. Some people think it is essential that central banks ease below the zero boundary. This includes central bankers at the ECB, in Denmark, Sweden, Switzerland and Japan who have all implemented negative rates.

Some critics believe that negative rates will have all sorts of unintended consequences. Even proponents of negative rates sometimes lobby for a move towards a cashless society where negative rates can be implemented with potentially fewer unintended consequences.

Regardless of whether side is correct, negative nominal rates are a sign that central bankers will fail to accomplish their goals. 

In the case of critics of negative nominal rates being correct, the reasons are relatively straightforward. Something will go wrong. Maybe attempts to avoid negative rates by changing deposits to cash mean negative rates merely incentivize unproductive behavior. Perhaps negative interest income of banks drive deleveraging, or the uncertainty of negative nominal rates negatively impact the markets. There are many possible unintended consequences that could cause negative nominal interest rates to be counterproductive.

What is interesting is that even if negative nominal rates are necessary and proper, things will still turn out badly in our current environment. Central banks are naturally cautious, and negative interest rates a new territory that they will not dive into. When central banks think an interest rate cut is necessary in positive nominal rate regimes, they usually move in increments in 25 or 50 basis points. However, many central banks are being very reticent about moving interest rates negative around or past the zero-bound - the Bank of Japan is a good example. They only moved the rate to negative 0.1%, and only apply it to specific accounts held by financial institutions held at the BOJ. To the extent that negative rates are necessary and proper, central bankers are too scared to move the rates sufficiently negative.

So either they are messing things up by implementing negative rates, or their negative rates won't be sufficient to accomplish their goals. This helps explain why the Japanese yen has actually strengthened since the implementation of negative rates by the Bank of Japan. Either they aren't doing enough, or what they are doing is counterproductive. Even if it is difficult to parse what negative nominal rates will do, it is safe to say that central banks resorting to the implementation negative nominal rates are unlikely to accomplish their goals.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/993489 2016-02-15T02:13:36Z 2016-02-15T02:13:36Z The GOP Establishment's Primary Problem
It's been a long time since I've posted. And I've been following the primaries much more closely than is probably healthy. Following primaries is unhealthy for a few reasons. First, it's paying attention to things that are hard to benefit from or change. Second, believing that the future of our country is changing on a day to day basis with the polls ascribes a bit too much explanatory power to politics when the default is for the major parties to trade nominal control without usually making drastic changes. Finally, no one thinks reality TV is good for you, and this season politics and reality TV are inter-lapping more than ever before. Also, closely following the GOP primary is counter productive when demographics suggest that any moderate Democrat should be able to win in the general election in today's status quo. That said, I have some thoughts that I am going to in-advisably share with the internet.

The GOP primary is a coordinated action problem for the Republican establishment. They really don't want Trump to win. They don't like Cruz. Unfortunately for them, voters do not like them. Between Trump, Cruz and Carson, the anti-establishment Republican candidates are polling at over 50%. To have any hope of beating either, they need to unite behind one candidate. Scott Walker saw this early on, along with his relatively low poll numbers. But what is driving the establishment candidates still in the race?

The establishment money and votes are currently spread between Jeb and Rubio and with a little bit of money and more votes going towards the more moderate Kasich. Given how they are currently polling nationally, the first order solution is to throw support behind Rubio. There are currently a three issues preventing that.

First, Rubio's robotic performance in the pre-New Hampshire debate made him look stupid. He's already relatively inexperienced, so any signals that he'll help Democrats accentuate this weakness in the general election is extra worrisome.

Secondly, there is a perception that Rubio is a disloyal former Jeb Bush lieutenant. George W. Bush's book on his father, 41, made loyalty a central theme. Jonathan Haidt's research tells that loyalty is even more important to conservatives, so a sizable group of Bush loyalists will resist rewarding disloyalty. 

The third issue is immigration. On this issue Rubio is not only out of step with a significant amount of conservatives, but he has demonstrated his ability to at least partially change his position when he comes into power. So the GOP establishment has someone who is disloyal and changes positions. 

Even with all of those problems, Rubio has plenty of money and is polling moderately nationally. With full establishment support he'd have a plurality of voters against Cruz and Trump. Absent a new self inflicted wound, he has no incentive to bow out at this point.

The other establishment hope has been Jeb! Jeb's problems are simpler than Rubio's. Jeb just isn't a good enough candidate to make up for the fact that he is a Bush. Not enough people support him. In a recent poll, 24% of Republicans claim that they would not support him in the general election even if he became the Republican nominee. The only candidate who has more Republicans refusing to support them in the general election is Trump, at 30%. The massive amount of money that he and his super PACs have raised will keep him in the race. My prediction is that he will stay in the race as long as it looks like he has a chance and/or if he believes that staying in the race will harm Rubio.

That leaves Kasich. He's more moderate, which works against him in primary season. He doesn't have the name recognition that McCain had, and without funds he is well behind on setting up his political organization outside of the time he spent in New Hampshire. When his second place finish in New Hampshire coincided with Rubio's debate implosion he seemed like the perfect compromise candidate. But he might not be able to stay in the race long enough to garner the establishment support, he entered the year with a lot less cash on hand than either Bush or Rubio. If he does stick around the establishment might default towards him, if it isn't too late by that point. Being more experienced and less ideologically conservative than Rubio, Kasich has little incentive to step aside for Rubio.

South Carolina and Super Tuesday might encourage establishment GOP members to get their collective houses in order, but the longer this disorder goes on the better it is for both Cruz and Trump. The way things are going, we may even see a brokered convention. That would be fun, at least for those of us who like a certain type of reality TV.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/948971 2015-12-13T10:17:44Z 2015-12-13T10:17:44Z Good policy held hostage
There are a lot of silly laws out there. People on all sides of the aisle would agree on that. And many would agree that some form of the solution is relatively obvious. But even when a most reasonable people on all sides would agree that a policy is bad the work to change it is just beginning. 

That's because fixing broken policy still creates winners and losers. And sometimes those winners are more on one side of the spectrum than others. Unfortunately, giving away a free win to the other side in the name of good policy is bad politics. 

This is a broken part of our system that is under discussed today. The current debate around oil exports in congress is a prime example of how hard it is to fix. Policy implemented in the 1973 oil crisis banned exports in most circumstances. So this is a forty year old nationalistic policy implemented in the midst of a crisis around a good whose supply and demand dynamics have flipped on its head in recent years. It obviously should change, and the White House's primary argument against it is that they would like to keep control of their ability to allow or disallow oil exports.

So unfortunately, if this policy is going to pass it needs to be included as part of a broad deal on spending and taxation. And tax credits to solar and wind companies need to be extended (corporate welfare in action), so each side gets a win. Refineries who have benefited from captive domestic oil producers and earned out sized profits for years may or may not be handed a tax credit as a consolation prize for losing their captive oil suppliers.

It is true that there is some real opposition to changing the inane law preventing oil exports from people who seem to think that our carbon energy based society needs to be made as inefficient as possible if they are going to reduce emissions in the long run. Politicians that count on support from these confused constituents could use a small victory to show them. But holding back a fix on bad policy to implement something for their special interests should be mocked the same way as Republicans who threaten a debt crisis to get their way on minor spending matters.

And outside of the debt ceiling hostage shenanigans, many within the GOP have acknowledged that they will fix the carried interest tax loophole only as part of an overall bargain around reforming the tax code. They are holding back an obvious policy change favored by almost everyone not currently utilizing the loophole as a bargaining chip.

A very similar dynamic is occurring within immigration policy, this time with Democrats holding back some obvious fixes unless the GOP agrees to a comprehensive deal. People on both sides know many of the things that need to be done with high skilled immigration. They don't quite understand that high skilled immigrants should never be placed in the position of indentured servants, but they generally recognize that educating students at world class colleges and then making it difficult to stay and live in the United States is bad policy. 

However, there is no chance of this being fixed unless the more difficult problem of low skilled immigrants is addressed. Each year this policy isn't fixed, too many promising college graduates decide to head back home where they can get jobs or start companies without worrying about legal issues. Even if the preferred solution to the thorny political problem would be good policy, holding acknowledged good policy hostage as a bargaining chip is an action that needs to be understood as a destructive tactic.

Our government is dysfunctional enough. Whenever there is general consensus on what would constitute good policy the politicians holding policy fixes hostage should not be given a free pass.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/905346 2015-09-15T13:53:30Z 2015-09-15T13:53:30Z Protecting Students with Double Negative Rights
One framework that I've found to be useful when thinking about policy is that of positive and negative rights. When thinking about who benefits, it's helpful to determine whether a policy protects an individual from others or if it gives individuals a claim on other members of society. I've used this framework in the past to discuss corruption in developing countries. To avoid both plagiarism and re-paraphrasing common knowledge, I'll quote myself:

"Negative rights are things that are prohibited from being done to a person, and includes areas such as freedom from violent crime, private property (freedom from theft), freedom of speech and freedom from slavery. Positive rights are things that society must provide for a person. These include areas such as the right to police protection, housing, a job, food and health care. Many positive and negative rights conflict either indirectly or directly with each other. While a police force might help enforce the negative right or protection from violent crime, it also weakens the right to private property by requiring that citizens have some of their money taxed in order to pay for that protection."

When thinking about how these categorizations of rights might apply within our modern cultures of victimhood, it becomes a little more complicated. Take the new proposal by the University of California Regents which hopes to label being "free from expressions of intolerance" as a "right," recently highlighted by Eugene Volokh. The proposed policy principles state in part that.

"Everyone in the University community has the right to study, teach, conduct research, and work free from acts and expressions of intolerance...


The following non-exhaustive list contains examples of behaviors that do not reflect the University’s values of inclusion and tolerance, as described in the Regents of the University of California’s Statement of Principles Against Intolerance.

* Vandalism and graffiti reflecting culturally recognized symbols of hate or prejudice. These include depictions of swastikas, nooses, and other symbols intended to intimidate, threaten, mock and/or harass individuals or groups.

* Questioning a student’s fitness for a leadership role or whether the student should be a member of the campus community on the basis of race, religion, ethnicity, national origin, citizenship, sex, or sexual orientation.

* Depicting or articulating a view of ethnic or racial groups as less ambitious, less hardworking or talented, or more threatening than other groups.

* Depicting or articulating a view of people with disabilities (both visible and invisible) as incapable."

Volokh goes on to highlight some of the more inane situations that could result.

"For instance, articulating a view that people with various intellectual disabilities are incapable of various intellectual tasks, or people with various physical disabilities are incapable of various physical tasks, would be condemned by the authority of the University."

It is interesting to fit these policies into the framework of positive and negative rights. Students, staff and administrators will not have to hear anything that might disturb their delicate psyche* and on that basis it looks like the Regents are trying to define a new negative right. But protecting people from offense is a false negative right. If a large subset of people become offended when women refused to cover up their left hand, the policy of protecting the offended by mandating gloves would not be the enforcement of a real negative right. The obligation of the women the cover their safehand for fear of offending crazy people would be best understood as a nonsensical positive right.

The required self censorship by many who would in the normal course of events cause offense is a duty imposed on them. The new policy of the Regents is the creation of a double negative right, or a nonsensical positive right. 

My grammar school teacher always made sure to point out when I was using a double negative because that meant I was being incoherent and if the Regent's principles are adopted the forthcoming policies are likely to be similarly incoherent**. The implementation of a speech and conduct code that discourages students from even thinking of discussing protected groups in a negative manner will not change hearts and minds. Students won't lose their prejudiced views, it will just prevent their views from facing scrutiny in the light of day.

If the approved answer to "What is your physically disabled classmate capable of?" has to always be "Everything!" then the ignorant students will never learn when the true answer is "Actually, a lot more than you thought possible." because there is less likely to be any discussion in the first place. It's better to let the prejudiced or misguided air their beliefs openly where they can be confronted with reasoned debate and facts.

Universities should make sure students are safe. Preventing vandalism, unwanted graffiti and actual threats to students are causes that everyone can stand behind. But academic institutions should encouraging discourse, and enshrining principles that will make people scared to state what they think is true for fear of punishment does the opposite. If I told you ten years ago that an institution's leaders decided that a large subset of contentious topics are not open for debate and anyone bringing up forbidden ideas will likely be condemned, you would have assumed I was talking about a religious institution or an authoritarian government. Today, more of you would have filled in the details correctly. And that might be the saddest part about this story.

*The neuroticism of Americans has been consistently increasing from the 50's through at least the 90's, so they may be right about the vulnerability of today's college students and staff. But it's likely that the implementation of policies such as the above exacerbate the situation.

**Often the application of negative and positive rights framework can also be incoherent, because outside of the simple cases it depends on how the rights are framed. If this post seems to go off the rails a bit, it's because I really wanted to use the phrase "double negative right" to describe anti-free speech rules and nonsensical positive rights in general. Unfortunately, I can't easily tell if the phrase "double negative right" has been used in a similar context due to the popularity of the phrase "that's a double negative, right?".
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/903837 2015-09-11T11:44:08Z 2016-07-30T19:33:27Z Honor vs Dignity vs Victimhood Cultures
Jonathan Haidt posted a really interesting article that puts the recent increased focus on microaggressions into a larger context. He posted the paper Microaggressions and Moral Culture by Bradley Campell and Jason Manning. The basic thesis is that the increased policing of microaggressions could herald another major cultural transition akin to the transition that occurred in Western societies in the 18th and 19th centuries. 

The cultures displaced in the 18th and 19th century West were cultures of honor. Honor was something that had to be earned and protected. The classic example of defending honor would be the duels that were fought to defend honor. These duels were fought even if the slight that caused the duel was unintentional. Members of honor cultures would be less likely to appeal to the law for help and are more likely to settle disputes themselves.

This culture of honor was displaced by a culture of dignity, where it is assumed that all humans have dignity that does not have to be earned or personally defended. People socialized into cultures of dignity rely more on centralized authority to settle major disputes, and will be more likely to shrug off minor slights that would need to be addressed in honor cultures. Campell and Manning point out that "Sticks and stones may break my bones but words will never hurt me" is a concept that is foreign to honor cultures.

In settings where censuring those who engage in microaggressions is becoming common, this culture of dignity is being supplanted by a culture that Campell and Manning label a culture of victimhood. In their words:

"A culture of victimhood is one characterized by concern with status and sensitivity to slight combined with a heavy reliance on third parties. People are intolerant of insults, even if unintentional, and react by bringing them to the attention of authorities or to the public at large. Domination is the main form of deviance, and victimization a way of attracting sympathy, so rather than emphasize either their strength or inner worth, the aggrieved emphasize their oppression and social marginalization."

The last transition from a culture of honor to a culture of dignity occurred during a step function upwards in economic growth. Cause and effect are messy, but the culture of dignity reinforced things that are beneficial to economic growth. The rule of law and the ability to trust strangers enough to work with them are both more difficult to implement in cultures of honor. 

This current potential transition from a culture of dignity to one celebrating victimhood is occurring during a time period of potentially slowing long run economic growth. Again, cause and effect are messy but there are obvious ways that a more enshrined culture of victimhood could retard economic growth. To take one example, the process of documenting and aggregating small offenses to punish people will eventually incentivize people to interact with out-group strangers to a far smaller degree than they have in the past. The act of sending a stranger a message will become a very risky. Transaction costs are increased when every little action is potentially going to be monitored and might lead to severe punishment.

It's important to note that this is not an inevitable transition. Even in our current society, there are many pockets where cultures of honor dominate. The culture of victimhood that is prevalent on college campuses today is not yet the dominant culture. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/879896 2015-07-11T23:45:11Z 2015-07-11T23:45:11Z Restaurant advice - ditch the middle
Tyler Cowen linked to some very good restaurant advice from Todd Kilman.

The basic thesis is that avoiding mid priced restaurants in favor of high end and low end restaurants will help avoid bad meals.

Anyone living in an area with good ethnic food can see the strengths of this strategy already - a good burrito or broken rice dish is going to beat most meals at casual sit down diners. Middle end sushi places will be getting their fish from the same places that low end sushi places do - they all will be serving the same mass frozen salmon/tuna/yellowtail/albacore that you can find in local Japanese supermarkets - the middle end places will just charge more for the decor and service. The places serving better sushi will be the ones at a high enough price point (or at a mid-high price point but in an area where their overhead costs are significantly cheaper) that take the trouble and expense to source better fish from their wholesalers.

There is a problem with this advice for those who live in or near San Francisco, which arguably has the best middle end food in the country. But even at the high-middle end restaurants in SF I often find myself disappointed as common tropes such as pork belly dishes at froufrou places won't be as good (but will be three times as costly!) as at much cheaper ethnic restaurant.

Kilman ends with a discussion of when middle end restaurants are unavoidable:

"Granted, there are going to be times when you can’t avoid the middle. You’re out with a group of co-workers, say, and need to find a place that satisfies a multitude of tastes and needs. Or you’ve got family coming in, and need to keep the costs down for a big group, while also making sure that a not-so-gently aging aunt is going to feel “comfortable.” These are obligation meals. And there’s nothing much to be done about them, except to go along with the wishes of the group, which, by the way, is what a good chunk of the middle exists to serve—the needs of the many."

One of the best ways to avoid middle end obligation meals is educating potential dining partners. Alternatively, now you know why your foodie friends are avoiding you.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/816256 2015-02-27T05:02:10Z 2015-02-27T05:02:11Z Loyalty and Patronage Politics
Loyalty is often an underrated attribute. It's important for large networks to be oiled by trust and having everyone work from the same page will mean that things actually get done. The Bush family values loyalty highly - it's a theme prevalent in 41, George W's book about his father. A recent NYT article covering Jeb Bush's campaign and their insistence that policy advisers only advise his team highlights how he has similar views on loyalty.

One of the major problems in politics today is a modern elite patronage system in which the government enables the continuation of rent seeking opportunities to large political donors. In this environment, an overvaluation towards the concept of loyalty can backfire. Loyalty to people will mean loyalty to insiders who have been benefiting from policies at the expense of the public.

Jeb Bush comes across as one of the more outwardly sensible GOP figures when it comes to policy, but libertarian leaning supporters need to remember that someone who values loyalty highly will have little interest in dismantling the system that has served their supporters well for decades. 

The principle applies to more than just one family, but it's helpful to remember that seemingly good qualities can have significant drawbacks in the wrong scenario. It's also an important reminder that it is important to identify the long time supporters of politicians, since those are the ones who might be able to call on loyalty for favors that help them at the expense of the public.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/795671 2015-01-14T02:56:11Z 2015-01-14T19:41:43Z The More Fungible Worker
A lot of people have been worrying the technology is taking away jobs and suppressing wages. To a large extent these worries are compared to the Luddites and are dismissed as silly and misguided.

The economist reaction to these worries is basically "That's silly, this is how economic growth works. No one thinks it is bad that the horse driver and telegraph operator jobs have disappeared." Economists are right that old inefficient jobs need to be replaced in order for human society to grow richer over time. When technology satisfies one need, workers are free to take a job that satisfies another of the almost infinite desires that humans have. And when workers are more productive, the marginal productivity of a good worker often goes up proportionally and their wages increase. 

But there is more to the "technology reduces wages" story than economists like to admit. The Luddites tried futilely to stop progress that benefited society, but the artisans themselves really did see their wages fall due to competition from technology. 

The obvious way that technology reduces the wages of workers in the developed world is how it enables and facilitates competition from workers in the developing world. Arnold Kling has called this the Great Factor Price Normalization.  In this scenario the average worker is significantly better off and society gains from trade, but workers in the developed world may see wage stagnation to pair with lower prices.

Arnold explains. "I want to suggest that there is a connection between this trend and the stagnation of median incomes in the United States, and even to the decade-long drop-off in employment here. New patterns of trade are developing that are reducing the advantage that a person enjoys merely for being located in the United States."

But there is a second way by which technology can suppress wages - when technology can guide and track workers the output of different workers becomes more uniform and thus more fungible. Before the era of ubiquitous cheap information technology, training and tracking the performance of mid and low skill workers was more expensive. Workers varied significantly in quality and ability and it made sense to pay workers with experience more so they would not have to be replaced by new workers who would be expensive to train. The extreme example of the fungible worker is the Amazon warehouse worker.

"The programs for our scanners are designed with the assumption that we disposable employees don't know what we're doing."

Amazon can quickly train employees as well as track them to make sure they are not underperforming. There is a smaller difference between one employee and their potential replacement. If an employee decides to leave their replacement is guided by technology that makes the new worker's productivity very close to that of a good worker.

Before these technological advancements, workers enjoyed mini-monopolies. The warehouse worker couldn't be easily replaced because their replacement might be way less efficient as they learned the layout of their workplace. As technology more directly guides low and mid skill workers in their jobs the workers are losing their mini-monopolies. Workers don't need job specific experience to be hired so the supply of workers available to every technology guided job has increased. A higher supply leads to a lower price (the price of a worker is their wage). After full employment is reached the general wage level may increase for low skilled workers, but for now the impact of the Great Factor Price Equalization and the More Fungible Worker are suppressing the wages of middle and lower class developed world workers.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/787239 2014-12-24T00:30:19Z 2014-12-24T00:30:19Z Vocational Training vs College in the US
Critics of the higher education system in the United States have a lot to complain about, but one of their clarion calls is that there needs to be a shift towards more vocational training. In principle this seems reasonable, the problem is that vocational training in the US doesn't work very well. A study of How College Affects Students found that evidence from the 1990's suggested that the impact of sub baccalaureate vocational training has approximately 1/2 the impact of an associates degree. And associates degrees are less than one half as effective as a bachelor's degree. In recent years, the advantage of a bachelor's degree has increased even more - this causes those who are familiar with the data to be very skeptical of those who call for increased vocational training.

Meanwhile, vocational education does seem to work quite well in Europe. Switzerland and Germany appear to be running many successful vocational training programs.

What's keeping the US vocational programs from looking like the successful European ones?

1. A lot of vocational education in the United States is provided by for-profit colleges that are dependent on federal student aid. For-profit colleges in the United States have until recently only had to convince students to attend and the federal government to continue to provide loans - they have not been held accountable for their failure to provide a valuable education. When the education company with the political connections and the best marketing win, the bad education companies prevent good education companies from taking root and growing.

2. In Europe, the important of a four year college degree is not stressed nearly as much. Especially if students were in a top high school, there is some measure of shame in going directly to vocational education.

3. If only low quality students are going to opt for vocational training right out of high-school, businesses will not want to create apprenticeship programs for workers they would not want to hire.

4. Vocational training in Switzerland starts at the age of 16. Instead of being at school for five days a week, students are in school fir one or two days a week and working at their apprenticeship on the other days. This preemptive sorting does not sit well with the American notion that anything is possible for high school students.

Current critics of the United States higher education system need to understand why vocational programs in the US generally have not worked. The best solution to a poor education system is the creation of a parallel system that works better. Peter Thiel is trying to demonstrate a parallel system operating with top students via his 20 under 20 program. But significant change will not occur without a solution that can be applied to a sizable percentage of average students. These solutions need to provide proof of intelligence and consciousness while imparting useful skills. And perhaps most importantly, any successful large scale education system has to show that their students have a willingness to conform

Defenders of the higher education status quo need to realize that emphasizing the importance of a four year college education for everyone creates a self reinforcing belief that makes it difficult to create workable alternatives. But many of those arguing in favor of our current education system are professors with a lifetime tenure, so some of them might understand the self reinforcing cycle they are perpetuating. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/784643 2014-12-17T17:01:15Z 2014-12-22T20:40:19Z Assorted Links: The Environment
1. Death to beavers! The next time you hear someone discussing the environmental benefits of vegetarianism for cutting methane production, see if they are equally as enthusiastic with regards to hunting down beavers in order to cut into some of the 800 million kg of methane they cause. [Edit: Not 800 million kg of methane, but methane to be 800 million kg CO2 equivalent]

Warning: Pointing out the various ways in which politics is not actually about policy is not the best way to make friends at parties. [Edit: And the search for counter-intuitive insights can often lead to inaccuracies]

2. India is attempting to stimulate growth by parring back environmental rules. Considering their current environmental rules are organized, they would need to be replaced anyway. The question is whether this cuts back on the need of bribery or if it just centralizes the bribes into the hands of centralized officials.

3.  The Economist on geoengineering.

"And the mere fact of experiments going ahead might lead people to assume that geoengineering could easily be made feasible, and thus to give up on reducing carbon emissions."

This sounds a lot like the people who in 2009 wanted to pretend that monetary policy was impotent because the fed funds rate were at the zero bound. They made these claims this in order to maximize the size of the fiscal stimulus. Once it was realized that more stimulus was needed, monetary policy became the only game in town and the Federal Reserve implemented QE2 and other programs.

At some point, geoengineering will be the only game in town and the people fighting it today are just ensuring that we will have less data on the long term impact of many potential solutions.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/775467 2014-11-26T18:42:59Z 2014-11-26T18:42:59Z Leftwing Vegan Problems
I'm neither leftwing nor a vegan. I just found the following line of thought to be an interesting logical problem.

There are many animals killed in mechanical crop harvesting. Clearing native vegetation, or even just utilizing mechanical harvesters, kills many sentient beings. There seems to be an active debate over whether or not enough animals are killed to justify the argument that eating cattle harms fewer sentient beings than eating vegetarian, but there is no question that many animals are killed in the cultivation of plants.

One way to avoid this is to utilize more human labor. Humans are less likely to indiscriminantly kill animals. Farming processes that require significant amounts of human labor, such as having humans pick fruit and vegetables, means that fewer animals are going to be killed by mechanical harvesters.

Vegans (and ethical vegetarians) are more likely than the average population to have political beliefs that see low wage occupations performed by immigrants as a form of exploitation. 

Until they succeed in getting at least some agricultural companies to raise wages to levels that they deem acceptable, leftwing vegans are forced to choose between exploiting immigrant labor or buying products whose production required the deaths of numerous small mammals.

One way to get around this is to not think about or discuss the problem of small animal deaths caused by food production methods. To the extent that the problem of animals killed in plant cultivation is ignored, it is evidence that being a vegan isn't actually about not harming animals.

Happy Thanksgiving!
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/773106 2014-11-21T02:26:37Z 2014-11-21T02:26:37Z Years to Train Physicians: An International Comparison
One aspect that is under weighted in the discussion on US Health Care is the focus on how our doctors are trained. When reform in the healthcare system is discussed, the main question is how the existing healthcare services should be allocated. We look to other countries for models on how health care is produced. Liberals cite the single payer systems in Europe that seem to work with relatively low expenses while conservatives often point to the public/private system in Singapore that are able to provide suitable services at a fraction of the cost of their gross national product.

But the question of allocation is only half the problem. The education of healthcare workers, and more specifically physicians, is a variable that is basically ignored by almost everyone in the health care debate. A 2009 paper by the Global Knowledge Exchange Network provides an overview of differing physician training requirements.
The table above contains data from the paper, supplemented with data from the World Bank, the OECD, the Congressional Research Service, the German Medical Association, and Singapore's Ministry of Health.

A 2013 OECD study found that the United States has the third lowest proportion of general practitioners to specialists among developed economies, with only Hungary and Greece having fewer general practitioners. Looking at the above table it's easy to see why - with education already lasting over ten years, the addition of a few more years for a significant bump up in salary is a strong incentive to avoid general practice. The return on those last few years of training is quite high.

It is interesting to note that a recent study found that foreign trained primary care physicians trained abroad outperformed American born physicians. Whether that says more about industrious foreign born immigrants or burnt out Americans is an exercise left to the reader.

Longer training times restrict the supply of physicians available to treat patients. A restricted supply means that demand must be rationed. In capitalist systems, that rationing occurs with the wages of doctors and costs to the patient going up. In socialist systems, that rationing occurs via longer wait times for patients with less serious conditions. But if restrictions on doctor training were loosened then in mixed systems there would be downward pressure on both prices and on wait times.

Unfortunately, no political reform of the medical system is going to occur without the public support of physicians. And the American Medical Association, the modern guild of physicians, is not going to support policies which have any chance of creating downward pressure on the wages of its members.

While analyzing which countries are most efficient in training physicians is a fun exercise, actual reform in the medical system needs to come more from other places. Ideas to reduce the incentives of hospital physicians to practice defensive medicine, price disclosure by medical service providers and the proper implementation of technology and standardization to reduce administration costs need to be given more weight. The political question surrounding the allocation of resources gets much easier if the amount of those resources can be significantly increased.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/760022 2014-10-24T22:35:48Z 2014-12-16T15:43:15Z Remember - It's Tesla vs Dealerships
Another state has effectively banned Tesla sales - Michigan. From a public choice perspective it's not surprising that the homebase of the old auto manufacturers is moving against their upstart electric competitor. Creative destruction is always opposed by those who are hurt by changes in the status quo. But people looking at the newest twist in the story from the angle of "Big Three vs Tesla" are missing a key point:

Old school auto manufacturers have been held hostage to dealerships for decades. Laws originally designed to protect large capital investments of dealerships have been extended indefinitely. None of the auto manufacturers are allowed to sell directly into states themselves - politically influential dealerships have locked automanufacturers into a disadventagous long term relationships via dealer franchise laws.

When Tesla was let into New York, it wasn't a compromise with the Big Three that got them a spot at the table - the deal that let Tesla keep their retail outlets also helped the dealerships in their relationships with out-of-state manufacturers. 

This doesn't make the strategy of the Big Three in Michigan and elsewhere right. But from their perspective they are just trying to ensure that their new competitor has to deal with the same parasites that they are forced to do business with. This may entitle them to sympathy, but it does not mean they deserve any support in their misguided quest to expand the reach of their rent seeking dealership partners.

Tesla's real enemy has always been the car dealerships and their lobbyists. And in the battle of corporations vs. rent seekers, consumers win when rent seekers lose. 

Side note: Dealerships are often portrayed as small businesses that help drive economic growth. This is because small businesses are seen as engines of job growth. This is wrong - the actual causation is that young firms are drivers of job growth and the correlation between size and job growth exists because many young firms just happen to be small.  Dealerships are generally old businesses.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/759014 2014-10-22T21:53:02Z 2014-10-28T05:54:30Z Attempting to Align Incentives: Banking Employees Edition
William Dudley, President of the New York Federal Reserve Bank, has an interesting idea on how to align the incentives of banking employees with the desires of bank regulators: Defer their bonus payments for 10 years and take regulatory fines out of the bonus pool. From his speech:

However, in contrast to the issue of trading risk, unethical and illegal behavior may take a much longer period of time—measured in many years—to surface and to be fully resolved.  For this reason, I believe that it is also important to have a component of deferred compensation that does not begin to vest for several years.  For example, the deferral period might be five years, with uniform vesting over an additional five years.  Given recent experience, a decade would seem to be a reasonable timeframe to provide sufficient time and space for any illegal actions or violations of the firm’s culture to materialize and fines and legal penalties realized.  As I will argue below, I also believe that this longer vesting portion of the deferred compensation should be debt as opposed to equity.

There is no question that banking incentives are broken. In the run up to the 2008 financial crisis employees were generating what looked like revenue in the short term, but ended up actually destroying many companies. Other companies were found to be systematically violating regulations designed to protect consumers, often because a simple cost benefit analysis can find that breaking the rules now and paying the fines later is more profitable than other approaches. Employees involved might accurately estimate that the chance of significant bonus clawbacks are generally close to zero percent. It's the shareholders who are stuck with the bill years after the bank's employees have walked away with between 40% to 50% of the revenue they generated.

What challenges will a Dudley style system encounter?

If the bonus pool is too lumped together the responsibility will be too diffuse to matter. Bear Stearns and Lehman both had significant employee stock ownership, and yet both firms went belly up in the 2008 crisis. Work will have to be done to ensure that the people causing the trouble are hit first and hardest by the problems they cause.

The deferal unilaterally changes the deal between shareholders and employees, and employees who do not want to wait for their bonus payments will leave the regulated sector. This may actually be a good thing, as FDIC insured institutions shouldn't be in the business of creating free call options for employees looking for a quick payout.

Base salaries will go up as a portion of total compensation to make up for slower payouts. Higher base salaries and smaller bonuses can cause employees to act in a more risk averse manner.

If this system isn't implemented unilaterally through all FDIC insured banks at once the employees with the most earnings potential will leave banks implementing this policy for greener pastures. Like reform to the modern college education system, reform has to come from the high status players or all at once.  

If a mandatory deferred compensation system was imposed from the top down as one of the requirements for deposit insurance or for institutions with access to the Federal Reserve discount window or for primary dealers then it has the potential to help more than harm. Shareholders win because they are more protected from the bad behavior of their employees. Citizens who are better protected against renegade employees and less likely to fund bank bailouts win, while certain employees who have been enjoying a "heads I win, tails you lose" dynamic are inconvenienced.

One caveat: Top down regulations on compensation are generally undesirable. Right now it is arguably too difficult to comply with all of the regulations that banks are supposed to follow - it's crazy that Citi needs 30,000 people working in compliance. This part of the system is also broken. And a congress plus a regulatory body trying to implement Dudley's reforms in some form may end up doing much more harm than good. But the financial industry, with both government subsidies and significant moral hazard, needs better ways to reign in broken incentives. Dudley's proposal gets a lot of things right.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/754884 2014-10-13T22:09:09Z 2014-10-13T22:12:09Z Note to Silicon Valley: Jean Tirole is Relevant

Most Nobel Prize winning economic work is ignored by people trying to understand Silicon Valley, and for good reason. Subjects like macroeconomics and trade theory are rarely relevant for what people are doing on a day to day basis. Even the issue of efficient markets is a non-question. The venture capitalists don't believe and the people trying to automate wealth management accept it is true as a matter of faith.

But the work of Jean Tirole, who was awarded The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014, is far more applicable to understanding the ecosystem of the technology sector. His work spanned many areas, but it is primarily on how to understand and regulate industries with few powerful firms. The Swedish Royal Academy of Sciences released a short summary of Jean Tirole's work here and their in-depth look is here - or just read Tyler Cowen's summary.

But why is this relevant for understanding the technology ecosystem? As Peter Thiel makes clear in Zero to One, one of the goals of a startup is to create an area where they are a monopoly. Google has an effective monopoly in online search. Facebook is the internet's most complete personal directory and the world's largest photo sharing company, LinkedIn owns everyone's online rolodex. Airbnb, Uber and many other successful new companies are successful because they essentially own their respective domains. Understanding the dynamics of market power is essential to understanding the most successful technology companies.

Once a firm is first to market, the question of what extent they should go to in order to deter competitors is a complicated question. In 1984, Jean Tirole and Drew Fudenberg plublished a paper on whether firms in various scenarios should over invest to protect their monopolies or if they should accept that they are going to face competition and stay lean and agile. The paper also highlights scenarios where the large initial investment to claim market share reduces a company's incentive to innovate, leaving them ripe for disruption after they have enjoyed the benefits of monopoly profits for a decade or two.

Another interesting question often faced today is that there is a company with a monopoly over one area, but how can they take that advantage to profit in other sectors? Tirole wrote many papers on vertical integration and monopoly power, and he did a literature survey of the field with Patrick Rey. Even if the goal of the literature is to figure out when to regulate these monopolies, companies can also use these strategies to find ways to expand their profit and market share. A mild version of this tactic is utilized by Microsoft when they release subpar versions of Microsoft Office to Mac so that power Excel users will be pushed to remain on the Windows platform.

Many startups are looking to build platform companies, where one company owns a two sided market and sells to both consumers and producers. Others may just want to better understand the incentives of the stores they are using to get their product to consumers. Jean was one of the first people to understand that maybe newspapers should be giving away their paper for free if that means they can charge businesses more for ads. This type of competition by the newspapers can drive their competitors out of business, but this seemingly monopolistic practice is benign - in many scenarios platform companies make is so everybody (except the platform competitors) wins. Here is a paper on Platform Competition that Tirole wrote with Jean-Charles Rochet - or better yet, a literature survey published three years later.  Alex Tabarrok and Vox have short posts addressing some of his work on platform markets.

This is only scratching the surface of his work, but it shows that many of the ideas driving value creation in Silicon Valley today have been analyzed in academia to a significant degree. These are complicated problems and sometimes returning to look at what the theory says can keep practitioners from making avoidable mistakes.  

Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/753968 2014-10-11T05:56:27Z 2014-10-11T05:56:27Z Snapshots of our world: Assorted Links
1. Tim Harford uses the analogy of picking the fastest grocery store checkout line to explain the efficient market hypothesis. Ironically, the advent of self service aisles has created an option that lets customers get out of the grocery store

2. The internet of murder things.

3. Welcome to the US, where everyone is guilty of something

4. And some things (literally things, not people) are guilty until proven innocent. (HT: MR)

5. Consumers in the US are spending more money on luxuries. All of them, not just the one percent.

6. A chart that highlights one of the impacts of the expansion of democracy to the masses. Presidents have to speak more simply in modern times. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/752218 2014-10-07T20:27:52Z 2014-10-07T20:27:52Z DFW: No such thing as atheism
I recently came across a collection of audio recordings by David Foster Wallace. Some of the short stories from Brief Interviews with Hideous Men are far more disturbing when I am forced to listen to every word and cannot just skim quickly past some of the more gruesome scenes. 

His commencement speech "This is Water" (transcript) is one of the more striking parts of the collection. This passage is towards the end of the piece:

Because here's something else that's weird but true: in the day-to day trenches of adult life, there is actually no such thing as atheism. There is no such thing as not worshipping. Everybody worships. The only choice we get is what to worship. And the compelling reason for maybe choosing some sort of god or spiritual-type thing to worship -- be it JC or Allah, be it YHWH or the Wiccan Mother Goddess, or the Four Noble Truths, or some inviolable set of ethical principles -- is that pretty much anything else you worship will eat you alive. If you worship money and things, if they are where you tap real meaning in life, then you will never have enough, never feel you have enough. It's the truth. Worship your body and beauty and sexual allure and you will always feel ugly. And when time and age start showing, you will die a million deaths before they finally grieve you. On one level, we all know this stuff already. It's been codified as myths, proverbs, clichés, epigrams, parables; the skeleton of every great story. The whole trick is keeping the truth up front in daily consciousness.

Worship power, you will end up feeling weak and afraid, and you will need ever more power over others to numb you to your own fear. Worship your intellect, being seen as smart, you will end up feeling stupid, a fraud, always on the verge of being found out. But the insidious thing about these forms of worship is not that they're evil or sinful, it's that they're unconscious. They are default settings.

It's worth noting that a trite message can still be important, true and undervalued.
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/747950 2014-09-29T00:17:57Z 2014-09-29T00:17:58Z Assorted Links
1. Bill Gross left Pimco. When some CEOs leave their companies the shareholders celebrate. In the case of Bill Gross leaving the shareholders of Pimco's parent company, Allianz, decided that the company was worth about 3.8 billion dollars less than the day before. Part of this 3.8 billion dollars is related to new information about the severity of the problems that caused Gross to leave in the first place. But because Bill Gross chose to join Janus Capital the same day, we are left with an estimate of about how much the market values the human capital of Bill Gross - slightly under $900 million dollars.

2. Clay Shirky tries to help his students stop multitasking. Apparently there are many drawbacks to multitasking and I should stop making assorted link posts. (fortunately for me these posts are generally a symptom of my multitasking and not one of its causes)

3. Regulatory capture in the financial sector: Goldman Sachs vs the Fed. We should expect these problems to persist for as long as regulators are hoping to find work for the companies they are regulating (or companies doing a significant amount of business with the regulated companies).

It's interesting to see the PR machine of Goldman go to work on damage control. First the response is "This person tried to get a job from us many times" implying that the employee was merely bitter. They also highlighted the fact that Goldman did have a conflict of interest policy and thus the whistle-blower was wrong (without any emphasis as to whether or not it was effective). Shortly thereafter, there is a massive change in Goldman's conflict of interest policy. 
Jeff Lonsdale
tag:unpleasantfacts.com,2013:Post/745841 2014-09-23T23:37:16Z 2014-09-23T23:37:16Z The Best People on the Internet
Are those who don't comment. So those who accidentally browse the comment section of popular websites should take solace in the fact that comments are not a reflection of the general population.

Via slate and the original paper.

While the study focuses on the behavior of trolls, it's interesting to note that people who are interested in debating issues also have more traits associated with Machiavellianism and sadism than others.
Jeff Lonsdale