Build character, without doing something you hate.

I was just reading Willpower by Baumeister and Tierney, which I enjoyed a lot. For some reason I had very good willpower while I was reading it. They take the idea that intelligence is supposed to be a good thing in life, but that actually ‘resisting the marshmallow’ or willpower also has a really strong correlation with ‘success’ (listed in the link). And that willpower is much more amenable to practise.

They point out that ‘willpower’ is the same thing you use for decision making and resisting impulses and we have limited supplies of the stuff. So starting 10 new years resolutions, that each require willpower, is impossibly hard. Do one at a time. They describe Franklin, who helped inspire Gretchen Rubin’s approach to her happiness project. He had a list of 13 values and each week he’d focus on one, slipping behind in the one he’d done in the previous week, but hopefully doing two steps forward in each focus week and only one step back in between, so that:

“On the whole, tho’ I never arrived at the Perfection I had been so ambitious of obtaining, but fell far short of it, yet as I was, by the Endeavor, a better and a happier Man than I otherwise should have been if I had not attempted it”.

The funny thing is that the recommendations end up really supporting religion. Lots of religious practices, meditating every day, praying every day, praying five time a day all add up to practising willpower. It seems that anything you do because it’s the right thing to do, whether or not you feel like it, is practising willpower. Or you could say that because you don’t feel like it you build character And the work done here gives you strength to do more good things in a virtuous circle.

Calvin and Hobbes build character

They also mention that the more tidy our environment, the more self control we have. In the study they quote you can be offered some money now, or more money in a week. People in tidier surroundings are more likely  to choose to wait a week.  This is funny as Gretchen Rubin studied the effect of clutter on happiness, pointing out that clutter is all over the popular press (blogs) but is not studied much, yet keeping clutter under control is an essential, foundation, habit so around 2011 the science caught up.

It might seem really obvious but I’ve also realised that reading about something, helps you think more focusedly on that subject. So while I was reading stuffocation, I decluttered (even thought the book is only partly about that) and while I was reading Willpower, I was keeping better habits. This suggests that constantly reading different books on the same subject can be useful at practising that subject, even if the books are not adding any new information. Even though I’ve decluttered reasonably well (though not as well as if Marie Kendo really came round to my house to say are you sure that brings joy to your life), it seems that reading a decluttering book every quarter would be a good way to inspire you to keep on top of things. Finally an excuse to get more of these books.

The final sentence is to point out (despite the Calvin and Hobbes strip) that I don’t think it is at all necessary to do pointless tasks to build willpower. In life and in the world, there are enough useful tasks that need doing, and helpful habits that can be built up, there is no need to build character just for building characters sake. Build character by building a habit of something useful and worthwhile (writing blogs?).

Why do I feel like London is built by the renters for the investors?

The title is inspired by my feelings when walking through the new bits of Kings Cross between York Way and Caledonian road. Glossy but anodyne buildings renovated at a high cost by investors to rent at a high price, which results in £7 beers (those high rents aren’t magiced out of nowhere). In a perfect world the area would have been built up by the business owner, making profits out of the turnover of the busines and investing it in better buildings. (I don’t know if that’s what happened, that’s just how it looks).

This is something I thought of after going to the London Fairness Commission event, Is London a Fair City at Guildhall this evening. The debate is ultimately derived from the ideas in the book The Spirit Level, Why More Equal Societies Almost Always Do Better.

There were a number of interesting ideas. The London Bridge Trust maintains five bridges but has so much money they have widened their charitable remit (but they still maintain the bridges). Even though housing was supposed to be  the third item it kept bleeding through to earlier items.

Inequality has gotten better since 1915, so we should stop making a fuss. Even though it got better because of changes after the wars that have been going backwards.

If rich people pay more tax we should consider that job done, and not worry about why they have so much money to pay more tax with. It would also help if you clarify whether they pay more in absolute numbers (yes) or a percentage of their income (not so much) This ties into an idea that wasn’t discussed. Everyone was very keen on a proper living wage. Businesses are not keen on this, otherwise they could voluntarily pay more. At the same time they pay low wages, they post profits. This is basically a choice we can make; should that money go to wages or profits. The thing is that wages, especially of poorer people, go straight into the economy as people buy stuff to improve their standard of living. While profits could theoretically go into the economy too, by being invested back in the business, in practise investment in the real economy has stagnated over the last 30 years and profits are more likely to go in to the financial markets. Therefore if businesses pay higher wages and post smaller profits, the economy will be better off (nef has done the analysis). And while you might worry about what spending on ‘stuff’ will do for the enviroment, if we bought leisure, or experiences, or services we can lighten our load on the environment (see Stuffocation, we can save the enviroment without needing the human race to suddenly become perfect).

The final question was a few votes, leading up to whether we should build in the green belt. A poll of the attendees showed a huge majority in favour of rent controls. I’m even a bit reluctant to mention that because the idea has been so thoroughly demonised that I’m afraid people will write off the whole debate as [left wing slur]. But I’m going to go ahead (wait I already went ahead). Almost nobody was in favour of freeing up planning control, probably because only the developers would profit and we are sick of loosing our best buildings (Waitrose in Holloway, I’m looking at you). Finally a few more people were in favour of building in the green belt and that is the craziest part. Why do we want to build in the middle of nowhere or zone 7, or wherever the green belt is, when we could build in zone 2, where the jobs are and the infrastructure already exists. Compare these two screen shots of Islington and Prenzlauerberg in Berlin (where I lived, three stops from Alexanderplatz), a pretty good bit of Berlin that is gentrified because everyone wants to live there.

Islington London Prenzlauerberg Berlin

And bear in mind most houses in Islington are three stories while every house in Berlin is five stories with handsome high ceilings all the way up. And interesting little shops and cafes everywhere, because they have the people to shop in them. I’m not saying there is an easy solution to this because I’m not sure building an extra house in the back of every garden will work and I don’t want to knock down handsome Victorian houses, and so many modern buildings are hideous, but, but, but, but, Zone 2 can fit more people in (Waitrose in Holloway, after knocking down a five storey building to build a two story one, I’m looking at you). So no to Greenbelt building, commuting never made anyone happier.

Was that something about how to beat the stock market?

In my previous post I mentioned that one of the unpredictable things Pounstone’s book can predict is the stock market. As the whole thing runs on people (not numbers) that sounds quite doable.

http://imgs.xkcd.com/comics/engineer_syllogism.png

The advice is

  1. buy index funds
  2. use their special patented method to figure out when to sit out of the market and keep your investments in cash, and when to buy back in (they fall down on the patented part by describing the method for free)

Poundstone doesn’t explain the first step, though Pete Comley does in his excellent book Monkey with a Pin. This book was inspired by the observation that 85% of fund managers don’t beat the market. Hence the value of index funds, which are the market.  When I first found out what an index fund is a few years ago I naively thought it was a new invention that would devastate the city. If people can get the same or better results for less money why wouldn’t they? I guess if psychics can earn money, and if there are whole professions where the experts guess right less often than chance, the fund manager doesn’t have to worry.

So Pete Comley pointed out the very important point that half of the ‘growth’ of the stock market is just inflation. Perhaps ‘just’ inflation is unfair. Inflation proofing an investment is pretty useful. Though Pete Comley showed that if you put cash in the highest interest account you could find, once  a year, then over the last 20 years (not including current low rates) you would actually also beat inflation.

So if you invest £17,250 and 23 years later you have £27,500, that looks like a respectable 4.2% per annum gain, but if inflation averaged 3.5% that was really only a 0.7% gain. Comley further calculated that overall per annum return on investment over the last century, after subtracting out inflation,  is 5% and average investement costs are 6%, giving overall returns of minus 1%, which would look perfectly respectable after inflation, say,  4%.

So beating inflation is not to be sneezed at. Actually since reading Monkey with a Pin I think Poundstone is the first person I’ve read who discusses the value of markets after adjusting for inflation.

If fund managers are not beating the market and the market is going up anyway because of inflation, which you get for ‘free’ just by owning unmanaged shares, then the next step is to minimise costs.

If you have an index fund of the market that is going up 5% a year with 0.5% annual fees (the maximum you should pay for an index fund, you might get a little less) and you compare it to a fund that is consistently beating that index (the market) by 1% a year, 6% overall, but which charges 2%, then I don’t even need to plot the graph to show you that lower fees are more important than small gains.

I like graphs so I’m going to plot it anyway.

Index fund returns

See how compounding interest doesn’t make much difference for the first 10 years and takes off after 20 years. But look at the huge difference when costs are 0.5% (red) vs costs of 1.5% (green). A mere extra 1% knocked almost a quarter off the final income. And while the expensive hedge fund at 2% interest and 20% of profits (purple) did beat the index fund, it would have to beat the market by 3% consistently for 30 years. Good luck finding a manager who is in the top 15% for 30 years running and who won’t retire in that time.

There are a lot more to the costs that I didn’t discuss (if the market goes up by 5% and fees are 0.5% you get less than 4.5%)and I didn’t even get round to the superspecial unpatented Poundstone method to beat the index funds. That’ll have to be another post.

Why I’m getting rid of my reward cards (I’m only a little paranoid)

I just finished reading William Poundstone’s: How to predict the unpredictable. It turns out we are actually quite predicable. Each chapter covers one topic and finishes with tips on how to win at e.g. rock paper scissors, tennis and the stockmarket (check out the table of contents on amazon ‘look inside’).

One point is that we really have no clue what random looks like, If you map 50 coin tosses as black and white squares, the random one (middle) looks fake and the fake one (top) looks random. In the random set, each coin toss has a 50/50 chance of being different from the previous one. In the one we think of as random, there is a 75% chance the next block will be different from the previous one. We have to go up to a 90% chance of a colour change (bottom, ) before we begin to think it looks fake.

Looks Random Sept2015

This is the law of small numbers. A pschological trick making us think the rules that govern large numbers (50/50 outcomes of 1000 coin tosses) will also govern small numbers (not really, there’s a pretty high chance of not getting a 50/50 split in 5, or 10, coin tosses).

Next up is passwords and PIN numbers, with estimates that 11% of the population uses 1234! If you found a debit card, and tried the three most likely PINs (1111 at 6% and 0000 at 2%) you’d have a hair under a 1/5 chance of getting the right number.

The tip for passwords is to find a random password generator, generate a few passwords and find one that is easy to make up a story to help you remember. Then only use it for a few important secure sites and not every time some online form asks you for a password. Personally I’m so sick of account names and numbers I’ll stop right there rather than sign up to another one. I’ve been reduced to buying theatre tickets by phone, which was actually just as easy.

Poundstone did fall down on one aspect. He describes the Target campaign where they looked at the buying habits across 25 products and found they could tell when someone was pregnant almost to the week (the list included suddenly buying certain vitamins and scent free lotion). They would then send these women flyers for baby stuff and as long as they mixed it up with lawnmowers, so the women didn’t know they had been targeted specifically, they were happy to start the new phase of their life as a Target shopper. The story includes the angry father of a sixteen year old, who then found out she really was pregnant.

Here Poundstone says the new predictions challenge not only privacy but also our illusion of free will. But I disagree, it is definitely a privacy issue. Target even agrees re adding the lawn mower ads ‘as long as the pregnant woman thinks she hasn’t been spied on‘.

It’s an interesting grey area. It is not unreasonable for the shop to have records of your buying habits, but putting them together gives them data you don’t want them to have. Maybe the moral here is pay attention to an upcoming need for new laws, get rid of your reward cards, and pay cash rather than card. I’m reluctant to do the second, but then I never do spend the points, so I’m putting it on my to-do-when-I-get-round-to-it list. Though I did just sign up to the Paperchase reward card, I’m hoping there is a limit to what they can figure out from my stationery spending. The second requires planning and effort, but is something I aim to do more often than not (I’m also going to put a big sign on my back saying ‘suitable mugging target’). The first one is on the back burner. I’m hoping someone else will set up a campaign group and start lobbying MPs to ban shops scanning our faces, recording everything we do in them, saving that data and paying attention (via algorithms) to all the data.

Finally, make sure you delete your cookies before shopping on line, you’ll probably get better prices.

Ugh, why is living in the future so tedious.