Monday, July 27, 2009

Why It's Dumb to Text and Drive

We've written before about the folly of texting. (See our May 26 blog here.) Now comes even more proof. A new study by the Virginia Tech Transportation Institute finds that texting while driving doesn't merely double or triple the risk of a crash; it increases the risk 23 times.

Compared with other sources of driver distraction, “texting is in its own universe of risk,” said Rich Hanowski, who oversaw the study at the institute, which is affiliated with Virginia Tech.

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Saturday, July 18, 2009

For The Non-Believers Among Us

Readers of this blog know that we've been harping for some time on the perils of multi-tasking, especially multi-tasking behind the wheel. If you still think you can text and drive at the same time, maybe this piece in the New York Times will make you think otherwise. There's also an interesting follow-up, which you can find here.

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Wednesday, July 15, 2009

Of Course We Gave Them a Good Rating...

The nation's biggest public pension fund has now filed suit in California over $1 billion in losses it claims were caused by "wildly inaccurate" credit ratings.

The California pension fund, known as Calpers, says that highly complicated structured investment products that had been given a AAA rating are now worthless.

Calpers contends that in giving these securities their highest credit rating, the three top ratings agencies -- Moody's Investors Service, Standard & Poor's and Fitch -- "made negligent misrepresentation" to the fund.

Moreover, Calpers, in its suit, cites conflicts of interest by the agencies that rated these securities. Not only were they paid by the companies issuing the securities, it says; but they went one step further: All three agencies received lucrative fees for helping to structure the deals -- and then issued ratings on the deals they helped create.

Nice work if you can get it, right?

We'll see what the agencies have to say for themselves (the New York Times said that they either did not respond to request for comment or said they could not comment).

But in the meantime, the folks at Calpers -- and the credit rating agencies -- should bone up on how conflicts, even small ones, bias the judgment of people we rely on for financial advice. To do that, read one of George Loewenstein's papers here.

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Monday, July 13, 2009

The Importance of Being Tall

Here's another of life's fun facts that you can't do anything about: Tall people make more money.

The latest study, in Australia, found that being 6-feet tall raises annual income nearly $1,000 compared to men two inches shorter.


"Taller people are perceived to be more intelligent and powerful," according to the study, published recently in the Economic Record.

If that is so, then chalk it up to another of implicit associations we make in life. Associations are basically mental shortcuts, (or prejudices, if you like)that help us hack through life's jungle of information. For instance, if we are told a wine is from North Dakota (instead of California) we turn up our noses. If a pain pill is red or black (colors we associate with power) we rate it as being more effective than one colored white.

And now we learn that if someone is tall, we apparently associate their height with brains and brawn.

"Our estimates suggest that if the average man of about 178 centimeters [5 feet 10 inches] gains an additional five centimeters [2 inches] in height, he would be able to earn an extra $950 per year - which is approximately equal to the wage gain from one extra year of labor market experience," said study co-author Andrew Leigh, an economist at the Australian National University.

Associations, of course, can lead us into all sorts of erroneous judgments. A white pain, for instance, pill can be just as effective as a black one. And a tall man can be as dumb as a short one. (Though I must admit, I've never had a good wine from North Dakota.)

But before the tallest among you (at least the tallest Americans among you) start counting your blessings, consider this: For more than two centuries, until World War II, Americans had been the tallest people in the world. But in the 1950s, Americans' heights stabilized. In most of Europe, though, heights have rapidly increased.

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Tuesday, July 7, 2009

What McNamara Learned

Anyone interested in the study of human error can benefit from reading the powerfully written obituary of Robert McNamara that appears in today’s New York Times.

McNamara was a former secretary of defense and the primary architect of the Vietnam War. President Kennedy once called him the smartest man he ever met. Yet McNamara came to consider the Vietnam War as a colossal mistake – confessing in a 1995 memoir that it was “wrong, terribly wrong.”

It’s instructive to compare McNamara’s view of the Vietnam War with George Bush’s view of the war in Iraq.

The roots of both wars share a striking similarity: an overconfidence in the precision of intelligence. In the case of Vietnam, Congress authorized war after President Johnson contended that American warships had been attacked by North Vietnamese patrol boats in the Gulf of Tonkin in 1964. But, as a 2005 report by National Security Agency showed, the attacked never happened. Instead, American ships had been firing at radar shadows on a dark night. At the time, however, the agency’s experts in signals intelligence told McNamara that the evidence of the attack was iron-clad.

That phrase bears an eerie similarity to a more recent expression of war-time certainty. Remember when George Bush asked then-CIA director George Tenet how confident he was that Saddam Hussein possessed weapons of mass destruction?

“Don’t worry,” Tenet reportedly replied. “It’s a slam-dunk.”

Slam-dunk. Iron-clad. In both case men were certain, and in both cases men were wrong. What’s informative is how McNamara and Bush responded to being wrong. McNamara spent the rest of his life analyzing (and agonizing over) where and why he erred. Bush hasn’t.

McNamara’s conclusions were distilled in Errol Morris’s 2003 documentary, “The Fog of War: Eleven Lessons from the Life of Robert S. McNamara.” The greatest of those lessons, McNamara said, was to know one’s enemy. “We must try to put ourselves inside their skin and look at us through their eyes,” he said.

When McNamara did that, he explained in an oral history, he concluded that we failed to grasp the nature of the threat of communism. “What went wrong was a basic misunderstanding or misevaluation of the threat to our security represented by the North Vietnamese,” he said. “I am certain we exaggerated the threat.”

That line caught my eye because just last week, the Times ran a story saying, essentially, that we had repeated that error in Iraq. In a series of interrogations before his execution, Saddam Hussein told an F.B.I. agent that on the eve of the 2003 American invasion, Iraq was trapped between United Nations orders to demonstrate that it had disarmed and a fear that appearing too weak would invite attack from its powerful neighbor and foe, Iran.

In fact, Saddam so feared Iran that he told the F.B.I. that if United Nations sanctions against his country had been lifted, Iraq would have sought a security agreement with the United States to protect it from Iran. (Italics mine.)

“We did not appreciate how large the threat of Iran loomed in his thinking,” said Charles A. Duelfer, a veteran intelligence official who led the hunt for unconventional weapons in Iraq in 2004. He called the United States’ understanding of Iraq in 2003 “cartoonish.”

The interviews, noted the article, “underscore once again both Mr. Hussein’s striking miscalculation of the risks he faced and the United States’ mistaken estimate of the threat Iraq really posed.”

In his oral history at Berkeley, McNamara predicted as much. “We didn’t understand the Chinese; we didn’t understand the Vietnamese, particularly the North Vietnamese. So the first lesson is to know you opponents.

“I want to suggest to you that we don’t know our potential opponents today.”

One man learned from history; the other has not.

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