I'm less popular than "Current Resident"

Thursday, December 4, 2008

Sarah gets a fair bit of mail based on her professional status. Every day brings at least one piece of mail offering her (what seems like) enormous sums of money to come be a surgeon in a desperately unattractive location. They seem unable to screen for the fact that she’s currently in year two of a six-year program. She also subscribes to several journals and magazines. I, on the other hand, receive household bills and little else. The result? Sarah gets more than ten times as much mail as I do. In fact, we receive more mail addressed to “Current Resident” than to “Steve Davis.” I only received more mail than this accursed “Resident” on two days out of the last 30. Sigh.


Californians more motivated by Gay Marriage than Obama v. McCain

Wednesday, November 5, 2008

With nearly the entire vote in, California has produced a very stranger result. Residents had the opportunity to vote in the presidential race as well as on 12 statewide propositions and a number of local and regional elections. Turnout in presidential elections is normally up compared to non-presidential years, and is partially driven by people who vote for president, but leave the rest of their ballot blank.

However, this year, it appears that an even larger number of people turned out to vote exclusively on Proposition 8 (from the LA Times with 95.4% reporting).

I can imagine the sort of person who would cast a presidential-only ballot, but fail to read through the propositions. I have much more difficulty imagining the ~30,000 people who went in to vote on just Proposition 8, and while they were there, decided not to fill in a bubble for president.


My personal search for alpha

Thursday, October 30, 2008

My earliest experience investing didn’t go so well, but that didn’t completely crush my belief that there’s alpha out there somewhere. I know, for instance, that top venture capitalists have consistently delivered higher (risk-adjusted) performance than other securities (The full argument can be found in Paul Gompers and Josh Lerner’s The Venture Capital Cycle). But that doesn’t seem to be true of mutual funds. What’s the difference? It looks like venture capitalists get to take advantage of network effects (the best VCs have lots of connections, making them better, giving them more connections, adding up to a substantial advantage over median VCs), and market illiquidity (there are very few VCs (and fewer “excellent VCs) providing funding for an enormous number of potential entrepreneurs). These two factors add up to a unique (non-public) informational advantage and strong bargaining power. Mutual funds, on the other hand, rely on mostly public information and trade primarily in liquid markets.

“Illiquid markets and unique information” sounds like a scam, but if venture capitalists can do it, maybe there are opportunities to be found in other areas as well. After reading Amarillo Slim's amusing biography, I realized I’d already participated in a number of illiquid markets, including some with unique information whenever I engaged in proposition betting -- e.g. wagering on who would win a basketball game or which member of our dinner party would arrive next. The reason why these are so lucrative is not only because people don’t always judge probability well and are risk averse, but also because entry into these bets is restricted, making the market illiquid (ultimately allowing 'incorrect' prices and, therefore, high expected returns/high expected losses for the participants).

For instance, in a class I had a few years ago, a professor was explaining expected value and decision trees with the following game: "You pay $2 for a chance to flip a coin. If it comes up heads, you get nothing; tails you get the opportunity to pay $2 to flip a second coin. If the second coin comes up heads you get nothing; tails you get paid $11." The expected value is positive (50%*[-$2] + 25%*[-$4] + 25%*[-$4+$11] = +$0.75), but three quarters of the time you lose money. It was meant to introduce the concept of expected value, then illustrate one of its limitations. After working through the example, the professor asked if anyone would like to play and about half of our class of 90 raised their hands. Then he asked who would like to play if the stakes went up by a factor of 10. Only one person was willing to risk $20-40, even though the expected value was positive. There would certainly have been other willing participants in the world, but they weren't given access to the game -- the market was illiquid because it was restricted.

This left me thinking about poker, proposition bets, and illiquid markets with imperfect information. Eventually, I found one in baseball.


Good argument, questionable chart

Tuesday, October 14, 2008

The New York Times had a graphic today showing how the economy fared under Democratic and Republican presidents since Herbert Hoover. They seem to be making a shortened and simplified version of the argument presented by Larry Bartels in his book Unequal Democracy (For those who don’t have a book-length period of free time, Steve Benen summarizes).

While I think Bartels’ argument is fascinating, I’ve really got to take issue with the Times' graphic. They obscure the progression of time and the length of term that each president had. Yes, the S&P 500 grew 10.8% under Gerald Ford, but he was only president for about 2 years. And yes, the S&P 500 grew 15.2% under Clinton, but was that his economic genius, or the continuation of a trend started 20 years earlier and lasting through three administrations under both parties?

I think the time series clarifies things greatly. Here’s a recreation of the original NYTimes graph, which sorts by party and orders by growth rate:

Here's a new one that orders by year, and shows term length:

I think the new chart does a much better job of showing the sequence of presidents, which helps the reader understand larger trends. Maybe the economy is more likely to grow under a Democratic President than a Republican one, but if that's the case, I'd like to see it shown more robustly.


Why I'm in love

Sunday, October 12, 2008

The other day I was reading xkcd and came across this fabulous comic.

It really spoke to me, since I think one of the greatest parts of a relationship happens when one partner recognizes and indulges a socially unpopular part of the other. It might be embracing something geeky like in this comic, or providing a hidden pleasure like Peeps, but it’s touching when it happens. Me – I like graphs.

For my anniversary with Sarah, one thing I got her was a pack of “fruit”-flavored Mentos, which we always have enjoyed on our vacations (consumption-based enjoyment, not science experiment enjoyment). The next day she sent me this graph of the contents of the Mentos pack.

I'm in love.


My early efforts at investing were unsuccessful

Wednesday, September 17, 2008

I don't fully subscribe to the University of Chicago's disbelief in alpha, but even if there are people who can successfully pick stocks that will perform in excess of their risk-adjusted expectations, I am certainly not among them.

Fortunately, I learned this lesson early in life, with my first (and so far only) investment in an individual stock: Stratos Lightwave. I made my purchase after getting involved in an investment club my sophomore year of college whose sponsor advised everyone to "put a token amount into a stock you choose; this will give you the motivation to follow the market."

It didn't go as well as I'd hoped:

Early experiences have a funny way of having outsized influences on our later lives, but I was more or less convinced by this to stop picking stocks, and leave my money in index funds. Of course, if you'd like to prove me wrong with a can't-lose stock, feel free to drop me a line.


The point of owning books

Friday, August 29, 2008

A personal library was originally a repository of knowledge. University libraries or ecclesiastical collections existed, but were rare and far away. Even as late as the 20th century individuals kept private collections of books that were more comprehensive on narrow subjects than most research institutions. That’s just not the case anymore.

Sarah and I own a couple hundred books. They’re mostly paperbacks, not printed on acid-free paper, not first editions, not signed, and usually not read more than once. Until recently I’ve treated these books with the care I was taught as a child so I could “responsibly” handle library materials and grade school textbooks that went a decade between replacements. But now I realize that my books are nothing more than long-form newsprint – around for a while, but not ultimately valuable, archivable, or important. They are temporary appliances of knowledge, just like my dishwasher, television, or toaster and they are only as valuable as I make them through usage.

So, I’ve changed. I think books should be cherished by being consumed, not by being preserved.

I now write in my books (a good practice for any student at any age, regardless of school policy). I rephrase what’s been said to remember it. I make comments to other readers, most notably my wife and my future self. And, I use them as scratch pads for other ideas that relate tangentially if at all.

I also now loan my books out (with the knowledge that two thirds will never be returned). That’s fine. A new copy of anything is two days and $15 away on Amazon, and if I’m honest with myself I know that I go back to old books relatively rarely. This new attitude will probably cost $30/year, but should allow me to loan out ~15 books/year. Just as some say you should publish content for free so that more people support your thinking (and therefore, more people buy your books/ask you to speak), I plan to give away books so more of my friends can discuss them with me.

And now, that project to catalog all of our books doesn’t seem *quite* as silly. Let me know if you’d like to borrow one.


Bill Clinton hated me

Thursday, August 28, 2008

I met Bill Clinton in 1999.

It was just a handshake/10 second photo sort of thing, but I remember it very clearly. I was 18, had disheveled hair, and was wearing a bow tie. Clinton shook my hand and said, “I like your tie.” It made me feel pretty good.

About eight years later, I was talking to a friend who worked in Washington who let me know that I’d missed the subtext. David Maraniss in his book The Clinton Enigma explains that Clinton used to compliment people’s ties when he actually meant “F*** you.” Apparently, it was a way to relieve stress without offending. As a politician you really can’t yell at people, but it feels good to tell the loathsome that you hate them, even if only in code. A tie compliment is the perfect code since just about everyone will read it as sincere.


Sleep greatly impacts my productivity

Friday, August 1, 2008

Some days seem so productive. Other days, not at all. I find that the amount of sleep I've gotten is the best predictor. I wonder if inability to do work when fully rested is just a visceral reminder that humans aren't meant to sit still for 60% of their waking hours.


Seasonality lowers the 2008 projection

Monday, July 28, 2008

An unknown Ken brings up a good point about my annualization of 2008 numbers in an earlier post about exercise. He asks if there is a seasonal effect, for instance, a spike in activity in early January while New Years' resolutions are still fresh. I don't think the particular example is right since I tend to make resolutions like "Spend more time at charity events," or "Save money elsewhere to spend it on occasional fancy groceries," but I acknowledge there may be seasonality.

Other than a consistent spike in July (a beautiful outdoor month in Boston), it's pretty hard to see the pattern in this data.

One thing that is clearly highlighted is my 2007 effort to train for my first marathon (the red line that jumps up in February). I went out hard, and while you'd hope to see that line trending upward as the mid-April race date approached, it actually trended down, revealing the results of my increasing knee pain.

Another big jump comes from a decision to start lifting weights in the spring of 2008. That heightened level of activity may be unsustainable, and points to a regression to pre-2007 levels unless I maintain the weight-lifting goal, or establish a new one.

However, the question remains – is there a difference between the seven months of data I've collected and the rest of the year? This next graph should clarify the issue:

Using this new information, we can prepare new estimates for the 2008 full year. With 205 days on record, we can figure the number of remaining projected workouts by multiplying 60 sessions by (365-205)/205 and then applying a 25% discount and arrive at a total of 35 additional sessions (as opposed to the original estimate of 41).

While this doesn't change the previous conclusions, which were based on year-over-year changes, and not just the 2004-2008 change, it does make the increase in '08 seem more reasonable, although 2008 still projects to be quite an increase over past years:


Workout length poised for a regression to pre-graduate school levels

It appears that 2004-2006, I averaged about 50 minutes per session, while in 2007 and 2008 I averaged about 20 minutes more. The most obvious driving force here is that I attended graduate school September 2006-June 2008, which left me with much more free time than when I was working.

So, what caused the longer sessions? Was it simply that I didn't have work waiting for me at home, and that allowed me to run farther? Partially, yes. I began playing squash on weekdays, something that had been strictly a weekend pursuit for me in the past. That sort of gain is likely to be reversed. Then again, having more time off also inspired me to set larger goals. I ran a marathon in the spring of 2007, and started lifting weights in spring of 2008, both of which made me spend more time at the gym. Those gains may be maintained.

A shift in the type of exercise might also help explain the change in workout length, but the exact composition and its change is unclear. It's also unclear why 2006 shows a decrease in workout length when the last 6 months were in graduate school or on vacation.

It seems clear that when predicting the future, the rise in number of workouts could be sustainable, but that the increase in workout length may or may not be in for a regression to the historical mean, depending on whether changes in exercise mix and goals or weekday squash was a larger driver of the 2007-2008 increase.

Of course, there is a significant observer/actor bias, but we'll assume that exercise is driven by stronger forces than graph creation.


Number of workouts per week has strongly driven increase in exercise since 2004

Sunday, July 27, 2008

Last time I looked at how much I've been exercising over the past five years. It looked as though exercise has been increasing, but I wanted to know why. The first question to address is how more frequent sessions and longer sessions have impacted total exercise. Have totals been padded because I've made exercise a more integrated part of my life or because I've had more time to spend at the gym? First let's look at frequency of workouts:

This shows a very steady growth of ~10 extra sessions/year. I'd expect this data to be pretty noisy since the decision to exercise or not on any given day is based on so many factors, and because the data refers to ~50-70 events per 365 days. Nevertheless, four years of increases of similar magnitude is enough to convince me that something is going on.

I interpret this as a steady integration of exercise into my daily life. While I did occasionally work out in the years before 2004, it was mainly pick-up sports at infrequent intervals. I had never jogged, never used a weight room (with the exception of 3 months in 2000), and never set goals to improve my endurance, strength, flexibility, or agility.

What this means for the future is that I would expect this trend of increasing exercise to continue and gradually level off. This stands in contrast to the other factor responsible for my increase in total exercise time, which I will investigate next: length of workout.


Time devoted to exercise has been growing

Tuesday, July 22, 2008

Since December of 2003 I've kept an exercise log. It started as a way to track how far and how fast I ran. At first glance it looks like I've increased the amount I've worked out pretty steadily over the past five years. The graph raises a number of questions, though. Why has exercise time gone up? Has it been from longer sessions? More frequent workouts? Is it driven by free time or is it independent of free time? Are the averages even over the years or do they represent periods of intense activity separated by periods of sloth?

Clearly, this needs some more attention.


Quitting my job to be a poker pro is not a viable option

Sunday, July 13, 2008

My first graph takes a look at my success playing poker online over a three year period 2003-2006. It looks like I’m pretty successful at low limit Hold-’em, but not so successful that I could make a living from it. It also appears I’ve hit my limit online, and that increasing the stakes isn’t a viable option.

I played online at PartyPoker and Paradise Poker, usually sitting at two tables at once (this was possible and advisable since there’s some significant waiting time as the other 9 players at the table act. People who do this for a living will often sit at four or more tables at once, but I found that the loss of concentration and fun I suffered made that a bad choice for me). I chose full table games rather than one-on-one or short handed (six seat) games. As you can see, I won fairly consistently at about $20/hour for the entire period I played after the first few sessions while I was getting the hang of it. You can see that of 32 sessions after the ‘learning period,’ fewer than a third were losing sessions, most of those were small, and a losing session was followed by another one only once. All in all, it looks like a pretty appealing way to make money.

On the down side, playing two tables at once for a long time got to be more of a grind than a relaxing activity. With the rise of programs playing tight poker at the lower tables, games got to be much less exciting, combined with the passage of the port security bill in 2005 it seemed like a good time to quit playing online. I quit entirely after a PartyPoker player obviously cheated, admitted to doing so in the chat box. I notified PartyPoker, they reviewed the incident and declined to discipline the player. That was the end for me.

If I’d been able to duplicate my success at higher limit tables, it might have been a good idea to continue playing. However, as you can see in the next graph, moving up to $3-6 and $5-10 did not result in winning play.

One could believe that what you see here is just the “learning period” that I experienced with $2-4, but I think it’s more than that. I needed more than practice to improve at these levels. As with anything, you need to practice, but you also need to develop technique. In poker, developing those skills requires reading books and articles, tracking and analyzing past performance, and probably playing live games. And, as with all sports, this work on technique is much less exciting than actually playing. I decided it wasn’t producing enough fun or profit to do that sort of concentrated work.

Interestingly, I also tried changing from Limit Hold-’em to No Limit, and played about 125 hours online.

While I started with a lucky run, the last 100 hours of play were slightly worse than break-even online. I’m not sure why my bankroll went up, then leveled off – almost like a reverse “learning period.” I guess this is what people call beginner’s luck, and what I call attention-grabbing, but irrelevant statistical noise.


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