Review of “Lifecycle Investing”

Summary

In this post I review the 2010 book “Lifecycle Investing” by Ian Ayres and Barry Nalebuff. (Amazon link here; no commission received.) They argue that a large subset of investors should adopt a (currently) unconventional strategy: One’s future retirement contributions should effectively be treated as bonds in one’s retirement portfolio that cannot be efficiently sold; therefore, early in life one should balance these low-volatility assets by gaining exposure to volatile high-return equities that will generically exceed 100% of one’s liquid retirement assets, necessitating some form of borrowing.

“Lifecycle Investing” was recommended to me by a friend who said the book “is extremely worth reading…like learning about index funds for the first time…Like worth paying 1% of your lifetime income to read if that was needed to get access to the ideas…potentially a lot more”. Ayres and Nalebuff lived up to this recommendation. Eventually, I expect the basic ideas, which are simple, to become so widespread and obvious that it will be hard to remember that it required an insight.

In part, what makes the main argument so compelling is that (as shown in the next section), it is closely related to an elegant explanation for something we all knew to be true — you should increase the bond-stock ratio of your portfolio as you get older — yet previously had bad justifications for. It also gives new actionable, non-obvious, and potentially very important advice (buy equities on margin when young) that is appropriately tempered by real-world frictions. And, most importantly, it means I personally feel less bad about already being nearly 100% in stocks when I picked up the book.

My main concerns, which are shared by other reviewers and which are only partially addressed by the authors, are:

  • Future income streams might be more like stocks than bonds for the large majority of people.
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COVID Watch and privacy

[Tina White is a friend of mine and co-founder of COVID Watch, a promising app for improving contact tracing for the coronavirus while preserving privacy. I commissioned Tom Higgins to write this post in order to bring attention to this important project and put it in context of related efforts. -Jess Riedel]

Countries around the world have been developing mobile phone apps to alert people to potential exposure to COVID-19. There are two main mechanism used:

  1. Monitoring a user’s location, comparing it to an external (typically, government) source of information about infections, and notifying the user if they are entering, or previously entered, a high-risk area.
  2. Detecting when two users come in close proximity to each other and then, if one user later reports to have been infected, notifying the second user and/or the government.

The first mechanism generally uses the phone’s location data, which is largely inferred from GPS.In urban areas, GPS is rather inaccurate, and is importantly augmented with location information inferred from WiFi signal strength maps.a   The second method can also be accomplished with GPS, by simply measuring the distance between users, but it can instead be accomplished with phone-to-phone bluetooth connectionsA precursor to smartphone-based contact tracing can be found in the FluPhone app, which was developed in the University of Cambridge Computer Laboratory in 2011. (BBC Coverage.) Contact tracing was provided over bluetooth and cases of the flu were voluntarily reported by users so that those with whom they had come into contact would be alerted. Despite media coverage, less than one percent of Cambridge residents downloaded the app, whether due to a lack of concern over the flu or concerns over privacy.[continue reading]

Hennessey on Career Regret

I’ve been mulling for a long time whether to stay in physics, and a colleague pointed me toward this Master’s thesis on career regret by Hennessey.

The study examines the experiences of individuals who, if given their time back, would have chosen a different career path. Despite the fact that career has been consistently documented as a major life regret for many it is rarely mentioned, or only referred to tangentially, in career development literature. Five individual interviews, four female, one male, with people retired or transitioning to retirement are presented to explore the experience of regret as it persists throughout the adult lives of participants. Although the narratives shared by participants are unique and deeply personal, common themes emerged through qualitative analysis. Four themes relate to perceptions of the past: Early Influences, Why I Regret My Choice, The Passage of Time, and Balancing Work and Family. One theme relates to the present: If I Could Do It Over Again, and one to the future: What the Future will Be. Findings from the current study add to the limited research on the topic of career regret and implications for theory and practice are examined.

In this blog post I’ll mostly just pull out notable excerpts. I encourage you to read the thesis if this catches your interest. (See also Hanson on deathbed regrets.)

From the introduction:

If you work full time for thirty years the number of hours spent on the job would be approximately 60,000…

What if you never figured out what you want to do with your life? What if you spent your whole life searching and never found the work you wanted?

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Meh deep fakes

A lot of people sound worried that new and improving techniques for creating very convincing videos of anyone saying and doing anything will lead to widespread misinformation and even a break down of trust in society.



I’m not very worried. Two hundred years ago, essentially all communication, other than in-person conversation, was done through written word, which is easy to fake and impersonate. In particular, legal contracts were (and are) typeset, and so are trivially fakeable. But although there were (and are) cases of fraud and deception through foraged documents, society has straightforward mechanisms for correctly attributing such communication to individuals. Note, for instance, that multi-billion-dollar contracts between companies are written in text, and we have never felt it necessary to record difficult-to-fake videos of the CEOs reciting them.

The 20th century was roughly a technological Goldilocks period where technology existed to capture images and video but not to fake them. Images, of course, have been fakeable at modest cost for many years. Even in 1992, Michael Crichton’s Rising Sun used high-tech fraudulent security footage as a realistic plot point in then-current day. Although we may see some transition costs as folks are tricked into believing fraudulent videos because the ease of faking them has not yet entered the conventional wisdom, eventually people will learn that video can’t be trusted much more than the written word.Which is to say, most of the time you can trust both text and video because most people aren’t trying to defraud you, but extra confirmatory steps are taken for important cases.a   This will not be catastrophic because our trust networks are not critically dependent on faithful videos and images.… [continue reading]

Reply to Hanson

I was privileged to receive a reply from Robin Hanson on my critique of his largely excellent book The Elephant in the Brain with co-author Kevin Simler. I think in several cases he rebutted something other than what I argued, but I encourage you to read it and judge for yourself.

Given the high-profile book reviews that are probably forthcoming from places like the Wall Street Journal, I thank Robin for taking the time to engage with the little guys!

Replies

I’ll follow Robin’s lead and switch to first names.

Some say we should have been more academic and detailed, while other say we should have been more accessible and less detailed….Count Jess as someone who wanted a longer book.

It’s true that I’d have preferred a longer book with more details, but I think I gestured at ways Kevin and Robin could hold length constant while increasing convincingness. And there are ways of keeping the book accessible while augmenting the rigor (e.g., endnotes), although of course they are more work.

Yes for each motive one can distinguish both a degree of consciousness and also a degree of current vs past adaptation. But these topics were not essential for our main thesis, making credible claims on them takes a lot more evidence and argument, and we already had trouble with trying to cover too much material for one book.

I was mostly happy with how the authors handled the degree of consciousness. However, I think the current- vs past-adaptation distinction is very important for designing institutions, which Kevin and Robin correctly list as one of the main applications of the book’s material. For instance, should the arXiv host comments on papers, and how should they be implemented to avoid pissing contests?… [continue reading]

Comments on Simler and Hanson

Drawing on a large academic literature in topics like sociology, behavioral economics, anthropology, and psychology, and especially the (generalized) theory of signalling, Robin Hanson has assembled a large toolbox for systemically understanding hypocrisy, i.e., the ways in which people’s actions systematically and selfishly deviate from their verbalized explanations. Although he would be the first to admit that many of these ideas have been discovered and rediscovered repeatedly over centuries (or millennia) with varying degrees of clarity, and although there is much I am not convinced by, I find the general framework deeply insightful, and his presentation to be more clear, analytical, and descriptive (rather than disruptively normative) than other accounts. Most of this I have gathered from his renowned blogging at Overcoming Bias, but I have always wished for a more concise (and high status!) form factor that I could point others to. At long last, Hanson and his co-author Kevin Simler have written a nice book that largely satisfies me: The Elephant in the Brain (Amazon). I highly recommend it.

The reason I title these sorts of blog posts “Comments on…” is so I can present some disorganized responses to a work without feeling like I need to build a coherent thesis or pass overall judgment. I do not summarize the book below, so this post will mostly be useful for people who have read it. (You might think of this as a one-sided book club discussion rather than a book review.) But since I will naturally tend to focus on the places where I disagree with the authors, let me emphasize: the basic ideas of this book strike me as profound and probably mostly true.… [continue reading]

PDF Guru is like Chrome for PDF readers

This is a quick post to highlight an excellent new PDF reader on macOS called PDF Guru (iTunes store). It is a recently revamped version of PDF Reader X.

I’ve only used it for a week, but it’s the best PDF reader I’ve experienced for reading academic articles. It’s snappy and reminds me of Chrome when it first came out. Draggable tabs. Split view. Plays well with Zotero. Can easily add native PDF annotation and search through the existing ones. (And it saves annotations fast when you close the file.Competitors either do this slowly or, like Skim, use a non-native annotation format that can’t be read by other PDF readers.a  ) The UI for “find” displays a lot of info intuitively.Edit 2018-1-12: And you can search for any unicode character! Really useful for searching a document for math.b   Everything is just nicely designed. I haven’t yet run into a limitation on the free version, but it’s worth upgrading to Pro to support the developer (only $20).



Beware that this is the first version following a big re-write of PDF Reader X, and it’s not completely stable. I’ve gotten it to crash a few times, but the developer has been very responsive to feedback and I’d wager on the stability improving soon. (Edit 2018-1-7: After upgrading to the new version, 3.0.20A, a couple weeks ago, I haven’t experienced any crashes. Looks stable.)

I’m advertising Guru because I think the current selection of PDF readers for academic reading is pretty bad.I have no connection to the developer.c   I strongly prefer Guru (instability and all) over these other PDF readers on maxOS that I have tried: FoxIt, Preview, Adobe Acrobat Reader, and Skim.… [continue reading]

PI accepting 2017 master’s student applications

The Perimeter Scholars International (PSI) program is now accepting applications for this Master’s program, to start next fall. The due date is Feb 1st. Me previously:

If you’re in your last year as an undergrad, I strongly advise you (seriously) to consider applying. Your choice of grad school is 80% of the selection power determining your thesis topic, and that topic places very strong constraints on your entire academic career. The more your choice is informed by actual physics knowledge (rather than the apparent impressiveness of professors and institutions), the better. An additional year at a new institution taking classes with new teachers can really help.


Here’s the poster and a brand new propaganda video:
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