Perth Leadership Institute - Economics and finance https://perthleadership.org/easyblog/categories/economics-and-finance Tue, 23 Oct 2018 21:52:03 +0000 Joomla! - Open Source Content Management en-gb Why don't risk managers worldwide use behavior as a component of financial and investment risk? https://perthleadership.org/easyblog/entry/why-don-t-risk-managers-worldwide-not-use-behavior-as-a-component-of-financial-and-investment-risk https://perthleadership.org/easyblog/entry/why-don-t-risk-managers-worldwide-not-use-behavior-as-a-component-of-financial-and-investment-risk
Perth Leadership Institute and its Founder, Dr. E. Ted Prince do a new take on an old issue. See the article by Katherine Heires in GARP Risk Intelligence, the News service of the Global Association of Risk Professionals.  ]]>
etedprince@perthleadership.org (etedprince) Economics and finance Thu, 16 Aug 2018 13:00:03 +0000
Is free trade obsolete? https://perthleadership.org/easyblog/entry/is-free-trade-obsolete https://perthleadership.org/easyblog/entry/is-free-trade-obsolete
So we’ve had a little excitement about the US imposing tariffs on steel and aluminum and now we’re into a global frisson about the possibility of a global trade war. As we know, they lead to depressions, or so it is said. But here’s the question I want to ask: if a world has declining population growth rates, does free trade still promise the same ...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 31 Mar 2018 12:58:48 +0000
Exercisers are the new 1% https://perthleadership.org/easyblog/entry/exercisers-are-the-new-1 https://perthleadership.org/easyblog/entry/exercisers-are-the-new-1
  So many articles about how good exercise is for you that it’s become positively nauseating. Even a confirmed curmudgeon like me can’t find anything wrong with it.   Yet the CDC says that only 20% of adults actually meet their do-good exercise guidelines (both aerobic and muscle-strengthening activity). That means that 80% of Americans don’t do en...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 03 Mar 2018 13:52:03 +0000
Is blockchain a bubble – and compromised too? https://perthleadership.org/easyblog/entry/is-blockchain-a-bubble-and-compromised-too https://perthleadership.org/easyblog/entry/is-blockchain-a-bubble-and-compromised-too
  Recently I have attended three conferences on widely divergent topics. Every one of them featured blockchain and what everyone was going to do about it and with it. It seems that the contemporary standard for demonstrating your innovativeness is showing you are into blockchain.   Blockchain is, according to the banks, going to transform the finan...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 24 Feb 2018 13:38:20 +0000
Will quantum bitcoins be free? https://perthleadership.org/easyblog/entry/will-quantum-bitcoins-be-free https://perthleadership.org/easyblog/entry/will-quantum-bitcoins-be-free
Now bitcoin and other digital currencies have been cratering. Does that spell their end? Nope, not at all, maybe quite to the contrary. There’s a new game in town for crypto-currencies. It’s called quantum computing. We’re now well into a new arms race for the most powerful quantum computer. IBM has just upped the ante with a 50 qubit quantum compu...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Thu, 08 Feb 2018 09:51:26 +0000
Shouldn’t behavioral finance be a part of fintech? https://perthleadership.org/easyblog/entry/shouldn-t-behavioral-finance-be-a-part-of-fintech https://perthleadership.org/easyblog/entry/shouldn-t-behavioral-finance-be-a-part-of-fintech

Fintech is hot; as I’m sure I don’t need to remind you. I just went online to find the top 10 opportunities. Here they are. I can’t argue with any of the topics on the list.

  1. Mobile Banking and Financial Inclusion for Underserved
  2. Smart Personal Finance Management
  3. Affordable and Easy Accounting for Small Businesses
  4. Innovative Payment and Money Transfer Processing
  5. Peer to Peer Lending and Microfinancing
  6. Accessible Investing and Online Trading
  7. Simplified Crowdfunding
  8. Big Data and Predictive Analytics for Fintech
  9. Digitized Insurance Experience
  10. Blockchain and Digital Currency

But here’s the thing. When you check them all out there’s no mention of behavioral finance. And here’s me thinking this is all about FIN- Tech. Get it? Am I missing something?

Could it be that the fintech crowd doesn’t think behavior matters? That it is not an important variable? Or that psychology is just too soft and squishy a subject to be worthy of serious scientific endeavor, or too new to be taken seriously….? Hmm, that’s worth exploring further.

I wonder what could be going on here? This brings back some sensitive memories, like when it was topical to talk about the hard and the soft sciences, with the soft sciences receiving a small but discernible curl of the lip. Like, they’re not worth exploring if you are into the real hard stuff.

Now of course there would be many who don’t consider economics to be a hard science, its (pseudo?) math focus notwithstanding. But you would think that finance would just about make the cut, Black-Scholes falling from grace notwithstanding. But in this telling, finance is the hard science and behavioral finance the soft-science underbelly.

Here’s what I think is going on. The economics guys have teamed up with the MBAs, both of whom are actually closet positivists who think that psychology, behavioral and neuroscience are too imprecise to be worthy of their attention. What is worthy are Big Data, math with rigor (which excludes pure math of course) and algorithmic ways of doing things, souped up with AI as necessary. But behavior just doesn’t make the cut.

So the cultural divide still persists, almost 60 years after CP Snow coined the term The Two Cultures. Before, the dichotomy du jour was hard vs soft science. Now it’s fintech vs behavioral strategy and neuroscience. Plus ca change etc. etc.

What all of this seems to mean is that the fintech types see behavior as a step too far and they really are not going to go there, no matter what. They were never taught about behavioral finance because the academics largely have ignored it, 3 Nobel Prizes notwithstanding. Until it’s shoved in their face by dark reality, it’s going to remain in the shadows, at least for them.

Why would the fintechnorati feel this way? Could it be because behavioral finance takes formal account of irrationality and they still remember all the lessons which drummed into them that homo economicus always makes rational decisions, reality to the contrary? Or could it be that it just makes the math too hard? Who knows? In 20 years people will be writing books on this, just like the books that hundreds of years later excoriated the inquisition for being so crassly stupid about heliocentrism.

Ironically the popular writers have picked up the cudgels on this one even though the academics and fintech types haven’t. Authors such as Malcom Gladwell and Nouriel Roubini are writing for the people who have to use this stuff and that’s why they’re so popular. But the professionals are missing this boat in a really big and splendiferous way.

My sense is that more aggressive and innovative types of going to run with this ball and outwit the fintech traditionalists. The Chinese maybe? Anthropologists, God forbid?

Science has a nasty way of going in the right direction anyway and making hitherto sceptics look like know-nothings. Watch for it to happen with fintech too.

 

 

 

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etedprince@perthleadership.org (etedprince) Economics and finance Sat, 23 Dec 2017 14:12:53 +0000
Is blockchain primarily a medical breakthrough? https://perthleadership.org/easyblog/entry/is-blockchain-primarily-a-medical-breakthrough https://perthleadership.org/easyblog/entry/is-blockchain-primarily-a-medical-breakthrough
    Now we know that blockchain is revolutionizing not just digital currencies but also accounting and increasingly other areas of finance. So blockchain is fundamentally a financial technology right? I’m not so sure.   Check out my Sanctus Sanctorum, Wikipedia, and it will tell you that blockchain is a distributed ledger . As such it can give you ...]]>
etedprince@perthleadership.org (etedprince) Uncategorized Sat, 16 Dec 2017 00:18:14 +0000
Can behavioral economics restore Alpha? https://perthleadership.org/easyblog/entry/can-behavioral-economics-restore-alpha https://perthleadership.org/easyblog/entry/can-behavioral-economics-restore-alpha
Did you notice that Richard Thaler just received the Nobel for behavioral economics? He’s the third; the first was Daniel Kahneman in 2002, the second Robert Shiller in 2013. Hmm, it took 15 years for the second and third prize to be awarded. Is that why economics globally is in such a mess? Why we still can’t predict recessions, the valuation of c...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 28 Oct 2017 13:24:46 +0000
Does streaming music reduce productivity? https://perthleadership.org/easyblog/entry/does-streaming-music-reduce-productivity https://perthleadership.org/easyblog/entry/does-streaming-music-reduce-productivity
Well, whadya know? US worker productivity growth rose sluggishly in the last quarter (at 0.9%). So what? This is kind of boring stuff after my usual posts on quantum brains, love force-fields and the like. What could possibly be of existential interest here? Productivity growth is usually said to be caused by eye-glazingly boring phenomena such as ...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 26 Aug 2017 13:16:04 +0000
Bitcoin meets behavioral finance – what happens next? https://perthleadership.org/easyblog/entry/bitcoin-meets-behavioral-finance-what-happens-next https://perthleadership.org/easyblog/entry/bitcoin-meets-behavioral-finance-what-happens-next

So now Bitcoin has split between two camps , the miners and the rest. That gives us a bit of insight into the psychodynamics of the Bitcoin community. Can we figure out more of them? How about a behavioral finance analysis? To wit, what are the cognitive biases of the Bitcoin crowd? That is, both the rational and the irrational ones, more of the la...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 12 Aug 2017 12:57:35 +0000
What’s wrong with quant approaches? https://perthleadership.org/easyblog/entry/what-s-wrong-with-quant-approaches https://perthleadership.org/easyblog/entry/what-s-wrong-with-quant-approaches
You know the old story: when a celebrity gets to be Time Person of the Year, it’s time to short them. Obama received the honor twice, in 2008 and 2012 and look where that got him! Trump was Time Person of the Year 2016 so look out! In the same vein I notice that the Wall Street Journal now has a new and separate section on quants. Does that mean th...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 03 Jun 2017 16:21:41 +0000
Are dynasties the future of democracy? https://perthleadership.org/easyblog/entry/are-dynasties-the-future-of-democracy https://perthleadership.org/easyblog/entry/are-dynasties-the-future-of-democracy
So I know I don’t have to remind you that we have a family running the US of A. Let’s say that it continues, with or without a gap between other family members also getting into the saddle. That’s what a dynasty is, in both cases. And this is hardly new. In modern times we’ve had the Kennedys, the Bushes and the Clintons. The Roosevelts before that...]]>
etedprince@perthleadership.org (etedprince) Leadership Sat, 06 May 2017 14:44:04 +0000
Quantum economics – can 2 (or more) minds be entangled? https://perthleadership.org/easyblog/entry/quantum-economics-can-2-or-more-minds-be-entangled https://perthleadership.org/easyblog/entry/quantum-economics-can-2-or-more-minds-be-entangled
I just read “ The Undoing Project” by Michael Lewis . You remember him? The author of Moneyball , the best-selling book about a new way to win at baseball. “The Undoing Project: is about the emergence of behavioral economics and behavioral finance. It focuses on the two key figures in the drama, Amos Tversky and Daniel Kahneman and the incredibly f...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 25 Feb 2017 14:15:35 +0000
Can refugees be the key to a new and vibrant immigration policy? https://perthleadership.org/easyblog/entry/can-refugees-be-the-key-to-a-new-and-vibrant-immigration-policy https://perthleadership.org/easyblog/entry/can-refugees-be-the-key-to-a-new-and-vibrant-immigration-policy
I think the debate about immigration is missing something really big. The biggest thing we should be worried about is the vitality and energy of our country. If we get that right everything else falls into place. I was just watching a documentary about Japan and the ongoing depopulation there. With more and more seniors as a proportion of the popul...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Fri, 10 Feb 2017 23:58:16 +0000
Are celebrities better venture investors than the professionals? https://perthleadership.org/easyblog/entry/are-celebrities-better-venture-investors-than-the-professionals https://perthleadership.org/easyblog/entry/are-celebrities-better-venture-investors-than-the-professionals
We Americans are obsessed by celebrities. Many of them have lots of moolah. So I’m sure you took notice of the recent announcements that Leonardo DiCaprio has joined a Boston VC firm . Maybe you also happened to notice another recent announcement that Kobe Bryant had launched a $100 MM VC fund, with one Jeff Stibel . This is just the tip of the ice...]]>
etedprince@perthleadership.org (etedprince) Entrepreneurship Tue, 27 Dec 2016 11:30:56 +0000
Can we unify traditional and behavioral economics? https://perthleadership.org/easyblog/entry/can-we-unify-traditional-and-behavioral-economics https://perthleadership.org/easyblog/entry/can-we-unify-traditional-and-behavioral-economics
So active investing is dead. Even the investment literati have finally figured that one out even though the writing has been on the wall for quite some time. I’ve been heralding the issue (“ An Inconvenient Truth - Alpha Financial Styles Beget Ginormous Returns ” and “ Less Algebra More Fudge Brownie - What Will Managed Investing 2.0 Look Like ?”)....]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 29 Oct 2016 12:31:35 +0000
ECB Should Push Issue of Refugee Bonds to Turbocharge EU Growth! https://perthleadership.org/easyblog/entry/ecb-should-issue-refugee-bonds-to-turbocharge-eu-growth https://perthleadership.org/easyblog/entry/ecb-should-issue-refugee-bonds-to-turbocharge-eu-growth
Useless factoid for the day: the European Central Bank (ECB) recently let it be known that it will likely start buying equities as part of its radical approach to quantitative easing . Apparently there aren’t enough bonds around for it to be able to buy. Mario Draghi, its head, really meant it when he said the ECB will take all steps to jumpstart e...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 17 Sep 2016 12:57:59 +0000
How do negative interest rates impact leadership and risk globally? https://perthleadership.org/easyblog/entry/how-do-negative-interest-rates-impact-leadership-and-risk-globally https://perthleadership.org/easyblog/entry/how-do-negative-interest-rates-impact-leadership-and-risk-globally
It just came out that the Bank of Ireland and RBS bank have introduced negative interest rates on large deposits. Germany and Japan both have banks with negative interest rates, as well as some of the Scandinavians. That’s got to qualify as a megatrend. It looks like negative interest rates are spreading fast. We are in uncharted territory. Likely ...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Sat, 20 Aug 2016 21:08:09 +0000
Should we deliberately slow down innovation? https://perthleadership.org/easyblog/entry/should-we-deliberately-slow-down-innovation https://perthleadership.org/easyblog/entry/should-we-deliberately-slow-down-innovation
Did you notice that Alvin Toffler, author of “Future Shock ” just passed away? His book was published in 1970. That was well before the Internet, Twitter, Facebook and even photocopiers and hand-held electronic calculators. Think what he would say today? Clearly the pace of change has accelerated dramatically since Toffler alerted us to the problem...]]>
etedprince@perthleadership.org (etedprince) Innovation and innovators Fri, 15 Jul 2016 22:53:08 +0000
BREXITed - UK Gain, EU Pain https://perthleadership.org/easyblog/entry/brexited-uk-gain-eu-pain https://perthleadership.org/easyblog/entry/brexited-uk-gain-eu-pain
So ok the UK is out. The pundits tell us that was a really bad move by the Brits. I beg to differ. Actually I think that BEXIT is going to lead to the British economy experiencing its biggest growth spurt in a century. It’s the EU we need to be worried about. How so? Leaving the EU is going to result in an epochal rollback of regulations in England...]]>
etedprince@perthleadership.org (etedprince) Economics and finance Tue, 28 Jun 2016 19:02:12 +0000