Monthly Archives: March 2013

Sleep Signaling

We sleep less well when we sleep together:

Our collective weariness is the subject of several new books, some by professionals who study sleep, others by amateurs who are short of it. David K. Randall’s “Dreamland: Adventures in the Strange Science of Sleep” belongs to the latter category. It’s a good book to pick up during a bout of insomnia. …

Research studies consistently find … that adults “sleep better when given their own bed.” One such study monitored couples over a span of several nights. Half of these nights they spent in one bed and the other half in separate rooms. When the subjects woke, they tended to say that they’d slept better when they’d been together. In fact, on average they’d spent thirty minutes more a night in the deeper stages of sleep when they were apart. (more)

In 2001, the National Sleep Foundation reported that 12% of American couples slept apart with that number rising to 23% in 2005. … Couples experience up to 50% more sleep disturbances when sleeping with their spouse. (more)

Why do we choose to sleep together, and claim that we sleep better that way, when in fact we sleep worse? This seems an obvious example of signaling aided by self-deception. It looks bad to your spouse to want to sleep apart. In the recent movie Hope Springs, sleeping apart is seen as a big sign of an unhealthy relation; most of us have internalized this association. So to be able to send the right sincere signal, we deceive ourselves into thinking we sleep better.

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Should I stop using my phone as a pedestrian?

I often listen to music or use my phone while walking through town. I have heard that this is dangerous and could cause me to get killed, so I’ll attempt a back of the envelope calculation to work out if I should stop.

Firstly, the base rate of risk for being run over as a pedestrian in the UK is 0.0006% per person each year. Let’s say as a young man I face double that risk, or 0.0012%. I don’t know how much using my phone some of the time while walking raises the risk, though this data suggests a pedestrian failing to look properly was the cause of 190 road fatalities in the UK, out of a total of 385 pedestrian deaths. For the sake of argument, let’s say the risk triples. Let me know if you have a better estimate. That would result in an extra risk of death of 0.0024% each year. Dying now would cost me some 60 years of healthy life, so I should expect to lose 0.00144 years for each year I engage in this behaviour – which is around 12 hours.

As compensation, I get to listen to music, audiobooks and check my email for on average 10 minutes a day, which comes to 60 hours or so a year. I would say that time is about 50% better spend than it would be otherwise thanks to my ability to use my phone, so I expect to gain the equivalent of 30 hours a year.

If these numbers are about right, I should be fairly comfortable listening to music or looking at my phone as a pedestrian. However, the harm is pretty close to the benefit, and someone could reasonably think the cost actually outweighs the benefit.

Nonetheless I could do better by not using my phone in cases where the cost exceeds the benefit, for example by keeping the volume low, not having conversations which are particularly distracting, and being strict about not starting to look at my phone if I expect to cross the street soon after.

If you like this approach – and maybe even if you don’t – you’ll also like How to Gain or Lose 30 Minutes of Life Every Day, which estimates how much life you should expect to gain or lose each time you exercise, eat fruit, vegetables or meat, drink alcohol, smoke a cigarette, remain overweight, or sit at a computer for hours at a time. Gains and losses are measured using the ‘micromort‘, which corresponds to half an hour of life. While the numbers are no doubt a dramatic simplification of the medical evidence, I find a concrete estimate of the benefits gives me stronger motivation to eat more vegetables, drink less, and perhaps exercise more as well. And it helps me prioritise which health enhancing activities are worth the trouble, and which are not.

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In the long run, we’re all still exposed to risk

Many of you will be familiar with the fact that past returns from notable stock indices, such as those in the US, are a biased indicator of the likely future returns to investing in equities. The problem is that due to war, government interference, and financial collapse, some stock markets disappeared altogether, wiping out investors. In some countries this has even happened multiple times. Historical stock indices that went to zero tend not to be remembered, and so are under-sampled. The result is ‘survivorship bias‘, a problem that shows up in many other research questions as well. When these defunct investments are put back in the sample, average returns are quite a bit lower than when you look at just, for example, the NY stock exchange.

A lesser known result is that a broader and representative sample of stock histories shows that investing over long time horizons doesn’t reduce the variability of your return. Contrary to convention wisdom, even young savers need to diversity across different assets types and countries in order to get that effect and be confident of retiring in comfort:

“One of the most enduring question in finance is the persistence of investment risk across time horizon. This issue of time diversification is crucial to long-term asset allocation decisions.

There is a widespread view that the longer the horizon, the more investors benefit from investing in equities. Young investors, for instance, are typically advised to allocate more to equities than those whose retirement is imminent, on the grounds that equities are less risky over long horizons. A common rule of thumb is that the percentage of stock allocation should equal 100 minus an investor’s age.

Some researchers claim to have found empirical evidence that equities are less risky over long horizons because of mean reversion. Mean reversion implies that the variance of stock retums does not grow linearly with time, contrary to a random walk. As a result, several authors have claimed that greater equity allocations are justified on the grormds that shortfall risk lessens as the horizon is extended.

This conclusion seems hardly justified. Previous findings of mean reversion have considered seventy years or so of U.S. data. For long-horizon retums, say ten years, this implies only seven truly independent observations, which seems insufficient to support robust conclusions about the risk of ten-year equity investments. The problem is that, with a fixed sample size, the number of efiective observations diminishes as the investment horizon lengthens. Another problem is that markets with long histories may not represent investment risk for reasons of survivorship bias.

One solution is to expand the sample by adding cross-sectional data. We describe the distribution of long-term returns for a sample of thirty countries for which we have long series of equity prices. The empirical evidence expands on the work of Jorion and Goetzmann (1999) and substantially extends results described by Dimson, Marsh, and Staunton (2002), who analyze a century of stock market returns in fifieen countries.

The results are not reassuring. We find no evidence of long-term mean reversion in the expanded data sample. Downside risk declines very little as the horizon lengthens. In addition, U.S. equities appear systematically less risky than equities of other markets.

Mean reversion is analyzed first in terms of variance ratio tests. There is no evidence of mean reversion from variance ratio tests across this sample, taking into account statistical properties of these tests. Furthermore, markets that sufiered interruption displayed mean aversion, or the opposite of mean reversion. Therefore, statistical properties such as high average retums and mean reversion may be an artifact of survival. Probabilities of losses on equities are reduced very slowly, if at all, with the horizon. In fact, shortfall measures such as value at risk (VAR) sharply increase with the horizon.

There is, however, some positive news. Diversification across assets pays. Over this century, a global stock market index would have displayed less downside risk than any single market. The conclusion is that across-country diversification is more effective than time diversification.” (HT Ben Hoskin)

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On Disowning Descendants

Parents sometimes disown their children, on the grounds that those children have betrayed key parental values. And if parents have the sort of values that kids could deeply betray, then it does make sense for parents to watch out for such betrayal, ready to go to extremes like disowning in response.

But surely parents who feel inclined to disown their kids should be encouraged to study their kids carefully before making such a choice. For example, parents considering whether to disown their child for refusing to fight a war for their nation, or for working for a cigarette manufacturer, should wonder to what extend national patriotism or anti-smoking really are core values, as opposed to being mere revisable opinions they collected at one point in support of other more-core values. Such parents would be wise to study the lives and opinions of their children in some detail before choosing to disown them.

I’d like people to think similarly about my attempts to analyze likely futures. The lives of our descendants in the next great era after this our industry era may be as different from ours’ as ours’ are from farmers’, or farmers’ are from foragers’. When they have lived as neighbors, foragers have often strongly criticized farmer culture, as farmers have often strongly criticized industry culture. Surely many have been tempted to disown any descendants who adopted such despised new ways. And while such disowning might hold them true to core values, if asked we would advise them to consider the lives and views of such descendants carefully, in some detail, before choosing to disown.

Similarly, many who live industry era lives and share industry era values, may be disturbed to see forecasts of descendants with life styles that appear to reject many values they hold dear. Such people may be tempted to reject such outcomes, and to fight to prevent them, perhaps preferring a continuation of our industry era to the arrival of such a very different era, even if that era would contain far more creatures who consider their lives worth living, and be far better able to prevent the extinction of Earth civilization. And such people may be correct that such a rejection and battle holds them true to their core values.

But I advise such people to first try hard to see this new era in some detail from the point of view of its typical residents. See what they enjoy and what fills them with pride, and listen to their criticisms of your era and values. I hope that my future analysis can assist such soul-searching examination. If after studying such detail, you still feel compelled to disown your likely descendants, I cannot confidently say you are wrong. My job, first and foremost, is to help you see them clearly.

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R&D Is Local, Global, But Not National

A recent Post article by Brad Plumer illustrates what is wrong with the usual research funding arguments:

One of the few things Republicans and Democrats have been able to agree on in recent years is that the government should be spending more on basic scientific research … Thanks to budget pressures and the looming sequester cuts, federal R&D spending is set to stagnate in the coming decade. …

As a result, scientists and other technology analysts are warning that the United States could soon lose its edge in scientific research — and that the private sector won’t necessarily be able to pick up the slack. “If you look at total R&D growth, including the corporate and government side, the U.S. is now at the low end … We’re seeing other countries, from Germany to Korea to China, make much bigger bets.” …

There’s a long, long list of world-changing innovations that can be traced back to federally funded R&D over the years. .. The key question here is how much of this innovation might have happened without government involvement. … Many economists agree that private companies tend to under-invest in very basic scientific research, since it’s hard for one firm to reap the full benefits from those discoveries. …

When the Congressional Budget Office reviewed the evidence in 2007, it concluded that government-funded basic research generated “substantially positive returns.” And it found that, on the whole, government R&D helped spur additional private-sector R&D rather than displace it. … The United States will soon spend less on all types of R&D as a percentage of its economy in the coming decade than countries like Australia and South Korea …

The sanguine view is that other countries are tossing more money at scientific research that will have positive spillover benefits for the entire world — including us. If China invents a cure for cancer, we all benefit. Others worry, however, that the U.S. economy could suffer from the fact that a greater share of research is happening elsewhere. (more)

Note the conflicting arguments: each small part of the world invests too little in R&D, because other parts gain without paying, but the US should fear falling behind nations that invest more. These two only makes sense together if the nation is the natural scale for innovation – innovations mostly leak away from their source within a nation, but mostly stay within each nation. The academic literature, however, suggests the natural scales are global and local – while there are gains to the world as a whole, gains are focused on related industries in the local area:

A recent body of empirical evidence clearly suggests that R&D and other sources of knowledge not only generate externalities, but such knowledge spillovers tend to be geographically bounded within the region where the new economic knowledge was created (Griliches 1992). That is, new economic knowledge may spill over, but the geographic extent of such knowledge spillovers is limited. … greater geographic concentration of production actually leads to more, and not less, dispersion of innovative activity. (more; see also and also)

While it would be great if the world could coordinate to promote R&D spending worldwide, there is little economic justification for forcing Wyoming and Louisiana, who spend 0.4% and 0.56% of GDP respectively on R&D, to pay for R&D spending in Massachusetts and New Mexico, where those figures are 5.49% and 7.65% (source), any more than the rest of the world pays for such spending. If the US government funds less R&D, it will be mainly states like Massachusetts and New Mexico that suffer, not states like Wyoming and Louisiana, relative to the rest of the world.

If R&D spending mostly helps the particular regions in which it happens, why do we pay for it at the national level? Probably because many see it as a national prestige good – people in Wyoming look good to foreigners by being in a nation where lots of impressive research happens in Massachusetts. Are they right, or is Massachusetts just getting a nice juicy transfer?

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Personal experimentation: summary

I asked how it could be that experimenting in my own life could be worthwhile, given that if such things were worthwhile other people should have already figured them all out. My suggested explanations:

  1. I am strange: nerdy, recent, young
  2. Innovation: there are constantly new things to experiment with
  3. Findings are not spread: or so much noise is also spread that the information is lost
  4. Context-specificity: your findings don’t apply to me, because people are unique or situations are complicated
  5. I am wrong: it’s easy to underestimate nebulous costs, to overstate fleeting or illusory benefits, to want to be the kind of person who tries new things, or to be too hopeful that life can improve fast

It seems to me that 3 is the biggest: results are collected so badly as to be often worthless and are aggregated poorly. It’s not clear to what extent this is because of 4: other people’s findings are just not so useful. Personal experimentation seems worth it even without good aggregation, but probably only if you avoid the same errors of measurement yourself. It could be worth it even with purely placebo gains, if you enjoy the placebo gains enough. But in this scenario, the gains are much smaller than you imagine, so you are probably over-investing a lot. There also seems to me a real risk that everything is so context specific that what you learn will be worthless as soon as you change many other things (4).

Explanations that involve others finding experimentation a lot less worthwhile (e.g. 1) seem unlikely to help much because it looks like others often find experimentation worthwhile. The problem seems to be somewhere between others making such efforts, and me having useful information as a result. Innovation (2) seems a bad explanation because it doesn’t explain the lack of information about age-old lifestyle questions. It seems likely that I have overestimated gains relative to losses in the past (5), but gains still seem larger than losses (it’s hard to disentangle causes, but my lifestyle has obviously improved substantially over the last  year or more, some of which seems directly attributable to purposeful experimentation and the rest of which seems at least not terribly damaged by it).

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Why it should be easy to dominate GiveWell’s recommendations

GiveWell’s charity recommendations – currently Against Malaria Foundation, GiveDirectly and the Schistosomiasis Control Initiative – are generally regarded as the most reliable in their field. I imagine many readers here donate to these charities. This makes it all the more surprising that it should be pretty easy to start a charity more effective than any of them.

All you would need to do is found an organisation that fundraises for whoever GiveWell recommends, and raises more than a dollar with each dollar it receives. Is this hard? Probably not. As a general rule, a dollar spent on fundraising seems to raise at least several dollars. It’s a pretty simple and fast multiplier that obviously beats putting your money in the stock market. An independent organisation raising money for GiveWell’s top charities should do even better than a typical fundraiser, thanks to:

  • the strength of evidence, which is especially compelling to big donors
  • the independent recommendation, which looks particularly credible and removes the perception of any ulterior motive
  • a willingness to maximise (for example by targeting the wealthy, and focussing on regular or legacy donors)
  • an intrinsic motivation to do good
  • the freedom to choose which of the three organisations they promote, depending on who they are talking to.

Putting your money into fundraising, rather than just giving it directly, does impose additional costs on the donors you inspire, and may ‘crowd out’ gifts to other charities. However, the logic of giving to GiveWell’s top rated charities is that they make (much) better use of money than most other individuals or organisations. So if you have a fundraising ratio significantly above 1:1, these downsides shouldn’t much matter.

You might ask: if fundraising is the best thing to do, why wouldn’t AMF, SCI or GiveDirectly just spend the money you give them on fundraising? My guess is that it’s simply a bad look. If they spend too much on fundraising, it will irrationally scare off their existing and potential donors. Even if a charity should ideally spend most of its receipts on further fundraising in order to grow more quickly, the option simply isn’t available. The social norm against ‘optimising fundraising‘ is generally helpful, because intense competition between charities for donations would cause ‘rent dissipation’, and less total money would flow to charity recipients. But if your charity actually is much better than other charities, and so it’s good when you ‘take’ their money, this social norm does harm by preventing you from doing so.

So, if you are unlike most donors and are willing to have your money spent on effective fundraising, you can easily increase your impact several times over. Just help GiveWell’s top charities take their fundraising efforts ‘off the books’ by founding or giving to a separate organisation that does it for them.

This isn’t actually an impractical plan. Starting up a lean and effective fundraising organisation is difficult, but much easier than building a global team to distribute insecticide-treated bed nets. Any bright and energetic person in a rich country who went and received the necessary training would have a decent shot at getting such an organisation off the ground. If you would like to discuss the first steps required to make this happen, drop me an email (robertwiblin [at] gmail [dot] com) and I can put you in touch with a team already working on this approach, who could direct you towards legal and financial support.

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