Moontower #39


Check this out.

What’s your gut reaction?

If Moontower Musings are doing their job then many of you will have smelled a trap and wondered “well how many cardiologists are there?”

The excerpt was taken from a Slatestar’s post Cardiologists and Chinese Robbers (Link). He discusses parallels in “Chinese robbers”, police brutality, and basically any anomaly that can be summed without context to indicate a trend.

Littlewood’s Law

“In the course of any normal person’s life, miracles happen at a rate of roughly one per month”

Applying Littlewood to the news, Gwern writes:

There will be enough ‘miracles’ that all media coverage of events can potentially be composed of nothing but extreme chance chances, even though it would seem like an ‘extraordinary’ claim to say that all media-reported events may be flukes. Given this, it is important to maintain extreme skepticism of any individual anecdotes or stories which are selectively reported but still claimed (often implicitly) to be representative of a general trend or fact about the world.

Inoculate Yourself

He maintains that your best defense remains standard techniques like critical thinking, emphasizing trends & averages, and demanding original sources can help fight the biasing effect of news.

Here’s an easy trick you can use every day. When you encounter cases where anecdotes are used to paint a picture, instead of jumping to horror, retrain your mind to ask “what is the denominator?”

Unfortunately, connectivity combined with the existence of billions of humans will lead to news which distorts reality. I don’t see any supply-side solution to this. Extremes sell. The human love of narrative is a biological backdoor that media holds a key to. It takes mental effort to be constantly critical. To constantly question how stories are framed. For a mild taxonomy of narrative fallacies and how to spot them Art of Manliness gets you started. (Link)

Gwern has some satirical recommendations for the journos. His intentionally naive belief that news is about signal and not clicks is cute. Some of my favorites:

  • Perhaps in one format, discussion could be weighted similar to a meta-analytic weighting of effect sizes: you are allowed to discuss both anecdotes and studies, but the number of words about an anecdote or study must be weighted by sample size. So if you write 1 page about someone who claims X cured their dandruff, you must then write 100 pages about the study of n=100 showing that X doesn’t cure dandruff. That’s only fair, since that study is made of 100 anecdotes, so to speak, and they are as deserving of 1 page as the first anecdote.
  • A “proportional newspaper” might allocate space by geographic region populations, so there’s a giant void with a tiny little 2-line wire item for Africa, while the (much smaller) USA section requires a microscope.
  • Weight by age: If someone is rereading a 50-year-old essay, that should be given more proportionally more emphasis on a social media stream than a 5-minute old Tumblr post.

The Cost of Taking The Bait

The news’ incentives plus our susceptibility to stories strand us in a suboptimal equilibrium. The distortions are insidious and distributed.

How do they darken our world?

1) Healthy skepticism is your best-case scenario

Back to Slatestar’s cardiologist’s example:

If you read Part I of this post and found yourself nodding along, thinking “Wow, cardiologists are real creeps, there must be serious structural problems in the cardiology profession, something must be done about them,” consider it evidence that a sufficiently motivated individual – especially a journalist! – can make you feel that way about any group.

So what are your options?

  • Put no effort into learning how to reason and be an easy mark for charlatans, pseudoscience, ads, politicians.
  • Go to a Penn & Teller show to start a life-long journey into skepticism

Nobody actively chooses to be a sucker, so this is a classic Hobson’s choice. You might not check out P&T but you do try to be critical. So you must find a way to be skeptical without becoming cynical. If my own experience is any indication I’d expect many of you to agree that this is a difficult line to walk.

2) We glorify extremes 

Dr. Oz and the media will highlight whenever a patient appears to benefit from one of his quack remedies. But no story will be written about the patients who did not get better using his tips. Sure that’s frustrating, but by now you are immune to that trick even if the masses are not (given how rich Dr. Oz is I’m pretty sure I’m not underestimating the public here).

But here’s a more speculative cost of glorifying extremes. School shootings. The gun control issue is important, but I’m a seller of it being the entire issue. The social mirroring aspect feels like it is not given enough weight. The question of whether they are contagious, and if so, why and to what extent feels underexplored. Malcolm Gladwell is only a scientist by airport bookstore standards so we know to take him with a heap of salt, but his riot threshold model is worth a peek.

My own feeling about the rise in shootings is strongly tied to a vague sense of how social media and traditional media feedback on each other which is highly coincident with how modern the epidemic really is. Gladwell’s theory happened to tie it together in a way that made me feel that I wasn’t alone in thinking social dynamics are the biggest driver.

  • I first caught wind of his take from a 10-minute talk at the New Yorker Festival. (Link)
  • If you prefer a 3rd party take on his theory, Derek Thompson gives it his characteristically balanced treatment. (Link)

If you are new to Moontower, you can find my own views about consuming the news here.

The Money Angle

Favorite Finance Blogs I Discovered in 2019

Movement Capital by Adam Collins (Link) (Twitter)
A Berg’s Eye View by Erik Berg (Link) (Twitter)
Demonetized by Nick (Link) (Twitter)
Breaking The Market by an anonymous engineer (Link) (Twitter)
LT3000 by Lyall Taylor (Link) (Twitter)
Fat-Tailed and Happy by an anonymous econ PhD (Link) (Twitter)
The Macro Tourist by Kevin Muir (Link) (Twitter)
Elm Funds by Victor Haghani (Link) (Twitter)
Musings on Markets by Professor Aswath Damodaran (Link) (Twitter)
Fundoo Professor by Professor Sanjay Bakshi (Link) (Twitter)

Do you even need to invoke factors to explain small stock outperformance?

I summarized a paper (h/t @breakingthemark) that says stochastic math can explain the outperformance. I added some color based on index correlation/volatility relationship.

My whole summary, as well as the original paper, can be found here.

An extract from my post…

Climb Higher

More letters

Some readers shared their favorite newsletters in response to last week.

  • For decentralized finance check out The Defiant by Camilla Russo. (Subscribe) (Twitter)
  • A short weekly with great links is How It Actually Works by Trevor Mckendrick. (Subscribe) (Twitter)


Money Stuff by Matt Levine. (Subscribe) (Twitter)

I think because it’s a daily column I forgot to include it last week (h/t to Arianna for pointing out my oversight). If your goal was to improve your thinking and get an education in high finance at the same time, I’m convinced this is the best thing you can read every day. I’d love to be proven wrong.
The Top 11

Spinal Tap style here’s the Moontower posts you seemed to like the most based on my proprietary state-of-the-art analytics which I will only tell you about if you get me drunk.


Is Loneliness A Downside of Connectedness?
Don’t Ignore the Tambourine

Finance and Economics

The Volatility Drain
The Income Inequality Myth
The Disagreeable Investor

The Scooped Midrange
The Homeownership Fetish
How Expensive Human Poop Saved Us All And How High Prices Are Self Correcting

Mind and Productivity

More Shower Thoughts Please
Memories As A Unit Of Time


Number Neighbors

References To Bookmark

Here are writeups you may find useful once they are practically relevant for you:

How To Approach Twitter (Link)
Tips to Optimize Your Reading (Link)
The Investment Experts Bookshelf (Link)
Car Lease Math is Not Obvious (Link)
Correlation Is The Key to Investment Portfolios (Link)

Last Call

  • Since I expressed my love of Portal: Bridge Constructor, Ari recommended the puzzle games by Zachtronics. (Link)
  • If you have a personal service business, Chris Sparks just published an awesome guide to selling and retaining clients. (Link with my highlights)
  • Dave Perell is an SF native but lives in NYC now. He recently visited SF and wrote an insightful post about what he saw. (Link)
  • One of the most fun papers that circulated Twitter this year was Dan McMurtrie’s analysis of the dating market. It’s a must-read. (Link)
    • My favorite excerpts:
      • “Practically speaking, if PERSON A is on dating apps and PERSON B is not, PERSON B is effectively definitionally desperate in comparison to PERSON A, which is generally not an attractive look. PERSON A is dating with the understanding that they can literally instantly have another date.”
      • “With the advent of online dating, women in prime reproductive age are in the dominant position in the dating market for the first time in human history.”
      • “The shifts in market opportunities and costs have the effect of lowering the market value of the median male”
      • Page 6 shows how women’s increased market power is allowing women to “settle less” which means less sex for men.
      • The Instagram Effect: Perfume becoming less relevant while cosmetic sales rip higher
      • “Divorce rates are dropping as a result of market participants making far more informed and well-vetted decisions versus historical norms.”
      • Note in the chart the up spike in “met in bar or restaurant.” In data science, the technical term for these reporting individuals is “liars”.

Then the finance journalist GOAT Matt Levine excerpts from it…

The age dynamic creates significant inter-age cohort competition in the female population and increased overall competition in the male population. This can be conceptualized as the market becoming more efficient, which naturally leads to many market participants anecdotally expressing unhappiness with the status quo as they incorrectly identify an inability to produce low effort excess returns as the circumstances being “unfair.” Basically, the same thing is happening in the dating market as is happening in the Hedge Fund market: things are getting more efficient, very few are pleased about it, and there are lots of strange advice books, blogs, and videos coming out.

…so he can comment himself:

I write about that dynamic in hedge funds from time to time. Sometimes it seems to me that a good unified theory of modern society’s anxieties might be “everything is too efficient and it’s exhausting.”

From my actual life 

If you know an Ob-Gyn who wants to be part of a cool trial, check out this Whatsapp message my friend Moshe sent to our group chat. He created the Sense Relief app for his wife when she was pregnant. If you know someone expecting you can get the app here.

Moshe: Hi guys. Update on my app SenseRelief and need your help. SenseRelief is now the number one app for nausea and vomiting and still number one for morning sickness in the App Store. We also now have access to free Apple watches from Apple to support our study. But I need a principle investigator to run the study. Do any of you know any OBGYNs that would be interested in participating in using SenseRelief to help relieve morning sickness? They would be the first people to study using the Apple Watch as a therapy.

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