• Recommended Posts

  • Browse By Category

  • Browse By Timeline

Elementary Watson! Trump is Moral Arbitrage for Media.


Long time back my friend in finance explained me the concept of Arbitrage. Apparently there are computers dedicated to searching stock prices on many stock exchanges. And every now and then a computer finds that a particular stock XYZ is being sold on exchange 1 at 99$ and is being bought at exchange 2 at 100$. Then the computer buys in a chunk of that stock from exchange 1 and sells on exchange 2, making small but sure profit. The opportunity may not come that frequently and the sizes of profit can vary. But if such an opportunity is found, then it must be jumped on because profit is guaranteed.

Before I write anything further, I must declare that I do not like Trump as a person. I do not think he should have become president. I did not vote for Trump.

But his rise from a fringe candidate to main candidate to president continued to baffle me. Throughout the primaries and in election and even right now, I continued to get amazed about how much coverage he was getting and he is getting even right now. This is the post about my attempt to understand the obsession of the media, both professional media and social media, with Trump. My AHA moment was thinking about this as arbitrage.

I think Trump as no friends. He only has enemies of enemies. And the continued media coverage helped him make more enemies and thus in a very convoluted way, get more people on his side by ‘enemies of enemies’ rule.

Just the way financial institutions love ‘financial arbitrage’ the people and media loves ‘moral arbitrage’. Instead of tackling complex issues that do not have good and bad sides clearly marked, they prefer to focus on small, irrelevant issues that have good and bad very clearly defined. So they can take the “good” side and feel good about themselves. This way no one has to face the uncomfortable, inconvenient truths about themselves. No reflection is required. No change to be made within ourselves.

Let’s keep the common people and social media out here. Because portraying the current affairs accurately is not really their job. But what the professional media did is inexcusable. They went after cheap headlines with ‘moral arbitrage’ with far more vigor than after complex issues that really mattered. All they cared about was staying in the positive light. And Trump gave them the perfect opportunity.

If we have to make sure another Trump does not rise in future, someone has to break this frenzied search for moral arbitrage in media. We need media that takes moral risk, handles inconvenient truth and is less judgmental than informative.

Why We Fail To Understand Each Other?


conflict

On two corners of this world, I am watching two divides. India Pakistan divide in Southeast Asia and another Democrat Republican divide in USA. Of course the first divide has lot more sinister dimension of possibility of nuclear war. And that has historical context too. But more on that in next post.

The Democrat Republican divide is interesting because it’s happening even when there is no reason for this divide to be that strong. After all, both parties support capitalism, human rights and more or less agree on constitution.

What makes the public opinion about each other diverge? Why people completely fail to understand each other’s viewpoints.

And then one of my walks, I made a discovery. I am sure people have made this discovery before. But here it is in my words.

When thinking about someone else, people expect them to behave in a rational and ethical way. But when thinking about themselves, people make decisions based on emotions.

It reminds me of an psychological experiment described to me by a friend of mine. Forgive me for not providing a link, but it was just part of a conversation.

People were divided into two groups and asked to make a choice.

A. Select an airplane ticket at certain price for flying on the route where bad weather and heavy turbulence was expected.

B. Or select a ticket on the route for double the price where good weather was expected.

Everything else was supposed to be same about planes. There was no known technical difficulties and both airplanes were statistically supposed to have the same probability of safe journey.

One group had to pick this ticket for an unknown person. They mostly picked the cheap but turbulent route, because that was rational choice, scary but still statistically safe and cheap. The other group had to pick for their own, they mostly picked the calm route with double the price.

After this, both groups were shown a movie narrating horrible turbulence experience. Then they were asked to make a choice again.

Again if they had to pick the ticket for other person, they picked the scary but cheap route with almost the same probability.

But here is the real kick. When they had to pick for themselves, they picked the safe but costly route even in significantly higher numbers. That means they were more inclined to avoid the fearful experience for themselves after watching the movie. But still they thought it’s OK for the other person to face the fear, as long as it was in their rational interest.

It’s not that people hated the unknown passenger. They  underestimated the importance of emotions to the other person.

When thinking about others, people underestimate the erosion to the quality of life by negative emotions like fear  and enhancement to the quality of life by positive emotions like self esteem boost.

But when it comes to them, they overestimate those exact things things. They want to avoid negative emotions and go for positive emotions, even if it means making a choice that seems not rational.

Two primal emotions  – desire to increase self esteem and desire to reduce fear play a huge role. If you leave room for these two emotions, you would understand the response much better.

Take an example. Think of a recent incident when white cop shot black person.

When white person is thinking about the incident of black person being shot by white cop, their first thought is whether the black person followed cop’s instructions? If yes and still shooting happened, then white people are willing to investigate further. If not, then the case closed. The black person should have followed the instructions.

When black  person thinks about the same incident, their first thought is whether the police followed the procedure. No matter the victim followed the instructions or not, the black person would conclude that if the victim did not pose danger to the officer, the shooting was not justified. The situation when cop arrests you is stressful to both ends and may be the victim was too stressed or confused ?

The white people are more likely to identify with police and allow them some emotional slack, like fear and anxiety. The black person is more likely to identify with the victim and allow them emotional slack, like fear and anxiety.

Who is right? I am afraid both are.

(I am generalizing too much. I know. There are plenty of white people that see black angle and vice versa.)

Next time if you don’t understand the choice made by other person, think of two things. Self esteem and fear. Or rather Self-Love and Fear. If the person has to not only make a rational choice, but also make sure it helps them to do self-love and reduce fear, what choice would they make? And you will surely have a lightbulb moment.

 

 

 

When Guns Are In Law, Gun Are The Law


There is one famous phrase in America, “When guns are outlawed, only outlaws have guns”.

Churchill once said that “Lie gets halfway around the world before truth manages to put its pants on.” He was absolutely right. Lie can indeed get around the world if it can ride a catchy phrase, like “When guns are outlawed, only outlaws have guns”. I have seen too many arguments hijacked by this catchy phrase and turned a very important subject, which makes life and death difference to some, into a reality show. Just to bring back the rationality of the argument in such cases, I am going to throw a new one in here.

When guns are in law, guns are the law.

Let me be clear at the beginning. I am not against guns. I do think guns have a place in society. In fact I think my home country, India has too tight laws that need to be relaxed and make guns access more easy. However, like all other things, guns are best used in moderation and it makes sense to have some common sense gun control laws. Importantly,we need to be able to carry on a rational debate about it using statistics and critical thinking and not just resort to catchy phrases.

About the phrase “When guns are outlawed, only outlaws have guns.” What you call guns is a wide range, from small hand guns and itty bitty pistols to fully automatic guns, armor piercing guns and anti aircraft guns. What you call the action of outlawing is a wide range again, from regulations and restricted access to complete ban. And what you call outlaw – the people – is wide range again. From small pickpockets or shop lifters to major drug cartels.

While the statement is true for a small range of guns, small range of actions of outlawing and small range of types of outlaws, the statement is false for majority of the range of guns and majority of the ways of outlawing them and majority of types of outlaws. And even when it’s true, (case in point – fully automatic weapons are banned but you can sure find drug cartels toting them), it’s rarely used for the purpose we are all afraid of – a random person committing mass shooting in a public place. For the most part, the drug cartels use those weapons to fight among themselves or to take on major law enforcement agencies, which are equally or better equipped than the cartels.

In colclusion, when-guns-are-outlawed phrase is wrong more times than right and even when it’s right, it’s irrelevant to the main argument. There is a legitimate argument on both sides of gun control. But it’s not the when-guns-are-outlawed… phrase.

It’s truly fascinating to watch an argument on gun control or any other hot political topic. There are rarely “independents” here. The people have already formed their stance. The debate revolves around very familiar points. Constitution, gun accidents, mass murders, mental illness, self-defense.

However when it gets into catchy phrases, the debate degenerates from thereon.

So if someone says to you “When guns are outlawed, only when outlaws have guns”, feel free to say “When guns are in law, guns are the law.”

Representation Without Taxation?


I am watching an interview. Some leader insists that the huge financial debt is a problem. That picks up my interest. Because I indeed think it is. I think there is a dose of conservatism needed in financial policies.

But then the leader turns around and argues for reduction of taxes.

Something about that line or argument always makes me uncomfortable. Let me see if I can put it into words.

You can’t always get out of the things you don’t like by doing the things you like.

It’s like telling an alcoholic that there exists a way to get out of addiction where they get to drink more, just that you have to drink at the different bar. No such bar exists. And if you want to kick addiction, it’s going to cause you some pain. It’s worth in the long run, but going to suck in short run.

I understand tax is not a simple thing. I understand there is a good argument to be made about what type of taxes to charge in order to incentivize the right behaviors and discourage the wrong ones. However at this point in time in American financial history, any argument for reduction in taxes is hard to swollow. If anyone wants to make a serious dent in ballooning national debt, the spending needs to be managed well, and the taxes must at least need to remain at current level if not increase.

To be perfectly honest, I think there is serious lack of financial education among common Americans. I don’t mean to single out Americans as financially illiterate. Common people from other countries are equally financially illiterate, but when you are not a citizen of a superpower, your country is not the most influential economy, your army not the world’s most powerful army, you maintain a healthy fear that makes you hedge your bets. That risk perception imparts certain default wisdom to you. Americans don’t have that gift of insecurity or fear. Also Americans have lot more borrowing ability than rest of the world that imparts additional dose of false all-is-well feeling.

And I understand I am grossly generalizing when I am talking about Americans. Obviously there is a large number of financially wise Americans that are exception to this. They were raised by parents who imparted good financial discipline in them. Or they have struggled, failed and developed a healthy risk perception. They save and live within their means. But the number of people who don’t have financial maturity is disturbingly large, large enough to influence the policies.

At the same time American government is one of the least corrupt government I have seen, and it employs many qualified and competent individuals. If I were to decide in whose hands tax money should be left, I would vote for government.

There is an excellent book called “Prophecy” by Robert Kiyosaki, the same author who penned “Rich Dad, Poor Dad”, which raises similar concern. The financially wise person in that books made an observation in late 70s when a large switch from pension funds to 401 k plans occurred. That person warned that such a switch is going to put control of retirement savings in peoples’ hands without providing them adequate education about handling them. We will know if his prophecy about retirement funds comes true in coming decade.

I am often surprised to find this argument for tax reduction or outright elimination coming from people who make very little money and pay very little taxes in the first place. Don’t they realize how much they are getting in return? Roads, School, Police, Strong Army? They are getting the best return for their tax dollars.

For some reason unknown to me, it is this segment in society that gets seduced by the idea of less taxes. “No taxation without representation” was a rallying cry for American revolution. Running a democratic government without any taxation, or in short “representation without taxation” seems to be the idea for this new political battleground.