Daily Dose of Optimism

2006 Resolution: Stop Reading The Economist

I've been dutifully reading The Economist every week for the last few months. Clocking in at about 120 pages per issue, this was quite a commitment. After this trial period, I've decided that I am not going to renew my subscription to the magazine. Here's why:

The Economist attempts to cover the world through a series of short articles on everything under the sun. Now, as I've written about before, I feel that the problem most businesses run into is that they try to do too many things, and wind up doing everything badly. I find The Economist is no exception.

The great thing about the internet is that you can find specialists in any given area. The main problem I had with The Economist is that for every topic they write about that I know something about, they:

1. Approach the subject very generically
2. Insist on rehashing unhelpful cliches as a means of showing "familiarity" with the subject, and
3. Add some weak "if...then" contingencies where outcomes are predicated on the Economist's idea of a global consensus of soft-liberal journo-logic.

When I think about it, if the Economist is either bland or wrong on the stuff I know, why would they be interesting or accurate on the stuff I don't? This reminded me of this passage from a 2002 Michael Crichton speech on media credibility:

"...there are some well-studied media effects which suggest that a simple appearance in media provides credibility. There was a well-known series of excellent studies by Stanford researchers that have shown, for example, that children take media literally. If you show them a bag of popcorn on a television set and ask them what will happen if you turn the TV upside down, the children say the popcorn will fall out of the bag. This effect would be amusing if it were confined to children. The studies show that no one is exempt.

Media carries with it a credibility that is totally undeserved. You have all experienced this ... as follows. You open the newspaper to an article on some subject you know well. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the "wet streets cause rain" stories. Papers are full of them.

In any case, you read with exasperation or amusement the multiple errors in a story-and then turn the page to national or international affairs, and read with renewed interest as if the rest of the newspaper was somehow more accurate about far-off Palestine than it was about the story you just read. You turn the page, and forget what you know.

In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all.

But when it comes to the media, we believe against evidence that it is probably worth our time to read other parts of the paper. When, in fact, it almost certainly isn't. The only possible explanation for our behavior is amnesia." 

Theoretically, The Economist should meet all readers' needs, but I found that in practice, it met none.
If reading is like eating, then the Economist is like canned vegetables - the content should be healthy, but the way it is served, it isn't. - Ed

2006 Resolution: Focus More on Companies

In 2006, I plan to focus the DDO more on individual companies, and less on general economic/market observations. (I started this today, with CMG). My goal is to make blogging the most efficient use of my time, as it will thus align better with my personal investment research. - Ed

2006 Resolution: Eat Consistently (Less)

A recent study of dieters who lost weight and kept it off showed that consistency is what counts. Last year, the International Journal of Obesity reported that people who manage their weight the best are those who eat the same whether it's the week, weekend, vacation or holiday season. Consistent eaters are nearly twice as likely to keep weight off as eaters who allow themselves to indulge on weekends or holidays and go back to strict eating during the week or after the holidays. Link to WSJ

Whoops.

Something to practice for the next round of holidays. - Ed

2006 Resolution: Ignore Real Estate Bubble Articles Until 2007

I think 2005 was clearly the year where widespread fear of the real estate bubble came and went.

Someday, a scientist with some real talent will be able to systematically track the rise and fall of memes, where they start and where they end, and what their relation was to an underlying phenomenon (if any). The result would teach us a great deal about idea origination, diffusion and extinction, which could be of use to media types, bloggers, scholars and the like.

With regards to the "Real Estate Bubble" meme, a June 15, 2005 NYT article made this point:

This year [2005], only about $80 billion, or 1%, of mortgage debt will switch to an adjustable rate based largely on prevailing interest rates, according to an analysis by Deutsche Bank in New York. Next year, some $300 billion of mortgage debt will be similarly adjusted.

But in 2007, the portion will soar, with $1 trillion of the nation's mortgage debt - or about 12 percent of it - switching to adjustable payments, according to the analysis.

The 2007 adjustments will almost certainly be the largest such turnover that has ever occurred. Link

This means that even if we start to see some signs of trouble in 2006, the avalanche would not come until 2007 and beyond.

Therefore, I resolve to ignore effectively all articles about the "real estate bubble" for twelve months.

Although I wish the time elapsed between idea and action was instantaneous, in reality, things can take their sweet time. - Ed

PS: The Rude Awakening (on June 16, 2005) reminded us:

The notion of a housing bubble is no secret to the masses. Therefore, could anything as widely anticipated as the end of the housing boom ever come to pass? Our contrarian instincts rebel at the thought. Perhaps, therefore, we have not yet reached the terminal stage of the bubble, but are merely drawing closer to it.  Link 

Amen.