History of Start up failure, Washdoctors

February 18, 2019 Ben Yeoh

A brief history of Wash Doctors – WashDoctors

History of a London based car wash start up from start to failure in 2 years. “As Founders of a business you need to be stable when things are going wrong, understated when things are going well.”

Me: We’ve used wash doctors. The business had some nice elements to it, some sustainable themes, possible better pay for workers. But the founders examine why the economics don’t work out for very human reasons (complaints, high variability of demand). Fascinating little glimpse into the very considered unfortunate end to a start-up. I hope they try some thing else.

https://medium.com/@washdoctorslondon/a-brief-history-of-wash-doctors-4e02f63ecd62

Social science, Economics, replication study crisis

February 10, 2019 Ben Yeoh

There’s a crisis in psychological and social sciences that has spread into medical and now economics. It’s notable to me that this crisis isn’t in physical domain sciences which are better measured and tend not to involve the human. Perhaps humans are too messy.

The crisis is a replication crisis. Many significant results in social sciences have failed to repeat in subsequent studies and analysis. Some results that have been replicated have shown a much lower magnitude of result. (See links below)

Some of the replication research is not perfect plus the philosophy of statistics would suggest a portion of any results at the 5% of 1 in 20 level will simply be random. (See links below)

Some significant social science results that haven’t replicated are:

-the “ego depletion” theory of willpower (Willpower is like a muscle, the argument goes. When it's tired, we're less focused; we give in to temptation and make shoddy decisions that hurt us later.)

-the “marshmallow test” (children who can wait for 2 marshmallows in the future vs 1 marshmallow now, do better on certain other metrics)

-The social priming theories

-Power poses

Interestingly, it also seems scientists are good at predicting which tests are most likely to NOT replicate. (https://www.nature.com/articles/s41562-018-0399-z)

A summary here:

“Psychology’s reliability crisis erupted in 2011 with a wave of successive shocks: the publication of a paper purporting to show pre-cognition; a fraud scandal; and a recognition of p-hacking, where researchers exercised too much liberty in how they chose to analyze data to make almost any result look real. Scientist began to wonder whether the publication record was bloated with unreliable findings.

The crisis is far from being limited to psychology; many of the problems plague fields from economics to biomedical research. But psychology has been a sustained and particularly loud voice in the conversation, with projects like the Center for Open Science aiming to understand the scope of the problem and trying to fix it.

In 2015, the Center published its first batch of results from a huge psychology replication project. Out of 100 attempted replications, only around a third were successful. At the time, the replicators were cautious about their conclusions, pointing out that a failed replication couldmean that the original result was an unreliable false positive—but it could also mean that there were unnoticed differences in the experiments or that the failed replication was a false negative.

In fact, the bias toward publishing positive results makes false negatives a significant risk in replications.” From https://arstechnica.com/science/2018/08/why-do-only-two-thirds-of-famous-social-science-results-replicate-its-complicated/

Interestingly this has spread into economics and the anomaly literature.

...In 2016, government economists Andrew Chang and Phillip Li tried to reproduce the results of 65 econ papers published in good journals. They got the original data, and even contacted the authors for help in following their footsteps. Yet still they only managed to reproduce 49 percent of the published findings…. See https://www.federalreserve.gov/econresdata/feds/2015/files/2015083pap.pdf

In the anomaly literature it is notable that “value” and “momentum” results mostly (though not all) have replicated but at lower magnitudes. This lower magnitude result seems to be fairly consistent as well. The paper also make a good point that microcaps seem to skew the results of previous work.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3275496

Most anomalies fail to hold up to currently acceptable standards for empirical finance.

My view: while there are complex root causes behind this (eg yes, there is fraud but it doesn’t explain many of the results), I think the overall message is to take results with a certain amount of skepticism and if you think the results seemed far fetched (eg Marshmallow test, possibly) then wait to see a replication study before putting too much weight on it.

A paper suggest the base rate fallacy is part of the explanation: https://academic.oup.com/bjps/advance-article-abstract/doi/10.1093/bjps/axy051/5071906

Confronting inequality

February 6, 2019 Ben Yeoh

Jason Furman reviewing Confronting Inequality: How Societies Can Choose Inclusive Growth “On the substance, the book finds that, on average, inequality results in less sustainable growth and lower growth. Redistribution has no direct adverse impact on growth and by reducing inequality actually helps it. Structural reforms (like deregulation) generally increase growth and inequality. Fiscal austerity hurts both growth and especially inequality, with the authors suggesting that it does not generally pass a cost-benefit test because the benefits of less debt are outweighed by the cost of getting to less debt. Monetary expansion reduces inequality.“

the book presents the IMF authors work it doesn’t argue the other side but makes a case against fiscal austerity...

Economist Jason Furman makes a much better summary review than me.

amazon link here

Germs killed 90% native americans c. 1500 causing re-forestation and mini ice age

February 5, 2019 Ben Yeoh

Earth system impacts of the European arrival and Great Dying in the Americas after 1492

Germs from Europeans arriving in the Americas from 1492, caused the native American population to die in large epidemics. With the loss of 90% of the human population, much of the agriculture land turned back into forests.

These forests acted as a large carbon capture sink reduced the Earth’s temperature significantly causing a mini ice age / cold spell.

A comprehensive paper drawing on many previous papers in this area. Link here: https://doi.org/10.1016/j.quascirev.2018.12.004

The arrival of Europeans in the Americas in 1492 CE marks the onset of disease epidemics resulting in the loss of the majority of indigenous people living in the Americas over the subsequent century (Berlinguer, 1993; Cook, 1998; Crosby, 1972, 1976; Nunn and Qian, 2010). Indigenous land use was widespread before European arrival, particularly in Mexico, Central America, Bolivia and the Andes where terraced fields and irrigated agriculture was practised (e.g. Abrams and Nowacki, 2008; Chepstow-Lusty and Jonsson, 2000; Heckenberger et al., 2003; Hunter and Sluyter, 2015; Whitmore and Turner, 1992), and across Amazonia where diverse pre-Columbian land uses left its traces in the composition of contemporary Amazon forests (Clement et al., 2015; Levis et al., 2017; Maezumi et al., 2018a; Watling et al., 2018). Thus the Great Dying of the Indigenous Peoples of the Americas (Wolf, 1982) after 1492 CE likely led to a reduction in land use. Fields and fallow areas then underwent secondary succession and in many cases increased carbon stocks as they reverted towards similar prior states – with local, regional and potentially global consequences for the Earth System.
The uptake of carbon on the abandoned anthropogenic lands after European contact may have been large enough to impact the atmospheric CO2 record (Dull et al., 2010; Faust et al., 2006; Lewis and Maslin, 2015; Nevle and Bird, 2008; Nevle et al., 2011; Ruddiman, 2005). Furthermore, at the same time high-resolution Antarctic ice-core records of atmospheric CO2 concentration show an anomalously large decline of ∼7–10 ppm (Ahn et al., 2012; MacFarling Meure et al., 2006) beginning in the 1500s with a minimum in the early 1600s (Fig. 1). Isotope analysis shows that the anomaly was driven by an increase in the terrestrial carbon sink (Fig. 1B, Bauska et al., 2015; Francey et al., 1999; Trudinger et al., 1999). Hence, the carbon uptake that is thought to have occurred following the arrival of epidemics in the Americas may have reduced atmospheric CO2 levels and led to a decline in radiative forcing that may then have contributed to the coldest part of the Little Ice Age(Faust et al., 2006; Neukom et al., 2014)

Long-term impacts of exposure to high temperatures on human capital

January 28, 2019 Ben Yeoh

Long-term impacts of exposure to high temperatures on human capital and economic productivity:

“Weather anomalies have a range of adverse contemporaneous impacts on health and socio-economic outcomes. This paper tests if temperature anomalies around the time of birth can have long-term impacts on individuals' economic productivity. Using unique data sets on historical weather and earnings, place and date of birth of all 1.5 million formal employees in Ecuador, we find that individuals who have experienced in-utero temperatures that are 1 °C above average are less educated and earn about 0.7% less as adults. Results are robust to alternative specifications and falsification tests and suggest that warming may have already caused adverse long-term economic impacts.”

Paper link here

https://doi.org/10.1016/j.jeem.2018.10.001

Ram Fishman, Paul Carrillo, Jason Russ (2018) (Journal of Environmental Economics and Management)

Comment: the falsification test does mean that spurious patterns are a less likley explanation, there could be other causal effects as correlation is not causation, but the finding is provocative.

It chimes with a recent paper by Isen et al. (2017) finds evidence for a simila r association among 30-year individuals in the U.S. born between 1969 and 1977. (Relationship between season of birth, temperature exposure, and later life wellbeing).

What is Davos like?

January 25, 2019 Ben Yeoh

Billionaire, Ray Dalio says this on Davos:

“Many people have asked me to share what Davos is like so here goes. It’s a gathering of people from all over the world who are sitting in very important seats in all sorts of subject areas (government policy makers, tech/philanthropy/science and most other specialties). These are not theoretical people; they are people who are actually in the seats of having to wrestle with the world’s most challenging and exciting problems. They interact by exchanging thoughts in 1) one-on-one meetings, 2) small gatherings, 3) through panel discussions and speeches and 4) after hours parties—so one can dive into whatever one is interested intensely with some of the smartest, most immersed, and nicest people in just about any area one is interested in. I personally start at about 7:30am and end at about 11pm each day and spend about 80% of my time in about a dozen one-on-one meetings and do all of the other stuff in small doses. I still regret missing out on so much other great stuff. I mostly focus on economic and geopolitical topics and a bit on ocean, nature conservation, and AI. I end the day with more energy than I start it because it’s so exciting to learn, help others understand, and come up with things to do that have big beneficial impacts.” (From his LinkedIn blogs)

Summary notes on IASB meeting on management commentary

January 19, 2019 Ben Yeoh

From Kris Peach, Australian Accounting Board Chair and CEO:

“2nd meeting of IFRS Management Commentary panel broadly supportive of performance, position and progress proposals.

Key issues discussed included verifiability of information, location of management commentary as part of the financial report, how to reconcile neutrality with ‘through the eyes of management’, importance of understanding purpose and components of alternative earnings measures (similar to performance reporting project proposals), conciseness and linkage.

Some concern about asking for management compensation disclosures only when related to performance measures, given all management compensation impacts performance, and suggested disclosures only tiny piece of performance aspect of the compensation.

Support for asking for forecast disclosures where forecast has been made externally. Some wanted more aspirational recommendation to have forecasts. Discussed need guidance on whats in financial statements & whats in mgt commentary (eg some climate change info should be in financials and some in commentary).

Noted need for more explicit consideration of intangibles in management commentary, particularly if not recognised on balance sheet. Also noted importance of discussing what risks eventuated in current year that were noted in prior years. “

Follows on from first panel, which had discussion on purpose amongst other things which is going to back pack in panel 3. Details on the consulting process on IFRS management commentary here.

The Power of Shareholder Votes: Evidence from Uncontested Director Elections

January 18, 2019 Ben Yeoh

Abstract: This paper asks whether dissent votes in uncontested director elections have consequences for directors.We show that,contrary to popular belief based on prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing dissent face reduced opportunities in the market for directors.We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.

Comment: This suggests that any amount of dissenting vote is an important signal, not necessarily the win/lose results. To me, this shows that shareholders (especially if you are voting on behalf of others) need to carefully consider how they should vote on directors even if that vote looks certain to pass.

Link to paper here:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2609532

Aggarwal, Reena and Dahiya, Sandeep and Prabhala, Nagpurnanand, The Power of Shareholder Votes: Evidence from Uncontested Director Elections (March 22, 2016). Robert H. Smith School Research Paper No. RHS 2609532; Georgetown McDonough School of Business Research Paper No. 2609532. Available at SSRN: https://ssrn.com/abstract=2609532 or http://dx.doi.org/10.2139/ssrn.2609532