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Oscar Predictions: Fly Like a Bird

February 22, 2015

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In 2010, I predicted the triumph of The Hurt Locker in the Academy Awards. In 2011 and 2012, I predicted the winnings of The King’s Speech and The Artist. Last year, I called correctly for Argo. In between, I predicted awards and victories for soccer teams, directors, actors, actresses, screenwriters and politicians.

Predicting the Oscars is not about my opinion about movies. It is about my opinion about the opinion of the average member of the Academy of Motion Picture Arts and Science, the people who vote on the Oscars. Reading other people’s mind is difficult, but fun. It can also be a source of advantage, something that my research explores. But enough about theory — let’s spread our wings!

So after I polished my crystal ball, consulted the stars (and the moon), rolled a few dices, flipped a few coins, and carefully analyzed all available information, I predict:

  • Best Picture – Birdman (even if Boyhood is a serious contender)
  • Director – Alejandro González Iñárritu (Birdman), although I would not be surprised if Richard Linklater (Boyhood) wins. Unlike last year, I do not foresee a split between Best Picture and Best Director.
  • Actor in Leading Role – Eddie Redmayne (The Theory of Everything)
  • Actress in Leading Role – Julianne Moore (Still Alice)
  • Actor in Supporting Role – J K Simmons (Whiplash)
  • Actress in Supporting Role – Patricia Arquette (Boyhood)
  • Best Adapted Screenplay – The Imitation Game
  • Best Original Screenplay –The Grand Budapest Hotel (even if Birdman is deserving, too)
  • Original Song – Glory (Selma), performed by John Legend
  • Documentary Feature – Citizenfour

These are my predictions. If you think otherwise, speak now or forever hold your peace…

Stock Bubbles are Deflated by Ethnic Diversity

November 17, 2014

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In diverse company, people think more deeply, make better decisions, study finds

From The Great Depression through the dot-com boom of the 1990s to the recent financial crisis, stock market bubbles are a constant malaise. Even as bubbles devastate individuals and nations, preventing them has been difficult because their sources remain opaque.

A new study proposes a cause: Bubbles happen when people mindlessly trust the behavior of others, and they do so much more often when surrounded by ethnic peers. In an article published today in Proceedings of the National Academy of Sciences, researchers show that markets of ethnically diverse traders are much less likely to suffer bubbles. These findings could have a lasting impact on economics — and ethnic diversity.

“Ethnic diversity can bring a variety of perspectives, but is valuable also because it changes how people think, feel and behave.” says Dr. Sheen S. Levine of Columbia University who formed the research team of sociologists, economists, psychologists and business school professors.

Dr. David Stark, a Columbia sociologist and a member of the research team, says that “when surrounded by others who are ethnically the same, you behave differently – more likely to accept things at face value, less likely to scrutinize and think for yourself.”

Dr. Evan Apfelbaum, a social psychologist at the Massachusetts Institute of Technology and a member of the research team, adds, “With ethnic homogeneity, we place overdue confidence in others, just because they appear superficially similar to us.”

To study how ethnic diversity affects price bubbles, Dr. Levine and his collaborators constructed experimental markets in Southeast Asia and North America. It was a laboratory for bubbles: “We could pinpoint the true value of a stock, and compare these true values with market prices,” explains Dr. Mark Bernard, an economist at Goethe University in Frankfurt and a member of the research team. “So we could identify bubbles as soon as they appeared and measure their exact magnitude.”

The researchers randomly assigned participants, all versed in finance, to ethnically homogeneous or diverse markets, letting them trade stocks to earn cash. There were no initial differences between traders in homogenous and diverse markets. But when trading begun, a striking difference between the markets emerged.

Homogenous markets were much more likely to bubble. In them, overpricing was higher as traders were more likely to accept speculative prices. Their pricing errors were more correlated than in diverse markets. And when bubbles burst, homogenous markets crashed more severely. “Bubbles have been long ascribed to ‘herd behavior,’ ‘animal spirits’ and ‘thought viruses.’ but hard evidence has been scarce until now,” notes Dr. Edward J. Zajac, a Northwestern University professor and another researcher on the study. Across markets and locations, market prices fit true values 58 percent better in diverse markets.

“Our first results came from research sites in Southeast Asia, involving Chinese, Indians, and Malay traders,” says Dr. Valerie Bartelt, a professor at Texas A&M-Kingsville and a research team member. “We wanted to verify that the results hold in a different culture.” The researchers proceeded to replicate the study in the United States with White, African-American and Latino traders. The findings were similar to those from Southeast Asia, despite sizeable differences in culture and ethnic composition. This suggests a universal pattern.

What is the practical significance of the findings? A recent study by CUNY’s Center for Urban Research found that more than half of Wall Street’s workforce was made up of white men, who earned more than twice as much as women and minorities. In the financial center of London, diversity may be even less, suggest data from Astbury Marsden, a recruiting firm.

“Our findings are another compelling reason to diversify markets, teams, boards, and organizations,” concludes Dr. Levine.

It grew faster than America, it was richer than Germany, so why did Argentina stumble?

February 15, 2014

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One of the most popular topics in my lectures, as evidenced by popular vote, is the root of national success — why are some countries more successful than others? I usually start by asking the audience to suggest some answers. Turns out that almost everybody has a homespun theory: “Japan is successful thanks to its culture” or “The US is successful because it is innovative”. But these theories, as compelling as they may sound, are usually limited.

It’s easy to explain something after it happens. But the ability to explain things before they happen — the ability to predict — is the mark of a good theory. Most explanations we hear are truisms: maybe good for explaining the present, but not the future. So what’s a good explanation of national success? A good theory would explain not only a country’s present success, but also predict if the good times will continue. A good theory would also do the opposite: predict which currently humble countries are set to rise.

In my lecture, we draw on the examples of Korea, Spain, and Argentina, relying on the research of Prof. Mauro Guillén and others. Argentina is a particularly powerful example. A century ago, it seemed destined for success: “Its economy had grown faster than America’s over the previous four decades. Its GDP per head was higher than Germany’s, France’s or Italy’s. It boasted wonderfully fertile agricultural land, a sunny climate, a new democracy”, as The Economist reminds us.

If we can understand what made Argentina grew and what stunted the country, we may be able to understand why some countries are more successful than others. We may also be able to predict which will be successful in the future. We may be able to take action today to make our country more successful for longer. The Economist details the facts. See if you can use them to craft a good explanation.

Raymond Weil: An entrepreneur against the odds

February 6, 2014

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Entrepreneurship is a young person’s game, they say, but Raymond Weil was 50 year old when he founded his watch company — Raymond Weil Genève. The Swiss watch industry was not flourishing, either. It was disrupted by cheaper technology, initially dismissed as inferior by the giants of the Swiss watch industry.

Raymond Weil (photo: Raymond Weil USA)

Swiss watches have been around for centuries. A tight cluster of manufacturers, assemblers, and marketers perfected the mechanical technology that made the watches synonymous with accuracy and dependability. In the 1970s, Switzerland controlled half of the world watch market, making watches largely by hand, competing on mechanical sophistication, and charging steep prices for perfection.

Then, Seiko of Japan and Hamilton of the US commercialized a new timekeeping technology, based not on springs, cogs and gears — but on quartz crystals. The new watches were extremely accurate, battery-powered, and much cheaper. From their dominant position, the Swiss makers dismissed the new technology. But consumers did not. Soon, Swiss watch sales were ravaged by low-cost quartz watches, primarily from Japan. Switzerland counted 1600 watchmakers in 1970. By 1983, only 600 remained.

Many would have avoided such a shrinking industry, but not Raymond Weil. In 1976, amidst the turmoil, he founded a new watch company that bore his name. He knew that he could not compete in low and mid-level watches — these were overtaken by the quartz technology. Instead, he focused on luxury watches, which is sold in prices that ranged between $500 and $4000. High-end luxury timepieces went for $20,000.

Rather than focusing on function or technological sophistication, Weil stressed design and heritage. The watches were gracefully crafted, and carried the “made in Switzerland” label. Realizing that technology is no longer a selling point, he did not shy away from the quartz technology, deploying it together with the more traditional spring powered, cog-and-gear watches.

Jasmine, a quartz women’s watch (photo: Raymond Weil Genève)

In 1983, with the traditional watchmakers in ruins, a new Swiss manufacturer appeared — Swatch. It stressed design; it competed on price. It eventually saved the Swiss watch industry, and it did so by furthering Mr. Weil’s notions of design and heritage.

Raymond Weil died at 87 on Jan. 26, 2014 in Geneva. A New York Times obituary is here.

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