A Petty Blog

That title is hard to parse.  He means a Bear-Market-Killing level of fear.  The amount of fear needed to kill a bear market.  As a rather contrary individual, I find it delightful that mass consensus of doom and gloom is a strong indication that the mass consensus is dead wrong.

The following excerpt is from my favorite investing blog (membership required, but lots of information is also available for free).  The added emphasis is mine.

SMI Weblog: Bear alert? Bah humbug.
The Hays methodology is to closely monitor three main market components — Psychology, Monetary, and Valuation. The “health” of these three components, measured by numerous indicators for each, is boiled down to a score of 1-6, with 1 being the best and 6 the worst. The interplay of these three scores gives them an idea of how attractive the market is at any given time, and by extension, how committed their clients’ assets should be to the stock market.

On Friday, Dodson wrote that their psychology composite had hit P1 last week, which is their most bullish reading. Here’s his comment:

“P1s are extremely rare. A P1 is bear market killing level of fear. Looking at our monthly tabulations of sentiment, a P1 has only occurred a couple of times since 1990: in October 2002 and October-December 2008. Both are on the who’s who list of market bottoms. For October 2002, it marked the ultimate low. In October 2008, it marked the market’s internal low and good entry point, but you really had to sweat it out until the ultimate market low in March 2009. That we have been able to hit P1 after a correction of 16% is astonishing. Investors sit on pins and needles.”

So, a “bear market killing level of fear” is a good thing!

Jeff Atwood over at Coding Horror wrote an article that got me thinking.  Apparently there are hordes of people applying for programming jobs who can’t even pretend to write a program.

I wrote that article in 2007, and I am stunned, but not entirely surprised, to hear that three years later “the vast majority” of so-called programmers who apply for a programming job interview are unable to write the smallest of programs. To be clear, hard is a relative term — we’re not talking about complicated, Google-style graduate computer science interview problems. This is extremely simple stuff we’re asking candidates to do. And they can’t. It’s the equivalent of attempting to hire a truck driver and finding out that 90 percent of the job applicants can’t find the gas pedal or the gear shift.

One of the early commenters ascribes this to the Dunning-Kruger Effect.

The Dunning–Kruger effect is a cognitive bias in which “people reach erroneous conclusions and make unfortunate choices but their incompetence robs them of the metacognitive ability to realize it”.^[1] The unskilled therefore suffer from illusory superiority, rating their own ability as above average, much higher than in actuality; by contrast the highly skilled underrate their abilities, suffering from illusory inferiority. This leads to a perverse result where less competent people will rate their own ability higher than more competent people. It also explains why actual competence may weaken self-confidence because competent individuals falsely assume that others have an equivalent understanding. “Thus, the miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others.”^[1]

“	The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.	”
	— Bertrand Russell[2]

The NY Times reported on this study in a 2000 article, Among the Inept, Researchers Discover, Ignorance Is Bliss.

One reason that the ignorant also tend to be the blissfully self-assured, the researchers believe, is that the skills required for competence often are the same skills necessary to recognize competence.

The incompetent, therefore, suffer doubly, they suggested in a paper appearing in the December issue of the Journal of Personality and Social Psychology.

”Not only do they reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the ability to realize it,” wrote Dr. Kruger, now an assistant professor at the University of Illinois, and Dr. Dunning.

Thanks to David Weiss and This Is True for pointing me to the NY Times article.

I’ve been talking about this study for years now, but didn’t know the effect had a name.  Now I can be extra-geeky when I throw this out in conversation (my preferred paraphrase):

The skills needed to evaluate competence are the same as those required to be competent.  Therefore, if you are incompetent, you don’t know it.

Frankly, that scares me to death.  Dr. Dunning admits the same fear, by the way.

I figure that as long as I am cognizant of this effect and aware of how much more there is to learn,  I’m probably OK.

 I found a blog on Architecture.  It’s a really interesting colossal time-sink.  I bookmarked the site years ago because of an article about park benches designed primarily to keep vagrants from sleeping on them.  This is even creepier.

Design with Intent | Deliberately creating worry
One of the cafés in an international European airport was often full. The problem was that people sat nursing their coffees for a long time as they waited for their planes to depart. The café asked itself: How can we encourage our customers to vacate the tables more quickly?

Their first ideas were probably along the lines of uncomfortable chairs, a seat charge, clear the tables immediately and so forth. However, the idea they finally decided upon was this: to turn off the flight monitors in the café! This made people worry about missing their flights, which led to them looking for monitors that worked, thus leaving empty tables. When the café had enough empty tables, the flight monitors suddenly started working again to attract new customers.

I think turning the monitors back on is the icing on the creepy-cake.

This video is a fascinating example of attention deficit in perceptions.

Just watch, no instructions.

You should also see this one (it’s the one with basketballs).

There’s an old saying: “If your only tool is a hammer, all your problems look like nails.”  I know it well, because it truly applies in the software development industry.  Most of the time, the software tools a programmer chooses for a job will depend on either 1) what the programmer know or 2) what the programmer wants to learn.

Seth Godin mentions this tendency in his blog today:

Seth’s Blog: Hammer time
One study found that when confronted with a patient with back pain, surgeons prescribed surgery, physical therapists thought that therapy was indicated and yes, acupuncturists were sure needles were the answer. Across the entire universe of patients, the single largest indicator of treatment wasn’t symptoms or patient background, it was the background of the doctor.

So, we programmers are not alone (I never thought we were :))

I love the phrasing of his parting advice.

The best way to find the right tool for the job is to learn to be good at switching hammers.

Of course, you can’t switch hammers unless you have more than one.

The software developers workers who will thrive in today’s and tomorrow’s global economy are the ones who make it a life-long practice to add new tools to their tool belts.

This is my favorite illustration about attention and perception. The original page is here.
In the movie below you will see a group of college students passing a basketball.  Some are wearing black shirts and some are wearing white. You must count the number of times the WHITE team bounces the ball between two players. Keep track of the total.
Go ahead and do it. I’ll wait.

(more…)

Dan Miller wrote this story in his August 18, 2009 newsletter:

I was Shocked! « Dan Miller’s Blog
Our mind can complete the expectations we have!

Recently I installed three new poles and decorative lights on the driveway approach to our house. Although I enjoy being a handy man, electrical work always makes me nervous. I rented a trencher, dug a narrow ditch and carefully laid the line in the trench. I then proceeded to install the outlets and run the line up each pole before completing the power attachment at our house. Twice in this process I recoiled with the stinging shock of electric power surging through my arms – but wait – there was no power yet attached. I hadn’t connected the line to the power source. Just the “anticipation” of power convinced me I had already “felt” a serious shock.

I find I’m not alone in this mysterious happening. Commonly known as the Pygmalion Effect, scientists say this phenomenon occurs when “a false definition of the situation evokes a new behavior which makes the original false conception come true.” In other words, once an expectation is set, we tend to act in ways that are consistent with that expectation, even when it’s not true.

I have had this experience with electricity, though not to the extent Dan reports here.  I’ll grant him poetic license to make the story interesting. It sounds familiar, and interesting, and similar to some other effects (notably the Placebo Effect).

Wikipedia’s entry for Pygmalion Effect also reports on an experiment familiar to me.  A number of school teachers were given a new class of students.  Some of the teachers were told that they were getting a group of exceptionally gifted students.  Others were told that their class was a bit slower.  All of the classes performed as expected - the “gifted” classes progressed much farther than the “slow” classes — even though students in all classes were randomly assigned.

In this experiment, Rosenthal predicted that, when given the information that certain students are brighter than others, elementary school teachers may unconsciously behave in ways that facilitate and encourage the students’ success. The prior research that motivated this study was done in 1911 by psychologists regarding the case of Clever Hans, a horse that gained notoriety because it was supposed to be able to read, spell, and solve math problems by using its hoof to answer. Many skeptics suggested that questioners and observers were unintentionally signaling Clever Hans. For instance, whenever Clever Hans was asked a question the observers’ demeanor usually elicited a certain behavior from the subject that in turn confirmed their expectations.

The bottom line is that our minds to affect our perceptions in a powerful way.   Your attitude will have a powerful effect on your life and your happiness (and apparently that of those around you).  I have seen expectations (sour attitudes) ruin vacations, jobs, homes, and marriages.  Used for good, a positive attitude will make your job better, your spouse prettier, and even make the weather better.  Really.  (but don’t overdo it and fall prey to the Pollyanaism.)

I enjoy the “daily tips on being a better husband” at  the-generous-husband.com.  Today’s tip deals with perception.

I was at the laundry mat today. (For the moment we have two families on one well, and we feel it’s wise to limit water use rather than find out the hard way how much we can draw.) My bride did the laundry mat run last time; I did it this time because she has a great deal of bookkeeping to do after the day job conference.

I am about done when a woman comes in, and before she can get her stuff into washers her phone rings. It is her husband, on his way home from work. She asks if he is going to stop on his way home and help her with the laundry. I don’t know what he told her as why he was not going to join her, but she replied “Fine, I’ll do it - AGAIN - even though I worked twelve hours today.” He apparently tired to convince her she was being unreasonable, but she quickly ended the conversation and started slamming clothing into machines.

I have no more information than this. I do not know how many hours a week they each work, what each of them does for the other, or how they split up the family chores. Maybe her side of the phone call did not give me the whole story; maybe I would see things differently if I heard his side of the story.  However, her perception is that she is doing more than he is, and that he does not care enough for her to help her out. And be it accurate or not, that is her perspective, and it is reality to her - it is what she is thinking, and feeling, and it is what she bases her decision on about her marriage, and her husband, and how much to put into each.

What is your bride’s perception of you, and of your marriage? Be it right or wrong, it is reality to her, and it is what she bases things on. Don’t ignore her perception just because you “know” it’s wrong. You are living with the consequences of her perceptions, so I suggest you deal with them. If her bad perceptions are wrong, how can you show her they are wrong? If her bad perceptions are based at least in part on truth, how can you change?

As Paul points out, perception is reality to the perceiver.  You will have to deal with the consequences of others’ perceptions, be they right or wrong.

A few years back, I inherited a perception issue with an employee under my (so called) management. We work in software development, where, for the most part, it doesn’t really matter what hours we work, so long as the work gets done and the necessary communication is not impeded.  This developer preferred to work a later shift - say, 10:00 AM until the wee hours of the night.  However, he had acquired a stigma of not pulling his weight.  I had to explain to him that it doesn’t matter how many hours he works, as long as it looks like he is slacking off.  Specifically, at 10:00, everyone is there to see him arrive “late”.  At 7:00 in the evening, nobody is there to see how late he works.  Not fair, but that’s how it works.