Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Monday, 15 July 2013
There are some interesting take-aways:
1. Fans are a more fluid group than people believe. There is a high degree of churn as people move, or get bored with the game or have families.
2. The market for players is effient and paying more for players will generally lead to better results. They do not use transfer fees as they are often non-disclosed.
3. Managers have a small impact on the overall performance of a team. They are little more than figure heads and spokespeople. The authors to have a lot of good to say about Wegner and Clough though.
4. The impact of 2 and 3 means clubs cannot select players on the basis of race without incurring a penalty. With regard to managers they can.
5. Football is not really big business. Even the largest Manchester Unite/Chelsea teams are barely, if at all profitable and their turnover is tiny compared to the largest firms on the stock exchange. The teams at the bottom of the Premier League are closer to a single Supermarket store in terms of turnover.
The book then drifts into some analysis of why England perform poorly on the world stage. They develop a model using income per head, population and football experience. This seems to indicate that England have slightly overperformed(they don't prove this factors are causal or identify exactly how good at predicting these variables are). They then speculate that the future belongs to large country that are open to new footballing ideas.
This book is rather like Moneyball which looks at baseball. But baseball is probably an easier game to analyse as there are fewer situations. And football is already heavily analysed via Opta, this book fails to really deep dive into the data and feels quite superficial. It is quite easy to read. I enjoyed it, but felt the best chapter were around the business of football and fandom rather than football itself.
Thursday, 24 May 2012
The book’s conclusion is that each industry has started out chaotically with many different companies employing rival standards and establishing their own network. However eventually a large company or small group of large companies has arisen to dominate each industry. These larger companies often offers lower prices, higher quality services or universal service which attracts consumers. However the result of this is the formation of monopolies which ultimately inhibit the creative process. The dominate monopolist will use a variety of methods to inhibit anything that threatens their position such as patients, buying rivals, pricing to remove competitors or surpressing innovations that threaten their core market(an example is AT&T discovering but surpressing the Answerphone).
The monopolisation matters as the result is that a small group have control of the “master switch” that determines the flow of information. The trends the author highlights are then applied to the new internet technologies and the relate to the patient wars that are currently being thought in the mobile phone/internet arena.
The author argues that there is a cycle effect as new technologies emerge which disrupt the existing industries or regulators break them up. A new cycle of consolidation then commences. The book draws on the ideas of Schumpter’s “Creative Distruction”, arguing that the collapse of old monopoly spurs innovation.
I enjoyed the history of film making which has become increasingly high risk, so failures can bring down film studies. Films have increasingly adopted strategies to mitigate that risk,
1. Vertical integration – buying cinemas in order to guarantee a market for films. Regulators have broken up the older Hollywood studio system and forced the studios to sell of their cinemas.
2. Sequels and remakes, this gaurantees a market for fans of previous versions and reduces the risk of developing new intellectual property
3. Films also have a longer product lifecycle, with revenue from sales of DVDs, to television and video game ties ins.
4. Merchandising, especially for children’s films or comics.
5. Establishment of smaller studios owned by larger studios that develop low cost, high risk films.
6. Finally some studies are owned by large conglomerates who can stand the risk of large losses.
A possible flaw in the book is assuming that the Master Switch is as possibly going to matter as much in the internet age. It is fair easier for media owners to censor television, radio or film that YouTube. YouTube and Facebook offer close to zero cost of content creation and distribution, resulting in too much content for any Master Swith owner to moderate. The only way it could be done would be to limit the form in which people can publish their information, but it seems hard to see how that can be “closed down” without user migrating elsewhere.
Tuesday, 22 May 2012
In terms of structure the book follows to imaginary people, Harold and Erika, following them from Harold’s birth to his death. Oddly the events always take place in the 21st century, which gives it a rather unusual feel. The characters are bright and generally lead successful upper middle class lives. Despite the title neither character seem to lead especially social lives. Harold’s influences are his parents and a teacher. Erika is influenced more by a people she meets as she strives to climb the corporate greasy pole. Friends and family of the characters do not feature.
The author believes that:
1. The unconscious mind is far more important in our decisions than we realize.
2. Emotions are bound up in reason and motivate and influence even our most rational thought processes
3. That we are learn from institution and relationships and these have a profound impact on us
The book therefore argues against the model of human beings that are seen to be rational decision makers as in simple economic models. It aims to replace older models of human behavior with deeper, more subtle modesl. However the book suffers as the science is rather weak. There is nothing especially original, and there are better books on aspects of behavioural economics, evolutionary economics and psychology. The author attempts to bring lots of themes together, but it all lacks rigour. There probably is a gap in the market for a book that analyses how people make decisions and the science behind it, but this book falls somewhat short.
A big problem for me is that the main characters are rather dull and the stories of their lives are not especially compelling. If this were a novel it would be a rather tedious one. They don’t really help to draw out his key insights, rather they seem to pad out the word count. The continual setting of the book in the present day makes it hard to suspend disbelief. Finally the characters are not really embodied in any culture or social group and seem to live successful middle class lives, largely on the basis of the fact they are quite intelligent and make good decisions.
Thursday, 19 April 2012
argues the case for cities. The major advantages of cities are that:
1. Cities allow intelligent people to congregate within a relatively small geographic area. Because lots of different skills can be found within cities there is a tendency for knowledge cross pollination.
2. Cities allow economies of scale in entertainment facilities (theatres, museums, restaurants, etc). This allows them to offer rewards to their citizens.
3. Cities are environmentally friendly as a major source of environmental damage is transportation and space usage. Cities can build upwards and use less space and transportation can better be managed on foot or via public transport.
The author provides some evidence that cities dwellers are more prosperous and that higher rates are associated with higher national incomes.
This book does consider that cities sometimes decline, either as a result of environmental shift or government policies. The cities of the USA have shifted over time. This was due initially to the movements associated with the opening of land to the west and changes in the size of boats which required larger harbours. The rustbelt of the USA is due to cities that were overly focused on single industries that have subsequently declined, such as the automobile industry or steel. The author recommends that rather than try to fight the decline with grand public works such cities should have a managed decline with empty buildings being demolished, and funds should follow people rather than buildings.
The book is largely free-market in approach, although it does see a role for government that goes slightly beyond getting out of the way of business. It is argued that governments ought to provide a decent infrastructure and public goods, as things like sanitation can only really be dealt with on a large scale. In general the tone of the book is that governments ought to focus on doing a few things well.
The book then looks at “suburbanisation” which is the trend for large sprawling cities that are common in the South of the USA. These are car based, decentralised cities built on cheap land. The appeal of these cities is their lower cost relative to the more centralised, older cities. They also offer better education and more space which makes them more appealing to young families. The book does not regard this as a positive trend as it increases environmental damage from transport (and also air conditioning required as these new cities are in very hot regions). The blame for this is placed on planning regulations which prevent older cities from building up in skyscrapers and force inner city land values high.
The book ends up asking if the cities in China and India end up as sprawling cities with the related environmental damage of being car powered, or if they will be skyscraper based and rely on lifts and public transport.
Monday, 16 April 2012
Unconventional Success: A Fundamental Approach to Personal Investment
is written by the head of Yale endowment fund.
Like “Smarter Investing” this is no “get rich quick” guide to investment book, it differs from that book in that it is focused on USA rather than the UK. The book similarly advocates investors hold a diversified portfolio - generally preferring government bonds, property and stock market trackers. Investors are advised to avoid the high fees associated with the active investment fund management industry. Where the book is strongest is in examining agent-principle issues. This occurs when the investors aims differ from the managers of the asset or their owner.
Developed World Shares - The management are supposed to be operating for the benefit of shareholders and are often remunerated to increase the returns to shareholders.
Government Bonds (Gilts) - Generally government lend to their own citizens and so are broadly neutral. In developing countries most Gilts are held domestically and in a democracy default is very unlikely.
Company Bonds – Interest payments on bonds are a cost for companies and so they will seek to minimise them. There is a downside risk of default and complex contractual arrangements that can allow bond issues to buy back Bonds if interest rates fall, but unlike shares the potential upside is limited. This leads him to prefer Gilts.
Property - Investments in commercial real estate which have a predictable revenue stream (like bonds) and a residual value at the end of the lease. This makes them operate a bit like a cross between Bonds and Shares.
Developing World Shares – These offer potentially returns are higher, but political factors may limit potential for shareholder as returns are diverted to workers, governments or managements.
He recommends avoiding asset classes where the cost of information are too high for private investors – such as high yield bonds(junk bonds), private equity, hedge funds and asset backed securities. These do tend to form part of his professional portfolio, but he has more resources to evaluate these asset classes than a private investor. A problem with this is that much of his returns are generated from these assets as the high barriers to entry presumably offer the potential for higher profits.
The book argues that professional advisors suffer from a severe agent-principle issue. These professionals as agents seek to maximise their fees. The structures of the industry mean there is often little incentive for these to be aligned with the interest of investors. The result is complex and overly large fee structures (“Where are the Customers’ Yachts?” as another book asks).
The writing feels like it is written by an academic economist and the issues are considered rigorously. What it does not do is offer much in the way of example portfolios or concrete advice for the UK investor. Instead it is more a call to be careful on costs and consider how the interest of the person issuing or managing an asset is aligned with the interest of investors.
The author also guest lectures on the Yale finance lectures with Robert Shiller, this is available from iTunesU.
is written by the head of Yale endowment fund.Like “Smarter Investing” this is no “get rich quick” guide to investment book, it differs from that book in that it is focused on USA rather than the UK. The book similarly advocates investors hold a diversified portfolio - generally preferring government bonds, property and stock market trackers. Investors are advised to avoid the high fees associated with the active investment fund management industry. Where the book is strongest is in examining agent-principle issues. This occurs when the investors aims differ from the managers of the asset or their owner.
Developed World Shares - The management are supposed to be operating for the benefit of shareholders and are often remunerated to increase the returns to shareholders.
Government Bonds (Gilts) - Generally government lend to their own citizens and so are broadly neutral. In developing countries most Gilts are held domestically and in a democracy default is very unlikely.
Company Bonds – Interest payments on bonds are a cost for companies and so they will seek to minimise them. There is a downside risk of default and complex contractual arrangements that can allow bond issues to buy back Bonds if interest rates fall, but unlike shares the potential upside is limited. This leads him to prefer Gilts.
Property - Investments in commercial real estate which have a predictable revenue stream (like bonds) and a residual value at the end of the lease. This makes them operate a bit like a cross between Bonds and Shares.
Developing World Shares – These offer potentially returns are higher, but political factors may limit potential for shareholder as returns are diverted to workers, governments or managements.
He recommends avoiding asset classes where the cost of information are too high for private investors – such as high yield bonds(junk bonds), private equity, hedge funds and asset backed securities. These do tend to form part of his professional portfolio, but he has more resources to evaluate these asset classes than a private investor. A problem with this is that much of his returns are generated from these assets as the high barriers to entry presumably offer the potential for higher profits.
The book argues that professional advisors suffer from a severe agent-principle issue. These professionals as agents seek to maximise their fees. The structures of the industry mean there is often little incentive for these to be aligned with the interest of investors. The result is complex and overly large fee structures (“Where are the Customers’ Yachts?” as another book asks).
The writing feels like it is written by an academic economist and the issues are considered rigorously. What it does not do is offer much in the way of example portfolios or concrete advice for the UK investor. Instead it is more a call to be careful on costs and consider how the interest of the person issuing or managing an asset is aligned with the interest of investors.
The author also guest lectures on the Yale finance lectures with Robert Shiller, this is available from iTunesU.
Thursday, 12 April 2012
Many investing books focus on “get rich quick” strategies. These tend to be around picking specific shares or times to enter or exit the market or investing in unusual types of assets(buy to let housing, ostrich farms, etc).
Smarter Investing: Simpler Decisions for Better Results
is different; it is a champion of the passive investing school. This argues individuals have only a few choices to make, firstly which broad types of asset to invest in and which fees, taxes and charges to pay.
is different; it is a champion of the passive investing school. This argues individuals have only a few choices to make, firstly which broad types of asset to invest in and which fees, taxes and charges to pay.
Many ”gurus” claim you can time the market, moving into shares when prices are low and selling when they are high. However research shows where the gains from shares are generally concentrated in a few days spread randomly over decades. If you miss one of these big winning days it might take years to catch up.
The other frequent claim is that you can stock pick specific shares and beat the market. However it is not possible for the average investor to beat than the market, this is because market is the sum of all participants and for every winner there must be a loser.
The professional investment fund industry promise market beating returns. In order to do this they incur costs in research, buying and selling and administration that eat into returns. However the average performance of funds before costs will on average be the market average. This makes professionally managed investment funds a poor choice for individual to invest in. Such funds tend to advertise based on past performance, even though they state that past performance is no guarantee of future success.
The alternative is passive funds which aim to track a recognized broad index of shares and so have far lower costs. They aim to grow with the market and not to beat it. The market has a strong rate of return over many decades from capital growth and share dividends. Unlike professional managed funds there is no need to pay for star investment managers and so costs are lower and more of the returns from the stock exchange are passed to the investor and not their advisors.
Individuals can also reduce the risk of their portfolio by investing in other assets. The main example is government bonds which pay a fixed rate of interest. The choice of how much of other assets and their relative riskiness is a key investment decision an individual should make. The amount invested in different asset types depends on an individual’s investment timescale and their psychological profile when faced with risks.
The final piece of the puzzle is rebalancing where an individual periodically examines their investment and adjust them back to the desired level. This involves buying and selling assets to return to a target split. So an individual may want to a half their money in bonds and half in shares. If shares rise faster than bonds over a period of time they will have to sell some shares to buy bonds. This is counterintuitive as it seems to involve selling when assets are rising, and buying when they are falling. But it helps to keep risk levels stable and locks in some gains when shares rise, and buys when prices are low.
This book recommends an individual
1. Sets investment goals and timeframes
2. Determines how much they need to invest and the risk they are prepared to bear
3. Sticks largely to asset classes that are well understood and where markets for index funds operate – bonds and shares
4. Rebalances that risk periodically.
5. Relentless fights against taxes, fees and charges that eat into returns
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