Why the Rich Go Broke

There is an interesting article at the New York Times entitled Fortune’s Fools: Why the Rich Go Broke. There are some pretty crazy stories about people who have gone from incredible wealth to bankrupcy and near poverty.

One part of the article reminded me of the talk of leverage in the comments section of a recent blog post. F used the term “leverage” which I wasn’t familliar with in the context of finances. In the article, Warren Buffett is quoted using it when talking to a group of college students:

Warren E. Buffett told an audience at Notre Dame that debt and alcohol were ever-present culprits in financial demise. “I’ve seen more people fail because of liquor and leverage — leverage being borrowed money,” he said, according to a transcript of his comments. “You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.

“I’ve never borrowed a significant amount of money in my life. Never,” he added. “Never will. I’ve got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X.”

A real estate tycoon would probably have the exact opposite thing to say (with regard to leverage) but it’s an interesting statement nonetheless.

Advertising via Stamps

I was reading a comic in the newspaper this morning, which joked that the post office should put celebrities on the walls, and “most wanted” criminals on the stamps.

That got me to thinking – why haven’t we made better use of the images that go on the stamps? Millions of letters are handled per day – that square inch of real estate might be valuable. (Actually, I knew the answer – it’s because the post office is a big, partially-government-controlled bureaucracy with no financial incentive to innovate, but I digress). I bet a company would be willing to slap their logo on stamps and hand them out for free. If that form of advertising proved effective for building some sort of mindshare, all letter-sending in the US could become free to people because it would be ad sponsored. I did a Google search and it appears there is in fact a pilot program to start allowing this sort of thing.

…advertising was barred from stamps until earlier this year when Congress overturned a 19th-century law barring commercial images on stamps.

Of course it was.

The Human Development Index

We were having a discussion at work about birth rates around the world, and happened upon an article at Wikipedia about the Human Development Index. It’s a composite number that takes into account a lot of factors (poverty, literacy, life expectancy, etc) for each country around the world. They also have a really interesting map:


The contrast between Africa and the rest of the world is startling, in particular Niger which has the highest fertility rate in the world, as well as the highest infant mortality rate. Also striking is the color difference between Hati and the Dominican Republic.


The difference between a statistical relationship and a causal relationship is one of the few things I will always remember from college statistics. Articles like this constantly remind me why it’s so important for people to know the difference.

Teens whose iPods are full of music with raunchy, sexual lyrics start having sex sooner than those who prefer other songs, a study found.

Songs depicting men as “sex-driven studs,” women as sex objects and with explicit references to sex acts are more likely to trigger early sexual behavior than those where sexual references are more veiled and relationships appear more committed, the study found.

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How businessmen are portrayed on TV

This short article from the Wall Street Journal is interesting (found via the Freakonomics Blog):

The study, titled “Bad Company,” looked at the top 12 TV dramas during May and November in 2005, ranging from crime shows like “CSI” to the goofy “Desperate Housewives.” Out of 39 episodes that featured business-related plots, the study found, 77% advanced a negative view of the world of commerce and its practitioners.

On the various “Law & Order” shows, for instance, almost 50% of felonies–mostly murders–were committed by businessmen. In almost all of the primetime programs, when private-sector protagonists showed up, they were usually doing something unethical, cruel or downright criminal.

It’s kind of interesting to me, because I watch those shows all the time and never noticed.

Interesting Article on Choice

(linked from Signals vs. Noise). This article is a pretty interesting overview of some studies of how people behave in the face of multiple choices.

For one thing, choice can be “de-motivating.” In a study conducted several years ago, shoppers who were offered free samples of six different jams were more likely to buy one than shoppers who were offered free samples of twenty-four. This result seems irrational—surely you’re more apt to find something you like from a range four times as large—but it can be replicated in a variety of contexts.

American football – not well understood by Freakonomics

This blog post, proposing an NFL consolation game like the World Cup’s, demonstrates a fundamental lack of understanding of American football. I would have commented at the site, but others commented well enough about why having a consolation game would be a bad idea (one person even pointed out that we used to have one).

To summarize why it’s a bad idea:

  1. There are too many injuries in football, and no one would want to risk an injury for a game that doesn’t matter.
  2. The outcome of the NFL playoffs isn’t a stack ranking of teams from best to worst. There is no round-robin or multi-game series’. There is just a winner, and everyone else loses.
  3. Similar to the last point, if we introduced the concept of a stack ranking (even if it’s 1-4) that in some respects diminishes the value of the Superbowl, which is the game, seperated by two weeks from all other games, determining one winner.
  4. Numerous people don’t even think it’s a good idea in soccer.