Financial Crisis: Bad Poker Players?

I have just finished reading Jonah Lehrer‘s book How we decide.

First, I loved the book. It is very well written and interesting throughout.

Second, when I reached the section on poker players, I was struck. It instantly made me think about the very recent financial crisis. Not because, I want to compare financial instruments to gambling, but rather because the decision process within both groups (financiers and poker players) is, in my view, quite similar.

In the book, when Lehrer talks about good poker players, he relates to their ability to stop calculating the odds and refer to emotions. Basically, the rational side of the brain becomes rather secondary.

The financial crisis appeared to be the exact opposite: students of finance and economics forgot (or put aside) the “something is not right” feeling and favoured some set in stone math prinicples.

Many reporters seem very keen on saying that economists did not see the crisis coming, but it makes me wonder if it’s not more that analysts and economists indeed saw it coming, but they instead ignored their perceived emotions and continued to refer to overcomplicated calculations that could not fail – theoretically.

Was the financial crisis really unpredictable or was it a badly played poker hand?

Music, TV and Movies: Songs from Motion Pictures

I’ve always loved music, movies and TV shows. I’m part of the new breed of screenmusic geeks: People who are huge fans of songs playing during TV shows and movies. The importance of those songs is too often ignored.

Some movies and TV shows are able to combine a great script, stellar acting and enchanting music. I can think of a few examples of when the screen combined those three elements: AMC’s Mad Men and HBO’s Entourage are sure picks for screenmusic.

I can think of numerous episodes where Don Draper’s mysteriousness is greatly enhanced with just the right song. On top of my head, I can quickly remember the song by Gordon Jenkins entitled Caravan, playing when he rides the train back home during the very first episode.

Here’s a link to our blog post on the issue: the Song Detective Blog

And the link to our platform: Song Detective HQ

A Texas Not-So-Much-Miracle Update

Paul Krugman reiterates that he thinks that the Texas miracle is Republican mumbo jumbo. However, I’ll reiterate that Texas might still have a slight edge over New York and Massachusetts. I highly doubt that the result is budget related, but I simply think that unemployment rate (depicted in Krugman’s graph) does not tell the whole story.

When looking at employment since peak rather than unemployment rate over time, Texas remains above (relatively speaking) New York and Massachusetts. Again, absolutely not a miracle, but Texas is, according to those numbers, doing a bit better.

Update: Free Exchange at The Economist Online has a post on the issue.