Sep 15

I recently read and enjoyed Super Freakonomics. The book was a worthy sequel to its predecessor, of course, titled Freakonomics.  Unlike most other books I’ve read, it’s tough to put in a few words what the underlying theme of this book is.

Instead, I’ll offer my take on a few of the anecdotes the book presents, and not assume that you are familiar with either the original book or the co-authors and their work.

Global Warming, not. If there is such a thing, its source isn’t any of the energy related fuels that are routinely blamed. Instead, it’s cows and the methane they produce. Increasing wealth across the world had shifted the demand from grain to meat and this shift is ultimately the cause. The Mount Pinatubo eruption? It actually helped cool the planet a bit, negating nearly a hundred years worth of observed warming. (I am not saying I agree with their conclusions, just sharing them. A number of scientists have spoken again these claims.)

Next, there is a discussion of suicide bombers and the criteria that one would use to discover them in a large population. Unfortunately, even a 1/10 of 1% false positive means that when analyzing a group of say 100,000 suspects, there will be 100 innocent people who are falsely accused. One factor in the data mining is that suicide bombers don’t buy life insurance, at least not until this book was published.

You drink just a bit too much at a party, and live just a mile or so from home, do you walk or drive? We are offered data that suggests it may be safer for you to drive, as you may have a lower chance of injury per drunk mile driven vs walked. (Disclaimer – Don’t do either. Get a ride from a sober person or call a cab.)

Last, a look at the impact of The Club (a metal anti-theft device that goes across a car steering wheel) vs LoJack (a hidden transmitter used to track a car after it’s stolen) and how the visible Club effectively says to move on to the next car, while LoJack has every thief wonder which cars are protected. Interesting way of comparing these two anti-theft devices.

You see, the chapters within the book skip from one seemingly unrelated topic to the next but still maintains an overall feel. Sort of an economist looking at the world through some strange glasses  and sharing his observations. Have you read this book, or the original? What did you think of them?


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Apr 19

This is a Money Mavens Network post, the first of many to come. This time, a number of the Mavens will be writing on the topic of using a Real Estate broker to sell your house. (We’ve not seen each others’ posts before publishing, so any similarities are purely from the category of “great minds thinking alike.”)

A few years ago, pre-crash, a neighbor put his house on the market. When it sold within two days of being listed, I found it odd that he seemed so happy with himself. I told him,”sorry, but I think you got Freaked.” I told him that I had read the book Freakonomics, and was recalling a chapter that discussed the conflicting motivation that a real estate broker had. The author cites a study that showed, all things being equal, an agent will sell his or her own home for an average 3% more than the same home sold for a client.  It turns out that when selling your home, an additional $20,000 may be quite a bit of money to you (as it is to me) but on a 6% commission, that’s $1200. Once it’s split between the listing agent and yours, and your agent splits half with her office, it’s a $300 difference. I went on to explain to my not-happy-as-before neighbor that the very fact that it sold so quick should make it obvious the price was set too low. In his case, the Zillow estimate was nearly $30,000 higher than his sale price and I thought he’d have at least split that difference had he set the listing price higher. Of course the agent’s economic interest was best served by a fast sale. I won’t even try to calculate the hourly return the commission brought her. In the end, the impact to my neighbor was far greater than the 6% listing fee. On a lighter note, this was a neighbor I wasn’t sorry to see move, a bit of schadenfreude, I suppose.

Recently when a friend told me she was putting her house up for sale, I walked her through the story above, explaining the math, the 1.5% of the increase/decrease in price being all the agent gets and leaving her with the warning that the agent is not her friend. To be fair, real estate agents are in a better position to move a house than most of us might be. Buyers are coming to them, and through MLS and their own networks have access to more information than you or I might. On the other hand, the internet along with market pressure is fast eroding that advantage.

Check out my fellow Mavens posts as well:
Len Penzo –  Real Estate Agents: Why You Rarely Get What You Pay For
The Financial Blogger at Green Panda Treehouse – Would You Take A Realtor To Sell Your House?
Tom at Canadian Fiance Blog – Should You Use A Real Estate Agent To Sell Your House?
Paul at Fiscal Geek – Should I Use a Realtor to Sell My House?


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Jun 04

I recently read “Logic of Life” by Tim Harford, and found it to be interesting reading. The subtitle, “The Rational Economics of an Irrational World” was exemplified by most of the anecdotes shared by the author. Publishers Weekly review offers “this book will be of great interest to Freakonomics and Blink fans as well as anyone interested in the psychology of human behavior” and I’d concur. Similar to Freakonomics, Logic of Life is a series of short offerings, here, grouped into 9 chapters, each chapter expanding on a common theme.

For instance, the subject of racial segregation is discussed with an analysis using a chessboard. The board is filled with black and white pieces matching the colors of the squares, i.e. half white, half black, all interspersed. We see how after randomly removing some pieces (people moving out of the old neighborhood) and adding some more (people moving in), the board no longer looks evenly arranged, there are now clusters of one color which in real life attract more of that color. (This concept was conceived by Nobel Prize winner Thomas Shelling and referred to as “The Schelling Segregation Model.”)

Tim Harford touches upon such varied subjects as gambling, the mismatched availability of single men vs single women, and the process of ordering meals when you know the bill is split N ways among the guests. Books such as this offer a different way of looking at the world, one sliver at a time. Many of the issues brought up can certainly be expanded into volumes of research, especially where the issue of race and racism were discussed, the author opening the door to a spin on a variety of issues.


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Oct 04

I wrote about The Law of Unintended Consequences in a post last week, and remarked, “I’d think the guys at Freakonomics would appreciate some of the times this becomes obvious.” Well, it’s either coincidence or someone there reading my blog and agreeing this is a law worth considering and observing its occurrence. A couple days back, Freakonomics published an article titled, “Is the Law of Unintended Consequences the Strongest Law Around?” about how the disability act actually resulted in higher unemployment rates for the disabled. As I stated last week, keep looking, examples of this are everywhere.

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