What I've Been Reading This Week (For Week Ending 4/8)

Apr 07, 2017
Behavioral Finance, Credit Scores, Career, Research, New Products, Current Events, Chart of the Week, Credit Reports, Math
  • Tesla now worth more than Ford but their valuation depends on hitting aggressive sales targets for Model 3 (Economist)

But Tesla is going to have to crank production up by an awful lot more to make the 500,000 cars a year which Mr Musk wants to see pouring off the production line by 2018, let alone the 1m intended for just two years later. To reach those volumes, Tesla is counting on its forthcoming Model 3. Priced at around $35,000, the new car will cost around half that of the other two models. Due to begin production later this year, the Model 3 is supposed to take Tesla into the mass market, where it will face stiff competition from plug-in vehicles produced by existing mass manufacturers, including GM, Nissan and BMW.

Researchers at Utah State University found that students who completed a basic financial-education course were more willing to wait for a bigger financial payout than those who didn’t. Put another way, those who took the class exhibited lower levels of impulsive behavior.“We see evidence that we can teach people self-control,” says William DeHart, a graduate student at Utah State University and one of the authors of the study, which appeared in PLOS ONE, a scientific journal published by the Public Library of Science, in July 2016.

Forget comic books or vintage lunch boxes. Credit cards, and the prizes they earn, are the hot new collectibles for millennials. Fanatics sign up for new cards in every city they visit. They get multiple versions of the same card. (That’s often allowed.) They angle to use their cards to cover tabs at restaurants. Driving their obsession is an arms race among credit-card companies to offer the best rewards. The trend has spawned blogs and message boards where card holders trade tips and brag about their conquests.

The most surprising finding is that search is common among employed workers. Depending on the specific measure used, roughly one in five or one in four employed workers actively looked for work during the four weeks preceding the survey. Almost all of the unemployed actively searched—a predictable finding, given the definition of unemployment. (The only exceptions come from those on temporary layoff.) A small fraction of respondents who were not in the labor force also searched. These are respondents who searched but were not available to start work in the next seven days and were therefore classified as out of the labor force.

Why do you they do it? Well it works…”Second, employed workers actively looking for work receive the greatest number of employer contacts and job offers. So, again, searching while employed seems to have the highest return in terms of generating new offers.”

  • Regulators are starting to have an impact on payday lending as their business has declined recently (Economist):

The threat of regulation may already have had an effect. The Centre for Financial Services Innovation, a non-profit group, reckons that payday-loan volumes have fallen by 18% since 2014; revenues have dropped by 30%. During the first nine months of 2016, lenders shut more than 500 stores and total employment in the industry fell by 3,600, or 3.5%. To avoid the new rules, lenders are shifting away from lump-sum payday loans toward instalment loans, which give borrowers more time to get back on their feet.

  • Abnormal Returns blog about the ongoing challenges of finding a business model to support quality content creation and curation. It had this money quote that resonated with me (Druce Vertes via Abnormal Returns); please let us know if we are meeting your quality and credibility standards!:

I think if we could somehow build a pervasive ‘pay it forward’ karma and reputation ecosystem that rewarded people for sharing quality and burying fake news and garbage, and somehow get back some of the old sharing ethic, it would go a long way. That’s what I’d be thinking about if I were a VC or online community entrepreneur. Tools to let people signal quality and build credibility and fight the noise machines.

  • Stats teachers or anyone that has an interest in data visualizations will love this image of one data set visualized 25 times (from Flowing Data). You might ask your students which one they like the most. Here’s the set-up:

You have to guide the conversation though. You must help the data focus and get to the point. Otherwise, it just ends up rambling about what it had for breakfast this morning and how the coffee wasn’t hot enough. To show you what I mean, I present you with twenty-five charts below, all based on the same dataset. It’s life expectancy data by country, it’s from the the World Health Organization and it spans 2000 to 2015. Each chart provides a different focus and interpretation.

  • What’s a Federal Reserve’s view on FinTech? The President of the Philly Fed gives his take on a recent speech at Penn (from Big Picture Blog):

So, there’s definitely some very interesting and potentially game-changing innovation coming out of fintech. But fintech overall is actually just natural market evolution and the assumptions about disruption — or indeed, creative destruction — are, with apologies to Schumpeter, probably out of proportion.

Part of the reason things can look like a revolution instead of an evolution is that we’re viewing them in isolation. If you look along the broad history of an industry, you put things into context. You see the way banking evolved its products and appendages just like the first single-cell organisms evolved fins and gills and eventually feet and legs. Securitization, credit scoring, prepaid cards — which my team had already done about 20 studies on before anyone was paying much attention to them — don’t look revolutionary on the scale of fintech. But neither does the Commodore 64 when you stand it next to a MacBook Air. Yet we’d never overlook the effect of widely available in-home computers.

So, while much of this is exciting and the technology is very, very cool, I always warn against overstating its overall effect. This is, by and large, the same kind of evolution the banking system has seen for the past 40 years; it’s just a different delivery system.

  • Computer security is broken from top to down but believe it or not things are starting to improve (Economist):

“The default assumption is that everything is vulnerable,” says Robert Watson, a computer scientist at the University of Cambridge. The reasons for this run deep. The vulnerabilities of computers stem from the basics of information technology, the culture of software development, the breakneck pace of online business growth, the economic incentives faced by computer firms and the divided interests of governments. The rising damage caused by computer insecurity is, however, beginning to spur companies, academics and governments into action.


About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.