Why I am not writing, and why it is a mistake

It has been a while since my last post. I have wanted to publish more regularly but it somehow escapes my will. For instance, I have read several books—So you’ve been publicly shamed (Jon Ronson), Letters to a young contrarian (Christopher Hitchens), and The caged virgin (Ayaan Hirsi Ali)—and I have yet to write proper posts about them. I am almost certain I have identified the main reason—other than lack of time: I have a lot more to read, and I fast-think (system 1) that reading is a better use of my time. I think this is wrong—or that if I slow-think (system 2) I would arrive to a different answer. Here are the two main reasons I get when I slow-think:

Reason 1: writing (or, in general, discussing) about what you just read helps structure and solidify your thoughts, sometimes providing new insights that you had not thought about.

Reason 2 (and probably the most clear contrast between systems): I find reading far easier than writing, and hence I do need to practice writing much more if I want to get any better—which, needless to say, I want.

So all these fancy references to Daniel Kahneman are just to say that I will try to have a post a week from now on. We’ll see if system 2 can impose its will—although if history is any indication, I am all in for system 1.

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On Tyranny, by Timothy Snyder

Post-truth is pre-fascism (Timothy Snyder)

Eternal vigilance is the price of liberty (Wendell Phillips)

Timothy Snyder is a Professor of History at Yale and, in 2017, he published On Tyranny: Twenty Lessons from the Twentieth Century. The timing of the publication is not random: it was a clear reaction to the Trump presidency and the rise of populist movements reaching political power around the world. More than lessons, I would say they are principles to follow that should make it more difficult for authoritarian regimes to rule.

Every lesson is backed by historical events (lessons) that occurred usually in previous tyrannic regimes, mainly in Nazi Germany or Communist USSR. I found some of them particularly compelling. He cites Vaclav Havel and his essay The Power of the Powerless. In communist Czechoslovakia, the regime could survive in the late seventies not because of massive support among the population, but because of an inadequate equilibrium. He uses the example of a greengrocer who has a sign that reads “Workers of the world, unite!” in his shop. The greengrocer does not endorse communism, but he wants to signal to authorities that he will not cause any problems. When many citizens behave like this, an authoritarian regime can go on. That is why his advise, in this case, is: Take responsibility for the face of the world.

While I basically agree with everything he explains, I still feel one should have written this book probably earlier. For instance, when a President started to authorise executions of American citizens without trial via drones. It is difficult not to see this as something a tyrant would do. While there were voices denouncing these facts—see this article from Glenn Greenwald—it is almost sure that had the president been a republican, the concern around this fact would have been much higher (there is a very funny video by We The Internet on this).

But as I was saying, the book is great. It highlights how important individual attitudes and behaviours are. Taking some responsibility for our actions can go a long way into preventing the rise of authoritarian regimes. It is sometimes difficult, after living in relatively peaceful and democratic societies, to keep in mind that this is not a default state. The authoritarian drive awaits in the corner; without the constant vigilance, it can slowly meddle in our day-to-day affairs.

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Universal Basic Income

Andrew Yang is a Democratic presidential candidate for the 2020 election that has a key policy proposal: a universal basic income (UBI) of $1,000 a month for every American. I have not precisely been a supporter of this kind of measures, but Yang makes a good case and I am definitely more in favour after listening to him. To know more about him, check the podcast with Sam Harris and  the one with Joe Rogan.

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Extreme Ownership, by Jocko Willink and Leif Babin

I was attracted by the notion of extreme ownership because of the tendency of human beings, and me in particular, of blaming bad luck when things do not go our way. I have always been wary about these thoughts. Things like “well, this is a mistake but it was done by my co-author, so it is not my fault”, or blaming administrative work (that I had to do) for the delays on my submissions. This is not to say that I made all the mistakes. This is to say that this way of thinking is not really useful, and that understanding the problems in life and then taking responsibility (taking “ownership”) to solve them seems much more effective.

In the book, Extreme Ownership, Jocko and Leif, who were part of the SEAL team in the Iraq war and spent a lot of time in Ramadi (they were leading the team of the American Sniper), explain how they apply this concept of extreme ownership to their day-to-day operations as well as their current business consulting activities. These are principles about leadership, so they can be applied to many things in life.

There are a total of 12 principles and the structure is as follows. First, either Jocko or Leif explain a situation in Ramadi where this principle was (or should have been) applied. Second, they explain the principle in plain words. They finish the chapter with a case in their consulting activities where typically a firm has a problem and this principle can be applied.

I have a problem with this type of books, however. They are way too long. For some reason, editors must hate short books (presumably because they cannot charge £15 for them) and you end up with books that are interesting but would be a delight to read if they were 150 pages long (in this sense, Sam Harris’s last books are great, especially Free Will and Waking Up: short and to the point). I like the principles, and I particularly enjoyed the business applications (typically 4-5 pages long). But their stories about the war are long, too long. They try to be as accurate as possible, and probably some people enjoy the military jargon, but unfortunately not me. The leadership ideas are good but sometimes are lost in the long war stories that are often just tangentially related to the principle being discussed.

What are these principles? Just to name a few, obviously extreme ownership, or the understanding that it is your responsibility as a leader whether or not the project succeeds or fails. Another principle I found interesting is the leading up and down the chain of command, which prevents people from blaming the leadership in many situations. In their case, they complained about the vast amount of paperwork that they had to do to get each mission approved. This is a recurrent complain in many places. But they argue that this is because they are not providing useful information to their superiors, and acted to change that—in other words, they lead up the chain of command.

The last one that they mention is discipline equals freedom. This might sound Orwellian, but it is not. By being disciplined, which is nothing more than acquiring habits that make your life better, one gets more time to enjoy it. Eating healthy, exercising, meditating… it might take discipline but it allows you to life a better life.

All in all it is an interesting book that give great insides, in particular for those that are interested in leading, although they can be applied to many situations in life. Jocko, by the way, has a podcast where he discusses leadership: Jocko Podcast.

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6th Emerging scholars conference – more papers

Continuing my brief summaries of some of the papers presented in the December’18 Emerging scholars conference (see the first one), I bring a paper on how capital regulation affects the repo market by Antonis Kotidis and Neeltje van Horen.

I have talked about the leverage ratio several times in this blog. Ages ago I discussed a different paper looking at the same issue (here and here), and I also talked about my own paper looking at the derivatives market (here and here). This is a topic that I find particularly interesting given how the leverage ratio—and, in general, post-crisis regulation—differs from the previous regulations.

I had my issues with Allahrakta et al. (2018), especially in terms of identification. Since my posts in 2016 it has been published in the Journal of Financial Intermediation, which is a great journal. My main issue was that they did not have a clear shock to exploit. In fact, looking at the data, they observed a break in the series around the end of November 2012, when nothing happened. They concluded that dealers were realising at that time that the LR would affect their repo business. But this is a backward reasoning: they start by assuming the LR affects repo, and then they provide an explanation on why we see this effect happening when no regulation is being announced or implemented.

Kotidis and van Horen, on the other hand, pick a particular change of the leverage ratio in the UK which provides a much better identification. From January 2017 onward, the biggest banks in the UK had to calculate the leverage ratio by using a daily average rather than their situation at the end of the month. This is an important change. Most repo transactions are overnight; this means that if a requirement, such as the leverage ratio, depends on the state of the balance sheet at the end of the month, a bank can simply reduce the amount of repos for one day to reduce the requirement. This Bloomberg article, where I commented, picked on this issue.

Repo transactions are particularly taxing in terms of the leverage ratio due to their nature. They utilise balance sheet—and hence the leverage ratio applies—but they are secured and have a very low return. Therefore, they are a great candidate to be affected by this requirement.

From January 2017 onwards, as I was saying, UK banks could no longer use the window-dressing “trick”. In order to identify the effect, they look at clients that enter into (bilateral) repo transactions with a UK dealer and a non-UK dealer. This is important because different dealers might have different clients, and thus if we observe that the total repo portfolio of UK dealers drops after the regulation it could be due to their clients demanding less, not because the dealers themselves reacted. But by fixing the client (i.e., by using client fixed effects), then the effect that they pick is much more likely to come from the dealer.

They find that UK dealers did reduce liquidity in the repo markets after this reform, and this affected mainly small clients rather than the big ones. The reduction comes in terms of volume and pricing, but not haircuts and maturity. They also find evidence that non-UK dealers stepped in to substitute for the drop.

This is a great addition to the set of papers looking at the effects of post-crisis regulation. We are still figuring these things out—many of the new regulations have just been introduced in the past year or two—but we are understanding more and more. Hopefully central banks will not lose their appetite to figure out which regulations are working as intended and which ones might have unintended consequences.

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Rationally Speaking with Julia Galef

I am sometimes accused of overthinking things. I am still mulling over whether that accusation has merit (Julia Galef)

Rationally Speaking is the podcast of New York City Skeptics and is hosted by Julia Galef, a writer and speaker on matters about science and reason (wikipedia page here). I have just discovered this podcast recently but I have to recommend it right away.

Julia has a mix of skills that makes her a fantastic host for this type of podcast. She has a science background and is comfortable speaking with scientist and academics in different branches. Her scepticism is shown when she suggests alternative explanations to the assertions made by the guests. She does a lot of research on these guests and comes up with very interesting questions. And she does all this while speaking clearly and in terms a general audience can understand.

The episodes are usually around an hour long, which is perfect for discussing important topics without needing more than a day to listen to all of it. The last episode—and this is the reason why I decided to recommend it here—features Sarah Haider, co-founder of Ex-Muslims of North America. Two personal role models discussing issues regarding the work that EXMNA does, the possible trade-offs between nuance and activism, and free speech. A delight.

I do listen to several podcast, but just some episodes that I am interested in. Until now, there was only one that I never missed: Making Sense (formerly known as Walking Up) by Sam Harris. From now on, however, there is another one that I will listen religiously: Rationally Speaking, by Julia Galef.

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The Four Horsemen

The terrorist attacks of 9/11 changed the world. There is little doubt about it. Apart from the two wars that followed, and the huge impact on security and international politics, it brought the attention of religious fundamentalism in the Western society. This pushed some secular intellectuals to be more open and frontal in their criticism of religion. Between 2004 and 2007, four books came out to become bestsellers: The End of Faith, by Sam Harris; The God Delusion, by Richard Dawkins; God is not Great, by Christopher Hitchens; and Breaking the Spell, by Daniel Dennett. The four men participated in many debates during their book tours, which made them the most prominent figures of the New Atheism movement.

During September 2007, the four of them met at Hitch’s house in Washington DC. They recorded a two-hour conversation—the video can be seen here. And more than eleven years later, on the 14th of February 2019, the transcript of the conversation has finally been published as a book—The Four Horsemen: The discussion that sparked an atheist revolution. It seems that Ayaan Hirsi Ali was supposed to attend the meeting as well but had to cancel at the last minute.

They focus the conversation, obviously, on religion. But they touch on a  range of topic within religion. They discuss arrogance—a typical criticism that they receive—and offence, remarking that there is probably nothing more arrogant than to think that you are doing God’s work. They also talk about the literality of scripture and the space between theologians and the masses. They discuss authority in religion and science, highlighting how in the latter there is always competition. They wonder whether criticising religion could actually be a bad thing to do. And they finalise arguing whether some religions are worse than others.

The conversation is great especially if one is familiar with the different topics that they debate. Of the four, Sam and Hitch are the ones I have read the most. It is great, for instance, to see how Sam introduces the concept of spirituality without religion: “I think there is a place for the sacred in our lives, but under some construal that doesn’t presuppose any bullshit“. This would be a book several years later. Or to see Hitch talking about the many debates and conversations he has had with religious people, and being reluctant to say that he would wish that religion would disappear because he would have nobody to debate.

While reading the book one wishes that the conversation would have lasted twice or three times as much. Or more. This cannot be repeated—Hitch died seven years ago—but at least we get to relive it. Maybe too informal at time—this is a conversation among friends, not a debate—the only shame is that they did not spend more time on topics that they disagree. But it is overall a fantastic conversation that anyone with a slight interest in religion should read.

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