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Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are the eight most fascinating ones I read this week.
Here you go, kids
Jim Tankersley of the National Journal writes a must-read piece on the unwieldy mess his father's baby boomer generation has left:
Ultimately, members of my father's generation -- generally defined as those born between 1946 and 1964 -- are reaping more than they sowed. They graduated smack into one of the strongest economic expansions in American history. They needed less education to snag a decent-salaried job than their children do, and a college education cost them a small fraction of what it did for their children or will for their grandkids. One income was sufficient to get a family ahead economically. Marginal federal income-tax rates have fallen steadily, with rare exception, since boomers entered the labor force; government retirement benefits have proliferated. At nearly every point in their lives, these Americans chose to slough the costs of those tax cuts and spending hikes onto future generations.
More complicated than it looks
Matt O'Brien of the Atlantic uses a chart from the OECD to show that the idea that European countries' surging borrowing costs were the result of excessive entitlement spending just doesn't hold water:
"There is [no correlation]" he writes. "Europe's biggest social spenders don't have any problems. And Europe's biggest problem countries don't spend that much on social programs."
I was told there would be no math
This is an older article, but still a great read. Derek Thompson breaks down 11 reasons why we're so bad at math. Here are two:
We let our emotions get the best of us. In a brilliant experiment from Poundstone's book, volunteers are offered a certain number of dollars out of $10. Offers seen as "unfair" ($1, let's say) activated the insula cortex, "which is otherwise triggered by pain and foul odors." When we feel like we're being ripped off, we literally feel disgusted -- even when it's a good deal. Poundstone equates this to the minibar experience. It's late, you're hungry, there's a Snickers right there, but you're so turned off by the price, that you starve yourself to avoid the feeling of being ripped off. The flip-side is that bargains literally make us feel good about ourselves. Even the most useless junk in the world is appealing if the price feels like a steal.
We do what we're told. Behavioral economists love experimenting in schools, where they've found that shining a light on fruit and placing a salad bar in the way of the candy makes kids eat more fruit and salad. But adults are equally susceptible to these simple games. Savvy restaurants, for example, design their menus to draw our eyes to the most profitable items by things as simple as pictures and boxes. Good rule of thumb: If you see a course on the menu that's highlighted, boxed, illustrated, or paired with a really expensive item, it's probably a high-margin product that the restaurant hopes you'll see and consider.
Harder than it looks
Where is wealth inequality the highest? Maybe in venture capital, as TechCrunch explains:
Cambridge Associates, an advisor to institutions that invest in venture capital, says that only about 20 firms -- or about 3 percent of the universe of venture capital firms -- generate 95 percent of the industry's returns, and the composition of the top 3 percent doesn't change very much over time.
Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.
- Of the people who think they'll get a bigger bonus, 41% think the number is based on their individual merit.
- Of those who think their bonus will decreased, a whopping 77% think it's due to market conditions or the firms performance -- only 3% who expect a decrease think it's based on their own performance.
So get that? Bonus increase, it's based on me. Bonus decrease, it's the market or the firm.
Demographics are one of the most important variables in determining long-term economic growth. So this report, from NewScientist, should get your attention:
US fertility has been declining steadily since 2008, according to a report published last week by the US Centers for Disease Control and Prevention's National Center for Health Statistics (NCHS). The report was compiled from birth certificates registered across the US.
In 2008, the average number of children per woman was 2.1, roughly the figure needed to replace each parent and keep the population stable. In 2011, this figure dropped to 1.9.
Why we cheat
Duke economist Dan Ariely gives a really good talk on dishonesty, animated by RSA Animate:
Enjoy your weekend.