What I Have Been Reading – April 2019

A few stories that caught my eye over the last month

The Life And Lies Of Anna Delvey

Sorokin has a Russian passport, but she tricked many New York elites and socialites into believing she was an heiress from Germany with a bottomless bank account.

In 2016 and 2017, Sorokin lived out of luxury boutique hotels, including the 11 Howards in SoHo, dined in expensive restaurants and often shopped at designer boutiques, reportedly offering to cover the bill for her friends any chance she could.

According to evidence presented at her trial, the 28-year-old also forged financial documents, lied about her family, and faked having an accountant and financial adviser in an attempt to scam banks into giving her multimillion-dollar loans, the Times reported. After a banker was unable to verify Sorokin’s documents, City National Bank denied Sorokin’s request for a loan of $22 million



Building A Travel Empire

Bookings acquisition alone created roughly $88 billion in value for Booking Holdings, nearly as great as eBay’s purchase of PayPal, Facebook’s deal for Instagram, and Google’s acquisitions of YouTube and Android. And, our calculations don’t even take into account Priceline’s acquisition of Active Hotels, which occurred a year earlier than that of Bookings.


Is your bank robbing you?

After that one disclosure from only one bank/brokerage firm, approximately $100 billion was moved from a 2% money market into a 0.3% bank sweep in one year. This move just about doubled the amount of customer deposits in their lower yielding sweep account. So, that will be close to $3.4 billion in earned interest taken straight from customers’ pockets in only one year


Relative And Absolute Income

Researchers asked almost 300 subjects how they felt  about different relative and absolute levels of income as follows:

A: Your current yearly income is $50,000 while everyone else earns $25,000.

B: Your current yearly income is $100,000 while everyone else earns $200,000.

(Prices are what they are currently and prices (therefore the purchasing power of money) are the same in states A and B.)

Around 50% of respondents preferred Option A, the lower absolute income, so long as their relative income was higher than those around them. This study was conducted in 1995. Since then the ability to compare yourself with others has exploded.

Social media is constantly shoving accolades, promotions, vacations, 30 under 30 lists, and the fake Internet lives of Instagram “celebrities” down your throat. In the past, we compared ourselves to our peers, co-workers, family, friends, and members of our communities. There were always standouts among these communities but the Internet has made everyone is a small fish in a big pond.

Now we can compare ourselves to every humble bragger from around the globe and it’s making many of us miserable because everyone’s life is perfect on the Internet and our real life is flawed. This is a game you’ll never win because the other side is always cheating.



Warren Buffett’s Outperformance Secret

The average private equity fund charges 2-20 as a fee structure. 2 percent of assets, and 20 percent of profits. It’s a standard fee structure. Berkshire charges no fees. Buffett’s salary is $100,000 per year.

There’s nothing else attached to it. Just that one fact alone, the difference between the 2-20 fee structure, and Buffett charging nothing accounts for 4 percentage points of the outperformance over time.

A talk by Morgan Housel


Happiness Vs Satisfaction

Kahneman contends that happiness and satisfaction are distinct. Happiness is a momentary
experience that arises spontaneously and is fleeting. Meanwhile, satisfaction is a long-term feeling, built over time and based on achieving goals and building the kind of life you admire. On the Dec. 19 podcast “Conversations with Tyler,” hosted by economist Tyler Cowen,

Kahneman explains that working toward one goal may undermine our ability to experience the other.



Why The Low Inflation?

In other words, the capitalists killed inflation. In the decades after World War II, Polish economist Michal Kalecki depicted inflation as a product of the struggle between business and labor. If workers manage to extract big wage increases, their employers recoup the costs by putting through price increases, forcing workers to seek even more, and so on in a wage-price spiral. In contrast, if workers have little or no leverage, as is now the case in many industries, the wage-price spiral never gets started.



The Mental Burden Of Debt

Getting rid of debt doesn’t just unburden finances, it takes a weight off the mind that clears up cognitive functioning, lessens anxiety and improves impulse control.


Ageing Populations

For the first time in history, the Earth has more people over the age of 65 than under the age of five. In another two decades the ratio will be two-to-one.



The Friendship Paradox

The “friendship paradox” refers to the fact that, on average, people have strictly fewer friends than their friends have.

This oversampling of more popular people can lead people to perceive more engagement than exists in the overall population. This feeds back to amplify engagement in behaviors that involve complementarities. Also, people with the greatest proclivity for a behavior choose to interact the most, leading to further feedback and amplification.

This is consistent with studies finding overestimation of peer consumption of alcohol, cigarettes, and drugs and with resulting high levels of drug and alcohol consumption.