Classic Quote on Fallibility and Imperfection in Investing
(Excerpted from Burton G. Malkiel’s ‘A Random Walk Down Wall Street’). But there is never going to be a handsome genie who will appear and solve all our investment problems. And even if he did, we would probably foul it up – as did the little lady in the following favorite story of Robert Kirby of Capital Guardian Trust:
She was sitting in her rocking chair on the porch of the retirement home when a little genie appeared and said, “I’ve decided to grant you three wishes.” The little old lady answered, “Buzz off, you little twerp. I’ve seen all the wise guys I need in my life.” The genie answered, “Look. I’m not kidding. This is for real. Just try me.” She shrugged and said, “Okay, turn my rocking chair into solid gold.” When, in a puff of smoke, he did it, her interest picked up noticeably. She said, “Turn me into a beautiful young maiden.” Again, in a puff of smoke, he did it. Finally, she said, “Okay, for my third wish turn my cat into a handsome young prince.” In an instant, there stood the young prince, who then turned to her and asked, “Now aren’t you sorry you had me fixed?”
The Thing Itself: On Obama’s Three Mammoth Decisions
(Excerpted from Thomas Friedman NYT Op-Ed, ‘Cars, Kabul and Banks’). If there is anything I’ve learned as a reporter, it’s that when you get away from “the thing itself” — the core truth about a situation — you get into trouble. Barack Obama will have to make three mammoth decisions after he takes the oath of office — on cars, Kabul and banks — and we have to hope that he bases those decisions on the things themselves, the core truths about each. Because many people will be trying to throw fairy dust in his eyes. Read the full article HERE.
The Quarterback Problem
(Excerpted from Malcolm Gladwell’s essay in The New Yorker, ‘Most Likely to Succeed’). This is the quarterback problem. There are certain jobs where almost nothing you can learn about candidates before they start predicts how they’ll do once they’re hired. So how do we know whom to choose in cases like that? In recent years, a number of fields have begun to wrestle with this problem, but none with such profound social consequences as the profession of teaching.
Eric Hanushek, an economist at Stanford, estimates that the students of a very bad teacher will learn, on average, half a year’s worth of material in one school year. The students in the class of a very good teacher will learn a year and a half’s worth of material. That difference amounts to a year’s worth of learning in a single year. Teacher effects dwarf school effects: your child is actually better off in a “bad” school with an excellent teacher than in an excellent school with a bad teacher. Teacher effects are also much stronger than class-size effects. You’d have to cut the average class almost in half to get the same boost that you’d get if you switched from an average teacher to a teacher in the eighty-fifth percentile. And remember that a good teacher costs as much as an average one, whereas halving class size would require that you build twice as many classrooms and hire twice as many teachers.
…According to Hanushek, the U.S. could close that gap simply by replacing the bottom six per cent to ten per cent of public-school teachers with teachers of average quality. After years of worrying about issues like school funding levels, class size, and curriculum design, many reformers have come to the conclusion that nothing matters more than finding people with the potential to be great teachers.
But there’s a hitch: no one knows what a person with the potential to be a great teacher looks like. The school system has a quarterback problem.
…In teaching, the implications are even more profound. They suggest that we shouldn’t be raising standards. We should be lowering them, because there is no point in raising standards if standards don’t track with what we care about. Teaching should be open to anyone with a pulse and a college degree—and teachers should be judged after they have started their jobs, not before…That means tenure can’t be routinely awarded, the way it is now…An apprentice should get apprentice wages. But if we find eighty-fifth-percentile teachers who can teach a year and a half’s material in one year, we’re going to have to pay them a lot—both because we want them to stay and because the only way to get people to try out for what will suddenly be a high-risk profession is to offer those who survive the winnowing a healthy reward.
