Related book: The End of Normal: The Great Crisis and the Future of GrowthDeal Tips From Buffett and Berkshire’s Other Managers (LINK)
Related book: Berkshire Beyond Buffett: The Enduring Value of ValuesCognitive Constraints on Valuing Annuities [H/T @jasonzweigwsj] (LINK)
This paper investigates consumers' difficulty in valuing life annuities. Using a survey-based experiment, we show that the prices at which people are willing to buy annuities are substantially below the prices at which they are willing to sell them. This finding is not a simple endowment effect, because it prevails even when the annuity and lump-sum option are both presented as deviations from their own endowments. We also find that buy values are negatively correlated with sell values, as those individuals who express the highest sell values tend to also express the lowest buy values. This sell-buy valuation spread is negatively correlated with cognition; that is, the spread is larger for those with less education, weaker numerical abilities, and lower levels of financial literacy. Our evidence contribute to the emerging literature on heterogeneity in financial decision-making abilities. Importantly, it implies that many people lack the cognitive skills required to manage their retirement asset decumulation decisions optimally.Paul Graham: The Fatal Pinch (LINK)
Scott Adams: The Human Mind (LINK)
Robert Sapolsky Explains the Biological Basis of Religiosity, and What It Shares in Common with OCD, Schizophrenia & Epilepsy (LINK)
Book of the day: Pay Attention to the Thin Cow