Women Lie: A Mathemetical Example

Some months ago and after around 10 pints of ale, an acquaintance and I had a discussion about women and sex. My drinking buddy, like most men I know, was adamant that he had slept with far more women than his girlfriend had men.

I find this position intriguing. Most men seem to think this and I've always seen it as an act of self-delusion. I know lots of women and the stories they tell me may not necessarily correspond with what they tell potential suitors. Unfortunately, women are still compelled to flatter men's egos in this regard. Women can present a mythical number when called upon just as easily as you tell your boss that your job interview tomorrow afternoon is a "doctor's appointment".

If you consider all intra-species, heterosexual coital encounters it's necessary that just as many women were involved as men. Most men can accept this, they just don't think it was their wife or girlfriend involved.

The fact is that for most men the precise opposite is true: the woman you are sleeping with has probably slept with more people than you have. And there is a mathematical proof.

This radical claim is an extension of something called the "Friendship Paradox". I will avoid trying to get into the mathematical details, but the principle is that someone who has had fewer sexual partners is far less likely to be sleeping with you than someone who has had many. If a woman has only ever slept with one man, it's unlikely it will be you. If she has slept with many men, then you may be in with a chance.

Assume the following diagram shows that sexual interactions between eight heterosexual friends; four men and four women:The table below shows the number of lovers each person has had, how many lovers their lovers have had in total and on average:

Note that the average number of lovers each person has is two. However, their partners have on average had almost three partners each.

Of course, the same can be said for the women: their average partner will have had more partners than them. However, in my experience women seem far less interested in convincing themselves otherwise.

Three points on RSPT

Three points about proposed "Resources Super Profits Tax" that I wish people would talk about more:

1. Dutch Disease
Dutch disease starts when you build a mine and start exporting your resources. If you are a miner, this is great news because you're making money. Importers go to foreign currency markets, trade their own currency for Australian dollars and use the AUD to pay you. Fantastic. If you're a miner.

However, if you're involved in farming or manufacturing this whole transaction is a whole lot less attractive. As demand for Australian dollars increases, the currency appreciates. You have nothing to do with mining and there's been no change to your business model. However, the cost of your produce from the perspective of your overseas customers may have just gone up 20%, and now they don't want to buy as much from you.

This phenomenon is not restricted to Australia - it's a critical issue with respect to the developing world. However, I have never heard anyone use it as a justification for the RSPT. It is important because it means that when the case is presented for other states to benefit from the natural resource wealth of WA and Queensland, it's not just a 'cash grab'. It actually reflects the fact that mining has made material inroads into screwing up the earning potential of non-resource rich states.

2. Mining and Manufacturing Are Different
I have heard arguments protesting against this tax on the basis that it sets a dangerous precedent for other industries. Undoubtedly, rapid changes in tax law may increase the perceived sovereign risk of investing in Australian assets. However, it's drawing a long bow to suggest the RSPT sets a precedent across industries.

The theoretical underpinning for this type of tax is that the capital used to produce resource profits is derived from a common resource. That is, stuff in the ground is owned by the government (and by extension, citizens) until it is dug up and sold. This is not an issue for most industries. In manufacturing you buy inputs, add value through labour, capital and technology then sell them. In banking, you buy money, add value and sell it.

Seen in a different light; the argument about the RSPT is not so much about thinking about how to tax profits, it's about negotiating how much mining companies should pay for their inputs. The government just wants to use profits as one of the factors in setting the price.

3. A Fair Tax Rate
There seem to be two sides to this debate; those who think mining companies should pay more and those who think they already pay too much. Surely, the issue should begin with the question of what constitutes an appropriate level and structure for mining taxation?

The failure to answer this question cuts both ways. Those who support the tax say that miners
should pay "more", but their failure to quantify a limit suggests they would be happy to raise the tax rate to the point of removing all profits and making the industry unviable. Those who argue that current tax rates are already too high fail to present any objective economic argument as to "why?".

Bikes Are Not Cars

There are two groups of people whose actions piss me off in relation to the "bike vs car" wars. The first is aggressive drivers who feel that it's perfectly acceptable to put my life in danger just to satisfy their innate compulsions to behave like cunts. The second is aggressive cyclists who do dumb shit on the road. The latter group piss me off primarily because I can't shake the feeling that it's their actions that create the built up resentments that motivate the former.

The fact is that a bike is not a car. And a pedestrian is not a bike. Incidentally, a pedestrian is also not a car, just in case anyone was confused. I would have thought that this was bleeding obvious, but evidently the motivations of one-sided interest groups are more pervasive than the laws of physics or even a basic ability to make observations about a moving vehicle.

Traffic laws are built on the principle of encouraging the lowest common denominator to avoid doing some of the stupid things they would otherwise do. These laws are not built on an innate principles or a universal rights framework. What this means is that you can contravene some of these laws but that doesn't necessarily make you a bad person.

If you are on a straight, clear highway that you know well on a clear day and you drive at 5km over the speed limit, you are breaking the law but are not necessarily behaving stupidly. Conversely, it may be moronic to travel at the speed limit if you're on an unknown, winding highway in pissing rain. Similarly, some jay-walking might be sensible and other instances might be stupid. Fines are a blunt instrument, which means that it's stupid to issue them without police exercising some discretion.

People will clearly have differing views on where to draw the line and one of the complication of setting laws is to get the balance right. Assuming that a bike is the same thing as a car, as certain new laws seem to suggest is a sure fire way to getting it wrong. Suffice to say, if you had a choice between my 65kg running you over in my 3 tonne Land Rover, or on my 8kg bike, which would you go for?

Marginally Legal

It's the little things that show you care. And when it comes to issues of the AFL's relationship with women, it's the little things that show you really don't give a shit.

I don't suppose that the problem of dealing with reams of hormone-charged, good looking young men, many of them far from home and stocked with cash, is an easy task. However, it's made significantly easier by the fact that most of these guys like what they do and they are on big salaries that would be hard to replicate elsewhere. That's a big carrot, but it's also a big stick to whack them with if they screw up.

By and large, the AFL is getting more comfortable with punishing players for certain indiscretions. Getting drunk on camera, for example, can get you in a whole world of trouble. In fact, getting drunk at all can get you in a lot of trouble. The actions of the "lowest common denominator" have certainly made things a lot less fun for those players who can have a few drinks and avoid getting arrested.

What the AFL is entirely less comfortable with, however, is spelling out to players that treating women badly is not a privilege that comes with the contract.

Wikipedia, that great font of semi-reliable information, provides a "List of Australian rules football incidents" dating back to 1910. While I acknowledge Wikipedia is far from being an exhaustive authority, it's interesting to note there is not a single incident on the list of an AFL player being convicted of rape. On a statistical level, this means one of three things:

- The AFL is a freakish statistical anomaly. I can't help but feel this is akin to those economists that argued that the GFC was the type of event that occur ed once in every six ages of the universe and that the occurrence just co-incidentally occurred in our lifetime; because the alternative was to admit that their models were wrong.
- the AFL is has screened out all rapists. I can't imagine how.
- The AFL has successfully managed to cover up, intimidate and/or pay off anyone who was going to be a 'problem' to them.

Given the last point is the only one that's even vaguely probable, I can't help but feel that the franchise needs to overcome a bit of a credibility issue every time an issue is raised.

It would be wrong to suggest that the position of the AFL hasn't improved over the years; for example, consider the following incident involving all-round nice guy, Brodie Holland:

"Brodie Holland was fined $2,500 for his role in a fight with a young woman over a taxi cab. After Hollands fiancee was involved in a scuffle with the woman, Holland approached calling the woman a "stupid slut" before trying to tackle her, placing her in a headlock after which she bit him on the stomach, before striking her in the head with his fist. His court appearance was pushed back on two occasions so not to clash with his football commitments; once he faced court no conviction was recorded and no punishment handed out from his club, Collingwood."

I suspect that even in the last three years that AFL might have had a rethink about the PR implications of pushing back a court appearance. The position taken with respect to another nice bloke, Andrew Lovett, suggest that there has been some progress. Perhaps Lovett could be the trailblazer in blowing apart the aforementioned lack of rape convictions against AFL players.

However, the franchise is still clearly uncomfortable. I can't help but feel that when two 'senior' St Kilda players were implicated in impregnating a 16 year old the AFL was fighting desperately to avoid the instinct to 'close ranks'. The fact that one of the players managers has come out today saying that "It's a disgrace the way this was put around not only Melbourne yesterday, but Australia and the world rest of the world probably" is an indication that a certain kind of 'boys club' mentality is alive and well in certain quarters.

A brief trawl of a few forums suggests that the implicated players (who have not formally been named) are aged 26 and 27. In my humble opinion, men this age screwing 16 year old girls is pretty shit behaviour. I know it happens. I know it's legal. I can imagine that an unwanted teenage pregnancy is a pretty bad outcome both for the girl involved and the lucky fellow whose sperm won the lottery to have his AFL earnings syphoned off in child support payments.

However, the AFL didn't come out and say any of these things. When once again called upon to implicitly give a view on appropriate behaviour, it said "...this is a private issue between the parties and the AFL will take no further action."

A New Theory on Gym Sessions

I have a new attitude to the gym. My newfound pragmatism is a sure indication that I'm finally getting my mojo back. It's an evolutionary development.

The Old System
Six months ago (at the peak of summer), I had little tolerance for gym workouts. I would haul ass in a few times a week, but my heart wasn't in it. Under these circumstances, the only way to keep myself going was to make it less about work and more about cute matching outfits.



This does help somewhat with getting out the door. Unfortunately, it means that when you catch sight of yourself in the mirror you think "I don't look so bad". Basically, it encourages laziness.


The New System
The New System, which has been made possible by renewed levels of enthusiasm, involves wearing the tightest, most unflattering thing available. I don't give a crap if the other women think I'm fat or there are old men checking out my bum. Gym time is my time - they can deal with thie own issues:





See, when you're in lycra and see yourself in a mirror at the gym, you're reminded why you're there. "Should I do an extra ten minutes on the bike?" Mirror check. "Yep, I guess so". "Should I run through another set of those squats?" Mirror. "Yes, indeed."

This system is awesome. Of couse, it's predicated on a healthy degree of body-loathing and accordingly, it may only work if you're a woman.

CAPM and Super Profits

I love hearing all the hyperbolae from mining companies about how they’re going to pack up their open-cut iron ore mines and move them to down-town Tokyo. However, articles pointing out that mining companies are generally opposed to mining taxes doesn’t really contain enough novel information for me to classify it as ‘news’.

To someone with a finance background, it intuitively doesn't make sense that something called a "super profits tax" will apply to all profits over the government bond rate. There is a relatively simple reason for this; the government bond rate is the rate at which the Federal Government can borrow funds. Financial institutions don’t like risk, and the Federal Government is the lowest risk borrower around because if they do get hard up for cash, they can just print more money.

In my experience, most people with an undergraduate finance degree still don't know what the Capital Asset Pricing Model (CAPM) is. They will have heard of it and they will nod their heads when someone mentions it. However, unless they work in corporate finance, have taken a corporate finance course in the past year or spent more time at the uni library than in the uni pub (not many people I know), they're generally just faking it.

The CAPM (pronounced "cap-em") basically just says that says people don't like risk and the more risk a project has, the less they like it. Not liking it doesn't mean you won't invest in something - it just means you need to expect to earn a higher return on your money for you to invest.

So, how do you quantify “not liking risk”? First, ask "what would you earn on something that had no risk?". Second, ask "how much extra do I need to earn to make up for the risk?".

The answer to the first question is “the government bond rate”. As mentioned earlier, being able to print money is a pretty neat trick when you’re trying to convince someone you can repay them. First problem solved.

The answer to the second bit is a two step process; first ask "how much more than the government bond rate can I earn on the share market?" then multiply the by a factor that compared the risk of a project to the market average. The long term historical average return on the share market is typically around 6% above the bond rate. The risk of the project is a factor that ranges from around 0.5 to 2. The mining industry is pretty risky; there are big capital costs and it’s common to go out and dig a big hole in the middle of nowhere only to discover you’re unearthed a massive resource of worthless dirt. If I assume a mining project is given a risk factor of 2 times a "standard company". This suggests that a "fair" rate of return that the company would want to expect to undertake the project is the risk free rate (assume 6%) plus the risk factor (2) times the risk premium (6%) 6% + 2*6% = 18%.

So how does 6%, or thereabouts, qualify as a "super profit"?

Assuming you don't pay any tax on your first 6% of profits, then you pay 40% for returns above that, earning a (100% equity) return of 18% would mean you pay 0% tax on 6%, then 40% tax on the remaining 12%; a total tax rate of 27%. You wouldn’t exceed the corporate tax rate of 30% until you earned a return of 24% or more.

US Congress Introduces Tie Ban Bill

As part of the new wave of Financial Regulations sweeping Wall Street, US Congress has today introduced a new bill banning the wearing of neckties in all public areas. The introduction of the bill has been anticipated for several months and has generated worldwide attention from both men's groups and political leaders, keen to take strong action in the wake of the fiscal fallout from the Global Financial Crisis

The neck-tie ban has incited strong responses in European countries, where recent financial turmoil has stirred up public anxieties about the potential for financial terrorism. However, some centre-right politicians have criticized the ban. In a speech in Cairo last year, French President Nicholas Sarkozy argued that Western countries should not be “dictating what clothes an American man should wear”.

American civil liberty groups have also been critical of the ban, arguing that it breaches First Amendment rights to freedom of expression. However, constitutional lawyers have disputed this interpretation. The First Amendment enshrines the rights of Americans with respect to religion, free speech, freedom of the press, the right to peaceably assemble and the right to petition the Government for a redress of grievances. Supporters of the Bill have noted that it makes no reference to fashion.

President Barrack Obama, a supporter of the Bill, has argued that the public has the right to demand strong action against the Wall Street institutions that have caused the GFC. He urged leading men's fashion houses to "Pay attention to Main Street, not just Wall Street". Obama noted that the neck tie became fashionable in the 1920s, less than a decade before the onset of the Great Depression and hinted at a potential relationship.

Responses to the ban from men’s rights groups have been mixed. Some groups have argued that the necktie has long been a symbol of male oppression and that the ban will be instrumental in liberating men who have been constrained by the practice. Richard Short, a leading men’s rights activist, has argued that the necktie is irrevocably intertwined with phallic symbolism “by forcing men to display this phallic representations in their business and formal public dealings, we are effectively defining them solely in terms of their sexual identities. By forcing men to wear ties we have taken away their capacity to show emotion and empathy in their public life and turned them into caricatures of large, floppy penises. Ultimately, this focus on the ‘swinging dick’ was the key factor that underpinned the Global Financial Crisis.”

However, other groups have argued that the ban will be counterproductive. Will Schlong, an activist, has argued that enforcing the ban would be detrimental to the men involved. Schlong has long argued that many men have limited opportunity to determine whether or not they wear ties, and are often constrained by what their wives and girlfriends put on their beds in the morning "how can we be issuing fines to these men, when their wives are the ones dressing them?" he argued at a recent rally to oppose the ban. Schlong has further concerns that some men, who’s wives prefer to see them dressed in formal attire, will become further socially isolated if their wives and girlfriends forbid them to leave the house altogether.

Numeracy

NAPLAN tests have just finished. For those who aren't 'in the loop' with either a) school aged kids; b) their parents; or c) education unions, the "National Assessment Program – Literacy and Numeracy" is taken by all year 3, 5, 7 and 9 students across the country. The results will later appear on the Government's My School website, thus providing parents with an empirical basis for haranguing school principals and bored office workers with an quantitative scorecard for playing "my old school's better than yours".

Speaking to my 10 year old sister about her numeracy test, she assures me that she's "stuffed it". Fortunately, our communication is bridged by a certain bond of genetics; whereby we not only share similar aptitudes, but also similar anxieties. I assume she's concerned someone in her class may have done better than her.

Jump forward 15 years. A former colleague and I have drastically differing views about the responsibilities of financial institutions. Neither of us are sufficiently important for our views to matter to the organisation and both of us are sufficiently unimportant that we can spend half an hour arguing about it every morning for a week. My colleague's view (I'll try to render it faithfully) is:

"There are laws in place to protect people. Financial institutions can't break the law, but it's not their responsibility to look after people who don't do enough research before throwing their money at things in the hope of easy money."

It's not that I don't have some degree of sympathy for this kind of pop-libertarian "rights and responsibilities" perspective. I just don't have that much faith in the financial of numerical literacy of most people. I take the view that Macquarie bank and Goldman Sachs JBW go into a negotiation, they both know the game, the rules (or lack thereof) and have the resources to stick up for themselves. But Mum and Dad Public just don't have those skills.

Unfortunately, I can see quite clearly how easy it would be to convince MDP to hand over the family farm:

1. Select an asset that has performed steadily over the past 10 years and show MDP a nice graph. This should assuage their concerns about risk;
2. Cite a historical percentage return (above the bond rate) and spell out how much an investment will be worth in ten years ("the magic of compound interest"); and
3 (the evil part) Use lots of simple language, but pepper it with financial jargon. The jargon makes you look knowledgeable to the uninitiated. The simple language makes them think that they ought to understand the jargon. The result is that they're too embarrassed to ask questions.

I'm not suggesting this - as nice as money is I kind of enjoy being able to get through the day without having to live in the continual knowledge that I'm an asshole. My point is that if I can think it, I'm sure I'm not the only one.

The point is, that as someone with a reasonably good grasp of numbers and financial matters (my colleague had a maths degree and I have an engineering degree and we both worked for the same financial institution), it's easy to forget that most people just don't know about money and numbers. To people who like numbers and are surrounded by other people who like numbers, it's hard to understand how confusing maths appears to most people, who only really want the kind of functional grasp of finance that will enable them to have somewhere to live and some money for when they're too old to work.

I have struggled with why this idea is so hard for a lot of financial types to muster. This idea of "functional knowledge" is precisely how I feel about plumbing, computers and housework. However, a recent working paper on the correlation between financial literacy and sub prime mortgage delinquency (courtesy of Federal Reserve Bank of Atlanta) has suggested to me that perhaps I have been guilty of a lesser form of the same delusion.

The paper appears to lead some institutional cred to my theory that most people just don't have the skills to make rational financial decisions. And that's before they're pitted against a counter party with an interest in them making poor decisions. The frightening part was when I looked through the five questions they used to categorise people into groups - provided in multiple choice form here.

Only 13% of people surveyed got all of these questions correct.

Let's hope those NAPLAN tests are doing some good.

Lift Off

Plastic Lines is my attempt to stave off the mental atrophy from spending all day staring at a spreadsheet. It is an attempt to rally against the frustration of reading media analysis that doesn't include any real information, political discourse that is polemic and news that doesn't seem to be asking the right questions. It is a tribute to smart stuff that I find interesting.

I will make all efforts not to be shrill or trite, but as a recovering smartass I am likely to lapse. I will endeavour to write frequently but I am, by nature, a little unreliable. I promise to re-read before I publish, but I will invariably make grave spelling and grammatical errors. I probably already have. I apologise.