Fluff from the naval of my mind

With each announcement of disaster in the world people flock to help. The questions are, why they do this and do they really help?

Take three events, two recent and one a little older; the recent Japanese earthquake and subsequent tsunami, the New Zealand earthquake, and the Haitian earthquake. Tragic events all and in each case mass appeals where immediately launched to raise money. People in huge numbers mobilised to raise and give money to help the victims of these events. This pattern is a common one and we are all used to seeing these appeals within moments of such large scale events.

These sudden and shocking events are ‘sexy’ and the concomitant media furore all but guarantees that we will see plastered across out screen images of the most appalling human tragedy for days or week following the event. This is free advertising for charity appeals, why would they not accept it?

On face value we might rank these three events (in order of immediate need) as; Haiti, New Zealand, Japan. While Haiti’s economy is in tatters (in no small part due to the actions of the rest of the world) it benefitted from immediate assistance the most. New Zealand’s economy is a first world economy but less robust than many, the assistance (especially immediate assistance with relief and rescue) was welcomed (it remains to be seen how that event plays out but I’d willingly bet New Zealand recover more swiftly than Haiti). Japan is a vast economy (behind only the US and China in the world rankings) and a nation well used to earthquakes. It will recover very quickly and, to date, has requested no external help (beyond calling on Russia to send some specialist equipment to deal with the nuclear power plant issues).

The problem, for those wishing to help, is that this exposure and the appeals show the immediate tragedy and tell us that we can help by giving money. Money to help rebuild, money to help fund rescue and relief efforts. The problem is that the donor has very little information on which to assess whether their money is actually helping or, as is sometimes the case, harming, or in other cases, irrelevant. What charities know donors respond to is the emotional appeal. They know that tragedy and the constant exposure to tragic images engenders people to want to help. The maxim seems to be ‘get in first, get in fast’ when it comes to raising money.

Without good information and an informed perspective though the donor’s money may be wasted, or at least it may not benefit the intended target, in several ways.

Charities raising money for specific events must, generally, ring-fence those funds. This is intended to ensure that the money is targeted at those the donor intended to help. However, some organisations put ‘small print’ into the giving arrangement that essentially says, ‘if we don’t use your money to help these people we will add it to a general pot for helping others’. Now, this may be acceptable to most people. After all, providing the money does some good, what matter if the people we were trying to help turn out not to need it so the money is given to someone else.

I don’t want to seem curmudgeonly here, but if the donor felt compelled to help the needy, why not give to charity on  a regular basis irrespective of any specific appeal? I do. I give regular, if modest, amounts to at least four charities. I selected these charities because I believe they do good work and I want to help them continue to do that good work. I encourage everyone to do the same. Charities help many more people with this long-term donation based money than they do with flash appeals because they can plan and invest over time.

The problem, for the donor, is one of trust. There is, I think, for many a tacit assumption that when the put a dollar into the flash appeal tin then someone on the other end will receive a dollar’s worth of help. Apart from the naivety of this view in general there is the more insidious problem that the dollar so given could end up going to someone not involved in the flash appeal, indeed may go to a cause that the donor positively objects to. There’s simply no reliable way to know for certain.

I’m a big believer in reading. A lot. And on a wide range of topics. It leads to much more than simply acquiring information and knowledge. (I am actually quite bad at remembering raw facts, I tend to remember principles. Things like names and dates are only vaguely recalled.) My reading style leads, for me, to synthesis; the reinforcing of knowledge and the creation of new ideas.

I’ve recently been revisiting books on Chess and Go, two very different but fascinating games. At the same time I am reading a book about information, three others about market investment and trading, another about evolution, and another on the psychology of trading. The connections between these topics are several and sometimes surprising.

Information theory is bound up with evolution and genetics. Trading is related with game theory and information theory. The psychology of trading is related to the psychology involved in chess and Go (recognition of patterns, avoidance of bias, planning, strategy, tactics, and pressure decisions).

Chess and Go are both games of complete information (both players know everything about the state of the board), where Poker (a game I have studied in the past and concluded was very much a game of money and skill, and not cards and luck as many suppose) is a game of incomplete information (players hold cards that only they can see and which are unknown to other players), in this respect Poker is a lot like trading and has a lot to teach about investment if you care to look. Gosh that last sentence got away from me a bit.

Seeing how one can look at market charts and divine from them the ebb and flow of sentiment among groups of investors, see how they react, see the bulls and bears react to news and the market movements. All this from some simple mathematics, a dash of game theory, and a sprinkling of applied psychology. (It’s a shame these techniques are less effective in predicting such behaviour!) Oh, and while I think of it, another book I read recently stimulated more thinking on markets, mass psychology and how it all relates to investing and social networks (see, I told you reading across topics triggers lots of connections).

Sometimes people ask me whether reading on so many topics at the same time is confusing. Well, sometimes, but rarely. My purpose in reading like this is to create opportunities for picking up ideas from different topics. It also helps me keep reading because I may be in the mood for reading some Chess studies before tea, then early evening may find me more inclined to read about trading, later I may read information theory, game theory, or perhaps the history of China, or some physics, mixing in some philosophy later and finishing with a dip into the psychology of intuition before bed.

Sometimes I’ll read straight through. One book, one day. If it’s a big book I may spend a week dipping in and out. More typically through I mix them up.

As I read one book I have ‘aha’ moments where I see the connection to others I am reading, or have read in the past. These connections between subjects get even more frequent the more you read.

In addition to direct relationships I find odd little things will start me off on a idea that sometimes bears fruit, and sometimes falls flat. Sometimes an odd idea pops into my head while reading something and this will send me careening off looking for information on an entirely unrelated topic (and often results in a list of books add to my ‘to be read’ list). It’s all a bit of an adventure.

My point here is that reading a wide range of material almost always reveals interesting links between topics and this helps to increase my understanding of information at both ends of the link. To improve your chances of hitting these connections, read more. The books linked to above are but a small sample of those I’ve read on each topic over the years. None of this makes me an expert in any of the fields mentioned (not by a long shot). My interest is to obtain a reasonably coherent understanding of a topic so that I can apply what I learn to other things. I seldom remain committed to any single topic for very long but I do enjoy broad interests, hence ‘eclectic learning’.