Author: Louise Pryor

Interesting Uncategorized

Interesting links

Post author By Louise Pryor
Post date 20 November 2011

Some things I’ve found interesting:

Have you seen those Google ads on the tube? The example they give of a strong password isn’t so strong after all. It’s always worth checking the statistics.
The important field – as usual with xkcd, make sure you read the alt-text
Language is not writing, and some myths that arise from the mis-identification
Sometimes, animations are the best way of showing data. This is a great one on global warming.
Don’t believe everything you read on Wikipedia – and remember the alt-text!

Tags climate change, data, password, security

Environment

The real cost of keeping warm

Post author By Louise Pryor
Post date 20 November 2011

If we are to deal with climate change, the price of carbon-intensive energy is going to have to rise, says Tim Harford.

It makes sense. We have to reduce our energy use, and pricing is a good mechanism to help that along. Along the same lines, fuel duty is a Good Thing.

Tags climate change, energy

Society Women

Possibly my attention has been primed by Ada Lovelace Day, and another recent event, but I’ve been noticing a lot in the press recently about misogynism and other forms of discrimination. The impression I get is that the mainstream is becoming increasingly laddish, or failing to become less so.

Women are speaking up about death threats and other abuse they are subjected to when they express opinions online. Men simply aren’t subjected to personal and sexual abuse in the same way. Such abuse just isn’t acceptable, whoever it’s directed at.

It’s not just when we express our opinions, either. Discrimination in the workplace is still rife, on both gender and ethnic grounds. And a report published today shows that female customers suffer discrimination, too. Noreena Hertz writes in the FT that:

Male entrepreneurs in Europe are 5 per cent more likely to successfully get a loan for their business from banks than women. A 2009 study of 14,108 firms across 34 countries, showed that those women that do gain access to loans are often subjected to higher interest rates – an average 0.5 per cent more on a business loan than men – or must accept more burdensome guarantees and collateral requirements.

This is not just a case of the market cleverly weeding out the good from the bad. Women are not given worse terms because their businesses are more risky, smaller or in less attractive industries than men. The many studies I looked at explicitly compared like for like. It is not that women are worse at business than men and so present worse credit risks – the average venture-backed technology company run by a woman is started with a third less capital yet has annual revenues that are 12 per cent higher than those run by men.

This is not good. It’s an inefficient way of doing business, besides being unfair and unjust.

There’s more subtle discrimination, too. Women are definitely treated as “other”, in my experience: hypothetical CEOs are nearly always called Jim or Fred, never Sue or Mary. What’s wrong with Chris or Pat, and simply not being specific about what sex they are? And why does the Actuarial Profession continue to use “the actuary… he” in its documents? Saying that “he” refers to women as well as men doesn’t change the effect it has on people. Personally, when I read or hear the word “he” I don’t immediately feel that it applies to me.

We’re by no means there yet.

Data

Data – it’s where the sporting action is

Post author By Louise Pryor
Post date 11 November 2011
1 Comment on Data – it’s where the sporting action is

Game Theory, the Economist sports blog (a fairly loose description) has had a series of articles recently on how technology is affecting sport. Telemetry (including GPS tracking) is being used in Formula 1, sailing, rugby and football, and looks likely to spread to others. Technology has been a huge influence in tennis, but it looks as if some of the recent increases in ball speed and spin may be down to old fashioned causes: the players improving their technique. With the help of hi-tech training methods, of course.

Some sports are embracing technology as a way of assisting referees and umpires and, presumably, supporting fairness and compliance with the rules; others resist its introduction, worrying that it will undermine referees’ authority (or, on a cynical view, that it will detect non-compliance with the rules). But participants in all sports are using technology to improve their training, strategy and tactics. And the technology they are using is centred on data: collecting it and analysing it.

We’re not just talking about professional athletes in the top teams, either. Many of the ordinary runners I know (myself included) use GPS and heart rate monitors in training. It appeals to the inner geek, apart from anything else.

It’ll be interesting to see how this tendency progresses. My prediction, for what it’s worth, is that top class training will become more and more data intensive, and that all sports will, eventually, be dragged kicking and screaming into the data age. As more and more money depends on the outcomes of sporting events, those involved are going to want the results to depend on the athletes, rather than the officials.

Tags sport

Interesting

Interesting links

Post author By Louise Pryor
Post date 11 November 2011

Some links I’ve found interesting recently:

What makes a good Regulator? (I was on one of the panels)
Berlusconi probably agrees with James Carville*
Some people think that some of us are in the right career — it’s not often actuaries make the headlines
Machine learning in action: an absence of preconceptions is a good thing
The UK lags most of Europe, as I know from bitter experience — hang on while the bytes creep from me to you

* Who said ” I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” Hat tip D’Maris Coffman.

Tags actuaries, Berlusconi, broadband, Carville, machine learning, regulation

risk management Uncertainty

Confidence and causality

Post author By Louise Pryor
Post date 8 November 2011

Ok, it’s a bit trite, but human behaviour is really important, and a good understanding of human behaviour is a goal for people in many different fields. Marketing, education and social policy all seek to influence our behaviour in different ways and for different purposes — that’s surely what the whole Nudge thing is all about, for a start. Economists have traditionally taken a pretty simplistic view: homo economicus seems to have a very narrow view of the utility function he (and it is often he) is trying to maximise.

Psychologists have known for some time that real life just isn’t that simple. Daniel Kahneman and Amos Tversky first published some of their work on how people make “irrational” economic choices in the early 1970s, and since then the idea of irrationality has been widely accepted. It’s now well known that we have many behavioural biases: the trouble is, what do we do with the knowledge? It’s difficult to incorporate it into economic or financial models (or indeed other behavioural models): it’s often possible to model one or two biases, but not the whole raft. Which means that models that rely, directly or indirectly, on assumptions about peoples’ behaviour can be spectacularly unreliable.

Kahneman, who won the 2002 Nobel Memorial Prize in Economics (Tversky died in 1996) has written in a recent article about the dangers of over confidence (it’s well worth a read). One thing that comes out of it for me is how much people want to be able to ascribe causality: saying that variations are just random variations, rather than being because of people’s skill at picking investments, or some environmental or social effect on bowel cancer, is not a common reaction, and indeed is often resisted.

It’s something we should think about when judging how much reliance to place on the results of our models. When I build a model, I naturally think I’ve done a good job, and I’m confident that it’s useful. And if, in due course, it turns out to make reasonable predictions, I’m positive that it’s because of my skill in building it. But, just by chance, my model is likely to be right some of the time anyway. It may never be right again.

Tags causality, confidence, modelling, psychology

Interesting

Interesting links

Post author By Louise Pryor
Post date 8 November 2011

Some links I’ve found interesting recently:

Tim Harford thinks that capitalism should be about more than just money, while John Kay thinks that it needn’t be about greed and gambling.
For me, one of the best things about this time of the year is the start of the brussels sprout season, but those who don’t like them may have an excuse.
Try this one if you think you understand probability.
The Blackberry outage wasn’t all bad — and John Beattie reminded me that we’ve been there before, anyway.
Another great pioneer has died — John McCarthy invented Lisp, the second oldest high level programming language still in use.

Tags Blackberry, capitalism, genetics, Lisp, probability

Actuarial Women

Inspired by Ada Lovelace

A month ago I, like many other general insurance actuaries, was at GIRO, our annual conference. There were around 650 people there, slightly under 20% of whom were women. And the proportion of speakers who were women was even lower (many thanks to Kathryn Morgan for the stats). I think it’s fair to say that the actuarial profession hasn’t been at the forefront of women’s rights: the Institute of Actuaries was founded in 1848, and women were first admitted to membership in 1919. The first woman fellow was Dorothy Davis, in 1923. Jane Curtis, the current President, is the first woman to hold the post. I’m pretty sure that when I qualified, in the mid 80’s, there were fewer than 100 women fellows.

Way back in the mists of time (1954), Monica Allanach, Pat Merriman and others started holding ladies’ tea parties, informal get-togethers for women actuaries. Over time the Ladies’ Actuarial Dining Society grew out of the tea parties, but now it’s being wound up. So last week we had a party in Staple Inn, the home of the Institute of Actuaries, to mark the end of the LADS and to recognise the achievements of women in mathematics.

It was a great evening, with about 50 or 60 of us there. Jane Curtis gave a short speech outlining the reasons for our being there, and Suw Charman-Anderson, the founder of Ada Lovelace Day, talked about the need for female role models in science, technology, engineering and maths. So we celebrated the achievements of all the fantastic women who have preceded us, including all those early women actuaries, and were urged to go out and inspire others.

Suw said that one of the reasons why she founded Ada Lovelace day was because she got fed up of the tech industry’s continual excuses for the lack of women speakers at conferences. Which brings us full circle.

Tags technology, women

Actuarial

Don’t count your chickens

Take reports of changed pension deficits with large amounts of salt. It’s always important to put news in context, and to think about what’s going on underneath, especially when you read a story based on a survey or report produced by a consultant. And yes, I am a consultant, and that applies to surveys or reports I put out, too.

In yesterday’s FT there was a piece (£) about the pensions funding position. Apparently it hasn’t changed much since December 2010,

partly because the gap between yields on government bonds and those on corporate bonds has widened, which has the effect of reducing liabilities.

No it doesn’t. Absolutely not. The liabilities have not changed an iota because of any change in bond yields. The pension schemes are still on the line for the same payments in the future as they were. The only thing that has changed is one estimate of the present value of the liabilities, in other words how much money should be set aside now to pay the liabilities in the future.

But let’s get this straight. Nobody knows how much the pension schemes will have to pay out in the future. It depends on all sorts of things — including how long the pensioners live, what survivors they leave when they die, what future inflation rates are, whether members of the scheme transfer out before starting to draw their pension, what options they exercise when they do start, and countless others. And that’s without even considering what can happen to active members (those still in employment). So the actual payments out are uncertain.

And the payments in are uncertain too — investment returns, employer contributions, member contributions.

It’s fairly easy, nowadays, to estimate the value of the assets — just use the market value. Which is of course highly volatile, especially in the short to medium term.

It’s much less easy to estimate the value of the liabilities. You project the likely future payments, and then use a discount rate to come up with a present value. Which could be volatile too, as well as uncertain, if the discount rate you use is volatile.

So the deficit (or surplus) is the difference between two large numbers, at least one of which is highly volatile and the other is highly uncertain. No change that occurs over just a few months can be really significant, if nothing else has changed.

Just apply some common sense. If the assets are the same assets (no big changes in investments), and the liabilities are the same liabilities (no big changes in membership or benefits), then the long term position simply can’t have changed significantly. Pensions is a long term business. Transient changes in estimated current values are bound to happen, but in the end what matters is that the benefits are paid out when they fall due.