29 May 2008 – The Aleph Blog

One Way to do a Good Survey

Posted on 29 May 200822 June 2017 by David Merkel

I get asked to participate in surveys, and frequently, I look at the surveys and think, “You’re wasting everyone’s time here. Some people grade everything harshly, some people grade everything easily. Many people keep their responses within a restricted band, other go for the poles.? Besides, you’re asking too many questions.? Few people have that many strong opinions.”

What I am going to suggest here applies to questions like, “How can we improve our marketing, service, or operations?” I used this technique several times to improve the marketing at an insurance company that I worked for. Here is the core of the idea: if you want to elicit accurate opinions on surveys — use a constraint.

When I survey people, I do a one question initial survey to ask what the issues are that they care about. It is just a brainstorm to identify issues. Then I follow with a one-question survey that lists all of the issues, and then I say: “Pretend you are the marketing director, and that you have a budget of $100,000. How would you divide up the budget?”

Placing a budget constraint on their answers forces respondents to optimize. It also standardizes, so you don’t have to adjust for optimists and pessimists. It’s a very simple question, so answers are sharp. And, if someone feels very strongly about just one item, they can express that. Plus, it values the time of those you are surveying, so they are more willing to answer; you get almost 100% completion.

Anyway, this method has worked well for me. If you try it, and it works well for you, or doesn’t, let me know.

The Dollar and Inflation

Posted on 29 May 200829 May 2008 by David Merkel

What can a possible crisis in Vietnam tell us about the US Dollar? Or rumors of currency stress in in nations in the Persian Gulf? That loose US monetary policy is rippling out, and affecting the countries with fixed (or dirty-fixed) exchange rates. These countries face a challenge — float their currencies, or revalue the significantly higher, and send their export economies into the cellar, or, keep importing inflation from the US.

Inflation is a global problem today, and many countries are ignoring it, because in the short run, economic growth is better. Because the US Dollar is the global reserve currency, it can get away with a lot of excess borrowing, given that there aren’t any countries capable of taking the place of the US as the reserve currency, yet.

Going BATS over Yahoo Finance

Posted on 29 May 2008 by David Merkel

I’ve used Yahoo Finance since 1997, I think.? What a great resource.? Today, they announced the return of free real-time quotes.? Nice, though I went through three phases in my reaction.? The first was, “Yes, the whole real-time market.” The second was, “What, just an ECN?”? The third was, “Okay, they trade 9% of all shares traded… that’s not ideal, but that’s pretty good.”

Now, how could Yahoo improve this?? At present, the ECN real-time quotes are only available on single stock quotes.? Create a view where they can be applied to portfolios, and things gets a lot better.? Let those quotes stream, and you have an amazing service.

An Annual Warning on Annuity Salesmen

Posted on 29 May 2008 by David Merkel

Beware financial companies that grow rapidly. Beware if you are an investor; beware if you are a consumer; beware if you are a regulator. Fast growth usually means at least one of the following is wrong:

The accounting, whether regulatory or GAAP
Consumer disclosures

I write this evening, because of this long article from Bloomberg on a division of Aegon, namely, World Financial Group. In this case, I don’t know about any accounting difficulties, but the disclosures to consumers are lacking.

The founder of ICH Corp, once said something to the effect of, “Insurance is a great business. You issue promises, and people send you money.” Thankfully, ICH is no longer among us.

Now, I don’t like the annuity business, and I advise my friends only to buy them if they have maxed out all their other ways of saving on a tax deferred basis. Have you maxed out your 401(k)? Your Roth or non-deductible IRA? If you have, and still want tax deferral, a deferred annuity could be useful. Consider getting one from Vanguard, because the fees from everyone else are dreadfully high.

Beyond that, product design is complex for annuities, and people don’t understand their annuities well. In general, I think that small investors are best served through simplicity, and the various variable and equity-indexed annuities don’t pass that test. Aside from that, the insurance industry uses complexity to hide fees.

Now, I have worked for three aggressive life insurers in my time. They wrote annuities like crazy. I know what the sales culture is like from the inside: very focused on getting a product that is easy to sell, and then selling like mad. I’ve also been on the legal committee at one of those insurers, and it is not fun.

My advice remains — buy what you determine to buy, not what someone is trying to sell you. Call for a “time out” at minimum with salesman, and if he will not assent to that, show him the door. Get your network of intelligent friends together, and analyze it if the salesman is willing to wait.

Buyer beware. Unless you have complex tax-avoidance needs, stick to simple insurance products.