In discussions of humor, Tim Slagle in Liberty Magazine has what I believe is an important insight. He says that everyone knows that it's important for the comedian to be liked by the audience. Since he says all comedians must have one of seven deadly sins, this requires work. However, even more important is for it to be clear that "the comedian likes the audience." "When I found that out, that changed everything," he says. He goes on to say "it is important to remember in marketing that even though you might be a niche product, you still want that niche to be as large as possible." A similar idea is made in the Ursut le May introduction to Rabelais. Something like: "you must roll around with your audience, make them feel that you are one of them, that you share their likes and weaknesses, and can together look at the human predicament as wonderful in its folly and greatness." I believe that this might be a partial key to successful companies and stocks. What do you think?

Steve Ellison replies:

All businesses try hard to be liked, even those that seemingly do not need to be liked, such as the regulated monopoly utility company I once worked for that advertises incessantly on television.

Alvin and Heidi Toffler in Revolutionary Wealth compared the pace of change in business to a car speeding at 100 miles per hour. They found change occurring almost as fast in "civil society… a burgeoning hothouse sector made up of thousands of churning and changing nongovernmental grassroots organizations". By contrast, the Tofflers found government so slow to change (they rated it three miles per hour) that they predict a Constitutional crisis at some point in the U.S. as events outrun government's ability to respond.

Nongovernmental organizations exert much influence over businesses because the nongovernmental organizations can persuade some consumers that particular companies are good or bad. For example, there were boycotts of Nike products in the 1990s when it was found that some of Nike's subcontractors in China had sweatshop-type conditions at their factories. To prevent a similar public relations catastrophe, the technology industry formed a set of certification standards for suppliers, complete with audits to ensure compliance.

Similarly, many companies are trying to improve their impact on the environment because environmentalism is an important value for many consumers, who would rather spend their money at a company that shares their values. To be effective, businesses' environmental initiatives must be real because sophisticated nongovernmental organizations request audits of, for example, reduced energy usage or carbon emissions.

Jim Sogi adds:

Another example of a company reacting to public pressure is described in The Botany of Desire where McDonald's stopped using GMO potatoes for their fries after large public outcry over their nondisclosure of the use of GMO products. Government regulation did not require disclosure of the percentage they used.

Alston Mabry writes:

I enjoy the humor that Patrick O'Brian injects into his narrative. The sly humor of Maturin, the buffoonish and navy humor of Aubrey.

Just listening again this afternoon to the sequence in HMS Surprise where they approach Bombay and then Maturin immerses himself in the city. If I were to pick a passage to demonstrate what a good writer O'Brian is at his best - his use of description, pacing, character, historical interest — I would likely pick the Bombay passage. (And Tull reads it so well.)

Thomas Miller writes:

The Postal Service is an exception. They don't care what the public thinks, hence the long lines in many offices. If the government is driving three mph, the PO is doing at least 50 mph — in reverse. The death spiral for the PO is moving forward and picking up speed. Survival of the fittest will prevail as always.

George Parkanyi adds:

Laughter is a surprise response, and we all like to be (non-threateningly) surprised — case in point being the hundreds of billions of dollars poured into the Christmas holidays just now. In humour, the surprise comes from the connection of two or more unrelated ideas and/or the linking of two or more unrelated contexts. Timing is used to enhance the surprise element. For the humour to work however, it is very important for the audience to recognize and understand the ideas and the contexts, which is why good comedy with broad appeal comes from day-to-day experiences such as being in the check-out-line at the grocery store. I've seen comedians do very funny routines just around that alone.

Since we like to be surprised, and to laugh, a comedian that can do that early on will be instantly liked. He is giving us an enjoyable experience. Comedians that are too abrasive (e.g. relying too heavily on swearing or making fun of an audience member for example) can quickly lose an audience by making them uncomfortable. I've seen examples of all of this in our past two evenings at Comix on 14th Ave in New York the past two nights. (What can I say, I like comedy - and so do the kids.)

The biggest take-aways from comedy that I can think of for trading are definitely the connection of unrelated ideas (and markets), but also the agility and quick-thinking required to deal with adversity. A comedian that has been interrupted and/or loses his train of thought must factor that in as part of the game, and deal with as quickly when it comes up. Timing is useful too.

Another take-away perhaps is not to take the ups and downs of trading too seriously. If you did nothing but throw darts at a quote screen, your odds would be 50-50 less transactions costs (and the cost of replacement monitors), so the markets are not necessarily an evil conspiracy or epic fight to the death. You think more clearly when not overly stressed.





Speak your mind

8 Comments so far

  1. Steve Leslie on December 30, 2009 9:03 am

    Thomas Miller's statement that the USPS is the exception is entirely misguided. They are a government business not a private company. They are monopolistic in the sense that under law they are the only entity legally allowed to deliver a letter. The lines are a result of the fact that there are no alternatives. To the USPS public image is meaningless. Fed Ex and others can deliver packages and as a result those prices are very competitive. They most assuredly care about public image. Look at Big Brown UPS and their marketing strategies.

    Name me one true business that the US Government conducts which runs efficiently and profitably.. I would be interested in the answer.

    The sad situation in health care that will be revealed is that a reduction in competition and the monopolistic introduction of the US Government into health care will result in longer lines in hospitals, doctors offices, drug counters and everything down stream. Watch what will happen when you are sitting in an emergency room next to a homeless person or an inner-city woman with numerous children who are going to receive free health care and you are but a number next to them. Or God forbid, you need a transplant and go on a government list for a replacement part.

    Ultimately this will be more expensive for Americans who pay for health care. Those who are poor and pay nothing or very little cant care less. From their view there is nothing but upside. To them this is nothing more than a giveaway a freebie not unlike cheese in winter.

    This is what happens when the Government takes over a business that is run by private enterprise. All one has to do to seek validity on this matter is to go to a VA hospital do see how they conduct business, or Social Security Administration and see the inefficiency of the system there.

  2. Gregory Rehmke on December 30, 2009 12:12 pm

    I recommend the Jerry Seinfeld documentary “The Comedian” for explaining the hard work of comedy. It is great because consumers of comedy (and movies) don’t realize the complex distillation, the months of reworking and practice, that goes into each minute of stand-up comedy. And every other industry is about the same. Consumers benefit from this distillation combined with division of labor, and each product and service around us embodies hundreds or thousands of hours of design and development work (work that has value only if consumers approve).

    Each good and service tends to require a much smaller slice of manufacturing labor. So once Seinfeld finishes thousands of hours and months of development on his stand-up routine, millions can enjoy the routine on cable or TV, and similarly once the thousands of hours of design and development work are finished and tested for a MacBook or iPod, millions of identical copies can be manufactured with very little human labor expended per unit.

    Technology brings great progress for computers as well as comedy.

  3. michael bonderer on December 30, 2009 1:56 pm

    The obvious would be Apple and Steve Jobs, but then what does one do with Larry David?

  4. Gary Rogan on December 31, 2009 2:11 am

    A good qualitative indicator of the level of corruption that exists in a society is how genuinely “nice” the top political and business leaders are. In relatively uncorrupted societies people rise to the top by pleasing their “audience”. In the mildly corrupt societies they bribe it. In the truly corrupt ones they fake a caring attitude while looting whatever they can. No matter what the level of corruption, it always pays to look like you care. People tend to suspend disbelief and enjoy feeling liked when they participate in mass leader/follower interactions, be they elections or comedy clubs.

  5. Rocky Humbert on December 31, 2009 9:00 am

    Steve- The benefits of free markets notwithstanding, surely you must agree that lousy customer service is not unique to government. We’ve all experienced lousy customer service dealing with the phone company, the electric company, the cable company, the credit card company, the car dealer, and even the after-Christmas returns line at Best Buy!

    The USPS has a special place in our history. It is the only government “business” specifically mentioned in the Constitution (Article I, Section 8, Clause 7): “To establish Post Offices and Post Roads.” One benefit of this Clause’s interpretation was the Federal Government building the US highway system. Only architectural purists would claim that we are worse off because US-1 runs from Florida to Maine!

    You ask, “Name me one true business that the US Government conducts which runs efficiently and profitably.. I would be interested in the answer.”

    Answer: The Federal Reserve. The Federal Reserve System has been consistently profitable since its formation. It has annually PAID money to the US Treasury. In addition to conducting monetary policy and being a regulator, they provide financial services to the private sector (including check clearing and operating the national payment system.)

  6. Orson Terrill on January 3, 2010 5:09 am

    As one who, for a while, based all my market hypotheses on the importance of "humor" I could go off for a very long time about it. Specifically related to stocks there is a relationship. However, I think that the study of birds is important to understanding humor (one subject of which I had desired to submit here some time back but immediately lost all my data, models, photos, video, and writings (and my dogs) when my girlfriend discovered my heart was for another girl).

    Birds preferring groups, like pigeons, exhibit a useful behavior that I believe is a pointer to the origins of laughter. When observing pigeons for an extended period of time you will notice a repeating pattern. Typically when feeding on the ground, for instance, one pigeon will scare from a sudden movement of another and take flight. Most of the time all frantically join in flight and fly in circles a few times surveying the area for any real threat, and make their way back to where they were. They will do this over and over unless the threat is real, or the incentive for returning has been removed. They become more comfortable with a location with this process. Too much comfort and they start to just merely jump in the air and float back down, because after all, the place is safe. Is this “trusting the comedian”?

    I was fortunate enough to be a few feet away from a large group in a park observing this "panic-exertion-calm" cycle as a hawk dove in on us. They were in the air before I even knew what was going on compressing the air around me with their flapping wings. Though I could tell it was different that time. After flapping full speed away over the lake in front of me they made lighting fast cut back. The hawk joined their flock, closing in on one. As fast as they flipped back towards me they reversed back to other direction, no circle here, and flew full speed out of sight. The hawk's target escaped by diving towards to the lake below while the group faked the move and continued away from me. Needless to say they never came back. It wasn't "funny" in the bird's equivalence of the word. I think this may point to the origins of laughter, and may explain its contagious attribute.

    As a group creature a large portion of this animal's logic is based on the behavior of those around it. It makes up for what it lacks mentally by grouping. I think this is how they continually rationalize the safety of a location. Instead of incorporating many variables they merely use this “panic exertion calm” pattern as a way of giving them a feeling for the place.

    People have a more complex method as we deal with many complex issues. Our intricate social experience necessitates the ability to chuckle off something that threatens our understanding of reality, an understanding we need to act out our roles daily. If someone jumps out and scares us we don't run around for five minutes to get over it, though if it’s scary enough we will. Laughter assists us in rejecting the negative association with the person scaring us and our environment. We logically understand we are safe, but chemically our brains are telling us we are in danger. Laughter gives us the chemical correction we need. If we don't, then an unhealthy sense of anxiety may develop and negatively affect our risk taking abilities (like going to the basement at night).

    Many theorists on laughter believe that laughter is largely an ego driven behavior, many times used to assert our superiority over someone else's subhuman mishaps. Surely this occurs, but I believe that this is mostly using laughter to assert the status about ourselves to ourselves. It is one that the most insecure engage in: standing around making fun of people. Even this exposes the real purpose of laughter. This is a tool used to protect the whole person (which includes our sense of physical safety) and their social group. Here it is used in an attempt by someone to protect their own identity from incorporating characteristics of the people they make fun of (real or imagined). They neurologically reject the information (clothing, hairstyle, whatever) being presented to them. Teenagers are the best at this, and they are also the most insecure. They wield this tool cruelly because their self-identity is so fragile. Is a young up trending stock with many volatile swings insecure, but does that mean it is developing properly? I believe this is partly why teenagers and children laugh so much more. They are chemically rejecting certain behaviors or notions while having a good time with the exploration of their logical boundaries (small children).

    The relationship of flocking birds returning to a location, laughter being used as a sentinel for what we incorporate as normal behavior for ourselves, social group, and society, and stocks is this: They are all based around a relatively trusted position and threats to that position. The structures of our personalities are obviously not fixed on a Cartesian plane, but they are still a mostly fixed structure at any point in time. Humor or laughter is an agent of plasticity. It seeks to maintain the status quo. It keeps the entropy of the social environment from making us gray. It preserves our direction. It doesn’t mean we whole heartedly reject the information per se. Laughter helps us induce a different view or information while safely maintaining our status quo. This is important. Our trajectory is determined in a symbiotic relationship between the short and long term. What we reject in laughter this time we may embrace the next. A dying rally can look like this.

    Stocks have positions and direction of course. There are many ways to measure this. That brings up another subject entirely that I will avoid here as this already much longer than I had hoped. In equities most people are long so a sell off is generally a negative experience to a person holding, and possibly scary. Will the selloff be juxtaposition to the trend? Will it be a joke that only a few “get” at first? Then the understanding spreads to a wall of laughter across the audience? Conversely, will it be swift and unanimous?

    Humor has a range of plasticity, or it is the range of which the plasticity occurs. A joke may be so far outside of the range that our logic can simply deal with it by becoming offended or simply recognize it as too much like our reality in a way that is simply not funny. Our social structures of the mind can deal with this incoming, unfunny, proposition. It did not get inside us and cause a problem with differentiation. We can reject it without exerting the correcting laugh that aids our logic in rejecting the small juxtapositions or subtle misunderstandings.

    So like jokes, maybe there are ranges in stocks too which are digestible? Maybe it depends on the counter velocity and range relative to the longer trajectory? Maybe there is an escape velocity? Something that ensures it escapes from the constructs which laughter could heal. Escapes to a range where a different response would be needed; a sell off that actually needs to be sold into. Maybe at that point the rally, instead of the sell off is the joke; the frame of reference; the direction in need of preservation. Careful you don’t end up like those pigeons; too comfortable pecking at my seed while the hawk dives in.

    What companies do people like? What will they decide is playing a good prank after a selloff occurs? Will a selloff and recovery reinforce their sense of safety or leave it weakened? Likewise for the “over rally”. How will that change the ranges you buy and sell? I dedicated much time building and studying various algorithms around this. It was worth it, though the fruit does not hang low and may not be plentiful if you lack resources as I do.

  7. Steve Leslie on January 3, 2010 11:00 am

    To Rocky Humbert's point: Fascinating points you make and well received. Although this post is a few days old I hope u respond to it.

    Lousy service is the norm and not the exception by and large. I can think of outsourcing phone calls as a downside. I recently spoke to someone in India to clear up a service problem here in the states. I could not understand a word she was saying. On the other hand, the reason I stay at T-Mobile is that in my view they provide excellent service and attend to details very nicely.

    I am ambivalent as to my view of the USPS I could argue either way that they do a good job. in many ways they do and it still fascinates me that a letter can arrive somewhere cross country overnight. As for building the highways that is a good thing. Still in the true sense of the word I do not believe that they are a real business as others are. As long as they are monopolistic and protected under the umbrella of the Constitution, I will avoid this debate.

    The federal reserve. Now here is something I need to think upon. I am unqualified and not knowledgeable to discuss this matter. Is it established and designed to be run as a business. Is its primary goal profitability or is this a sidelight of its efficiency. And if it profitable where do the profits go. My guess is that it is returned to the US Government to spend. I am confident there is not profit sharing plan nor bonus plan at the end of the year. Perhaps the true point here is that a government monopoly can be run profitably and efficiently under the right guidance.

  8. Rocky Humbert on January 4, 2010 10:41 am

    Steve- Yes, the Federal Reserve transfers its profits to the US Treasury each year. In 2008, the Federal Reserve paid the US Treasury $31.7 Billion down from $34.6 in 2007. This amount excludes their commercial activities. For more information, see

    starting at page 172.

    One final thought: The terms “efficient” and “profitable,” have different definitions for economists, accountants, politicians, investors, and pundits. Not-for-profit organizations and the government are not profitable (as an accounting matter), hence measuring their profitability and efficiency need different yardsticks than measuring the profitability and efficiency of a for-profit organization. Despite my bias that the private sector is more efficient than government, experiments with privatizing various government services (e.g. transit, garbage collection, jails, fire departments, tax debt collection) have had examples of BOTH successes and failures. I would be interested in seeing umbiased studies of why particular privatization activities have succeeded or failed.


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