Saturday, July 23, 2005

Better watch out.

Luck largely dictates whether one has the good fortune to accumulate wealth; where the skill lies is in how one spends it.

The new wealthy fail to appreciate both elements of the equation.

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Rich Man, Preposterously Rich Man
WASHINGTON, July 21, 2005

This commentary was written by CBSNews.com's Dick Meyer.

At about 3:15 a.m. this past Sunday, a nurse, Robin, quietly came into a room in Stephens Memorial Hospital in Norway, Maine, and barely waking the patient up, gently changed the packing inside her badly infected and very painful foot wound. The patient, a person Robin had never met before, happened to be my 13-year-old daughter.

Watching this scene of competence and compassion, and being odd, the first person I thought of was Stephen S. Crawford.

Earlier in the week, Crawford, 41, was dismissed as a co-president of Morgan Stanley, the investment bank. He held that job for four just months but was awarded a goodbye package of $32 million.

According, to the National Compensation Survey the government published last year, registered nurses who work full-time earn about $52,000 a year.

Tuesday evening, the president nominated a man named John G. Roberts to be the next associate justice of the Supreme Court of the United States. Being odd, the first person I thought of was Phillip J. Purcell.

Roberts will be paid about $199,000 a year to be on the Supreme Court. That's a raise of about $30,000 from his current salary as a federal appeals court judge, but it's still pay cut from what his salary was at the Washington law firm of Hogan & Hartson, $1,044,399.

Purcell, who was fired as the CEO of Morgan Stanley, will get a severance package of $113 million. Justice Roberts will have to sit on the court for about 568 years if wants to earn what Mr. Purcell got just for being axed.

A few weeks ago, I had the opportunity to scrub up and go into the operating room with Dr. Frederick Finelli, a surgeon who is also president of the Medical staff at the Washington Hospital Center. I watched him perform a gastric bypass operation on a morbidly obese patient. Finelli also took me to observe procedures by two renowned Washington surgeons: Paul Corso, who was doing a heart bypass, and Paul Sugarbaker, who was in the middle of a 14-hour marathon to remove abdominal tumors from the gut of a middle-aged man.

Meeting these men, who are routinely entrusted with the lives of the nation's most rich and powerful, as well as the penniless, and being odd, I immediately thought of Edward Lambert.

Lambert is the first hedge fund manager to crack the $1 billion a year mark, according to Institutional Investor's Alpha Magazine. The top 25 hedge fund managers earned an average of $250 million in 2004, according to Alpha.

According to the government's survey, the average doctor made about $118,000 in 2003. Top Washington surgeons do better than that, but they don't earn hedge fund or investment banking money just for saving lives in ways that demand years of training and where mistakes have kind of a high cost.

Obviously, I have been trying to figure out some rhyme and maybe a little reason to how society allocates its rewards and obviously I have failed. I can't really find a correlation between the way society values things and the way society distributes money. And I guess that's why I'm too dumb to be an investment banker or a hedge fund manager.

While flying recently, I had the opportunity to discuss this with an investment banker who joined Goldman Sachs in 1983. Goldman is famous for making people rich young and then losing them to other callings, like Robert Rubin and Jon Corzine. The guy next to me was clearly brilliant and obviously loaded. We spent a lot of the flight trying to explain why investment bankers now received such gargantuan pay. He couldn't really.

He said that really, most investment bankers didn't risk much personally because they are protected by huge corporations and are not entrepreneurs. They work hard, but he said their lawyers work much harder for much less money. He said zillions of brilliant Ivy League kids would go into "i-banking" for a fifth of the money with no drop-off in talent, so it’s not matter of supply and demand. Maybe society simply values money for money's sake and accumulators are the valued.

I could be convinced that there is nothing new about this in America, that if I had tried to make sense of who got what 50 or 100 years ago, I would have been just as baffled. But there may well be a fresh angle. The gap between the uber-class and the middle class seems to be at one of its widest points ever. That's mostly because the uber-class is consuming an unusually high portion of national treasure.

The Congressional Budget Office says that in 2002, the top one percent of the population received 11 percent of total national after-tax income; in 1979, that top one percent got only 7.5 percent. In a statistical realm where numbers move at glacial pace, this is a fast melt.

In 1982, the ratio of average CEO pay to average worker pay was 42 to 1; in 2003, the ratio was 301 to 1. The government says the average "blue collar worker" made about $31,000 in 2003. Those gaps have become canyons.

There is also a perception issue. The Media - especially television entertainment and magazines but also the press - is going through a phase of wealth obsession and idolatry. The reality of increased wealth concentration and media cheerleading, I fear, combine to make people who do good work for good but not astronomical pay (nurses, doctors, teachers) feel inadequate and frustrated in a country that historically has had minimal class resentment.

"This is not the type of thing which a democratic society - a capitalist democratic society - can accept without addressing."

What left-wing bleeding heart said that?

Alan Greenspan.

Dick Meyer, a veteran political and investigative producer for CBS News, is the Editorial Director of CBSNews.com, based in Washington.

This time it is different from the last time that it was different.

They paint the Brooklyn Bridge every few years as well, or so it has been said.

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Another tech-stocks bubble?

Jul 22nd 2005
From The Economist Global Agenda

Internet firms are all the rage again. Another triumph of hope over experience?

MARKETS like these need heroes, and Google is the closest thing they’ve got. With most share prices stuck in the mud until recently, Google’s has shot up by 60% this year alone, nearly quadrupling since the firm went public last August.

Why? Investors with more dollars than sense are desperate to find something promising juicy returns. Google is too new to have burned buyers in the last dotcom downturn. And it has a plausible tale to tell. To hear the techie analysts sell it, prospects for online sales and advertising, especially the sort of paid keyword-search business that Google has perfected, are virtually limitless.

Yahoo!, Google’s rival in the search business, was the first of the big four internet firms to report second-quarter results. On Tuesday the firm announced revenues, net of commission to marketing partners, that were 44% higher than the same quarter a year earlier. Profit grew more than sixfold but most of it came from the sale of an unidentified investment (could it be Yahoo!’s shares in Google?). Investors reacted by “taking profits”—ie, dumping Yahoo! shares in after-hours trading.

The 53% increase in second-quarter profits and 40% rise in revenues reported on Wednesday by eBay, an online auction house, were better received. The figures exceeded expectations and eased worries that eBay's precipitous growth might be fizzling out.

To keep its share price above the $300 mark that it first achieved last month, Google needed to trump its two rivals when it announced its results on Thursday July 21st. On the face of it, they were pretty good: second-quarter profits more than quadrupled to $343m, on almost doubled revenues of $1.38 billion. Google's shares duly closed at a new record of just under $314 on Nasdaq. However, they then plunged below the $300 mark in after-hours trading, on worries that Google's rise may be running out of steam. The firm's chief executive, Eric Schmidt, admitted that revenue growth may not be so impressive in the current quarter.

The last of the four internet giants, Amazon, an online retailer, reveals its results next week. All have their fans. But it is Google that produces the acid burn. Now, Buttonwood likes a hero as much as the next hackette (and confesses to watching “The Last of the Mohicans”, ostensibly with her daughters, at least once every six months). She has approached the internet yarn with a fresh eye, determined to let bygone busts be bygone. And valuations are, in fact, better founded than many of them used to be.

But around 50 times next year's expected profits is still quite a leap of faith. At the levels seen in recent days, the price of Google's traded shares implies that it is the world's most valuable media company, with a market cap comfortably in excess of Time Warner's $76 billion—even though the latter had $42 billion in sales last year to Google’s $3.2 billion. True, Time Warner‘s business is increasing at a snail’s pace compared with Google’s. But putting so high a price on future growth only makes sense if all’s for the best in this best of all possible worlds. And it isn’t. There are a lot of unknowns, plus some knowable storm clouds rolling in.

The arguments for these high valuations (and Yahoo!, at around 60 times expected profits is right up there too) all boil down to one: the growth in internet firms’ business reflects a secular shift that is broadly impervious to economic cycles and has a long way to run.

More people are gaining access to the internet, and specifically to broadband, to which about a third of American households, for example, are now hooked up. They spend more time—and money—online than dial-up peons. Sales on the internet grew by almost a quarter last year, and have been doing so at a similar clip since 2001. Even so they account for only a small fraction of American retail sales.

Meanwhile, on the marketing side a big gap has opened up between the proportion of their media time that people spend online (almost 35% in America, on figures from Forrester Research, an independent firm) and the percentage of ad spending devoted to the internet (about 6%). That void cries out to be filled. Internet advertising in America grew to about $12 billion in 2004 as a bouncing economy boosted all advertising and firms warmed to the web. Forrester expects it to increase by some 23% in 2005 and then to taper off to single-digit growth by 2010. Search-engine marketing, Google’s speciality, will see the fastest growth.

Add in abroad, where the business is growing twice as fast as in America, and the picture is rosier still. About half of the revenues of eBay and Amazon, along with two-fifths of Google’s and more than a quarter of Yahoo!’s, come from outside the United States. Mike Mahaney, an analyst at Smith Barney, reckons that if these patterns continue, and neither Google nor Yahoo! loses market share, their revenues should keep growing for quite a while at 25-30% annually. His estimate that Google’s shares will hit $360 in 12 months’ time is on the high side but it looks less outlandish all the time.

Now for the cold water. The internet’s growth is slowing markedly: most people in industrialised countries have access now, so just adding users is not the source of growth that it was. Broadband is increasing the value of the net as an advertising medium. But the growth rate of broadband connection is slowing too–not just in America but most places.

Another negative—who knows yet how important it will prove—is that a bit of a backlash against the net is setting in along with viruses and other malware, points out Fred Hickey, the editor of High-Tech Strategist, a newsletter. Independent research firms have found that people are increasingly unwilling to give their details online: Gartner found that of the roughly 30% of a survey sample who bank online, three-quarters were logging in less frequently than before, and nearly 14% of them had stopped paying bills online; Financial Insights found that 18% of internet users had stopped shopping online for fear of identity fraud; Jupiter Research found that even online dating is down, at least in America.

Then there is competition. Barriers to entry in internet businesses are low, as Amazon’s slipping market share testifies. Yahoo! is trying to improve its search system to challenge Google in paid search ads, and Microsoft has entered the game too. And as Google, sensibly, also expands from its original business, it is running into higher costs and hostility. Its move into video search, especially, has ruffled the feathers of those providers whose content it blithely skimmed without asking first.

A bigger risk to Google even than competition is that of an economic downturn. For the more internet businesses grow, increasing their share of the wider market, the more cyclical they become, and this is something that its share price fails totally to reflect. America’s economy refuses to lie down, for the moment, but there are plenty of reasons to think it will. When it does, internet business will dwindle too, and the shooting-star stocks with it. After all, it has happened before.

At the end of the day, most people buy Google less from some rational assessment of the future of the internet than because they think “they can’t not be in it. There’s nothing else out there when the price is rising so fast,” says Fred Hickey.

Paul Desmond, the president of Lowry’s Reports, has a theory about this. Lowry’s is an old investor-advisory firm that has tracked supply and demand in individual firms’ shares for almost 70 years and is big on the cyclical ebb and flow of investor sentiment. Investors move from complete abandonment of the stockmarket at a major market bottom like March 2003, then gradually through a period of increasing confidence until they get to a point where greed really sets in, he says. When they start focusing on a relatively small number of get-rich-quick stocks, it is a sign that the bull market is about to turn. There is incredible buying strength behind Google right now, according to Mr Desmond. The bull is not nearly on its knees yet, but “we’re seeing a warm-up of that with Google,” he says. You have been warned.

Always seemed a perfect source for contagion.

June 11, 2005

Put your sweet lips . . .
A simple gesture that can express love and reverence — or insult and betrayal. A kiss, Keith Thomas discovers, is never just a kiss

Look at these people! They suck each other! They eat each other's saliva and dirt! — Tsonga people of southern Africa on the European practice of kissing, 1927

In what must still be the longest single work devoted to the kiss — Opus Polyhistoricum . . . de Osculis — the German polymath Martin von Kempe (1642-83) assembled 1,040 closely packed pages of excerpts from classical, biblical, legal, medical and other learned sources to form a sort of encyclopaedia of kissing. He listed more than 20 types of kiss. These included the kiss of veneration, the kiss of peace, the kisses bestowed by Christians on images and relics, and by pagans on idols, the kissing of the Pope’s foot, the kiss bestowed by superiors on inferiors, the kiss used in academic degree ceremonies, the lovers’ kiss, the lustful and adulterous kiss, the kiss exchanged by couples sealing their marriage vows, the kiss of reconciliation, the kiss carrying contagion, the hypocritical kiss and the kiss of Judas.

It would not be difficult to prolong von Kempe’s list ad infinitum. For kisses take so many different forms. A kiss can be given in private or in public, by men to men, men to women, women to women, adults to children or children to each other. They can be unilateral or reciprocated. They can be on the lips, on the cheek or on any other part of the body. They can be blown in the air. A kiss can express deference, obedience, respect, agreement, reverence, adoration, friendliness, affection, tenderness, love, superiority, inferiority, even insult. There is no such thing as a straightforward kiss.

The conventions governing the use of the kiss as a gesture of greeting or farewell have, for most historical periods, been established only in the most fragmentary outline, and then usually only for the upper classes of society. What sort of gestures, if any, were exchanged on meeting and parting by two 12th-century serfs? When, if at all, did an 18th-century collier’s wife kiss her friends? These are not questions to which it is yet possible to give a confident answer.

But the kiss does have a history. While psychologists and psychoanalysts tend to write as if kissing has a universal and unchanging meaning (for Freud, the erotic kiss is an attempted return to the security of the mother’s breast), it is far from a universal practice. It seems to have played a less conspicuous part in either the ritual or the erotic life of most Asiatic, Polynesian or sub-Saharan societies, while in the West the norms and conventions governing its employment have, from the beginning, been constantly evolving.

One could attempt to summarise this evolution by saying that the use of the kiss as a ceremonial means of expressing and cementing social, personal and political relationships has, during the past 800 years, tended to diminish, whereas its erotic significance has been increasingly emphasised.

Since the days of the early church, Christians had exchanged a holy kiss of peace as a symbol of their unity in Christ. But in due course the male and female members of the congregation were segregated so as to avoid kissing between the sexes and, from the 13th century onwards, the members of the congregation began to kiss the osculatorium or pax-board rather than each other. In the 16th century Protestants omitted the kiss altogether.

Other forms of ceremonial kissing also disappeared. At some point in the late medieval or early modern periods (14th to 18th centuries), the handshake, oath or written document superseded the kiss as the accepted symbols of reconciliation. In England, at least, kissing between males was unusual, other than within the family or in courtly ceremony. In his Troilus and Criseyde (late 1380s), Chaucer notably minimised the degree of physical contact between men which he found in the Italian source for his story. When Thomas Coryate, an experienced courtier, visited Venice in 1608, he thought it “an extraordinary custom” that two male acquaintances would “give a mututal kiss when they depart from each other, by kissing one another’s cheek: a custom, that I never saw before, nor heard of, nor read of in any history”.

Meanwhile, the erotic meaning of the kiss became increasingly central. In 1649 an English observer could write that the kiss was used “in salutation, valediction, reconciliation . . . congratulation, approbation, adulation, subjection, confederation, but more especially and naturally in token of love”. The mouth became more welcoming with the advent of more effective dentistry — which did something to diminish halitosis and produce gleaming white teeth — and the sexual connotations of the kiss became more apparent and its meaning more ambiguous. Eventually the ambiguity proved too much; and, for social and ritual purposes, the meeting of lips had to be replaced by other words and actions, less susceptible to misinterpretation. The English social kiss between men and women had been on the lips and therefore disappeared, whereas the French kiss on the cheeks was less blatantly erotic and accordingly proved more enduring.

Any form of kissing between men similarly became objectionable once the idea of homosexuality had been clearly formulated. In 1626 the writer William Vaughan deplored the “unnatural kiss of man with man, a minion-kiss, such as Jupiter used to Ganymede his cup-bearer”. Under the later Stuarts, French influence on courtly manners created a temporary fashion for foppish young men to kiss each other on the cheek, but in the 18th century men seen kissing were likely to be accused of sodomy.

Affectionate kissing and touching between women friends and acquaintances lasted much longer, because the notion of lesbian love was slower to take root than was that of male homosexual desire. Even so, physical tokens of affection between women were thought more seemly if not exchanged in company or in the presence of men.


This interpretation, according to which the sexual meaning of a kiss gradually drove out all other meanings, is open to two obvious objections. First, it glosses over the fact that the kiss had always had an erotic connotation. In ancient times as now, the lips were an erogenous zone, whatever cultural conventions may have implied. There were always problems about using so intimate an act for the purposes of public ritual — that was why the early Fathers were worried about the kiss of peace — and there was always scepticism and distrust of the Neoplatonic notion that kisses could unite souls without awaking a desire for the union of bodies.

Medieval literature abounds in equivocal kisses, with lovers and lechers exploiting the social and religious conventions of the day to advance their own particular sexual agendas. The fine line separating social from sexual kissing caused much social anxiety and provided rich possibilities for drama, both comic and tragic. An English traveller in the 1770s to Scotland, where French-style social kissing was practised, remarked that “it very seldom happens that the salute is a voluntary one, and it frequently is the cause of disgust and embarrassment to the fair sex”.

This inherent potential for misunderstanding is what distinguishes the history of the kiss from that of most other gestures. It might be argued that it is a matter of indifference whether a hostess greets her guests by kissing them on the mouth, as in Tudor England; by shaking hands, as in mid-20th-century Britain; or by rubbing noses, as in Polynesia. They are all ways of making strangers welcome; and, so long as everyone concerned understands the conventions, it might seem of no consequence which one is employed. But what distinguishes the kiss from so many other multi-purpose gestures is that its sexual nature has always lent a potential ambiguity to its meaning.

The second objection to the notion that the ritual kiss was subverted by the erotic kiss is that it implies that the trend was all in the same direction. In fact, there were periods when the movement was the other way. The early Middle Ages had seen the rise of the kiss, as it came to occupy an unprecedently central position in a wide range of secular and ecclesiastical rituals. The Romans, by contrast, did not employ even the social kiss until the period of the Empire, and then only among the aristocracy.

The social kiss between men seems to have fluctuated according to fashion. The habit among elegant young males at the later Stuart courts of kissing each other has already been mentioned. “Sir, you kiss pleasingly,” says one of them in an early-eighteenth-century play, “I love to kiss a man, in Paris we kiss nothing else.” In the trenches of the First World War, the imminent threat of death could lead to a suspension of normal codes of behaviour and restore the male kiss as a non-sexual symbol of intimacy, while in the late 20th century, it has become commonplace for men on the football field to exchange kisses at moments of triumph.

These developments are part of an altogether larger relaxation of bodily inhibitions which has occurred in the West since the 1960s. The social kiss and hug have returned, much to the embarrassment of middle-aged Britons, who have grown up accustomed to a far greater degree of bodily distance.

The subject also has a medical dimension. For the attitude to kissing can change when breath and saliva are regarded as potential instruments of infection. The Roman Emperor Tiberius (AD14-37) issued a decree banning kissing, because it was believed to be responsible for the spread of an unpleasant fungoid disease called mentagra, which disfigured the faces and bodies of Roman nobles.

Not that the avoidance of bodily contact was always so rational. Some bodily habits, which had been happily tolerated in one age, became wholly unacceptable in another. No one has ever exceeded the Roman epigrammatist Martial (late 1st century AD) in evoking the nauseous experience of having to kiss lips and faces covered with dirt, snot, ulcers and scabs. Thereafter there were many such complaints. The social and physical squeamishness of 18th-century doctors prevented them from adopting mouth-to-mouth resuscitation as a respectable medical practice, even though they were aware of its life-saving potentialities. In the same century, authorities on politeness condemned the practice of those who “put their faces so close to yours as to offend you with their breath” as a “horrid and disgustful habit”. When aristocratic Romans of the imperial age took up the practice of kissing friends and clients, they perfumed their breath with myrrh. How far, one wonders, have modern dentistry and breath-sweeteners been a precondition of the return of the social kiss in modern times?

Sir Keith Thomas is the author of Religion and the Decline of Magic (Penguin).

Copyright 2005 Times Newspapers Ltd

The ability to trust versus the ability to judge who to trust.

We may like face-to-face meetings because it is easier to trust someone under that circumstance. In fact, our ability to make good judgments about who to trust may actually function better when the interaction occurs remotely and with dampened emotions.

link to original paper.

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Looking to Make a Sale or Get Promoted? Emotions Will Help Determine the Outcome


High emotion contributes to great opera. It does not, however, serve us well when making judgments about others. This is the argument advanced in "Feeling and Believing: The Influence of Emotion on Trust," a new paper by Maurice E. Schweitzer, Wharton professor of operations and information management, and Jennifer Dunn, a PhD student in the department.


The two researchers conducted five experiments to determine the influence of emotional states -- happiness, gratitude, anger, and guilt -- on trust. Each experiment confirmed that incidental emotions (emotions from one situation that influence judgment in a following, unrelated situation) affect how willing we are to trust others. For example, our anger over a speeding ticket is likely to affect how we judge someone later in the day. The researchers conclude that despite feeling we are rational beings who make clear, lucid judgments, in reality we all walk around in a sea of emotions that are likely to influence how we act in both business and social contexts.


The article, recently published in the Journal of Personality and Social Psychology, stems from Schweitzer's ongoing interest in negotiation, where trust plays a critical role. Previous research identified trust as a combination of two constructs: one's own propensity to trust and one's knowledge about the other person. "This research suggests that we make a cognitive decision and use reason to decide whether or not to trust someone," notes Schweitzer. "What our research says is that trust is much more labile than that." In other words, trust is a constructed judgment that is influenced by irrelevant information. "The extent to which I do or do not trust you is a function not only of how trusting a person I am and what I know about you, but also a function of irrelevant events that have influenced my emotional state. For example, if I hit a parked car, argued with my spouse, learned that I have to pay a large repair bill (or won an award, had a paper accepted, or saw my stock account grow) beforehand, I would trust you less (or more). The main idea in the paper is that emotions which are irrelevant to the judgment task nevertheless influence trust judgments in predictable ways," Schweitzer says.


He and Dunn demonstrated this through a series of experiments, each one designed to test a different aspect of the "emotions affect trust" theory. In one study, for example, he and his team approached people waiting for trains and asked if they would be willing to take part in a study. They were asked to name a co-worker and then -- after an "emotion induction" phase -- answer a series of questions about that person. In the "emotion induction" phase, participants recounted in writing an incident that made them angry, sad, or happy (depending on which emotion they were assigned). Participants wrote about events like the birth of a child (happiness), the untimely death of a loved one (sadness), or the destructive behavior of a neighbor (anger). After this exercise, participants rated their co-workers on such statements as: "If X promised to copy a presentation for me, s/he would follow through," and "X would never intentionally misrepresent my point of view to others." Results showed that happy participants were significantly more trusting than were sad participants, and sad participants were significantly more trusting than were angry participants. Throughout each of the five studies, the results were the same. "What surprised me most was the magnitude and consistency of the effects," says Schweitzer.


A "Simple Manipulation"

For managers, this study reveals much about human nature, he suggests. "We can easily channel people and direct them to a happy, sad or angry place ... in a relatively short period of time with a relatively simple manipulation." These manipulations can take the form of a short story (e.g., a news story), a short movie clip, or even a short discussion. For example, the best salespeople "don't call on a customer and start with a comment about the stock market dropping or a favorite sports team losing. Instead, they focus attention on something uplifting," like a team making the playoffs or an upcoming holiday.


"In negotiation, we have always known that non-task communication -- discussion that's not directly relevant to the negotiation process -- is important for closing a deal," says Schweitzer. "This research gives us some insight into why it's important and what kinds of things should go into that communication." Specifically, "non-task communication, like telling jokes/stories or talking about sports, can change people's emotional states and make them more (or less) trusting. My advice is to give serious thought to non-task communication. This includes preparing the types of stories you tell and the types of non-task questions you ask. It also includes learning more about a client, such as whether he/she is a huge Red Sox fan or cares a lot about wildlife refuges. Conversely, you should recognize that when a salesperson or someone else engages in a conversation like this, he or she may influence your emotional state and subsequently your 'trust judgment'. The reason you gave someone a large contract may have more to do with how funny the story he told you beforehand was than with his reputation for dependability."


So going in to ask for a promotion or new responsibilities on the job is probably a good time to recount a funny story or ask about your supervisor's golf game, Schweitzer says. The point is to recognize the role that emotions play. Outside events -- such as the rise/fall of IBM stock if your supervisor owns it, or whether his or her child got accepted into a prestigious college -- as well as non-task communication, like telling a funny story, are important for trust judgments.


That's not to say we should never acknowledge problems that occur outside of the work setting, Schweitzer adds. "You have to demonstrate sensitivity." If a colleague is going through a difficult time personally, you should acknowledge it, but not dwell on it. "Our research shows that you can shift people to think about happy things and make them -- literally -- happy."


What Schweitzer and Dunn don't know is how long these incidental emotions last. The research tested people's propensity to trust immediately after the emotion induction (putting people into a happy, sad, or angry mood). Schweitzer is now working on a series of tests to determine the durability of these emotions: Do they last for minutes, hours, days or weeks? The results should help fill out the picture of how emotions affect our judgments.


Being Aware of Your Emotions

A second key finding in the study is that if people are aware of their emotional state, then the emotional state does not generally bleed into their judgments of others. In one study, for example, participants were shown film clips to induce either happiness or anger. Participants in the "happy" group watched a Robin Williams comedy routine, while those in the "anger" group watched a clip from the film Witness, in which teenagers harass an Amish man. After watching the clips, half of those in the "happy" group saw a brief note on screen that read, "Prior research has shown that even short film clips like the ones you have seen can influence people's emotions." The other half saw a blank screen. This was duplicated in the "angry" group. Consistent with the other study, angry participants provided significantly lower trust ratings than happy participants among those who did not receive the warning message. Among those who viewed the warning message, trust levels were about the same.


Again, says Schweitzer, links to the business world are clear, in particular because the results speak directly to the issue of "emotional intelligence," a widely discussed concept in recent years. "Managers and employees alike need to realize that when making decisions, they are in a state that is driven partly by reason, but also partly by emotion," he notes. Taking into account the role of awareness, managers can keep an eye out for employees who are at risk for bringing unrelated emotions to critical decisions. For example, a manager in a law firm may need to pull another lawyer aside and say, "I know case X isn't going well, but case Y is different," or "I know you're going through a difficult divorce, but don't let that cloud your judgment when you go into your negotiations today." Says Schweitzer: "When people recognize the trigger, or source, of their emotions they are less likely to misattribute them. When I realize that I'm angry because of something my spouse did, I am less likely to use that anger in an unrelated judgment. When I am not aware of or thinking about why I am angry, I am more likely to misattribute it."


Unattributed emotions are a problem, he points out, particularly for people working in high-stress, fast-paced jobs, like judges and parole officers, who have to make quick judgments about people. Because they move from one incident to the next without the luxury of time to sit back and gauge their emotions, they are more likely to misattribute emotional states. Again, awareness and correct attribution of emotional states can help manage this process, he suggests.


Based on his work in the field, Schweitzer thinks people conceive of themselves as rational human beings driven by rational thought -- particularly Westerners -- but it's not true. "People undervalue the extent to which emotions influence their judgment," he says. Correctly attributing our emotional states can counter the effects of others who are trying to manipulate our feelings. "Good sales people tell jokes and funny stories; they bring little gifts. What they are trying to do is influence people's emotional states." Recognizing that this person is trying to make you feel good can help separate the good feelings from the decisions at hand. Are you feeling you can trust these new partners and sign on the dotted line because it's a solid deal or because you are ecstatic over your new baby? "This is what we need to be aware of," says Schweitzer.


The highly emotional people in the crowd shouldn't feel too bad, he adds, noting that our quick emotional reactions have served us well for the past 100,000 years. Our ancestors who happened upon a snarling, big-toothed animal were smart to listen to their emotions and run the other way. "Actually, it's only been fairly recently that we can or should override those emotional reactions," he says. In other words, going into battle mode may not be the best response to a large, scary-looking person coming toward you at work. Especially if it's your boss.

Friday, July 22, 2005

More tail.

Trends towards either ultra-luxury or super-cheap segmentation also occurring in Japan.

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Small-Box Is Beautiful; With the rest of the world swamped by Wal-Marts, the humble 100 Yen shop is all the rage in Japan.

By Hideko Takayama
892 words
25 July 2005
Newsweek International
Atlantic Edition
41
English
Copyright (C) 2005 Newsweek Inc. All Rights Reserved.

Sure, Wal-Mart may rule the retail universe in America, and big-box stores like Tesco and Carrefour are the rising powers in Europe. But Japan, as usual, is a little different. One of the hottest retail trends in Japan has nothing to do with the high-volume, ultralow-price model that is killing off rival categories from Arkansas to Alsace. The big thing in Japan is the 100 Yen shop, an echo of the dollar stores that are approaching extinction in the American shopping scene.

Convenience-store chains are opening scores of small 100 Yen shops, and some supermarket chains are setting up 100 Yen counters within their stores. They are designed to appeal to a growing population of penny-pinching housewives and senior citizens in the world's most rapidly aging nation, yet they are not discount stores at all. They are cheap because they offer very small servings, not deep savings. Their hottest-selling item: the 100 Yen (about a dollar when tax is added) portion of fresh vegetables or fruit, perishable commodities that convenience stores have not offered in Japan before. Lawson, the nation's second largest convenience-store chain, has opened seven Store 100 shops in Tokyo since May, and plans to open a total of 1,000 nationwide by 2008. With other big convenience-market players like am/pm Japan and Three F joining the race, "a fierce competition is on," the Tokyo Shimbun commented recently.

The number of 100 Yen; shops began to rise when deflation hit Japan in the 1990s. But the latest wave of openings will add significantly to the current total of 4,600 such stores, in what can be read only as a discouraging sign; analysts had hoped that a revival in consumer demand would stabilize Japan's on-again, off-again recovery. The convenience stores had catered mainly to men in their 20s and early 30s, who consume a steady diet of soda and potato chips. When sales began to stagnate a few years ago, these chains began to look at the aging of the population--not just the fact that Japan has a higher share of citizens over 65 than any other industrialized nation, but that nearly 90 percent of Japanese under 60 say they worry about getting by in their old age. "These worries have led Japanese consumers to tighten their purse strings," says Charles Yuji Horioka, an economics professor at Osaka University.

So far this is an urban boom. In suburban and rural Japan, families tend to be larger and vegetables cheaper. Shops are scarce, so people drive to huge malls just as Americans do. It is older city residents, wedded to the tradition of buying fresh food daily, who most want a small shop close by. When Sakuko Shibuya found a brand-new Store 100 in her neighborhood in Tokyo recently, she thought it was a godsend. The 75-year-old Shibuya has to care for her 80-year-old bedridden husband, and her legs were getting too weak to walk far. "This is what I was waiting for," she says.

Most of the new 100 Yen shops are found in central cities, take up no more than 180 square meters and stay open 16 to 24 hours a day. Typically they carry about 3,000 items, from stationery to avocados, and increasingly cater to the elderly, housewives and singles with small and affordable daily rations; am/pm Japan's Food Style has introduced 100 premade dinner packages (at about 200 Yen to 300 Yen each).

They fall into the class of convenience stores, which now account for 7.1 trillion Yen out of total retail sales in Japan of 129 trillion Yen, leaving a lot of room to grow. A recent Nikkei Marketing Journal survey showed that in 2004, big-box retailers continued to face falling prices, rising competition and unsteady profits. Meanwhile local retailers, including electric-appliance discount shops, have enjoyed much healthier profits, the journal says. Of course, Japan is still one of the leading markets for global luxury brands, too. What's happening, says Horioka, is that status-conscious consumers are scrimping more on "everyday goods that are not visible to others," in order to splurge on luxe labels.

Ninety-nine Plus Inc. is a good barometer for the future. The company began opening its Shop 99 stores in 2001 with fresh vegetables and last year added 237 outlets, enjoying a 67.5 percent increase in sales. The chain now has 639 shops and, since listing on the Jasdaq last year, has seen its share price rise 400 percent. This growth comes at a time when, according to a recent survey by the Institute for Research on Household Economics, a private think tank, more than 50 percent of Japanese households have seen their incomes fall since 1998. "Japanese consumers are becoming a lot more conscious about values," says company spokesman Akio Okamura. "They know that their salaries aren't going up much." That's oddly good news for the 100 Yen shops, but a lot less encouraging for Japan.

Ease of access.

At some point the packaging will cost more than the contents. See: cosmetics.

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But the Dang Thing Won't Open
Today's Packages Make Customers Twist and Shout
By Joyce Gemperlein
Special to The Washington Post
Sunday, June 12, 2005; F05

Mona Doyle recently filmed people attempting to open bags of pre-cut lettuce. The tape plays like a bit from the television show "America's Funniest Home Videos." Everybody uses force and torque that would otherwise be reserved for the gym. Either the bag opens suddenly and sprays lettuce all over the floor, or defeat is conceded and scissors or knives are employed.

When Doyle, whose Philadelphia company does research about food and beverage packaging, showed the tape to an audience of produce packers, they chuckled. But Doyle says that belligerent packaging is making consumers spitting mad. They use words "hate" and "difficult" to describe products that seem to be welded shut.

Why, oh why, are we not yet a slide-lock or, at least, a press-and-seal nation? More and more food packages -- for cereal, potato chips and pre-cut salads, for example -- are being marketed as "convenient," but neither the formerly effective "pinch-and-pull" technique nor that old fallback, teeth, can open them.

In many ways, food packaging has come a long way since the days, for example, when potato chips were sold out of bins. The common snack bag has evolved from waxed paper ironed into packets in 1926 by the female employees of Laura Scudder's potato chip factory in their California homes. (Thomas Edison, by the way, invented waxed paper when he was 25 years old.) Also in 1926, Karl Prindle, an employee of DuPont, developed moisture-proof cellophane. Prindle is also responsible for later developing the zip-tab for cellophane packages. Zip-tabs are the thingies that stick out from under the cellophane on a package. When you pull them, the cellophane tears.

Many modern snack bags are now made of polypropylene materials that bar humidity and moisture, which make Cheez Doodles and the like droopy. That layer is bonded to a microscopically thin sheet of aluminum that keeps out rancidity-promoting oxygen, says Mary Ann Falkman, editor-in-chief of Packaging Digest. In addition, most package seals aren't formed by glue these days but by pressure from huge metal jaws that clamp down on the layers.

The reason for such intricate packaging is to keep food fresher longer -- this cuts down on waste and saves the company money. Secure packages also eliminate spillage during shipping. But these days "security" is perhaps the more effective buzzword. This is because "poisoned" is a much scarier word than either "stale" or "messy."

Fears of food tampering predate even Snow White and the wicked Queen with her apple. But more recent fuel on the fire includes the 1982 lacing of Tylenol with cyanide, which resulted in a revolution in the drug- and food-packaging industries. That was reinforced by the attack on the World Trade Center on Sept. 11, 2001; then came the Bio-Terrorism Act of 2002, which outlines measures to protect the food supply. A recent report about concern that school lunches could be a target of terrorists may fuel this fire further.

And need I even mention those amazing before-and-after pictures of Ukrainian opposition candidate Viktor Yushchenko, who was poisoned at a dinner during his campaign for president?

"Packaging is now a very important part of people's purchasing decisions," Doyle says. "It didn't used to be. But now there's this Catch-22. Yes, packages need to be harder to open -- be tamper-evident -- boy, do they need to be sealed. But, especially with aging baby boomers, the packages must become easier to open.

"A lot of [older] people tell us that they just can't cope with bags that they need scissors to open, and so they don't buy them," Doyle says. It also irks people that, once opened, the bag is often ripped down the side, making it impossible to use it to seal in leftovers.

Doyle has no solid statistics on injuries caused by our hassles with packaging, but they do exist in England. One study there shows that "wrap rage," as it is called by the Brits, has been the cause of more than 60,000 injuries. These often occur when consumers resort to knives and scissors to deal with stubborn packages, according to a 2003 report in the Daily Telegraph.

(That said, here's a paradox: Hard-to-open bags don't seem to be stopping us from buying pre-cut lettuce, considered the biggest marketing phenomenon in the history of produce. Sales of the convenience item are soaring. The Produce Marketing Association reports that sales hit $2.6 billion in 1994, then $8.8 billion in 2003. The numbers are expected to zip up to $10.5 billion in 2005. Obviously, cutting our own lettuce into bite-size pieces irritates us even more than cutting open a bag.)

Doyle says American consumers' demands for ease and convenience have evolved over decades and, once given an easier way, we demand even easier ways. In plain language, we are spoiled.

For example, American consumers were once thrilled with press-and-seal zippers on plastic storage bags. But as time has gone by, Doyle has found that more and more people say pressing the two sides of a plastic bag together until the grooves mesh is trickier and more time-consuming than it seems. We now consider slide-lock bags, which have a plastic nubbin you pull across the bag to seal it, to be the most consumer friendly.

Doyle says food producers may understand that consumers want slide-lock salad greens and potato chips, but so far they are unwilling to spend the billions of dollars it would take to change the packaging. Still, she is optimistic and foresees a world in which grocery stores are full of slide-lock bags and packages that look and work something like the plastic-lidded cardboard canisters that contain raisins and oatmeal.

I comforted myself with her vision last week as I spent 10 minutes in a school cafeteria prying 13 foil lids off single-serving containers of chocolate pudding because, even when kindergartners dropped them on the floor, they wouldn't open. They frustrated fifth-graders, too. The lids were not only tight under assault from my fingernails, they burped pudding onto my shirt as I finally broke each seal.

Go ahead, laugh.

© 2005 The Washington Post Company

Thursday, July 21, 2005

You might not be lucky; you might just be brain-damaged.

"There was no such thing as stock in the Pleistocene era..."

How does he know that?

Time to recruit stock jockeys on the basis of flat affect.

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Lessons From the Brain-Damaged Investor --- Unusual Study Explores Links Between Emotion and Results; `Neuroeconomics' on Wall Street

By Jane Spencer
1260 words
21 July 2005
The Wall Street Journal
D1
English
(Copyright (c) 2005, Dow Jones & Company, Inc.)

PEOPLE WITH certain kinds of brain damage may make better investment decisions. That is the conclusion of a new study offering some compelling evidence that mixing emotion with investing can lead to bad outcomes.

By linking brain science to investment behavior, researchers concluded that people with an impaired ability to experience emotions could actually make better financial decisions than other people under certain circumstances. The research is part of a fast-growing interdisciplinary field called "neuroeconomics" that explores the role biology plays in economic decision making, by combining insights from cognitive neuroscience, psychology and economics. The study was published last month in the journal Psychological Science, and was conducted by a team of researchers from Carnegie Mellon University, the Stanford Graduate School of Business and the University of Iowa.

The 15 brain-damaged participants that were the focus of the study had normal IQs, and the areas of their brains responsible for logic and cognitive reasoning were intact. But they had lesions in the region of the brain that controls emotions, which inhibited their ability to experience basic feelings such as fear or anxiety. The lesions were due to a range of causes, including stroke and disease, but they impaired the participants' emotional functioning in a similar manner.

The study suggests the participants' lack of emotional responsiveness actually gave them an advantage when they played a simple investment game. The emotionally impaired players were more willing to take gambles that had high payoffs because they lacked fear. Players with undamaged brain wiring, however, were more cautious and reactive during the game, and wound up with less money at the end.

Some neuroscientists believe good investors may be exceptionally skilled at suppressing emotional reactions. "It's possible that people who are high-risk takers or good investors may have what you call a functional psychopathy," says Antoine Bechara, an associate professor of neurology at the University of Iowa, and a co-author of the study. "They don't react emotionally to things. Good investors can learn to control their emotions in certain ways to become like those people."

The study demonstrates how neuroeconomics can offer insight into a question that has become a growing focus of economic inquiry: Why don't people always act in their own self-interest when they make economic decisions?

Though the field is still in its infancy, researchers hope neuroeconomics could someday have dozens of real world applications -- like explaining how brain chemistry influences market phenomena such as bubble manias and investor panics. Wall Street executives already are paying attention to the findings, since it offers insight into what motivates investors.

"This branch of inquiry and economic investigation is really fortifying and buttressing our understanding of investor behavior," says David Darst, chief investment strategist in the Individual Investor Group at Morgan Stanley. "It's beginning to inform our tactical decisions."

Using sophisticated brain-imaging technology such as magnetic resonance imaging, or MRI, tests and other tools, neuroeconomists peek inside people's brains to see which regions are activated when we engage in behaviors such as evaluating risks and rewards, making choices and cooperating with other people. Neuroeconomic researchers also tap into brain activity by measuring brain chemicals and exploring how damage to specific brain regions impacts economic decision making.

Neuroeconomics grew out of a related field called behavioral economics. Behavioral economists use insights from psychology and other social sciences to explore why humans don't always behave as predictably as standard economic models suggest they should.

In the late 1990s, when the links between psychology and neurobiology were firmly established, behavioral economists began turning to neuroscientists, in addition to psychologists, for help explaining human behavior. The idea was that if brain chemistry could explain phenomena such as depression or attention deficit disorder, it might also help explain more mundane psychological functions, such as how people reach financial decisions.

Behavioral economists, like Princeton's Daniel Kahneman, who won the Nobel Prize for Economics in 2002, began teaming up with neuroscientists, like Peter Shizgal at Concordia University in Montreal. In one study, the pair used gambling games and neuroimaging techniques to look what part of the brain is triggered when people anticipate winning money. They found that monetary rewards trigger the same brain activity as good tastes, pleasant music or addictive drugs.

The 41 participants in the new study included people with and without brain damage, including a control group of participants with brain damage that didn't affect their emotional processing. Players were given $20 and asked to play a simple gambling game that involved 20 rounds of coin tosses. If they won a coin toss, they earned $2.50. If they lost the toss, they had to give up a dollar. They could choose not to play in any given round, in which case they kept their dollar.

Logic indicates that the best strategy was to take the gamble in every round of the game, since the return on a win was much higher than the potential loss, and the risk in each round was 50-50. The players with emotion-related brain damage took a more logical strategy, investing in 84% of rounds, while the nonbrain-damaged players invested in just 58% of the rounds. Emotionally impaired participants outperformed the nonbrain-damaged participants, winding up with an average of $25.70 versus $22.80 at the end of the game.

The researchers believe fear had a lot to do with the poor performance of nonbrain-damaged participants. "If you just observe these people, they know the right thing to do is invest in every single round," says Baba Shiv, an associate professor of marketing at the Stanford business school and a co-author of the study. "But when they actually get into the game, they start reacting to the outcomes of the previous rounds."

Yet emotions may play a useful role in financial decision making. While the brain-damaged players did well in the specific game in the study, they didn't generally perform well when it came to making financial decisions in the real world. Three of four of the brain-damaged players had experienced personal bankruptcy. Their inability to experience fear led to risk-seeking behavior, and their lack of emotional judgment sometimes led them to get tangled up with people who took advantage of them. Their life experience suggests emotions can play an important role in protecting our interests, even if they sometimes interfere with rational decision making.

Humans developed this fear response as a survival mechanism to protect against predators. But in a world where predators aren't lurking around every corner, this fear system can be over-sensitive, reacting to dangers that don't actually exist and pushing us toward illogical choices.

"There was no such thing as stock in the Pleistocene era," says George Loewenstein, a professor of economics at Carnegie Mellon University, and a co-author of the study. "But human beings are pathologically risk averse. A lot of the mechanisms that drive our emotions aren't really that well adapted to modern life."

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Psychological Science
Volume 16 Issue 6 Page 435 - June 2005

Research Report

Investment Behavior and the Negative Side of Emotion

Baba Shiv1, George Loewenstein2, Antoine Bechara3, Hanna Damasio3, and Antonio R. Damasio3

Abstract

Can dysfunction in neural systems subserving emotion lead, under certain circumstances, to more advantageous decisions? To answer this question, we investigated how normal participants, patients with stable focal lesions in brain regions related to emotion (target patients), and patients with stable focal lesions in brain regions unrelated to emotion (control patients) made 20 rounds of investment decisions. Target patients made more advantageous decisions and ultimately earned more money from their investments than the normal participants and control patients. When normal participants and control patients either won or lost money on an investment round, they adopted a conservative strategy and became more reluctant to invest on the subsequent round; these results suggest that they were more affected than target patients by the outcomes of decisions made in the previous rounds.

In contrast to the historically dominant view of emotions as a negative influence in human behavior (Peters & Slovic, 2000), recent research in neuroscience and psychology has highlighted the positive roles played by emotions in decision making (Bechara, Damasio, Tranel, & Damasio, 1997; Damasio, 1994; Davidson, Jackson, & Kalin, 2000; Dolan, 2002; LeDoux, 1996; Loewenstein & Lerner, 2003; Peters & Slovic, 2000; Rahman, Sahakian, Rudolph, Rogers, & Robbins, 2001). Notwithstanding the fact that strong negative emotions such as jealousy and anger can lead to destructive patterns of behavior such as crimes of passion and road rage (Loewenstein, 1996), in a series of studies using a gambling task, researchers have shown that individuals with emotional dysfunction tend to perform poorly compared with those who have intact emotional processes (Bechara et al., 1997; Damasio, 1994; Rogers et al., 1999). However, there are reasons to think that individuals deprived of normal emotional reactions might actually make better decisions than normal individuals (Damasio, 1994). For example, consider the case of a patient with ventromedial prefrontal damage who was driving under hazardous road conditions (Damasio, 1994). When other drivers reached an icy patch, they hit their brakes in panic, causing their vehicles to skid out of control, but the patient crossed the icy patch unperturbed, gently pulling away from a tailspin and driving ahead safely. The patient remembered the fact that not hitting the brakes was the appropriate behavior, and his lack of fear allowed him to perform optimally. A broad thrust of the current research is to delve into this latter possibility, that individuals deprived of normal emotional reactions might, in certain situations, make more advantageous decisions than those not deprived of such reactions.

Recent evidence suggests that even relatively mild negative emotions that do not result in a loss of self-control can play a counterproductive role among normal individuals in some situations (Benartzi & Thaler, 1995). When gambles that involve some possible loss are presented one at a time, most people display extreme levels of risk aversion toward the gambles, a condition known as myopic loss aversion (Benartzi & Thaler, 1995). For example, most people will not voluntarily accept a 5050 chance to gain $200 or lose $150, despite the gamble's high expected return. Myopic loss aversion has been advanced as an explanation for the large number of individuals who prefer to invest in bonds, even though stocks have historically provided a much higher rate of return, a pattern that economists refer to as the equity premium puzzle (Narayana, 1996; Siegel & Thaler, 1997).

On the basis of research showing that patients with neurological disease that impairs their emotional responses take risks even when they result in catastrophic losses (Bechara et al., 1997), as well as anecdotal evidence that such patients may, under certain circumstances, behave more efficiently than normal subjects (Damasio, 1994), we hypothesized that these same patients would make more advantageous decisions than normal subjects (or than patients with neurological lesions that do not impair their emotional responses) when faced with the types of positive-expected-value gambles we have just highlighted. In other words, if myopic loss aversion does indeed have an emotional basis as suggested in the literature (Loewenstein, Weber, Hsee, & Welch, 2001), then any dysfunction in neural systems subserving emotion ought to result in reduced levels of risk aversion and, thus, lead to more advantageous decisions in cases in which risk taking is rewarded.

To test our hypothesis, we developed a risky decision-making task that simulated real-life investment decisions in terms of uncertainties, rewards, and punishments. The task, closely modeled on a paradigm developed by Gneezy (1997) to demonstrate myopic loss aversion, was designed so that it would behoove participants to invest in every round because the expected value on each round was higher if one invested than if one did not. Our goal, then, was to demonstrate that an individual with a deficient emotional circuitry would experience less myopic loss aversion and make more advantageous decisions than an individual with an intact emotional circuitry. Such a finding would provide a new source of support for the idea that emotions play an important role in risk taking and risk aversion.

METHOD

Participants

We studied 19 normal participants and 15 target patients with chronic and stable focal lesions in specific components of a neural circuitry that has been shown to be critical for the processing of emotions (Damasio, 1994; Davidson et al., 2000; Dolan, 2002; LeDoux, 1996; Rahman et al., 2001; Sanfey, Hastie, Colvin, & Grafman, 2003). Specifically, the target patients' lesions were in the amygdala (bilaterally; 3 patients), the orbitofrontal cortex (bilaterally; 8 patients), or the right insular or somatosensory cortex (4 patients). We also studied 7 control patients with chronic and stable focal lesions in areas of the brain that are not involved in emotion processing. All these patients had a lesion in the right (4 patients) or left (3 patients) dorsolateral sector of the prefrontal cortex.

The patients were drawn from the Division of Cognitive Neuroscience's Patient Registry at the University of Iowa and have been described previously (Bechara et al., 1997). The lesions in the prefrontal cortex are due to stroke or surgical removal of a meningioma, those in the right insular or somatosensory region are due to stroke, and those in the amygdala are due to herpes simplex encephalitis (2 patients) or Urbach Weithe disease (1 patient). (The patients with bilateral amygdala damage due to herpes simplex encephalitis also have damage to the hippocampal system, and consequently have severe anterograde memory impairment. However, they have normal IQ and intellect. Removing the data for these patients did not affect the results.) The control patients' lesions in the dorsolateral sector of the prefrontal cortex are due to stroke.

All target patients have been shown to perform poorly on the Iowa Gambling Task (Bechara, Damasio, & Damasio, 2003) and to have low emotional intelligence as measured by the EQi (Bar-On, Tranel, Denburg, & Bechara, 2003). All control patients have been shown to perform advantageously on the Iowa Gambling Task and to have normal EQi scores (Bar-On et al., 2003; Bechara et al., 2003). The target and control patients had a mean age of 53.6 (SD= 11) at the time of this study; they had 14.5 years of education on average (SD= 3) and mean verbal and performance IQs of 107.2 (SD= 11.5) and 103.4 (SD= 14.5), respectively.

The normal participants were recruited from the local community through advertisement in local newspapers. None had any history of neurological or psychiatric disease (assessed by questionnaire). Their mean age was 51.6 years (SD= 13); on average, they had 14.6 (SD= 3) years of education and verbal and performance IQs of 105.5 (SD= 7) and 101.4 (SD= 10), respectively.

All participants provided informed consent that was approved by the appropriate human subject committees at the University of Iowa.

Procedure

At the beginning of the task, all participants were endowed with $20 of play money, which they were told to treat as real because they would receive a gift certificate for the amount they were left with at the end of the study. Participants were told that they would be making several rounds of investment decisions and that, in each round, they had to decide between two options: invest $1 or not invest. On each round, if the participant decided not to invest, he or she would keep the dollar, and the task would advance to the next round. If the participant decided to invest, he or she would hand over a dollar bill to the experimenter. The experimenter would then toss a coin in plain view. If the outcome of the toss were heads (50% chance), then the participant would lose the $1 that was invested; if the outcome of the toss were tails (50% chance), then $2.50 would be added to the participant's account. The task would then advance to the next round.

The task consisted of 20 rounds of investment decisions, and the three groups of participants took roughly the same time on the task. Note that, as indicated earlier, the design of this investment task is such that it would behoove participants to invest in all the rounds because the expected value on each round is higher if one invests ($1.25) than if one does not ($1). In fact, if one invests on each and every round, there is only around a 13% chance of obtaining lower total earnings than if one does not invest in every round and simply keeps the $20.

RESULTS AND DISCUSSION

Overall Investment Decisions and Amounts Earned

Examination of the percentage of the 20 rounds in which participants decided to invest revealed that the target patients made decisions that were closer to a profit-maximizing viewpoint than the other participants did (see Table 1). Specifically, target patients invested in 83.7% of the rounds on average, whereas normal participants invested in 57.6% of the rounds (Wilcoxon statistic = 345.0, p< .002) and control patients invested in 60.7% of the rounds (Wilcoxon two-sample test statistic = 44.5, p< .006). Further, as hypothesized, target patients earned more money over the 20 rounds of the experiment ($25.70, on average) than did normal participants ($22.80; Wilcoxon statistic = 315.5, p< .03) or control patients ($20.07; Wilcoxon statistic = 44, p< .006); the average amount earned by normal participants did not differ from that earned by control patients (Wilcoxon statistic = 73, n.s.).

Figure 1 shows the percentage of rounds in which participants decided to invest, broken down into four 5-round blocks. The pattern of results suggests that all three groups of participants started close to the normative benchmark. However, unlike target patients, who remained close to the normative benchmark, normal participants and control patients seemed to become more conservative, investing in fewer rounds, as the investment task progressed. One potential account for these findings is that emotional reactions to the outcomes on preceding rounds affected decisions on subsequent rounds for normal participants and control patients, but not for target patients. We examine this potential account in greater detail in the next section.

Impact of Outcomes on Previous Rounds on Decisions in Subsequent Rounds

We conducted a lagged logistic regression analysis to examine whether the decision-outcome combination in preceding rounds (did not invest, invested and won, invested and lost) affected decisions on successive rounds more for control participants (normal participants and control patients) than for target patients. The dependent variable in this analysis was whether the decision on a particular round was to invest (coded as 1) or not invest (coded as 0). The independent variables were several dummies that were created for the analysis: control (coded as 1 for control participants, 0 otherwise), invest-won (coded as 1 if the participant invested on the previous round and won, 0 otherwise), invest-lost (coded as 1 if the participant invested on the previous round and lost, 0 otherwise), and participant-specific dummies (e.g., dummy1, coded as 1 for Participant 1, 0 otherwise). The overall logit model that was tested was decision = control invest-won invest-lost control by invest-won control by invest-lost dummy1 dummy2 etc. Note that any significant interactions would indicate that the effects of the decisions and outcomes in preceding rounds on decisions made in successive rounds were different for target patients and control participants.

Both interactions in the logit model were significant: control by invest-won, 2(1) = 10.27, p< .001; control by invest-lost, 2(1) = 31.98, p< .0001. These results suggest that normal participants and control patients behaved differently from target patients both when they had won on the previous round and when they had lost. As detailed in Table 1, control participants were more likely than target patients to withdraw from risk taking both when they lost on the previous round and when they won. Compared with the target patients, who invested in 85.2% of rounds following losses, normal participants invested in only 40.5% of rounds following losses (Wilcoxon statistic = 350.0, p< .001), and control patients invested in only 37.1% of such rounds (Wilcoxon statistic = 45, p< .006). Similarly, although target patients invested in 84.0% of rounds following wins, normal participants invested in only 61.7% of rounds following wins (Wilcoxon statistic = 323, p< .01), and control patients invested in 75.0% of such rounds (Wilcoxon statistic = 67.5, p= .16). These results also suggest that normal participants and control patients were considerably less risk aversive following wins than following losses (normal participants: 61.7% vs. 40.5%, difference = 21.2%; control patients: 75.0% vs. 37.1%, difference = 37.9%); in contrast, target patients invested equally often following wins and following losses (84.0% vs. 85.2%, difference = 1.2%).

CONCLUSIONS

The results of this study support our hypothesis that patients with lesions in specific components of a neural circuitry critical for the processing of emotions will make more advantageous decisions than normal subjects when faced with the types of positive-expected-value gambles that most people routinely shun. Such findings lend support to theoretical accounts of risk-taking behavior that posit a central role for emotions (Loewenstein et al., 2001). Most theoretical models of risk taking assume that risky decision making is largely a cognitive process of integrating the desirability of different possible outcomes with their probabilities. However, researchers have recently argued that emotions play a central role in decision making under risk (Mellers, Schwartz, & Ritov, 1999; Slovic, Finucane, Peters, & MacGregor, 2002). The finding that lack of emotional reactions may lead to more advantageous decisions in certain situations lends further support to such accounts.

Our results raise several issues related to the role of emotions in decision making involving risk. It is apparent that neural systems that subserve human emotions have evolved for survival purposes. The automatic emotions triggered by a given situation help the normal decision-making process by narrowing down the options for action, either by discarding those that are dangerous or by endorsing those that are advantageous. Emotions serve an adaptive role in speeding up the decision-making process. However, there are circumstances in which a naturally occurring emotional response must be inhibited, so that a deliberate and potentially wiser decision can be made. The current study demonstrates this "dark side" of emotions in decision making. Depending on the circumstances, moods and emotions can play useful as well as disruptive roles in decision making. It is important to note that previous experiments demonstrating a positive role of emotion in decision making involved tasks in which decisions were made under ambiguity (i.e., the outcomes were unknown; Bechara et al., 1997). In the present experiment, the patients made decisions under uncertainty (i.e., the outcome involved risk but was defined by some probability distribution). We do not know at this point whether decisions under uncertainty and decisions under ambiguity draw upon different neural processes, so that emotion is disruptive in one case but not the other. Regardless, the issue is not simply whether emotions can be trusted as leading to good or bad decisions. Rather, research needs to determine the circumstances in which emotions can be useful or disruptive, and then the reasoned coupling of circumstances and emotions can be a guide to human behavior.


Acknowledgments

We gratefully acknowledge a suggestion from C. Hsee that sparked the idea for this study. This work was supported by Grant PO1 NS19632 from the National Institutes of Health (National Institute of Neurological Disorders and Stroke) and by Grant SES 03-50984 from the National Science Foundation.

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• Loewenstein, G. (1996). Out of control: Visceral influences on behavior. Organizational Behavior and Human Decision Processes, 65, 272292.

• Loewenstein, G., & Lerner, J. (2003). The role of emotion in decision making. In R.J. Davidson, H.H. Goldsmith, & K.R. Scherer (Eds.), Handbook of affective science (pp. 619642). Oxford, England: Oxford University Press.

• Loewenstein, G.F., Weber, E.U., Hsee, C.K., & Welch, N. (2001). Risk as feelings. Psychological Bulletin, 127, 267286.

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Psychological Science
Volume 16 Issue 6 Page 435 - June 2005

Ball of confusion on a rope?

It provides false cues to the nose and demolishes one's sense of touch.

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The Soft Soap on Soaponification

Written by Steven Heller
Published on February 23, 2005.

Filed in Voice: AIGA Journal of Design.

“Soap is probably one of the few cleansing items with which we can have a truly personal experience,” notes Nancy Jeffries, Editor-in-Chief of Soap & Cosmetics Magazine. “It is, after all, a joy to hold something that smells wonderful, provides a pleasurable tactile experience, and cleanses one's body too. It is also an affordable luxury that appeals to every strata and aesthetic.” Soap, therefore, is another in an ever growing line of commercially solvent, alluringly designed, lifestyle consumables; a source of visceral appeal not just for its labels and packages but for the physical impact of the total product, which ranges from pure white bars to opaque cakes to sumptuous ovals as well as myriad colored balls, blocks, shells and shards—plain or stamped with ornamental patterns and typographical motifs and sometimes stuffed with surprises inside. Form and function have never smelled so good.

Wiping out dirt was why soap was invented back in 2800 B.C. in old Babylonia. As Brian Sansoni of The Soap & Detergent Association in Washington, D.C. explains, it was originally made from an ancient process called “saponification” whereby fatty acid extruded from cows and sheep called tallow combined with alkali splitting the fat into fatty acids and glycerine, and then sodium or potassium salt was injected to make a yucky but effective cleanser. For the first couple of thousand years, soaps were so abrasive they were only used for cleaning clothing, not bodies, which instead were bathed in herbs, milks, and oils (for those like Cleopatra who could afford it). In the 8th Century, Spain started producing solid body soaps and, over the next four hundred years, France, Italy, and England followed suit. Incidentally, the Spanish and Italians used kinder and gentler olive oil while the French and English stuck (perhaps literally) to tallow, which answers some unasked questions about national hygiene.

There were also two ways of preparing soap—cold and hot processed—wherein lye was added then poured into rectangular moulds to harden and be carved up like cheese. Soaps were solid or opaque until the early nineteenth century when a clear, presumably more natural substance, was made with alcohol, which actually dried out the skin. Yet the concept of purity caught on, and eventually softer coconut and palm oils were substituted for harsh alcohols. In 1879 the most famous American variety, touted as “99 1/100 percent Pure,” was a white brick called Ivory Soap, invented when a surprised employee of Procter and Gamble accidentally forgot to turn off a mixer and shot more than the usual amount of air into a large batch of goop, resulting in the first and only floating soap. The public frothed for it.

Design entered the picture when competing manufacturers worked up lathers adding novel scented ingredients like green crystals, blue streaks, and brown flakes as well as devising unique contoured shapes to distinguish one brand from the other.

The Marseille soap manufacturer C. Ferrier & Cie, for example, developed a dozen different cake designs for its numerous Savons to appeal to women (and some men) at all social stations for quotidian washing or sumptuous bathing.

Soap has had a certain cache from before the turn of the century, but in recent years it has become an even more hedonistic accoutrement signifying health, beauty, and aesthetics. “Design, color and fragrance all play a role in the selection of a bar of soap,” notes Nancy Jefferies. “Every individual can find something that connects them to the soaps they choose, and of course that cachet is relative and perceptual.” Ivory’s floating brick is still on the market but no longer has the same status appeal owing to its plebian design—in fact it is downright déclassé. Today, the smoother, suppler, and more streamline the bar the greater its charm.

Among the most popular, dildo-shaped soaps (some on ropes) are quite popular among certain sets but there are also varieties that resemble striated igneous rocks and shards of turquoise (ouch), and others that look like breast implants. Actually, soap can be made to fit any mold. While heart and shell motifs are perennial favorites, comic varieties like the Homer Simpson-shaped soap are rising to the surface these days. Many more prosaic specialty brands, however, are imprinted with birds and flowers and impregnated with verbena or jasmine. There are also organic shapes, like durable oatmeal-based bars that look like something the cat dragged in from the woods or, if a sun-drenched plain is more appealing, there are soaps imbued with honey or shea butter with scents from Provence and Grasse that look like, well, honey or shea butter. It should be no surprise that design of most specialty soap is feminine, but for the man who longs for a strong scrubbing bar in a masculine form the old standby LAVA not only does the job, its jet black pumas pigment is now truly haute design.

Wednesday, July 20, 2005

del.icio.us noise filter

del.icio.us/lightray del.icio.us is a great noise filter. If you are reading this blog, then chances are you also read stuff that's of interest to us. bookmark your sites in del.icio.us and email us your user name so we can link to your feed. We can include your stuff in our listing, and everyone ends up with a better filter.

Con game.

Only 11 out of 56 economists surveyed worry about the housing bubble as their biggest worry about the economy. Wonder if that number has gone down from last year. Have economists replaced media as the great contrarian indicator--the fewer worried about an issue, the greater the real concern?

"I try to be fair, honest and act with integrity." -- any time one has to try to "act with integrity", one is engaged in a dishonest activity.

Disavowal of responsibility -- another classic sign of fraud perpetration.

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Easy Money: A Mortgage Salesman's Pitch --- Mr. Ray Touts Low Payments For the First Five Years; Interest Keeps Piling Up --- A Chance to Buy That Escalade
By George Anders
2573 words
20 July 2005
The Wall Street Journal
A1
English
(Copyright (c) 2005, Dow Jones & Company, Inc.)
SANTA ROSA, Calif. -- Hardly anyone makes home loans as quickly and as often as Ben Ray III of Benchmark Lending Group Inc. He is a former school counselor who struggled for years to find the right job. He sold vintage wine for a while and wrote grants for his native tribe of Pomo Indians.

Now the 39-year-old Mr. Ray is on pace to earn $200,000 this year in mortgage commissions. His friendly, efficient style helps win borrowers' trust. But his biggest edge comes from offering alluring and controversial mortgages that require unusually slim payments for a few years, before bigger sums fall due. Some customers use these loans to borrow as much as seven times their annual income -- a staggering jump from the two-times-annual-income level that was the rule of thumb when the 30-year fixed-rate mortgage was the norm.

As real-estate mania intensifies, the mortgage industry keeps making it easier to borrow. "Low documentation" loans are catching on, including ones where lenders simply take borrowers' word about their income and don't ask for pay stubs. Repayment terms sometimes are stretched as long as 40 years, to help shrink monthly payments. In the most common twist, lenders aren't requiring even token efforts to repay principal in the early years of a mortgage. Interest-only payments suffice. In some cases, borrowers can even pay less than that, allowing interest to pile up and be repaid later.

Skeptics worry that this easy-credit euphoria could end with a real-estate crash and waves of problem loans. Federal Reserve Board Chairman Alan Greenspan warned in June that housing prices in some areas appeared "unsustainable," adding that he was concerned about "the dramatic increase in the prevalence of interest-only loans." In a recent Wall Street Journal survey of 56 leading economists, 11 named a possible housing bust as their biggest worry for the economy.

For now, default rates are low and property prices remain strong. Many aspiring homebuyers are willing to try anything that stretches the amount they can borrow, since house prices continue surging while wages fail to keep pace. Aggressive lenders are enjoying the boom while it lasts.

Fifty miles north of San Francisco, Benchmark is a small, fast-growing mortgage company that typifies the industry's current stampede into interest-only lending. Benchmark gets about 60% of its business from loans with such features. In part, that reflects the iconoclastic tastes of company founder N. Bernard "Barney" Aldridge, a former rock-band drummer who comes to work in shorts and sandals.

In an interview, Mr. Aldridge scoffs at people who pay down their mortgages, month by month. "That's just a way of transferring money to your heirs," he says. "As a borrower, I'd rather make smaller payments and have the money myself."

Like many mortgage originators, Benchmark doesn't keep its mortgages long. Of its 2,176 loans last year, all but seven were sold to Wall Street firms and bigger mortgage companies, to be repackaged as bond-like instruments for insurers, pension funds and other investors. Benchmark nets about 1.5% of the value of the loan for its trouble, while freeing up capital to start the lending cycle again. It also means Benchmark doesn't have a major stake in the long-term fate of its mortgages.

Founded in 1995, closely held Benchmark is one of 2,994 consumer-finance lenders licensed to do business in California. That tally keeps growing, aided by a regulatory belief that lots of home-lending capacity is good for economic growth. California's Department of Corporations checks applicants for financial solvency and makes sure that top company executives have passed background checks and hire qualified people.

Benchmark expects to book $900 million of mortgages this year, nearly double last year's pace. The company does most business by phone, advertising briskly on AM radio. It urges people to call a toll-free number, assuring them: "There's no selling here. Either we can save you money or we can't." Some 150 people work at Benchmark's sleek two-story headquarters, fielding calls within earshot of a vast bubbling fountain.

Among Benchmark's loan officers is Mr. Ray, a stocky man who favors billowy Ralph Lauren tunics. At mealtimes he struggles to stay on the South Beach diet, but on the phone he is in total command. He listens well. He crunches monthly payment estimates quickly and slips them into conversation effortlessly.

Most days, Mr. Ray is as busy as a bartender at happy hour. Each call begins with a chipper greeting: "Hi, this is Ben. What kind of loan can I help you with today?" In moments, he creates an atmosphere of optimism and certainty, sweeping away callers' jitters.

"I'm so glad you called today," Mr. Ray told one caller in early June, about five minutes into the conversation. "If we start on your loan tomorrow, we can get you the money by the end of the month."

For all this bonhomie, Mr. Ray repeatedly confronts deep tensions between people's spending dreams and the dangers of too much debt. Some callers have a bankruptcy filing in their past. Others are working second jobs in the evening as Target store clerks to pay the bills.

"People are killing themselves," Mr. Ray says after work one evening. "They don't save any money, and they put themselves at great financial risk in the name of instant gratification. You don't ever want to be in a situation where you have to sell your house or lose it."

When people's credit ratings are a mess, Mr. Ray urges them to tidy their finances before seeking more debt. But if they meet Benchmark's loan standards, he reasons that it isn't his job to police the public's appetite for debt. "I can't organize people's lives for them," Mr. Ray explains. "All I can do is make sure the loan is made properly."

Besides, if callers are creditworthy, Mr. Ray figures somebody will finance them, regardless of any qualms he might have. In that case, he declares, "I want to be the guy that does the loan." Mr. Ray gets a commission of 0.2% to 0.4% of each loan he originates.

Mr. Ray joined Benchmark in mid-2003, after rattling around in a series of jobs at schools, hospitals and the tribal reservation that never paid more than $37,500 a year. Because of injuries from a car accident, he had been out of work for a year before joining Benchmark. His finances were in tatters, and he was driving a battered Pontiac. His brother-in-law, a Benchmark employee, suggested trying the mortgage business. Mr. Ray was dubious at first, but then decided it might work.

As a raw trainee two years ago, Mr. Ray stood out with his eagerness to book business. During a three-week orientation, he pestered his bosses for a chance to field live calls ahead of schedule. Grudgingly, they let him sit by a phone after 8 p.m., after veteran loan officers had gone home. The next day, he excitedly told his bosses that he had screened seven calls -- and expected to close on at least one loan.

"It was a couple from Sacramento," Mr. Ray recalls. "Lovely people. They wanted to borrow $423,000. They became my first mortgage, and I hadn't even finished training. My bosses couldn't believe it."

Now Mr. Ray's cubicle has become a teaching stop for new trainees, who listen to his patter like acolytes, absorbing every detail. When loan applicants repeat a fact that Mr. Ray has just told them, he responds with a crisp "correct!" -- like a schoolteacher praising a bright child. It's a potent way to take command of the call and keep things moving fast. In the cubicles near Mr. Ray, other loan officers now chirp "correct!" in the midst of their calls, too.

Benchmark does much of its business in California, catering to welders, flight attendants and others who want to buy or refinance $500,000 homes. Callers hope to borrow most of the home's value, drawing on household incomes that average just $70,000 a year. At Benchmark, such middle-class strivers are greeted with open arms. True, they may be hard-pressed to cope with traditional mortgages that require principal repayment each month. But they can handle interest-only mortgages with smaller monthly payments.

If even that amount seems too steep, Benchmark offers something called the Freedom Loan. For the first few years, it lets borrowers choose between standard repayment terms -- and a "minimum payment" option calculated on a 1% teaser interest rate. For the first month, that option fully services the mortgage; after that, the interest rate climbs above 5% and the minimum payment covers only about two-thirds of monthly interest due.

Anyone picking that lenient final option must pay the price later, because unpaid interest is tacked onto the balance due. But for the short term, such loans let borrowers adjust payments to match their income fluctuations, feeling as if they are handling vast amounts of debt effortlessly. In areas where buyers are frustrated by lofty home prices, the Freedom Loan and similar variants offered by dozens of other mortgage lenders have become very popular.

Sitting in his cubicle, Mr. Ray introduces callers to the delights of the Freedom Loan. He recommends it to young buyers, older buyers and to established homeowners who simply want to refinance their existing mortgages. When a Colorado shopkeeper says he wants to refinance his current $170,000 mortgage with a loan twice that size -- so he can extract some extra cash to be used for buying investment properties -- Mr. Ray knows just what to recommend.

"In your situation, I'd recommend the Freedom Loan," Mr. Ray says. Whizzing his fingers over an HP-10B2 calculator, Mr. Ray declares that the Colorado man can borrow $340,000 and make minimum payments of just $1,125 a month. Payments on a traditional 30-year, fixed-rate mortgage would be nearly twice as high. "This lets you control your cash flow," Mr. Ray declares. "It's going to be a much better loan for you."

Benchmark's top executives encourage such serenades. "We paint pictures," says Lance Diener, the company's executive vice president for sales. "This is all about people improving the quality of their lives. If you can save $800 a month on your mortgage payments, maybe you can buy that brand-new Cadillac Escalade." Larger loans also mean more revenue for Benchmark.

Today's frolics carry a price, though. As Mr. Ray tells callers, the Freedom Loan is set up so that all its terms are drastically recast after five years. The skimpy minimum-payment option disappears. Unpaid interest is tacked onto the balance due. Borrowers may owe more -- and they need to repay it faster. A new payment schedule emerges, most likely with sharply higher amounts due each month.

Benchmark's Freedom Loan has been offered for less than a year, so there isn't any first-hand data about how customers will fare after its easy-credit terms expire. But there is plenty of muttering in the industry. Mr. Diener says he has heard competitors dub it the Prison Loan, on the belief that borrowers might be so deeply in debt after five years that they could lose their homes. He calls that an unfair slur by rivals who "don't understand the benefits of the loan."

Inside Benchmark, employees are encouraged to focus on what could go right. Training classes are packed with hypothetical examples of people who borrowed heavily to buy homes a few years ago -- and now can refinance them to take advantage of 30% or greater appreciation. Although there's no guarantee that the refinancing window will stay open, Benchmark employees and executives present that as the normal course of events.

When one trainee asked about grimmer scenarios in the event of a drawn-out property slump, people at Benchmark stared at him with bewilderment and pity, as if he didn't understand the first thing about real estate. The firm's overarching philosophy is explained in a separate meeting by Jodi Ehrlicher, Benchmark's processing manager. "Buying a home is a leap into the unknown, but you have to do it if you want to get anywhere," she says.

Mr. Ray echoes that. "My parents always told me: 'You can never go wrong if you buy real estate,'" he says. As a boy, he watched his father scrape up enough money to buy a condemned home near the edge of tribal lands, about 70 miles northwest of Sacramento. The Rays had to pour a new foundation to salvage the house. Once they did, it turned out to be a nice home -- and a good investment.

Mr. Ray freely concedes that Benchmark's rates aren't always the cheapest. Rates on the Freedom Loan generally are set at 2.9 percentage points above the yields on short-term Treasury securities. Other lenders offer similar loans at spreads of 2.5 points to 4 points. But Mr. Ray urges callers to do business with him anyway because he is quick, affable and dependable.

"I'm making a huge commitment to get this done for you," Mr. Ray tells one caller. "Part of what you're paying for is service." When he books loans, he arranges for appraisers to show up within a day or two. He schedules notaries to make house calls for the closing, so customers don't need to cool their heels in a title-company office. His goal is to make borrowing as easy and painless as ordering a pizza.

For Mr. Ray, selling mortgages has been a ticket to prosperity. He is leasing an elegant condominium in Santa Rosa with an option to buy. He takes vacations in Paris and Hawaii. He has upgraded to a top-of-the-line sport-utility vehicle, the GMC Yukon Denali, and is helping out family members who need cash. In a few years, he thinks he will have saved up enough money to start buying rental properties on the edge of California's wine country.

It's a big leap from the world he knew as a school counselor in the late 1990s, when he fought endless battles against truancy and drug use. He arranged picnics on the weekend for the most troubled teens and their parents, trying to show them a calmer way of life. When one boy dropped out of school and drifted away to Los Angeles, Mr. Ray recalls, "It broke my heart."

At Benchmark, Mr. Ray holds back. "I don't take stewardship for people's lives," he says. "I try to be fair, honest and act with integrity. But I'm not a marriage counselor. I'm not a parent. I don't put people's emotional issues in my bag when I walk out of here. The loans don't go home with me."