Progress Daily

Nicos Nicolaou’s research team used quantitative genetics techniques to compare the entrepreneurial activity of 870 pairs of monozygotic (MZ) and 857 pairs of same-sex dizygotic (DZ) twins from the UK, and found relatively high heritability for entrepreneurship, with little effect of family environment and upbringing.

Because MZ twins share all of their genetic composition and DZ twins share half of their genetic material on average, differences in the concordance between entrepreneurial activity of MZ and DZ twins can be attributed to genetic factors.

Studies of MZ and DZ twins raised together and apart have shown that the MZ twins raised apart are consistently more similar than DZ twins raised together.

Many parents are misinformed or make erroneous evaluations about the zygosity of their twins, leading some parents to raise their DZ twins as MZ twins and other parents to treat their MZ twins as DZ twins. Studies have shown that in cases where parents made erroneous conclusions about the zygosity of their twins, it was actual, rather than perceived zygosity that predicted similarity between twins.

The researchers estimate that 48% of the variance in the propensity to become self-employed is explained by genetic factors. None of the variance in self-employment can be attributed to shared environmental factors, while 52% can be attributed to non-shared environmental factors plus measurement error.

The researchers re-ran the analysis adjusting the model for potential confounders - income, education, marriage, age, race, and immigrant status - that have been shown to be associated with entrepreneurship. The heritability estimates for self-employment, drop only to 41% when these variables are included.

To identify the mechanism through which genetic factors operate, the researchers examined the respondents attitude toward entrepreneurship through an item that asked them to indicate, on a scale from one (a very good career) to five (a very bad career), their view of entrepreneurship as a career. The best fitting model to explain the variance in attitudes included shared and unshared environmental factors. None of the variance was explained by genetic factors, indicating that the mechanism through which these factors affect the tendency to become an entrepreneur is not through attitudes toward the vocation.

“Is the Tendency to Engage in Self-employment Genetic?” (.pdf file here), by Nicos Nicolaou, Scott Shane, Tim D. Spector, and others

People who are perceived to be trustworthy are more likely to have a higher credit score and pay lower interest rates on loans, and are less likely to default, according to a study by Jefferson Duarte & Stephan Siegel (”Trust and Credit“).

The researchers studied members of Prosper.com, where people looking for loans are matched up with individual lenders.

Each Prosper.com loan applicant submitted a profile which included credit and work history, education level, income and an optional photograph of themselves for lender review.

More than 6,800 loan applications, 2,600 loans and 12,000 photographs were used in the study.

Duarte hired a team of 25 people to rate the applicants’ trustworthiness on a scale of 1 to 5 using only the photographs of the borrowers. The team also judged the probability that the borrowers would repay a $100 loan.

Those judged to be trustworthy were more likely to get a loan from Prosper.com lenders and tended to have a credit score about 20 points higher than those determined to be untrustworthy.

“Untrustworthy” borrowers were 7% more likely to default on their loan than a perceived trustworthy borrower with the same credit score.

The researchers controlled for race, age, gender, obesity, attractiveness and education, employment status, income and homeownership.

“Creditworthiness may be linked to looks,” by Rebekah Kebede

According to Abhijit Banerjee & Esther Duflo (of the Poverty Action Laboratory), among the rural poor, fewer than half have children aged 13-18 in education, whereas among those living in cities and earning over $2 a day the figure is over three-quarters.

In emerging markets, among the very poorest (those living on less than $1 a day), the number of children in the household ranged from 1.8 to 3.6 per adult woman. In families that live on $6-10 per person, the average number of children per household was between 1 and 1.3 (these figures do not include China so they are not influenced by that country’s one-child policy).

“Notions of shopkeepers,” The Economist

Based on the 2007 Pew Global Attitudes survey, the attitudes of people in emerging nations whose household income can be considered at least “middle income” by international standards (more than $4,300-per-year in standardized international dollars) differs from those of poorer citizens.

Middle class respondents are more likely to say it is very important to live in a country with key institutional features of democracy, such as fair multiparty elections and a fair judiciary, are more likely to emphasize the importance of the rights enshrined in the First Amendment (free speech, a free press, and freedom of religion).

When asked to choose which is most important to them personally — free speech, freedom of religion, freedom from hunger and poverty, or freedom from crime and violence — they are more likely to prioritize being able to speak freely in public (lower-income respondents were more likely to emphasize being free from hunger and poverty).

People in the global middle class are less likely to consider religion central to their lives, and less likely to believe faith is essential for morality. (See “Unfavorable Views of Jews and Muslims on the Increase in Europe” and “World Publics Welcome Global Trade - But Not Immigration.”)

Similar differences characterize views about homosexuality, especially in Eastern Europe.

Middle-class respondents are more likely to consider global warming a very serious problem; and they are more likely to say that pollution is a very big problem for their country.

Life satisfaction tends to be higher in wealthy countries (see “A Rising Tide Lifts Mood in the Developing World“); and in developing countries, it tends to be higher among wealthy people.

Across the 13 nations, the median percentage rating their current life in the range of seven to 10 is 50% among the global middle class and just 31% among poorer respondents.

The median percentage of middle-class respondents saying their life five years ago rated at least a seven was 45%, compared with 33% of the less affluent.

The 13-country median percentage among the middle class saying their lives would rate a 7-10 in the future was 71%; in contrast, 58% of less wealthy respondents felt this way.

“The Global Middle Class,” Pew Global Attitudes Project

Surjit Bhalla defines the global middle class as those earning $10-100 a day. This middle class’s share of the world’s population rose from 1/3 to over half (57%) between 1990 and 2006. This is the third middle-class surge since 1800. The first occurred in the 19th century with the creation of the first mass middle class in western Europe. The second, mainly in Western countries, occurred during the baby boom (1950-1980). The third one is happening almost entirely in emerging countries.

The number of middle-class people in Asia has overtaken the number in the West for the first time since 1700.

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In many emerging markets the middle class does not grow incrementally, it surges. The chart above shows why. The vertical line represents an income of $10 a day. The lop-sided bell shape represents the distribution of income in a country (in this case, China) with a tail of poor people on the left, a longer tail of rich ones on the right and a bulge of people on average incomes in the middle.

As the economy grows, the bell moves to the right and as it meets the threshold, a great whoosh of people cross into the middle class.

In China, the middle-class share of the population soared from 15% to 62% between 1990 & 2005.

“Burgeoning bourgeoisie,” by John Parker

Less than 1% of private gifts to charity are anonymous.

Dan Ariely, Anat Bracha, and Stephan Meier (”Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially“) conducted an experiment where the number of times participants clicked an awkward combination of computer keys determined how much money was donated on their behalf to the American Red Cross. Since 92% of participants thought highly of the Red Cross, giving to it could reasonably be assumed to make people look good to their peers. People were randomly assigned to either a private group, where only the participant knew the amount of the donation, or a public group, where the participant had to stand up at the end of the session and share this information with the group. Participants exerted much greater effort in the public case: the average number of clicks, at 900, was nearly double the average of 520 clicks in the private case.

The researchers added to their experiment a monetary reward for participants. In private, being paid to click increased effort from 548 clicks to 740, but in public, there was next to no effect. Presumably, for the public clickers, the added motivation of financial reward was offset by the reduced appearance of generosity.

“Looking good by doing good,” The Economist

In 1993, the OECD analyzed forecasts made between 1987 and 1992 by the governments of the USA, Japan, Germany, France, Italy, and Canada, as well as those of the IMF and the OECD itself. (See “How accurate are Economic Outlook projections?“) Not only were each of these organizations’ predictions abysmally inaccurate, but they would have made better predictions for inflation and gross domestic product if they had scrapped all their sophisticated economic models and simply guessed that the numbers in each year would be unchanged from the last.

Yet governments use these predictions when attempting to steer the economy.

Ubiquity by Mark Buchanan

 Researchers (John Coates, Mark Gurnell & Aldo Rustichini) at the University of Cambridge report that men with longer ring fingers, compared to their index fingers, tended to be more successful in the frantic high-frequency trading in the London financial district. (See “Second-to-fourth digit ratio predicts success among high-frequency financial traders.”)

The impact of biology on success was about equal to years of experience at the job.

(The same ring-to-index finger ratio has previously been associated with success in soccer and basketball.)

The length ratio between those two fingers is determined during the development of the fetus and the relatively longer ring finger indicates greater exposure to the male hormone androgen.

(Previous studies have found that such exposure can lead to increased confidence, risk preferences, search persistence, heightened vigilance and quickened reaction times.

In a separate study last year, the researchers researchers studied male financial traders in London, taking saliva samples in the morning and evening. They found that those with higher levels of testosterone in the morning were more likely to make an unusually big profit that day. (Testosterone affects aggression, confidence and risk-taking.)

In the new study, the researchers measured the right hands of 44 male stock traders who were engaged in a type of trade that involved rapid decision-making and quick physical reactions.

Over 20 months those with longer ring fingers compared to their index fingers made 11 times more money than those with the shortest ring fingers. Over the same time the most experienced traders made about 9 times more than the least experienced ones.

Looking only at experienced traders, the long-ring-finger folks earned 5 times more than those with short ring fingers.

“Finger length may predict financial success,” by Randolph E. Schmid

The Internet gives access to a huge market at very low marginal cost. This creates the possibility of success at very low participation rates.

Wikipedia works despite the fact that only about 0.01% of readers regularly contribute material. With 680 million annual visitors, that’s still 75,000 active contributors — who have created 10 million articles.

YouTube works with just 0.1% of users uploading their own videos.

And spammers can make a fortune with response rates of 0.00001%.

“The miraculous power of scale,” by Chris Anderson