The Banking Sector
By Kevin
There or nah?
I've got this article sitting on one of my browser tabs for centuries; it's a great article I wanted to share and just write a thing or two about but I guess I've just been way too busy. Whatever the professor was talking about, it's indeed facts about the life of students especially those in the colleges in the city. It probably started out with LSE and UCL but then King's students hopped on and Imperial College students (none of whom are Economics students) decided that banking was for them. Being a student of LSE, I admit that the frenzy about banking in school got me a little curious. Yet beneath all the 'prestige', it is indeed just a job, one that is like every other and the same sort of considerations apply - whether you want the lifestyle and role it involve.
For students thinking about the course to do in university, your interest in the subject still matters more than the job it might land you in. For most professions, clearly you need to be trained in the area so there is little dispute for people who want to be doctors, lawyers, accountants or engineers. But just make sure you've chosen these 'jobs' because you're inherently interested in the work (the challenge it offers, the problems you've to solve and the techniques you may acquire) and not the remuneration. For other discipline which do not readily translate into specific jobs, have in mind where the field may lead you to but be open; and then charge at it and relish the experience.
And relating to what the professor mentioned about models, readers might like to check out my views on economics and models.
Learning Grit
By Kevin
I just thought it'll be interesting to share this audio interview from The Economist. There's quite a bit of wisdom with what education should be seeking to deliver. In particular, there has to be more emphasis on feedback mechanisms and using tests results, and the things we learn from the (wrong) responses that the child gives. We're currently putting way too much weight on the preparation of tests as if the score is the end point. In reality, every tests provides some feedback to help the child improve and overlooking this is missing one of the most valuable resource that we generate at our schools.
In fact, I've written a long time ago on using tests.
On Culture of Corruption
By Kevin
Free to Park?
Ray and Edward wrote an interesting paper in 2006 trying to think about corruption with effects of social norms and that of legal enforcement being disentangled. Initially, I thought that it was merely an interesting paper, a great observation of a natural experiment and potentially a great example of the kind of thinking modern day economists should be acquainted with applying when going about their daily routines (even outside academia).
Yet when I saw figure 2, on page 32 of the linked file, something else struck me. For most countries with the exceptionally low corruption measures like that of Singapore, there is virtually no unpaid parking tickets. Yet Singapore presents itself as a rather stark outlier. Given what Ray and Edward was suggesting in their study about how corruption norms is deeply ingrained, can it mean to say that Singapore's success is nothing but a result of extremely effective legal enforcement? And that we are merely law-abiding out of fear of punishment rather than our integrity?
What sort of culture have we created with our argument that officials need to be well-paid so that they would not corrupt? Does it implicitly suggest that lowly paid officials should be allowed to be corrupt? More importantly, what does justifying high ministerial pay by saying that these people are talented individuals who would earn the high pay in a market setting anyways mean about how much we value integrity?
Ray and Edward used Transparency International's definition of corruption: "the abuse of entrusted power for private gain" when thinking about it. The definition by its spirit feels almost like a description of the very act of prescribing a high salary for oneself. So what do you think?
Morality of Markets
By Kevin
It definitely can buy you this book...
Jonathan makes it seems as if economists are pitted against philosophers in his WSJ article.
[Economists] have assumed a role in society that for the past 4,000 years has been held by philosophers and theologians. They have made our lives freer and more efficient. And we are the poorer for it. - Jonathan Last
The truth is that economics has always been an extension of philosophy. Adam Smith was a philosopher who wrote first 'Theory of Moral Sentiments' before 'Wealth of Nations'. He wrote first,
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it. That we often derive sorrow from the sorrow of others, is a matter of fact too obvious to require any instance to prove it.
Yet the most famous of Adam Smith's quote subsequently immortalized by generations of economists was:
"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages."
Jonathan focuses too much on what economist would consider 'static efficiency', which really is just one aspect of economics that is more easily analysed and subjected to greater scrutiny than its more important counterpart, 'dynamic efficiency'. Dynamic efficiency basically considers the long term efficiency consequences of different 'incentives' and signal mechanisms in the economy.
In other words, even the values, and attitudes that economics promote goes into the equation of dynamic efficiency - if it promotes destructive behaviours and interactions that is beneficial to actors in the short run but bad for the entire system, then there are grounds for these to be weeded out. In any case, the discipline acknowledges that competition or market forces are important in bringing about good outcomes but then by the second welfare theorem (when competition can't bring about the greatest welfare then there are ways to adjust the competition to motivate it to bring about that), we know that artificial frameworks and structures needs to be put in place to encourage what is good for dynamic efficiency.
That being said, Michael Sandel's book is definitely a good buy.
[Meanwhile, for those in UK reading this, you might want to enjoy an awesome Starbucks deal.]
Defining Happiness
By Kevin
In this TED talk, Daniel Kahneman speaks about the two different kinds of happiness that is defined based on the two 'selves' that resides within us - the 'remembering self' and the 'experiencing self'. And it is interesting how our bias towards the 'remembering self' affects the way we make decision and live lives. The example given about vacations is particularly apt and important. He did neglect to suggest how our remembering self who tells stories to ourselves and others can possibly help the experiencing self generate more happiness through boasting to others about their experiences.
The single most powerful observation that Daniel makes in the talk, I feel, is this:
We think of our future, as anticipated memories.
And perhaps then, indulging in lots of changes in life, despite the discomfort of adapting and adjusting, could possibly enhance the happiness of life by generating more memories for ourselves. Indeed, much moments we live in life are simply lost and we rely very much on sensations to generate memories that can be retrieved more easily. If reported happiness is really what we value then measuring the actual emotions is not longer helpful; and then we get into a rather bizarre situation where inventing nice stories for our lives do help to make us feel happy even when our experiencing self may not have thought likewise.
Motivation & Sensible Thinking
By Kevin
I always think that motivation and sensible thinking go hand-in-hand. Motivation without sensible thinking can be foolish and even delusional; sensible thinking without motivation can be cold, indifferent and possibly irrelevant. And Purpose Fairy seem to put together pretty well.
My favourite entry is this one on forgiveness. And there was a pretty popular one that I thought I just have to link to.
Chasing Goldman
By Kevin
Emulate, don't Chase
When I first borrowed 'Chasing Goldman Sachs' by Suzanne McGee, I didn't expect to be finishing the rather thick tome. It turned out to be a pretty fine book with its 'utility' analogy of the function of the financial industry and tracing the evolution of the industry from a boring, administrative sort of place to one where brains were pit against brains with unintended (disastrous) consequences.
It was essentially a discussion on the problems in the system itself - culture, regulatory capture (to a certain degree) and incentive problems. There was the typical journalist sort of inconclusive discussion about where the industry to move towards in the coming future. I often write stuff like that to sound intelligent because saying nothing and facilitating viewpoints is the best way out when you find it too risky to take a stand on the issue.
And then I was watching Margin Call, which depicted the sort of culture as well as paradigm that people in the industry have about themselves and the rest of the world. Indeed, it was pointed out by Suzanne that the Wall Street approach towards a problem is vastly different from that of someone on Main Street:
On Wall Street, when you spot a problem, you figure out how to profit from it; not how to solve it.
So let's say you know Enron cooked their books; you don't blow the whistle! At least not until you've accumulated vast amounts of short position on their stock. If you know a war is going to break out in the Middle East before everyone else, you don't call for peace or try and prevent it - you buy oil futures! And so the examples go. That's the way they work, don't expect them to try and prevent a crisis; tell them about it and they'll shrug and go behind their cubicles to their spreadsheets and start computing potential cashflows in different states of the world.
Towards the end of the book Suzanne talks about the importance of learning Goldman Sachs' strategy rather than trying to emulate their returns. I guess it applies to many aspects of life. You realise that when your friends do brilliantly in exams, and you hope to beat him at his game, you don't just go all out to ramp up your studying hours and consult tutors for every other thing. You find out what he does, understand his motivations, find your own motivation and work out a niche for yourself. Don't scramble for the solution only when trouble comes along or try and catch up only when you're falling back - have a strategy, know what you want and then know what to do about it. Only then, you've a chance at getting close to 'chasing Goldman Sachs'.
Efficient Monopoly
By Kevin
A while back, I wrote an article about the failures of competition in the context of Singapore - where we've failed to set up the competition in a way that benefits the society. Consequently, the result of the competition becomes wasteful and often rather dismal to those involved in the race but didn't emerge anywhere close to victors. But David Brooks (author of 'The Social Animal'), points out in an article on New York Times, that we may have overlooked the 'monopoly' in the context of competition in this world.
He sets up the 'monopoly' situation as diametrically opposite of competition but the truth is that 'monopolies' are actually trying to compete as well but they see a larger and more open playing field than those who are engaged in fierce competition in one aspect. Obviously pulling ahead of competitors is not just about mirroring what they do but innovation, often setting yourself apart from them can be immensely valuable. What is forgotten, however, is being so different that you simply create a 'monopoly' altogether.
The Contrarian
The evolutionary landscape that competition is sort of 'model' after features 'monopolies' as well. In Eric Beinhocker's Origin of Wealth (which I read quite a while back); he talks about the need for innovators that tries to jump around the landscape rather than groping around his existing location for peaks. Fierce competition, the sort described by Brooks, is characterised by incremental improvements that allows you to gain advantage over your rivals, much like a mountain climber scaling a specific peak, trying to outdo his rivals by going via the steepest path so that he can get there in the shortest time. And he does so by figuring out the direction he must head in, in order to accent the fastest (global optimization on a R-n landscape has the same sort of spirit but as usual, in mathematics we always imagine rather smooth surfaces that makes things easy - the fitness landscape is hardly smooth).
The good 'monopolist', however, is the innovator who leaves this peak in search for a higher peak or more difficult one to outdo his rivals. Or perhaps he decides he'll dive into ocean trenches instead rather than climb mountains. Opening up a new field and dominating it pays off handsomely in the long run. It also requires one to maintain the bigger picture of the situation. And that is what we observed in the case of John Paulson during the height of the Subprime Mortgage bubble. As an 'outsider' from the mainstream Wall Street, he carefully studied, monitored and analyzed the over-extension of credit in the Subprime Mortgage market before he started taking on short positions that ultimately paid off during the crisis.
Traditional competition, that Peter Thiel is arguing for people to 'avoid', distorts our perception of risks because it captures you into the system and makes you fearful of falling behind when you do something different. When everyone is reading their textbooks and preparing for exams, it would seem somewhat unwise to be reading some other popular Economics books or even the Bible. Yet as a student captured in this whole paper chase, one needs also to realise that there is little value in re-reading what one has been reading for practically the whole year. Combining the content learnt with newer, obliquely relevant knowledge improves your associative memory and can remarkable enhance the ability of questions to trigger knowledge you've already acquired previously over the term. More of this next time on ERPZ.
The key here is that one needs to master the art of being a 'good monopoly' even as one gets too caught up with competition. And this monopoly, would be an efficient one.
Wasted Eureka
By Kevin
Once again, another batch of students are encountering Project Work for the first time in their lives and fearing for it. I'm looking into the two questions and providing a bit of guidance on how to go about tackling them much like what I did for the students last year (here and here).
Seal that heals
This year's question follows the standard PW format; which goes by the 'research-then-implement' structure. The point is always to get you to study a particular issue/topic/area and then make use of your findings to design an implementable plan with specific actions. Likewise, both questions are usually similar or overlapping to a certain extent. They are quite general as usual and allows much room and space for creativity - something we Singaporeans seem to be mocked for lacking.
The Eureka Moment
Aim
This project task encourages you to explore the world of invention and/or discovery in a particular field and then use your findings to benefit the communityTask Requirements
Identify an invention/discovery in a particular field (eg. in science and technology, medicine, transport, design and construction, consumer goods and services, etc.) and show what its impact has been.Suggest how your chosen invention/discovery could be adapted to meet a need in the community.
This first question deal with inventions or discovery and obviously you have lots of them to choose from; select something you're interested in and with information available, preferably something that has been implemented somewhere or tried out and you can use the results of the trial to justify your plan. I would advise you to start off with identifying the invention/discovery before trying to think of a need in the community to be met by it. Starting with the need could be challenging. Once you've got your invention/discovery; ask yourself the following:
- What are the impacts of the discovery/invention?
- What is the original motivation/intent behind the discovery or invention?
- How is it applied in the real world? Does it solve a problem, improve on an aspect of life?
- Who does the invention/discovery help? Where and when was it used?
- Is there any side-effects, unintended consequences, dangers?
- Can the invention/discovery be adapted to a similar community in Singapore or around us? How can you reduce any risk that comes with applying the invention/discovery? What kind of difference can you make with this adoption?
Something interesting people might want to look into is that of robots; I recently took notice of this invention, 'Paro the seal', which is a social robot designed to accompany elderly. It could meet the need of an ageing population with lonely elderly folks perhaps. And Sherry Turkle voiced some concerns about this.
Now we move on to the next task option.
Waste Not, Want Not
Aim
This project task encourages you to consider the issue of wastage in a particular area and to suggest ways to reducing such wastage.Task Requirements
Identify an area (eg. of any natural resource, money, time, food, opportunity, etc.) where wastage takes place and show the present and future impact of such wastage.Draw up a plan to highlight the problem to a specific group in the community and suggest ways in which they might reduce the wastage.
Now this task deals more specifically with a kind of problem. Still, wastage can be on anything so there's much scope for exploration. 'Wasted opportunity' alone can practically be anything. Choose something that can be wasted but that waste can also be salvaged or put into some other better use then the way it is used now.
- Why is it wasted at present? How does this waste arise? (Eg. Banana peels waste emerges from consumption of bananas)
- How is the waste currently treated? Ignored/Disposed? Used but not efficiently?
- Is there any residual value in the waste? Does the waste actually have value elsewhere? (Eg. Cow dung might be waste to the cow but fertilizers for the farmers)
- Is there a mechanism for us to bring this residual value from one party (the one who wastes it) to the other (the one who needs it)?
- Is there any cost involved in this transfer? Can we design a mechanism for that specific group in the community who can make use of the waste?
- What would be the impact of reducing this wastage? Who benefits and how can the impact affect the society at large?
Food Unwasted
Being based in London for my studies now; I could suggest looking into expired food and consumer products in supermarkets. You could do a project to survey the wasted perishable food that are disposed by supermarkets (like fresh vegetables, fruits, microwaved food, sushi, baked items, etc) every so often. And then a solution could be something like what is used in British supermarkets; that is to reduce the prices of these goods as they approach expiry date so that the supermarket can clear the stocks while recouping some of their cost and reduce wastage at the same time. I have not seen this in supermarkets in Singapore so it might be worthy to look into this.
Please try not to end up copying the suggested ideas because if you can see this post, a thousand over other students or more would see it and your tutors too, would be able to see this set of guidance and possibly use it for their class.
All the best!
Ageing Happy
By Kevin
Population is something mentioned somewhat regularly on this blog; not only because it is an important variable in social sciences but also because it affects every single one of us more than we normally imagine and that it is a statistic we continually contribute to by our mere existence. I mentioned a while back that I wrote population study papers back in High School. What I didn't mention was that I was studying the ageing population in Singapore. I was looking at what brought about the ageing scenario in Singapore (the institutionalization of the two-child norm and aggressive anti-natalist policies converging with socio-economic development) as well as some potential consequences - higher burden on society, etc.
On aggregate measures, Singapore has somewhat managed to avoid the costs through 'import' of youthful migrants and permanent residents. But I've perhaps left out a major consequence about the presence of an ageing population; I mentioned advantages such as potentially lower crime rates but I made no mention about putting their experience and knowledge into good use. I mentioned about how new niche markets relating to healthcare may emerge but made no reference to the fact that people who live longer might actually be better at dodging health problems that younger people usually face and there's probably some opportunities there.
In any case, Laura Carstensen probably gave a good idea of the perspective that is largely lost in our doom and gloom perception of an ageing population. Perhaps the point about the aged being happier is important as well; and an emotionally stable, knowledgeable, and healthy (if not strong) population can indeed prosper in ways we have never properly sat down to contemplate about.
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