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.
Passion Trade-Off
By Kevin
Do Something, on the side....
I was reading this entry on the HBR blog and found it incredibly perceptive if not insightful. We all have this incredibly strange tendency to believe in an 'all-or-nothing' situation even when we don't actually live such lives. Perhaps we enjoy the binary-choice questions both because they are simple and elegantly reflects our priorities but we almost definitely would hate to be put into that kind of situation where there appears to be no 'third' way.
So must there really be a trade-off? Can't you hold on to your job while trying out something new in the backyard of your home in hopes that you'd create a new product for your future firm? Can you not work as an accountant by day and sing in a bar in the evenings? The people who succeed in doing what they really enjoy and receive the financial fruits do not always simply plunge into something that was initially judged as impossible or unprofitable. They experiment and achieve small wins that leads on to big wins; sometimes it is about persisting through the whole series of failures and hanging on (which might be impossible if you take the all-or-nothing mindset).
OMGPOP, the firm behind the overnight sensation app 'Draw Something' started out as a 'joke' according to its founder and was on the verge of winding up after 35 failed attempts to create an app that generates sufficient revenue for the firm. And then all of a sudden, Zynga came and bought the struggling start-up for $180 million. So were those guys lucky? Yes. But did they hold on to the firm because they believe they'll get lucky? I guess not; it was something closer to passion.
Sure, you can always imagine that if you had not put in that much in your passion, you could have made more money and live a more comfortable life. Or that if you had not suppressed your passion and pursued that high-paying job, you'll be happier. The grass is always greener on the other side. Learn to realise that you can actually balance it. And that life is not all-or-nothing.
Materialistic Rewards
By Kevin
Having failed to secure a seat in Alain de Botton's public lecture in the LSE led me to check out his talks on TED.com which turned out to be wonderful. His insights into life and philosophy is extremely powerful and can indeed be applied to living well.
Eurozone Crisis
By Kevin
BBC has a pretty interesting take on the Eurozone crisis and it explains how past information is often irrelevant in the market's considerations of matters; and of course, the short-sightedness of the market.
Bauhaus Archives
By Kevin
Tubular Steel Chair
I was in Germany for a while this winter break and I spent half a day at Bauhaus Archives. It was a really interesting museum that traced the history of the Bauhaus school and it's 'radicalism' in arts and design. The conception of Bauhaus as a school that would marry arts with craftsmanship was a really powerful idea to me personally. In essence it seek to put together fine arts and applied arts as well as the socio-economic value of them.
I looked at how some of the course components of Bauhaus focused on perfecting the skills and crafts of students while getting them to think about the appropriate materials and techniques involved in the production of things they designed. In many sense, I see a lot of Bauhaus sort of ideas in IKEA - design oriented towards functionality and serving the needs of people (including low costs). Perhaps there's always a business element in the whole Bauhaus movement - in any case, we want to believe that business exists to serve the greater interests of the society.
Equally important in the Bauhaus movement was the idea of 'total arts and design', where all different forms of arts and design were explored, architecture, photography, metal works, pottery, weaving - including the combination of these different products. The potential of such a school combined with industry haven't seemed to be explored again after the closure of Bauhaus - at least not in my knowledge. I'd love to see the movement spring to life again and not just be a relic of the past where we can only reminiscent on the impact it has brought to design in the modern world.
Giving Thanks to Siteground
By Kevin
Love hating it.
If you've been a long-time user of the resources on ERPZ or been reading the pile of this articles written every now and then, you'd know the guy behind most of the stuff here. It's Kevin, yea that's me. But perhaps it's also time to know that this website is hosting on Siteground and ERPZ have been with them since 2007, the year I finished A Levels. I only properly got started with supplying academic resources subsequently.
Anyways this post is part of the little contest that Siteground has organized for Thanksgiving to share our experience/impression of Siteground with the world. For me, I guess it's also to give thanks to this company for making it possible for me to share these stuff to the students out there who are motivated, driven and interested to make good of their studies and future lives.
Siteground and I share a really love-hate relationship. When I first started it, I switched from a host that used H-Sphere and I thought C-Panel was a really difficult control system to use. But I loved their prices and the fact that there was no restrictions on space, FTPs, databases and such (during those days it wasn't that common). Geeks out there will know that and Siteground was probably one of the more competitive companies that started slashing these restrictions and others followed suit.
I hate the way Siteground locks me in and then starts raising the full year hosting prices bit by bit (at least every time I need to renew my contract), and I hate the way they hold my Credit Card information hostage and I can't delete them from my account so unless I explicitly make them terminate the hosting, they'll debit sums from my Credit Card month by month to pay for further hosting. But I loved the fact that when I run into trouble and send a ticket to the support team, I get replies that shows that they care, though more often than not, it takes quite some effort to find a means of getting to the ticket submission. Quite a few times, Chinese characters stopped showing up on some of my pages though there was no issue with my character encoding and scripting. I managed to get them to check it up and after a thorough look through they fixed the problem for me.
Siteground do care for their customers even though they use extremely competitive pricing techniques (US$9.95/yr hosting for your friends who join us! But service renewal for yourself? US$108/yr). Once I got pretty frustrated and decided to cancel my hosting because I've been forking out these payments on my own and generating zero income from the website and yet the host is always driving up the prices. I asked to cancel my hosting but thankfully for the readers of ERPZ, Siteground negotiated a special price with me upon discovering that I want to cancel the hosting. I'll need your continuous support in terms of referring friends to your site and making my costs worth it. Everyone I reach out to makes me feel that my expenses on this site is worth it.
That's my story with Siteground. They are an aggressive, very competitive company offering web-hosting and an array of other web solutions. They do a good job for me thus far and I must say that for all my complains about their pricing and deals for existing customers, they're fine. So do approach them (through me, it's like a super awesome deal) if you want to start a website. You might be elated to enjoy a good deal, often taking for granted when their service is smooth and running well, and sometimes secretly believing you're smart because you're with them. Some other times, you cope with difficulties with the hosting, you get disappointed by them or angry with them for trying to rip you off. This is life with Siteground, it's like living in the rest of reality - you wrestle, fight, laugh and then, you both become good friends in the end.
Population Again
By Kevin
When I was studying the Singapore population back in 2004-2005 as part of my 'Major Research Paper' (supposedly a Chinese High innovation as part of the Integrated Programme to make good use of the time otherwise used to prepare for O Levels), the total fertility rate of Singapore stood around 1.26. It was already pretty controversial that time because people were basically screaming about how our country has been below replacement fertility for many years and that the people were not reproducing themselves.
In the Population in Brief 2011 (pity I didn't have such a reference material during those days when I was working on the research), it seems that fertility in Singapore has fallen even further but it seem to have stopped being such a big deal as the government internalized the social message at large, 'don't bother us with this matter'. There's even a line that says, "We recognise that getting married and starting families are personal choices and decisions." And in a typical Singapore-style bossiness that cannot tolerate inaction or lack of response to something deemed unsocial, it went on, "The Government aims to create a pro- family environment, through a comprehensive set of measures, including the Baby Bonus cash gift and co-savings, tax reliefs and rebates, as well as child care subsidies."
Up, up, up more slowly now...
In the latest LSE100 module which I recently completed, we explored the question, 'Is Population Growth a good thing?'. I was thrown back into a world I was familiar with from research and study of Human Geography back in High School. The Demographic Transition Model, Pro- and anti-natal policies, the 'development as a contraception' argument and so on. It was both interesting and somewhat annoying that themes in the discipline hasn't quite changed much. I guess the discipline is in itself shaped by the themes so I can't expect too much. But to consider population growth over a longer period and look at its dynamics from the perspective of the development of the human civilization and forward is interesting especially when you add technology, resource constraints and the notion of ideas into play.
And of course, more dramatically, the world just crossed a new milestone of having 7 billion people in the world - I remembered that the 6 billion mark was crossed some time in late 1999; my Geography teacher used so say that she and her geography class got the chance to watch the countdown (or count-up?) to 6 billion. More so than ever, we're all just another tiny soul wandering around the increasing crowded surface of our planet.
Happiness & Money
By Kevin
Does money bring happiness? Apparently for some, it may bring more misery; and this may be the case for the ultra, mighty rich who are basically not such happiness-efficient consumers of material wealth (ie. they already have so much material wealth that their riches can't buy the marginal stuff they desire). This is the finding of a paper published late last year, The Heterogeneous Effects of Income Changes on Happiness.
While 98% of people get a bit more satisfaction out of life (but not a lot) when their incomes rise, the remaining 2% are known as "frustrated achievers" — more money only makes them more unhappy, according to a team led by Leonardo Becchetti of the University of Rome Tor Vergata in Italy. Studying data on UK households, the researchers found that 70% of the frustrated achievers are female, and divorce is more common among this group than among the rest of the population.
Which brings me to the interesting idea explored in a public lecture in LSE last month; two professors 'debate' on the validity of using happiness as a measure of social progress rather than the 'traditional' indicators of income-measurements and development figures (mortality, access to services, nutrition, etc).
Indeed, happiness might often be relative and too often depends on context and circumstances. Our method of asking people if they are happy is as good as trying to measure the wealth of economy by randomly selecting people on the streets and then noting the amount of cash in their wallets. Too much of data relating to happiness is being missed out in the way it is captured now, making it difficult for happiness to be a measure of social progress though ideally, it actually serves as a good benchmark.
The Microfinance Experience
By Kevin
This is a long overdue reflection of my experience with development work as well as Microfinance during my last academic session and the a short trip to Ghana in Summer 2011, as part of a community development brigade under the Global Brigades.
During my course on Microfinance (organized by The Student Initiative), I wrote an essay to conclude the course. It discusses the development of microfinance briefly and focused on the idea of expanding savings in the whole social enterprise of Microfinance. I covered the issue of financing of these enterprises and addressed the question of the future direction of the industry. It was interesting how this intellectual view connected with my personal experience on the ground when I went to Ghana.
Personal savings facilities did have a latent demand there. Previous experiences with micro-credit hasn't always been positive for the folks and they hope to reverse the financial equation and accumulate for investment rather than borrow to invest. These made sense to a certain extent: their proximity to poverty and sometimes subsistence lifestyle means that their access to money was limited; this made it difficult for them to repay loans when their investments pays them off in terms of crops and livestock that may not be readily liquidated (owing to price fluctuations in the market that may be in conflict with the repayment cycles). Accumulating savings and subsequently investing savings meant that there was less pressure trying to convert the non-monetary wealth back to money.
At Ekumfi-Ekotsi, where our brigade served, we designed a simple banking operation that the folks from the community can implement to accumulate savings to provide small, community-based loans as well as generate returns to finance community development projects. The focus was on savings and the incentives that these folks have for savings. We wanted to make the system simple for them to quickly see the benefits and save effectively. Our Microfinance Brigade even has a website set up on future recommendations for the brigades serving at the particular village. It included a report we've written to guide the future development of the fund. On the day before we left, there was 6 accounts set up with the fund and approximately 50 Cedis saved.
It was thus amazing that we later learnt that the number of savers went up to 200 when the next LSE brigade went down. They made it drastically easier for people to set up accounts by subsidizing the costs of passport-sized photographs required for account opening. And many more little workshops and marketing to promote the importance of savings. I attended the Global Brigades Student Leader Conference for Europe just last week and met a member of the brigade who was last serving at the community in late September - approximately 3 months after we left. The description of our projects progress was amazing; the folks at Ekotsi have almost internalized the idea of saving and using the fund as if that had been part of their lives all the while. There's now 350 savers and they garnered sufficient funds to start making loans.
I didn't get the chance to fully understand the current operations but the new savings products which I recommended did get implemented (way before the timeline I've laid down); as a matter of fact, the brigades had to move fast the execute ideas because there will be a period without any volunteers at the community and the committee of the operation will be pretty much managing it all on their own.
Perhaps we really did make an impact, with our ideas if not our work there. The model we created became the standard for Microfinance conducted by Global Brigades in Ghana. Granted, we adapted from the FUNDER model they came up with in Honduras and consequently, they are more receptive to our community-oriented, social benefits-driven model. It was still a fantastic success. Looking back, we're just a bunch of 9 foreign students in Ghana for 10 days after all.
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