Future concerns

One of the primary fear of the future an average man has stems from the “abstract idea” of how physical discomfort would feel like during old age just prior to the point of death and how terrible it might be.
 
This primary fear is the main driver behind the average man’s continued effort to accumulate resources of various forms. It is done with hopes to alleviate that “discomfort” when it does eventually come.
 
The problem with that mode of thinking is the future is unknowable and man ends up wasting his precious limited life span over provisioning, not to mention it’s overall negative impact on the environment.
 
An alternate approach as practiced in various ascetic traditions is to steadily build the ability to keep equanimity at various thresholds of discomfort through daily practice. This curtails over-provisioning , frees up precious time to do more meaningful stuff and is generally good for the environment.
 
Related references:
– Diogenes
– Seneca
– Meditations, Marcus Aurelius
– Vipassana mediation
– TaoDeChing, Lao Tze
– The Tiger’s Cave, Trevor Leggett
– Zen mind, Beginner’s mind, Shinryu Suzuki
– The book of five rings, Musashi

Different by Youngme Moon

Key takeaways

  • Removing an authoritative metric to measure performance invites fresh reinterpretation and creative differentiation
  • Having an authoritative metric in place is the surest way to invite competition and conformity
  • “For the most part, we do not see before we define, we define before we see”  Public Opinion, Walter Lippman
  • In business product categories are very flexible. All it takes is a perceptual shift to transform the consumption behavior of the masses
  • “Intuition becomes increasingly valuable in new information society precisely because there is so much data”, John Naisbitt

The dichotomy between privacy and health

1984: Big Brother is Watching
Across multiple literature, its been stated privacy versus health will be one of the primary dichotomy societies around the world will need to juggle with as technological advances are made in the fields of artificial intelligence, communications (surveillance) and medical science (genetic research).
 
What is surprising was the rate at which the Corona pandemic catalyzed this change. In light of this, it is fascinating to observe how different societies position along the spectrum. Some societies has opted for surveillance to the maximum extend possible with current technology while others opted for its polar opposite going to the extend of staging mass protests against it use. 
 

Related readings:

  • The AI Economy, Roger Bootler
  • To Be a Machine, Mark O’Connell
  • Irrational Exuberance, Shiller, Robert J.
  • Life 3.0: Being Human in the Age of Artificial Intelligence, Max Tegmark
  • Mind Children The Future of Robot, Hans Moravec
  • The Singularity Is Near, Ray Kurzweil
  • 1984, George Orwell

Thoughts on the nature of framing

Optical illusion of the old lady and young lady

The basis we use for interpreting what is happening our world is through the understanding of our history. History heavily relies on narrative constructs.

The critical flaw with using narration as a tool to understand, encode and communicate what has transpired is it can only support data in a chronological order while reality is inherently chaotic, multi-linear, on occasions non-linear and confounds understanding thus narration. To tell a coherent tale of what has transpired, authors are forced to decide what to include and leave out of the narrative they weave. This phenomena is commonly labelled as the narrative fallacy.

Compound narrative fallacy with a collection of common human cognitive bias such as the framing bias, survivor bias, confirmation bias and consistency bias and you get a recipe for a fragmented society. This is especially more so when you have multiple equally plausible narratives that are diametrically opposed but draw evidences from the same chaotic sample space to reinforce their positions.

The task of deciphering what has transpired becomes even more daunting to the everyday individual with the reintermediation of social platforms as our primary news source. In the days prior, individuals need only rely on one official news source on how to understanding what is happening, usually from their government. Now, individuals are bombard on a daily basis with news sources sponsored by multiple parties with varying interest and agendas. In this day and age, it has become crucial for individuals to exercise critical thinking.

Some final food for thoughts:

  • Iran is portrayed as an evil country in American media
  • America is portrayed as the devils incarnate in Iranian media
  • China is portrayed as an evil country in American media
  • America is portrayed as an evil country in Chinese media
  • Why is it that the winners are always as good and righteous in any battle?
  • “If God’s on our side, who the hell could be on theirs?” Private Reiben in Saving Private Ryan.

Thought provoking artifacts

Conflicting frames about Bills Gates

Bill Gates the evil person
Bill and Melinda Gates the philanthropists

Conflicting frames about the 2020 CoronaVirus

Conflicting frames about global warming

Related references:

Continue reading “Thoughts on the nature of framing”

Predator’s Ball by Connie Bruck

  • no matter how much research you done regarding a stock you don’t have a contract what the future price should be
  • with high yield bond there is a contract for a certain price in a future, if you are correct about the calculation, you will be correct about your yield
  • bargain price: liquidation price 75cents on the dollar buy at 20 cents
  • when you are not a big established investment firm like Lehmen brothers, you have no franchise to protect. You are free to go the unconventional route for potential outsized returns
  • great ideas are born bad. Its easy to make your way to a great idea from crazy outrageous ones than cautious and sensible ones. Investment bankers by default filter out the crazy outrageous ones.
  • Contrarian thinkers need to train themselves to see things via unconventional routes
  • ways to structure a bond
    • give money back sooner
    • give higher interest rates
    • give more stock
    • give stocks cheap
  • It is easier for corporation to pay interest which is tax deductible than dividends which are not
  • Bonds offer process
    • first tier  high rollers offer liquidity get to buy at cheaper price and exit earlier
    • second tier payers, with franchise to protect, who want to avoid stigma of being junk bond buyers will come in later at more expensive price and exit later.
  • Successful leverage buyout scenario: after buy out use cashflow from business to pay off the junk bonds thus deleverage the business
  • Mutual fund arbitrage: compare value of underlying portfolio and stock price
  • If you are right about a company being undervalued and it is willing to put itself up for sale, there will be buyers
  • Poison pill: defense mechanism against corporate take overs. When would be acquirers crosses threshold of ownership, existing shareholders are given extravagant rights rights making it less desirable as take over target
  • Michael Milken:
    • perception versus reality, see what the world could not.
    • Vision is Strength.
    • capital is abundant, vision is scarce.
    • excess capital is not strength but opportunity for weakness
    • capital put in the hands of someone with vision will result in drastically different results.
    • return of the owner manager as opposed to the corporate manager
    • by-pass the China wall principle where companies try to isolate the deal making and arbitrage departments
    • knows many industry in depth

Related references

King Icahn, biography of a renegade capitalist by Mark Stevens

  • way of thinking
    • There is a strategy behind everything. Everything fits. Thinking this way taught me to compete in many things, not only take over but chess and arbitrage
    • Empiricism says knowledge is based on observation and experience, not feelings
    • Studying 20th century philosophy trains your mind for takeovers
    • Chain thinking: just like chess, in any transaction, think of every single possible move and counter move
    • always consider what might be the worst case scenario and then protect your downside while increasing your control
    • a civilization starts to decline when a large part of its population stops working
  • Icahn/Kingsley theory: focus the market’s attention on the disparity in values and someone will buy you out
    • Take over strategy potential outcome after indicating it as a take over target
      • acquisition of shares by original suitor
      • hostile challenger
      • white knight  who will come and free up the locked up value
    • Prefer stocks with limited downside exposure, gravitate towards out of favor stocks that had already been discounted by the market
    • When analyzing a company, earnings does not always present a clear picture. Depreciation is paper losses. Cashflow presents a better picture. Key components to analyze
      • asset
      • return on equity
      • cashflow
      • capitalization
    • committed the mistake of just focusing on financial engineering to reduce cost, think about how to grow the business
    • Did not realize after fully taking over a company that the revenue side of the business is usually circumscribed to external factors not under direct management control
  • On negotiations
    • everything has to be negotiated
    • threaten, continuously threaten by painting a very dire picture. This helps frame the alternative which you demand as something very very reasonable
    • wear down your opponent
    • answer a question with a question
    • always push the deal as far as it can without blowing up
    • wait until a company is so stretched in need of a deal before buying on the most favorable terms
  • On goal setting
    • have no fixed goals
    • see all the possibilities
  • Princeton liberal arts eduction:
    • exposure to eclectic mix of human knowledge teaching a student how to think, explore and question rather than prepare them for a specific career
    • the best thinkers will rise to the top of their chosen careers precisely because they have not limited themselves to narrow courses of study

Related references

Liar’s poker by Micheal Lewis

  • Michael Milken:
    • between perception and reality there is a gap
    • herd instincts: investors are constrained by appearance. A manager of a respectable financial institution will shun “fallen angels” so as to avoid appearing imprudent to his colleagues
    • forces wishing to keep a large company afloat are far greater than those that wish to see it perish
    • credit rating systems are flawed. It focuses on the past instead of the future. Ignore large fortune 500 companies in favor of ones with no credit standings to find a good deal.
    • The market which may be quick to digest earnings data was grossly inefficient in valuing everything.
  • Lessons from Solomon brother traders
    • I don’t pat myself in the back, because the next sensation is a sharp kick lower down
    • those who say don’t know, those who know don’t say
    • Despite the valuable lessons history can offer us, its shown that man does not learn any of these valuable lessons.
  • Benjamin Graham: The more elaborate the mathematics, the more uncertain and speculative the outcome. Avoid substituting experience with theory.
  • Key historic events:
    • 1933 Glass Steagall act: separation of investment banking and retail banking
    • July 1944 Bretton wood systems: World currencies agree to a fix exchange rate against the USD, USD agree to fix exchange rate with Gold.
    • 1971 Collapse of the Bretton Wood systems: US, faced with increasing pressure to maintain the USD gold exchange rates as its foreign reserves were depleted by a extended Vietnam war, went off the gold standard to prevent a run.
    • 6th October 1979 The Volcker Act : money supply will be fixed, interest rates would float
    •  12th Nov 1999: repeal of the Glass Steagall act: banks can now take use consumer deposits for investment purposes.

Related references

Thoughts on Fake News

A stroll through the peaceful streets of Rome. In contrast, it felt like the end of the world is here if you read news about Italy recently.

The human brain is a remarkable pattern recognition engine. When given incomplete information it will conjure up the “missing” pieces to generate a coherent whole that could be comprehended. More often than not what gets generated is the worst case imaginable scenario. In a normal time and age this is a wonderful function to have running automatically in the background to keep this primate alive.

However, this automatic function becomes problematic as three trends converge.

Trend 1 – big tech like Google and Facebook consolidated advertising revenue putting news entity under increasingly pressure to sustain themselves as their advertising revenue dwindled

Trend 2 – the proliferation of publication medium means anyone can now claim to be a news entity.

Trend 3 – Proliferation of Growth hacking techniques perfected by tech companies like Facebook that hijacks the human brain’s automatic fight or flight to generate user action that gets converted to revenue.

News entity generate revenue with hyper inflated news that drives readership and vitality by tapping into fear and anger. This drives wide spread panic. Corona  is perfect catalyst.

Book summary: What it takes, Stephen Schwarzman

Profile

  • Partner at BlackStone

Personal effectiveness

  • the bigger the goals the more significant the consequences
  • since you can only do one important thing at a time, always pick the most important one to start with
  • most important lessons are learned at inflection points between when failure turns into success
  • the best executives are made not born, they absorb info, study their own experiences, learn from mistakes and evolve
  • The goal of education (questioning and thinking) as a discipline is to learn how to think, it only ends when you die
  • there are as many realities as individuals, study more individuals
  • find a great mentor
  • Cultivate inner fortitude: Helps preserve morality and ethics in the face of fear and greed
  • The harder the problem the more limited the competition
  • The first job is foundational. Always look for one with a steep learning curve and strong training.
  • when caught in a tight spot, don’t become fixated on your own problem but on someone else’s
  • when seeing a huge transformative opportunity don’t worry that no one else is pursuing it.
  • never get complacent
  • make decisions when you are ready not under pressure
  • objectively assess the risks of every opportunity.

On finance and trading

  • master uncertainty: finance is a dynamic world where you will need to adjust to situations, people and new information quickly
  • build a model to explain a certain phenomena and then test it
  • do not mistake interest in making money versus interest in psychological comfort
  • market tops
    • loose credit conditions and a rising tide
    • buyers generally overconfident
    • number of people you know who become “accidentally” become rich
    • number of IPOs increase at the top, so does the valuations and size
  • market bottoms
    • very hard to bring companies to IPO
    • difficult to detect
    • markets are declining and economy weakens
    • most buy too early or under-estimate the severity of recessions
    • usually takes a year or two for market to get out of recession. even then asset value takes time to recover
    • risk is the least after a crash
    • best time to enter is after position has experienced 5-10% recovery from a crash
  • practice discipline and sound risk assessment
    • wait till the cycle fully plays out
  • Cycles are powered by supply and demand characteristics
    • understand and quantify them
    • e.g. real estate top is when building is valued significantly above replacement cost
  • Sometimes a trend especially negative ones will exhibit symptoms spread across various territories (escalating land prices Spain, India and US prior to 2008)

On building a company

  • fund raising from an LP for a new fund you are starting yourself will be harder than the prior company whom the LP already has a relationship with.
  • make sure there is not sole decision maker for important decisions to avoid getting blind sided
  • Accessing an idea
    • big enough for you to devote your life
    • unique enough as an offering that people will want it
    • timing must be right
  • transition from gut to system during the middle of the life cycle to continue further scaling
  • a business is an integrated system. Understand how one part works by itself as well as in relationship with other parts. Information is the most important asset in business

On management

  • being a strong and accurate accessor of talent is the most critical skills of entrepreneurship.
  • look for cultural fit.
  • Get the candidate into conversation mode
  • its as hard to start and run a small business versus a big one. Choose one with potential to be huge. Why waste time asking for 5-10 million USD when you can ask for 50-100 million USD?
  • find people who sense problems, design solutions and takes the business in new directions
  • be proactive in addressing personal differences over day to day operations

On deal making

  • ultimately comes down to a few key critical points
  • clear away the clutter and focus on these points to be effective
  • learn to slow things down
  • practice intense listening

Related readings

  • Outliers, Malcom Gladwell

Chat with Joe and his dad

On Kaoshiong

  • KaoShiong is where the bulk of industrial manufacturing occurs
  • Taiwan is a Japan trend follower

On strategy

  • When macro economic environment is not conducive for continued operations, stop operations to conserve resources for future opportunities.
    • Decision to close wooden frame manufacturing factory
      • Europe became more environmentally conscious
      • Malaysia reduced the yearly quota of timber to be harvested
      • These two trends reduced demand for wooden frame and increased cost of raw wooden material

On personal growth

  • Adversity in youth provides an opportunity to build character and gain experience.
  • restricting the amount of resources your offspring has access to might be a good thing but it breeds resentment
  • Good things come from seemingly bad experience too

on DDP policy in KaoShiong

  • Too radical in their actions and lacks calibration in their policies. Really good at manipulating the press
  • Stance
    • Anti China
    • Pro resource less young
    • Pro taxing businesses for social welfare
    • Pro reducing pension to retired
  • Equally corrupt as the KMT but too aggressive in their policies leaving nothing for the business to continue operations
  • manufacturing businesses has been negatively affected with over regulation and rising administrative cost
  • Worker protection makes overtime illegal severely restricting the throughput volume businesses are allowed in their operations
  • Workers not making enough from their day job due to such restrictions are forced to take on a second job on top of their main one
  • 30,000 to 40,000 businesses have failed within the KaoShiong area over the past 12 months at the point of writing with more set to fail if policy should persist
  • While GDP growth rate has been reported at 2% in 2019, shipping volume through KaoShiong has continued to drop

On KMT

  • A more mature party with measured policies which lost leadership due to lackluster performance
  • Stance
    • Pro-China
    • Pro-business
    • Pro-protecting pension of the retired

Social security system and the aging population

  • Social security system is in a state of flux. Employers are required to contribute to two systems. The contribution for the old system is 5X the new system and was too much overheads for the employers.
  • Retirees are concerned their pension will get cut while the young are concerned their contribution to the social security system is to heavy a burden

On China

  • China has imposed restrictions on independent Chinese tourist to Taiwan
    • Chinese tourist are easy customers who engage in indiscriminate spending
    • Night markets looked empty
    • Quite a few restaurants have closed down along the main street due to the lack of tourist spending
  • The bulk of Taiwan’s export has been to China it makes economic sense for both territories to become unified
  • noteworthy to observe Joe’s shift to a pro Chinese stance the on Chinese Taiwan relationship as compared to the high school days.
  • Observation of Taiwan style politics in contrast to Chinese style politics leads me to have reservation about how these two systems can be resolved.
    • the Taiwanese have no reservation with injecting outrageous humor into the legal framework afforded to them by their political system with candidates as outlandish as Mr Crazy Friday and Mr Fortune God
    • China’s one country two system need to become more robust for this undertaking
    • Recent HongKong riots has caused concern for Taiwanese and has lead to increased support for the DDP whose leader English Tsai is known to be a strong negotiator

On Korean Japan trade war

  • Huge influx of Korean tourist observed during this period of tension (Sept 2019)
  • Korean tourist are more discriminate in their spending, hence a lower per capita spending as compared to the Chinese tourist.