Saturday, December 12, 2015
Lessons for Investors from my last Karaoke session !
Yesterday was the highlight of my school holidays as a very generous classmate took the initiative to organise a karaoke for us. The location was at K Suites at Orchard Parade hotel, as we are all SMU students, we pay $18 per head which was relatively cheap as it is a short walk from Orchard MRT station.
As you guys might be aware, there is a significant age gap between my classmates and me. My classmates are mostly over a decade younger than me. Some of them who did not go to a karaoke with me before, and snarkily asked me whether I was going to sing Theresa Teng songs. I think they were somewhat amused when I showed them that I was actually quite a Miley Cyrus fan and did Wrecking Ball to keep them entertained.
( On hindsight, I should have twerked ! This generation of youths love twerking !)
Which is about today's topic which is Openness to New Experiences and what it can do for the investor.
I hang out with folks a generation younger and I am quite grateful for the experience. When I go karaoke with folks my generation, the songs are really different. We sang Bohemian Rhapsody and some of the dudes in my generation still sing Abba or Eagles songs. Actually you can assess a person's openness to new experiences just by observing their song choices in a karaoke, if they are stuck in a time loop within their generation, it shows a lack of openness to new experiences. I actually take notes on my iPad to note down what my classmates sing and I was able to keep in touch with the later songs - I picked up One Republic's Counting Stars that way.
I think this new economy is not so much for the young and old but there is a significant advantage of openness to new experiences.
We are witnessing yet again a new form of downturn which affects commodity stocks and the knock on effects is that the great industries of the past may no longer be attractive investments. In particular, my view is that retail is seeing what I would think a permanent downturn as more Singaporeans turn to shop at Q0010 - Funan Centre is the first of such casualties. Stocks like Comfort Delgro would also face disruption from Uber. Even fossil or bio-fuel related industries look bad as governments are now trying to massively adopt solar energy.
Investors need to be cautious but open to new ideas. Crowdfunding remains risky but can draw 8-12% annual returns but I recently got burnt by a default from a small local beauty company.
At a personal level, I'm not too sure that 2% growth in the Singapore economy would not affect corporate legal practice ( Disputes arise from disagreements about money, so less business, nothing to disagree about ) so I am also becoming more open-minded towards community work.
When we talk about openness to new experiences, we need to distinguish between two forms of open mindedness. We should avoid one and cultivate the other.
The first form which is reflexive open-mindedness makes a person unconditionally accept everything. Low IQ people tend to accept bullshit from Deepak Chopra like his now-famous "Attention and intention are the mechanics of manifestation". A reflexively open-minded karaoke sings everything without curation and understanding the audience. That is why I sang Taylor Swift and Miley Cyrus with my classmates yesterday and did not do any Abba or Dennis DeYoung numbers.
The form of open mindedness which investors should cultivate is reflective open-mindedness which is to push new ideas through existing mental models before accepting it with open arms. For example, I stopped funding lending campaigns with a default rate rate above 16% because they were irrational based on projected expected returns estimates. I would always stick to fundamental measures like dividend yields even when dealing with new economy stocks.
Similarly, a good karaoke kaki needs to have a filter with what constitutes bad taste.
For me bad taste in music would always include anything by Eric Clapton, Depeche Mode, Phil Collins or Timmy Thomas. ( I like Justin Bieber ! )