Friday, July 29, 2016

What does Trump, Brexit and NUS Freshman Orientation have in common ?

Wow ! The last article broke a major record with more than 1500 hits within the first 24 hours. I will need some time to follow up on that topic as we head towards National Day.

This weekend's article is about Trump, Brexit and NUS.

What do they have in common ?

What the events have in common is that all three events are animated by the same force : Tribalism.

A lot of investors and political commentators do not really understand Trump and Brexit voters. To help illustrate my case, here is a personal story.

When I was a government officer, we held a software competition for secondary schools and some tertiary institutions and I was sent to be one of the judges to determine who should win the contest. The entries have all been stripped of student names and participating schools so that judges can make a decision as to who should win.

After choosing 3 entries for the winning teams, I was asked whether I could change my selection. Apparently, all the three entries me and my fellow judges chose turned out to be from the same elite school. I held my ground saying that my decision was final and that meritocracy has to prevail. It was not apparent during judging that all three entries came from the same school.

After the announcement of the results, some ITE lecturers came to speak to me. They explained how difficult it was to motivate the ITE students and it was miracle that they could even create software using this tool called MIT App Inventor. I agreed with their stand but I said that unless the competition organizers created special awards for the best ITE and polytechnic team, I would have to do my part and award the prizes to that ONE school which won all three prizes. The lecturers were disappointed with my response and said that they would want to review whether they would participate in such competitions in the future.

How does this story relate to Trump and Brexit ?

The Trump and Brexit supporters are not irrational idiots as the mainstream press has portrayed them to be. In fact, collectively, they are doing what any logical player would behave.

Once you lock a group of people out of game and they have no chance to win no matter what they do, they will find some way to stop participating in the political process. Push them too far and they will find ways to destroy that system because a lot of volatility will give them a chance to be ahead of the pack.

Chaos becomes their only ladder.

Brexit and Trump gave these voters a political voice. For the first time, someone is fighting for their rights and way of life. White men who do not have degrees still have a sense of pride. The American South has a strong culture of honor.  They want to work to earn a living to support their families and will not be happy living on handouts.  When members of a majority ethnic race are sidelined this way, the reaction can be felt in the polls because these people are not minorities. Tribalism pulled the UK out of the EU !

Tribalism as an animating force also influences NUS Freshmen orientation culture except that the roots of this may not economic in nature.

I was an NUS undergrad once, we came in fresh from NS and I also felt anger being a year older than some girls and Malaysians in Raffles Hall and yet being made to greet them as seniors. Imagine all that sexual tension felt by NUS males, but the feeling of impotence as they have no decent jobs, no sign of a bright future ahead, and no financial security. 20 years ago, there was a story about this ex-Commando who, after being talked down by Malaysian men and women a year younger than him, eventually lost it and challenged fellow hostelites to a fist fight. I never figured out how the story ended but in the end, all Singaporean NS men in Raffles Hall were given pre-orientation counselling and told that they could walk away anytime. As for me, I walked away after 1 week.

In no way am I condoning the activities in NUS, but the roots of a lot of ills in this world comes from male insecurity. A lot of swaggering and posturing from NUS male undergrads comes from personal helplessness and insecurity. I would call this pathetic but I was also pathetic myself when I was younger. I think this leads to the over-sexualized activities because it's all about compensation for their flaccid masculinity.

I'm just going to end by giving advice to that creepy undergrad who asked a girl for sex over Whatsapp. The reason I do this is because I could have been that guy if I were in my 20s lah.

I think undergraduate males do not really know their true value in the dating market. If you are in your 20s, you are a NINJA. No Income, no jobs/assets. If you are engaged in your studies and build your resume, you can play a late game of attrition against your female "opponent".

Your assets will only appreciate in time. Her beauty fades. This is not a fair game.

Don't surrender to your insecurity. You will be able attain some status in Singapore with your degree if you diligently apply yourself and then you will be ahead of 75% of the rest of the male population. Hold back.

When women hit their 30s, they will be much more kinder to you and you can potentially win this game.

In fact, right now I'm going through this phase of life seeing all my old friends get married after their 40s.

All their wives are young and hot.

Congratulations ! As we say after a board game session - Good game !

Tuesday, July 26, 2016

The Absurdity of the Singapore Dream

As National Day is around the corner, I just want to share one or two points about the absurdity of the Singapore Dream or what most Singaporeans accept as the right way of living.

My objective is not to demoralize you but to get the you to begin thinking about your life.

Here are some of my points :

1. There is an increasing evidence that living in the right district can get you into a better primary school and put you on better footing that everyone else. Rich folks already stay along Bukit Timah Road. Some parents become poor just to buy a home in those areas.

2. If you accept my argument that an education qualification is largely driven by signalling, then the only reason why you are making more money than your peers is not your skill but the branding of your university. You realise that your qualification gives you your higher income at the expense of others.

3. In 21 years, a medical degree at its current inflation rate can cost up till $480,000. It would be naive to not to believe that the cost will not be borne to the patients. Some folks want their children to make a lot of money as doctors and lawyers but complain about legal and medical fees.

4. You may want to pick up a university elective which teaches you something interesting but in the interests of grades, you stick to what you already know so that you will not blow your GPA. Its safer to learn new things on Coursera than SMU even though SMU cost me $70,000 and Coursera is free. ( I speak from personal experience )

5. At work you focus on experiential goods like travel, but the reason you need travel is because you are so stressed out by work. You become financial independent so that you can travel more. After becoming financial independent, you have no more work stress, so there is no need to travel anymore.

6. The CPF feels more like a tax than a source of security in your 20s. It gets better in your forties, but by then your OA is gone because of that HDB flat.

7. Also you can buy gold with your CPF-IS which does not yield anything, a crappy ILP with high management fees and commissions, but not a high-yielding counter like Asia Pay TV (This is not investment advice ).

8. You keep getting asked to be innovative and take one risks in your career, but because of home loans you need to manage, you cannot but choose the more secure path. If you are single, you can take risks, but Singaporean women will not take a risk on you.

9. You can become obsolete in your field even while you are being employed in it because its too expensive to invest in your training. You use your personal time to study, but you risk underperformance at work because you cannot use personal time for work.

10. Herbivores withdraw from the marriage market. Women react by being more open to Tinder relationships to meet the fewer men left in the market. Successful men get enough sex from Tinder and see no need to get married.

11. You buy a car so that you have greater speed. In practice, your friends who take public transport are more punctual than you because you need time to find parking.

12. Some children are security at old age. But they are also the cause of old age.

13. You lament about your life and want your kids to succeed where you have not. You then put them in a study regime which robs them of a childhood.

14. You are rich when you are old. But all the assets are tied to your home, which depreciates over whatever is left of 99 years. Government asks you to reverse mortgage it after you spent an entire life trying to own it fully. And you think you own your house and declare it an asset.

15. You read Angela Duckworth to work on your resilience and grit. You work really hard to increase your capacity for suffering. You suffer discomfort because it hones your resilience to take on more discomfort and suffering. This is so that you will enjoy the future more.

The points I raised is not a gripe. Some of the points come from personal experience and I would do it all over again if I were given a chance to relive my life again.

We still live in one of the best societies in the world.

But these points raises existential questions about the meaning of life and the Singaporean Dream.

Should we always go for the best schools, best jobs, good marriage and kids ? Why does society work so hard to misunderstand you when you try an alternative ?

Questioning the Dream too much is also not the best answer because it can lead to nihilism and can make you a cynic. That is not the objective of this article.

If there is no true purpose in life, then why even bother ?

I welcome readers to add to these points which I have raised.

Sunday, July 24, 2016

Lessons from Sarong Party Girls.

When I first read about the book Sarong Party Girls by Cheryl Tan Lu-Lien, I stopped everything I was doing, bought the e-book from Amazon and completed it within 4 days. It is truly Singaporean with almost every sentence written in Singlish and talks about the like of an SPG and the things she and her friends would like to do on weekends. I thoroughly recommend this fine book for readers of my blog.

Reading the book while thinking about the revelations from the social sciences about herbivores, got me thinking about how everything should fit together to form some sort of a business framework, and as it turns out, there is something out interesting when you put everything together.

Behold the Tree of Prosperity SPG 2 x 2 Matrix !

One axes of the matrix is based on gender. The other axes is based on esteem, which is broader than the notion of self-esteem in psychology but also incorporates the esteem granted to the archetype by society in general. ( A legal scholar will note that this concept of esteem is determined objectively and subjectively. )

If you build on this table, you will end up with four cells with implications on lifestyle design and strategy :

a) Herbivore

A herbivore is a man with low esteem. He has retreated from the dating and mating universe and exists purely to play computer games. In the novel, this cell would have been the Ah Beng, but Ah Bengs are a cultural relic of the past and Singaporeans are almost always English-speaking these days. The previous article mentions lifestyle design of herbivores and their special ability is to use short-term contracts to sustain a gamers lifestyle while living with their parents. This life is workable and paradoxically results in high personal satisfaction.

I am actually in the borderline herbivore quadrant. Although I am married, Coursera is favourite my MMORPG.

b) Sarong Party Girl

In Cheryl's novel, the SPG is played by the protagonist Jazeline and her buddies Imo and Fann. SPG's are women who sort of know that they won't really hack it with the local male market as most guys like myself are really looking for wife and mothers. In a similar way, they employ a form of retreat by hunting for white husbands. As demonstrated in the novel, while you might not have much respect for Jazeline, Jazeline does not have much respect for women who marry local men either.

The SPG lifestyle design is challenging because of their low income and high expenses. They typically hitch onto the Flower princes to be able to afford to club aggressively because otherwise savings would be impossible given their materialism. This is a difficult lifestyle because they can only remain fresh for this long and has to complete against Japanese and Chinese talents.

c) Flower Princes

High esteem men are flower princes. They are high income alpha males living it up in clubs and drive big European cars.

Flower Princes feature prominently in the novel ( Louis, Kim Meng ) and, personally, give us men a bad name, Flower princes are often family men who have enough money and expense accounts to entertain a low of people during the weekends. As males are not really built for monogamy, the riches guys can afford to live polygamous lives while it is legal to do so. This means paying for SPGs to sustain their clubbing lifestyle.

It's hard to sustain a flower prince life in Singapore because a lot of money is required to sustain this. Flower princes have the capital to sock something for retirement because the music is going to stop one day and many will end up crawling back to their families upon retrenchment. I hope they read the financial blogs on what to do when that happens.

d) Good Mare

My entire life was spent being rejected by Good Mares but I still love them for it.

There was only Good Mare featured in the novel ( Sharon ). Women who spend their lives in the better schools like CHIJ and St. Nicholas. As adults they have high tea at Goodwood Hotel. The highest form of Good Mare does not use material goods to distinguish themselves from others, they employ the most subtle brands to signal to their own kind.

Good Mare have only one financial strategy, Marry a guy who comes from RI or ACS ( In my opinion, its way better than a white guy here ).

The rest will take care of itself.

The power of the 2x2 matrix is that it gives a thinker the power to immediately stereotype and categorise a situation or a person.

The uses of such a model are infinite and may include :

Where do you see yourself in this matrix ?
Perhaps you really want to marry a Good Mare, how do you distinguish a Good Mare from an SPG ?
Do you see yourself as a Flower Prince but is actually a deluded Herbivore ?
You are a Flower Prince subsidizing SPGs every weekend in a club, are they hanging around because you grant them access to white men ?

A good fiction writer will have a field day creating new stories with these archetypes.

Tuesday, July 19, 2016

The Herbivore's Guide to Lifestyle Design

Social science is full of surprises.

While we do know that there are men who give up on relationships and withdraw from society (also known as herbivores in Japan), up till recently we are not too sure on how they spend their time and whether they are satisfied with their personal lives.

This is why the findings of Erik Hurst are potentially earth-shattering.

Imagine being told that it's ok to forego the academic rat race and join the workforce as a non-degree holder and face a rapidly changing economy where unemployment is happening with greater frequency.

Just make sure that you avoid unhappiness by simply refusing to start a family and enjoy yourself by playing around 12-30 hours of computer games every week instead.

The idea that this is a feasible lifestyle that results in high personal satisfaction is not an easy fact for society to swallow.

Nevertheless, it is interesting to see how this pans out numerically.

a) Baseline Herbivore expenses

While a herbivore is gainfully employed, his expenses are similar to ordinary working single men who live with their parents, if he needs $150 for transport, $500 for food and $200 to support parents, on a starting Poly graduate's pay of $2,000 is decent if you only have to pay for broadband and a continuous stream of games from Steam.

Let us also make a presumption that an unemployed herbivore can sustain himself on $600 if their parents can look after themselves.

b) Savings through-out sporadic unemployment

Where there is no real need to plan for future expenses, a person can save only to cover situations of occasional unemployment. Imagine a baseline situation where a person can save $300 when employed but would only need $600 a month to live on when unemployed, then this person can sustain 1 month of unemployment for every 2 months of work.

Herbivore lifestyle design equation -> 2 months work = 1 months play

With a simple back of the envelope calculations, we can design a lifestyle for the herbivore male which is distinctively different from what we are conditioned by in Singapore. Herbivores don't have to participate in the vicious rat race which men must go through. In fact, by giving up women and family completely, they earn some semblance of radical independence which men normally cannot get.

This person can seek short term contract jobs to earn about $2,000 to $3,000 a month. Every 6 month contract earned can earn at least 3 month holiday where the person can stay at home and play computer games continuously and engage in personal hobbies.

As contract jobs are the new norm where jobs are rapidly getting automated, and I expect demand for contract labour to exceed supply even in the face of rapid automation of jobs.

What if Herbivore's learn to invest ?

While I doubt a person who makes a choice like this would even find it worthwhile to seek for rents in the market but at 8% returns, a portfolio size of $90,000 can support a herbivore lifestyle. For some, this may come in he form of a an accidental windfall or inheritance.

Hard Truths about life for Singaporean Males

There is, indeed, a blue pill and a red pill.

Now I could imagine that my son having grown up in the future, after years of rejection from the System and fickle women, would seriously consider this form of withdrawal as an alternative to the kind of responsible family life that Singaporeans males were conditioned to accept.

Once you remove the moral arguments based on duty and filial piety, you will realise that there are actually no logical impediments to accept the choice of turning herbivore if you believe that your aim in life is simply just to be happy.

By that time, all I can do as a disappointed dad would be to grab him by collar and tell him that he's like this because no one has accepted him for who he, I am disappointed at the low standards he has set in his life and he needs to try harder.

Sunday, July 17, 2016

The Power of Constraints and the Focus as a personal asset.

This is going to be a personal update.

I've spent the past 4 weeks doing my internships and I've been personally struggling with a normal workday after more than 30 months without regular employment. When I held my previous job, I would get flu once every one or two months. After I stopped work, I fell ill only once last year in October. I fell ill again 3 weeks into my internship.

I was also not as productive as I was during my professional years. I could study about 3-4 hours after leaving the office. These days, I have to struggle to get along with 6.5 hours of sleep every day.

The first insight for this article came along after a game session yesterday. My character was constrained in an extraordinary way which most players would not ordinarily experience. Rather than complain, I tried to stick it out to see what would happen and I was able to develop a refreshing method of dealing with adversity thrown at me. As these constraints are likely to remain even in the next session,  I researched and accidentally stumbled into a new tactic for a different game.

I think that this is useful lesson in real life.

a) Constraints can be a good thing. 

High-level TRPGs are slower and less fun than low-level games because players have too many options and there are many ways to reach a resolution in a game session, if you try to optimise too much, the game bogs down. Having a constraints limits you to just a few non-resource-intense options to keep the game fast and refreshing.

Similarly in real life, there is too much obsession with options when sometimes simply constraining some of them may help you make better life decisions. A discussion with a few high gifted but non-noteworthy individuals found that the reason why they have mediocre outcomes in life is because their heads are full of ideas and while executing one good idea, they keep getting interrupted with better ones.

b) Focus needs to be invested well.

The other thing which happened to me this that I spent 36 hours of life watching this really gripping  and super-addictive Chinese Wuxia drama called Nirvana in Fire. My friend was raving about it months ago and I ignored it until this drama got mentioned in 1843, the lifestyle magazine of the Economist. Since when does a Chinese drama get mentioned by the super-savvy editors of that magazine ?

The 36 hours one a week took a heavy toll on me, I was planning my talk at the same time and I was unable to really have much time after work. I was shocked that I was so relieved when it was all over. Finally, I can finish up my readings on public international law for my next semester.

Your focus and attention is an important asset class which needs to be invested meticulously.

A little bit of leisure is fine, Game of Thrones Season 6 is just one hour a week for 12 weeks. The opportunity cost is small. 36 hours is about 3 non-fiction books for me.

While we are in the topic of time, focus and attention as an investible asset, some research from the University of Chicago, has raised some disturbing findings on the use of time. When investigating unemployed males with non-degree qualifications, something which I think Singapore policymakers should be more obsessed about,  it was discovered that they engaged in 12 - 30 hours of computer game-play and scored high in contentment and life satisfaction. It was the married individuals in this demographic which expressed the most dissatisfaction with life.

This can potentially lead to perhaps one of the most controversial lifestyle advice for Singaporean males who lack a degree qualification and are concerned about future prospects :

Get used to staying single and play computer games, if you lose your job, you will still have a relatively high satisfaction with your lifestyle. The road to unhappiness lies with getting married.

Can't imagine any government being happy with advice given out like this.

Thursday, July 14, 2016

My talk on Funding your child's University Education at the Lifelong Learning Library.

It's been a tiring day !

Today's event attendance was great and I noticed that some folks are far too young to actually be parents but I think we had a very fruitful session exchanging ideas with each other.

When I started planning the presentation months ago I wanted to spread an unconventional message on the how to determine the value of a paper qualification along with the ways and means to come up with the financial resources to pay for one. One key objective would be to shed light on private university degrees and try to explain why salaries of these graduates are low compared to local degree holders.

Along the way, I was able to blend in some ideas from economists along with some statistics to get parents to start thinking about the opportunity costs of paying such a large amount of money to tuition teachers and enrichment seminars and think about how large this money stash can get if it was invested in the stock market instead. This forms the heart of my dangerous idea : Money paid to tutors and enrichment schools could have been used to pay off dividends starting from the day your child graduates from a polytechnic.

I had expected the audience to be hostile and to give me a hard time, but everyone was agreeable and gracious today.

Thank you for your attendance.

A copy of the slides can be downloaded from the link below :

Link to the PDF.

I hope to get more speaking gigs into the future. This is akin to getting Toastmasters training without paying for membership dues.

I am interested in doing some research and talking about how couples should manage their finances together. If you have a venue and want a free speaker, do let me know on this blog.

Wednesday, July 13, 2016

Don't forget my talk on funding your child's university education tomorrow !!!

One of my concerns is that no one will attend my talk tomorrow as it is a weekday afternoon after all so here's another reminder :

The time would be from 12.30pm - 1.30pm.

The venue is as follows :

The LLiBrary
Lifelong Learning Institute
11 Eunos Road 8
#03–02 (via Lobby B)
Singapore 408601

For tomorrow's talk, I would like it to be as refreshing, politically incorrect and lively as the articles on this blog and have planned something which probably was never presented to parents before. We will be talking informally about the relatively low salaries of private university graduates, apprenticeship schemes and MOOCs.

I've planned at least one controversial discussion on private university education and would like to invite guests to consider whether it would be better invest the private tuition fees into the stock markets instead. 

Hope to catch you guys there !

Sunday, July 10, 2016

World War III : CPF Edition

Today's article is a little incoherent.

I was ill throughout the weekend and wanted to share some insights into the most divisive issue between financial bloggers, which is the tension between transferring CPF into the CPF-SA versus keeping the funds within CPF-OA and investing part of it into the stock market.

Unfortunately I was unable to really come up with a simple illustration which can adequately explains why bloggers disagree on this issue. The best thing I can say is that if you support the transfer into CPF-SA, you would fall into the left triangle in the diagram shown above. If you support the CPF-IS route, then you would fall into the right triangle. Depending on how you internally view the efficient frontier represented by the curve I drew, one triangle may be bigger than another which can lead to a contention between experts because we all hold different views on what the market is like in our heads.

This is why I suggest throwing away financial knowledge and ask ourselves whether we like the idea of eating the government, or we prefer to eat the financial markets. I would not think that one answer is better than the other.

I would just to address one point raised by the CPF-IS camp about whether they are confident of markets returning 8% every year on average in Singapore.

This is also an area of contention.

If you look at the historical returns of equity an asset class, it does indeed have a record of giving out 8-9% with a standard deviation of 20%. However, market growth will always be function of GDP growth and we are looking at a pretty slow rate of growth in Singapore moving forward for the next decade. If we apply the rule of thumb suggested by Nate Silver in the book The Signal and the Noise, a more conservative picture emerges as he suggests that market growth will taper to GDP + 2%.  This means that going forward, even a 6% return for owning equities would be considered optimistic in Singapore.

But I do know that I do not belong to either camp.

I transferred my CPF-OA to CPF-SA and maxed it out early in my life before I even started studying the financial markets. Subsequently, I was able to buy my EC with both me and my wife's CPF and even have invested substantially in CPF-IS. My reserves in CPF-OA can still last me another 4 years before I need to top up my OA with my dividends.

Tuesday, July 05, 2016

Jiak Cheng Hu - Manage your CPF by "Eating the Government"

The CPF board invited some financial bloggers to have a session and I was able to gate-crash the event because a few "more prominent" bloggers were not able to show up for the event. As it turns out, the event was informative and it was a great learning experience for all of us. I felt that the CPF folks very very candid and gave us a realistic picture on how the program is viewed by the general public.

In this article, I would like to put my own spin into the CPF and show that there is definitely room for more improvement.

Firstly, people need to understand that the CPF program would always attract more negativity than positivity. Any program which forces a citizen to set aside money for retirement and housing is not going to be welcome by the people who think that they have the right to spend their own hard-earned money.

Secondly, the CPF program does not really know what is it's true mission should be. On one hand, it is supposed to be retirement fund. On the other hand, it is also money set aside for housing and medical expenses. These two objectives are often at cross-purposes with each other. For example, A HDB loan mandates that the borrower exhaust his entire OA account so as to minimize its size.

I don't believe that the CPF is created for retirement planning or home ownership.

To me, the CPF program is a program to hold every citizen's money on ransom such that when they screw up their own lives, they have to dig into their own financial resources to pay for medical and home ownership expenses rather than dig into the money the government needs to run its daily businesses and maintain our infrastructure. CPF is, thus, protection money.

Protection money meant to protect the more responsible citizens from the less responsible ones.

A lack of clarity as to the CPF's role prevents financial bloggers from being able to agree with each on how to manage CPF funds and to what extent should it be employed for buying housing.

So instead of prescribing what is the right way to manage your CPF, I will share a philosophy which in my opinion, would be a better guiding principle on retirement planning.

I call this the "Eat the Government" philosophy. ( Jiak Cheng Hu in Hokkien )

When you decide to "Eat the Government", your objective is not to maximise your utility when it comes to social security but to extract the largest amount of funds from the Government without regard for your personal consequences.

This means three things :

(a) Extracting the largest returns from the government as much as possible before reaching 55.
(b) Trying to get the most money out of the CPF when you reach 55 years of age.
(c) Maximising the amount your children will get from the CPF Board after you die.

Applying this philosophy will result in three moves :

a) Transfer as much of your OA to your SA as possible.

Getting 4% risk-free is quite amazing. Personally, I think it's better than getting 8% from equity if your horizon is longer than 20 years.

The government pays 2.5% for the CPF-OA risk-free. Transferring the funds to CPF-SA gives you 4% but limits your flexibility as funds can no longer be used for housing. If you "Eat the Government", then you should maximise your transfer to SA so as to extract 4% from the government as much as possible.

I was able to max out my CPF-SA before I hit 32 years of age. This exacts a heavy toll on the CPF board who has to pay me $4,000 - $8,000 into my SA every year since my early thirties.

b) Invest your full 35% of CPF-OA

This is less intuitive.

When you invest 35% your CPF-OA, the government is not giving you interest on that money you pump into the stock-markets so, on first inspection, it goes against the idea of "Eat the Government". But investing your money into REITs and high yielding counters can yield over 6% which then flows back into the OA account allowing it to grow at a faster clip. In my case, I have already maxed out my CPF-SA, so I put in the remaining 35% of the CPF-OA into a portfolio which returns about 5-6% dividends. It allows me to grow the CPF faster and "Eat the government" by moving those funds out of reach of their investment managers and directly into investments of my choice.

[ One alternative school of thought is to keep the funds in OA and invest 35% of it into the markets rather than move it to SA. But I am biased towards SA as it is a guaranteed 4%. ]

c) Choose the Basic Plan instead of the Standard Plan for CPF Life.

If you know that you will die early, always opt for the Basic plan. If you will live to ripe old age of 120, then the Standard plan would be more worthwhile. But, unfortunately, we do not have an idea how long we will live.

If you are single and have no kids, the Standard Plan works because you will have no need for your money after you die. However, if you have kids and do not absolutely hate them, the Basic plan provides a smaller pay-out but leaves behind a larger residue after you pass on leaving more money for your children.  So while you do not get to Eat the Government, you children would.

[ Note : I expect the actuaries who designed CPF Life would reduce the longevity risk transferred per unit price of the annuity to earn CPF Board reasonable profits, so you should always be mathematically well-off when you reduce your exposure to these annuities instruments.

Put another way, if you adopt the Standard plan, you may need to live significantly beyond the average life expectancy to break even against the Basic Plan.

Do note that this is my own speculation and I welcome officials to disprove my hypothesis. ]

In summary, in spite of its schizophrenic nature, the CPF programme is still fundamentally a good thing because it prevents Singaporeans from hurting ourselves. However, as it stands, simple questions like whether CPF should be used for housing will not achieve any consensus even amongst financial experts who may be evenly divided as to whether the CPF is meant for retirement or housing.

Perhaps a better approach is to design a series of moves as part of deeper personal philosophy, acknowledge your personal biases, and then stick to the plan as part of your lifestyle design.

Friday, July 01, 2016

The Nature of Success

One challenge of modern living is that we do not really know for sure whether we have really succeeded in life. To many people, this is a difficult philosophical question with no concrete answer.

The Happiness Equation: Want Nothing + Do Anything = Have Everything by Neil Pasricha offered a pretty novel model of success which I have attempted to extend in this article.

Neil proposes three dimensions of success in his book :

a) Measurable success

One dimension of success is that it has to be measurable. Accumulating $1,000,000 is measurable. So is making partner in a consulting firm. Measurable success has a certain degree of visibility and is, generally, what modern societies like Singapore cherish the most.

b) Social success

The second dimension of success is social in nature. It means that people respect you because of certain deeds you performed. If friends and acquaintances consider you a successful person, you would have attained this dimension of success.

c) Private success

The last dimension of success is personal in nature. This means a degree of personal satisfaction and self-respect. You have private success if you feel that you have succeeded internally.

The book proposes that it is often very rare to succeed in all three dimensions, more often you can, at best, attain 2 out of 3 dimensions of success. 

I took the liberty of extending the model to consider what happens when one dimension is absent.

a) Absence of private success - The Super Manager

The successful executive or manager embodies the lack of private success. You have measurable results and the admiration of others but you are constantly trying to do better and end up living an anxious and neurotic lifestyle. 

b) Absence of measurable success - The Hipster

Someone who creates a critically acclaimed piece of art is said to lack measurable success. Your peers and critics laud your creation and you have an internal feeling of satisfaction for creating this work but the art-work may not result in a measurable pay-off and does not result in tangible benefits for society.

c) Absence of social success - The Rentier  

The greatest insight for me is that rentiers or financially independent folks who do not do useful work are deemed not to be respectable by their peers and thus lack social success. 

It answers a nagging problem I have when I spoke to some younger female SMU classmates and half-jokingly asked whether they would marry a guy who have have a cash stream but does not seem to do anything useful as part of work. I was very surprised at such a huge negative reaction even though I  disclaimed that such a person will not be a financial burden to them. They overwhelmingly preferred the guy to have some respectable job. ( Maybe even transfer the financial independence to them so they can become tai-tais ! )

While this model is more philosophical than empirical, one possible insight we can learn from this model is that we can try to experience different kinds of success throughout our lives. 

At some stage of our life, we can be a busy executive and throw ourselves into the rat-race. At some other stage of our life, we can try to produce a great work of art/software/product and make a positive qualitative difference to the world. And finally, we can also experience what it's also like to be financially independent and use the numbers to sustain ourselves to our personal satisfaction.

It's OK to be limited to two dimensions of success at any point of time. 

There exists an opportunity to be successful in different ways throughout our lives.