The End of an Era

Today actually marks the end of an era.

Beginning tomorrow 1st April 2019, Tictail, the platform where I sell my books, will shutting down for good. It is also time for me to permanently end the sale of my books from this blog.

Until very recently, I'd always struggled with the selling of my books. My distributor MarketAsia changed hands and I could no longer find a home for my physical copies, so I had to load them in my parent's home and wait for the occasional sale to get them to my tiny fanbase. It was such a sad day years ago when I ordered a significant portion of my books to be shredded because I had no space in my home to contain them. For years, I would sell about $50 worth of books every month.

Things started to perk up only after I figured out that my books can play a major role in building my personal brand after becoming an investment trainer. Some readers might know that I give away my books to folks who show up for my previews.

After initiating this new arrangement, the problem started to reverse itself - my books are now getting depleted so quickly that it is not feasible to sell them to blog readers anymore, at the rate I am going, I'm not even be sure that my stock will last till May 2019.

There are going to be other trainers who have publishing ambitions. I have the following advice for them :

• Being only a writer is not a workable strategy to make money. Singaporeans are not a very literate lot and you need to combine writing with speaking to actually get somewhere. It took me over a decade to learn this simple lesson.
• Be a best seller, not a best writer. My first book was unedited and I still have nightmares that it would ruin my brand because of the bad English. My first book turned out to be a Straits Times Bestseller. Just be authentic, this is not an English Literature exam.
• As a finance author, you'll grow old enough to see your heroes become villains. My first book mentioned the corporate heroics of the Hyflux founder and the virtues of buying SPH as a dividend stock. It might be better positioned in the humour section rather than the finance section today. 

So from this point onwards, the only way to buy my books is to show up for my course preview, but the question is whether I have another book in me to do this again.

I think I still have great content, the only issue is that I hate doing the footnoting and after getting a Law Degree from SMU, I would be a disgrace if I do not footnote every single claim I make in my new piece of work. The other issue is that I am never going to self-publish again. 

Now I go big or go home.

It is time to seek a "real publisher". When I was a rookie finance author, one publisher rudely asked whether I was a millionaire and scoffed at me after I said no. Today I can qualify as an AI under the Singapore Law and I will make sure that I give this local publisher a miss. 

   

What problem is Financial Independence supposed to solve ?

I thought it might be a good time to summarise everything I know about The Problem that becoming financial independence is supposed to solve. If no one works on coming up with a proper definition of the problem, financial independence is just like blockchain technology, a solution looking for a problem.

Here is what I know about the problem so far :

a) Emergence of the gig economy

The emergence of the gig economy is a new thing that folks in my generation did not have to contend with. Graduates from the ITE/Poly/University tracks will face an economy that will not give them a permanent employment role 50%/40%/10% of the time.

The effects of being in the gig economy is not truly understood so far because most 20-somethings are energetic enough to earn a decent wage. Problems occur when they fall sick or start to slow down when they have a family. There are knock-on effects when it comes to home ownership and marriage.

Investors may be beneficiaries of this phenomenon because the gig economy keeps folks cautious and this maybe that's why inflation has been benign.

b) Retrenchments are affecting younger workers compared to the past

The latest round of retrenchments in 2018 hit folks in their 40s and PMETs hard. Anecdotes from my students tell me that even some folks in their 30s are being let go by companies. This is likely due to the half life of a good degree becoming shorter and shorter.

I learnt structured programming in JC, then in University Object Oriented programming required a radical rethink of how to write software. These days we have functional programming and just around the corner, quantum computing may enact a paradigm shift which may render all software developers obsolete.

The combined effects of (a) and (b) may lead one to conclude that Millenials today with a degree have about 10 years of regular employment where they can get a steady increment every year with little fear.

Let's look at what happens at the end of 10 years :

a) Your salary will become lumpy as work becomes projectised

I had a great conversation from an old friend today. The problem faced by Gen-X guys like me is not that we will lose a salary. The problem is that our salaries will become lumpier. Our work becomes more projectised and we will paid when someone has an incentive to pay us.

For me, I have a training gig with Dr Wealth. I get paid only after every class. If I conduct a class, generally I will be paid a week later. If I am ill and cannot conduct a class, I don't get paid. I also don't get paid if my services are no longer required by Dr Wealth. I may have to find a new company to partner with.

I am not alone in this regard because a lot of guys my age look for short working contracts and face the same situation. Alternatively, it is a life of moving from retrenchment to retrenchment.

Sadly our home mortgage payments are not lumpy but remains consistent.

b) You will come under pressure to retrain and it would be a fight for survival

The government is not doing this Skills Future thing for fun, they anticipate that folks will have to reinvent themselves quite a few times in their lifetime. As someone who graduated recently from law school, this process of reinvention is a very unpredictable move. In my case, the legal industry not only became unattractive, I had the added weight of ageism against me. Even if I can find a way to become a community lawyer, my paid would be a mere fraction of my last drawn income. In essence, my pay cut would have been more than 50%.

A lot of Gen-X guys are now facing the pressure to retrain, but they have to realise that it's less about retraining but more about readjusting to a lower income and maybe longer hours at work.

Retraining is about survival. You don't retrain to thrive or do better. That is why skills training adverts show discouraged workers, they don't show 40-something uncles going back to SMU and trolling his Legal philosophy lecturer on why Trump is awesome. 

c) Life gets better for a short while, then it starts to sucks

If regular solid employment is going to last only 10 years, then your life is only going to get better for a short while before it starts to suck over the long term. If the future is lumpy and unpredictable, then every financial obligation you are taking upon yourself is going to hurt you over the long term.

10 years basically means that if you have a car. That's the only car you can afford your whole life. You may only go for a home mortgage significantly below what you can afford because it lasts 25 years. I can't even imagine why folks in their 20s today will want kids in this kind of economic environment.

If we position the problem statement as what I have above, my solution fits the problem statement perfectly.

(i) Dividends investing allows a lump sum asset to be converted into a perpetual stream of small quarterly payments.
(ii) Leverage can deal with short 10-year  horizon span most 20-somethings face in today's workforce.

( Note : Risk of  margin call makes leverage feasible only for folks who know a lot more about finance. )

The STI ETF has gains 6.92% since inception with a semi-variance between 11-12%. Investing in a disciplined manner to the tune of $1,500 every month for 10 years will barely get you a quarter of a million dollars at the end of the period, after which you will barely get $8,000 a year in dividends.

For this game to be played well, you need to be at the level of the most dedicated FIRErs on the blogosphere. Otherwise, when you hit your 40s, you may be going through the equivalent of Design Thinking programme thinking that it would actually make you valuable to an employer in the future.

2-3 years after that, you will still be back attending another course after getting retrenched

The Model Thinker #11 : Entropy : Modelling Uncertainty

Data falls into four categories.

Data could be in equilibrium. A person's height is in equilibrium, as is the stock price for one counter at market close today.

Data can be cyclic. Revenues for the semiconductor firm is generally cyclical because there are ups and downs.

Data can be random like the distribution of stock prices on the SGX.

Finally, data can be complex. If my daughter chooses stocks, it may not be completely random and, my daughter being a 7 year old, possibly may not be based on a fixed pattern as well.

Equilibrium and randomness can be modelled using Entropy (expressed as an equation above).

Where we are indifferent or have no special information on a variable, we can model the behaviour assuming that entropy will be maximised. 

In cases where values falls within a range, the uniform distribution maximises entropy within a given range. Distribution of different species in a geographical zone may be uniform.

Where the number has to be positive and cluster around a mean, the exponential distribution maximises entropy. At larger time scales, stock markets indices tend towards an exponential distribution.

Where numbers are described by a mean and variance, maximising entropy results in a normal distribution curve.

I will not say anymore on this chapter as the book promises more on how this applies to the stock-market in later chapters.

BBFA The RPG - From Keyboard Warrior to Marriage Material !

We all have to begin somewhere in life.

I have spent a large part of my younger life as a BBFA so I know that BBFAs have a strong affinity with the Financial Independence Movement.

Once of the core strengths of the BBFA is that they are not constrained by society's judgement on their approach towards financial planning. This gives them the freedom to work towards building a pile of Fuck You Money without society making them feel bad for doing it.

One very effective way to achieve your financial goals is by gamification, so I decided to imagine what the BBFA RPG would roughly look like.

A BBFA's prime attribute is Intelligence. BBFA's generally have no use for Charisma.

The level advancement table should look like this.

-->

Level	Title	Portfolio Size	Passive Income / Month
1	Keyboard Warrior	$-	$-
2	MMORPG Maven	$20,000.00	$100.00
3	Data Hog	$40,000.00	$200.00
4	Gian Png Kia	$80,000.00	$400.00
5	Chicken God	$160,000.00	$800.00
6	Soi Cowboy	$320,000.00	$1,600.00
7	FIRE Disco Dancer	$640,000.00	$3,200.00
8	Marriage Material	$1,280,000.00	$6,400.00

This game assumes that 6% yields are possible in an income portfolio.

The Special Abilities of a BBFA is as follows :

At 1st level, the BBFA gains the title of Keyboard Warrior and gains the power of Rebuke/Turn Woman. When activating this special ability, The BBFA goes online and blames everything on women who prefer hanging out with jerks instead of nice guys like them.

At 2nd level, the BBFA gains the title of MMORPG Maven. At this level, the BBFA no longer needs to pay his MMORPG subscriptions with his earned income as his dividends will effectively pay them for free. Once a month, the BBFA can buy a virtual item using dividend income. Just feel good about himself.

At 3rd level, the BBFA gains the title of Data Hog. Home broadband and mobile phone expenses are now paid by their passive income. The BBFA gains immunity to lag. His rate of Porn Download doubles as a result of a better Fibre plan.

At 4th level, the BBFA becomes a Gian Png Kia. He no longer need to work for hawker centre food. Once a week, he can order a piece of fish along with his economic rice. He can, of course, entertain the idea that women might be impressed by this giving the DM a good laugh in the process.

At 5th level, the BBFA becomes a Chicken God. Twice a month, he can visit Geylang and have all his expenses paid by his passive income. He can now use masterwork condoms (ribbed for his pleasure) and gains advantage to all save versus sexually transmitted disease.

At 6th level, the BBFA gains the title of Soi Cowboy. Once a quarter, he can summon 1d6 BBFAs of lower level accompany him to visit Bangkok. This trip is fully paid for by his dividends. Unfortunately, his posse will have to pay their own way. No money no honey.

At 7th level, the BBFA gains the title of FIRE Disco Dancer. He gets a taste of financial freedom. He gains immunity to retrenchment and no longer takes psychic damage from his day job.

At 8th level, the BBFA gains the title of Marriage Material. A single woman of marriageable age that comes within 30 feet of the BBFA must save versus Celibacy or be charmed by him. The single woman can make a saving throw again every month. If she makes her saving throw, she is immune to the BBFA's charms until he gains another level.

Gaming Analogy for the FIRE movement.

There are many interesting parallels between the FIRE community and Board gamers.

As it turns out Tabletop Gaming magazine talks about different attitude towards tabletop gameplay last month which can be applied to the FIRE movement.

In tabletop gameplay, players can be arranged around a 2x2 matrix. On one axis is respect for the rules and, on another axis, respect for goals.

This creates four categories of different "players" that can be found in the board-gaming world our society today.

Let's look at each category one by one.

1) Conventional Player / Believer in the Singapore Dream.

The conventional player is the kind of player you meet most of the time. Those who respect the rules of gameplay and respect the goals of the game. In D&D, the fighter tanks; the cleric heals; the thief opens lock; the wizard Fireballs.

In personal finance, respect for the rules means that the person respects the conventional way money is being made - study hard, get a job/start a business and put aside some of that for a rainy day. Also in Singapore, the ultimate conventional goal of traditional masses is to get married, start a family, buy a home, and have kids.

2) Cheat / Criminal

The kind of player that board-gamers universally hate are cheaters. Cheaters still want to win so they respect the goal of the game. They just do not believe that are constrained by the rules. A common approach to cheating is to miscalculate your victory points or in the case of Magic the Gathering, miscounting the amount of life you have left. One player did it so often that the community named a cheating manoeuvre after him.

(Can't name the person because I am now considered to be the same profession as that guy and some gamers do read my blog.)

In personal finance, a cheater is someone who is looking for a short-cut to gain financial success. One example is someone who commits a criminal offence like embezzlement or corruption. The proceeds from criminal enterprise would then go into buying big cars and homes to show that they have arrived. ( Some do arrive - in Changi prison )

Cheating is also a continuum, some behaviours in society may not be criminal but are unethical. There is a lot of conflict of interest in society today. Would that be considered being disrespectful of the rules even though it is followed?

3) Gamer's Nightmare / Hipster

There are players that are quixotic that they are even bigger nightmares than cheaters. The are the  folks do not follow the rules and don't respect the goal of the game.

There was once a really unpopular DM that was hated by the gaming community in 1990s who ran a Vampire the Masquerade game for a friend of mine. Once the game began my friend kept badgering the DM by repeatedly asking him "Is there a rock on the floor?". The DM got impatient and finally said,"Ok, you find a rock on the floor." My friend then said,"Ok, I hit myself on the head until I die ! Toodeloo muthafucker ! Kakakaka ! "

In personal finance, this may be more akin to someone who takes an unconventional view about life. Maybe someone who refuses to work, and dumpster dives everyday for example to champion some arcane anti-capitalist cause. They are very much like hipsters from Western culture. They may not have families, but everyone else is wrong because they are corporate drones.

4) FIRE / My approach to gameplay

Interestingly the board-game article did not cover the fourth category of gamer which I belong to. Gamers like me respect the rules but we don't really care about the published goal of the game. We won't cheat, but we invent our victory condition throughout game play to amuse ourselves losing many games we play but having immense satisfaction while doing it.

For me, my consistent victory condition is that the sore loser / asshole does not win and I am willing to lose the game to make that happen. I play normally when there are no sore losers in the group.

Beyond my approach to gameplay, there is always this player whose sole goal of playing Dominion is to collect all the Harem card in his deck so that he can be some Harem master at the end of the game. In Settlers of Catan, these are players who try to build the longest road. Finally, in Twilight Imperium, these are the hilarious jokers who role-play the alien race and and expect everyone to negotiate with them as if it is an RPG.

In FIRE, most of us respect the rules on how to make money. So much so that I believe that FIRE aspirants are more hardworking than conventionals because they know that every cent they make can be used to compound towards a better future. Where the FIRE community differs is that they don't really care about the ultimate goals of the Singapore Dream.

I would not blame them for that.

Every mortgage you get last about 25 years. Every child takes 23-25 years to grow up and start being able to earn money on their own. Your degree's half life, on the other hand,  is only 6-8 years. Your career may last 15 years at most.

A true gamer who attempts FIRE knows that, these days, he has about 8-10 solid years to offset his basic expenses before he runs out of luck in his career. Those with degrees need to be be careful, recent surveys show that most retrenched professionals in 2018 are degree holders in their 40s.

By discarding the ultimate goal of the Singapore Dream, a FIRE aspirant can gain the freedom to breakaway from corporate work.

In the short term, however, there is not much functional difference between a the most effective FIRErs and BBFA. This weekend, I will discuss the BBFA's affinity with FIRE in a separate post.

The Model Thinker #10 : Broadcast, Diffusion and Contagion.

What does it mean when it was written in The Economist that a group of whiz kids hired by Barclays Bank modelled the cryptocurrency craze as a disease and concluded that the bull market in 2017 is not ever occur again ?

After reading this chapter, I suspect that the they used models of broadcast, diffusion and contagion to model the behaviour of cryptocurrency investors - specifically this thing called the SIR Model.

If I am right, then cryptocurrency investments reach fever pitch based on the following variables :

P(contact) = Probability that a non-crypto investor gets exposed to a cryptocurrency idea.
P(spread) = Probability that a person exposed to a cryptocurrency idea would actually invest in it.
P(recover) = Probability that a cryptocurrency investor quits crypto-trading.

Whether a disease or an investment idea can spread through a population depends on this number called the basic reproduction number or R0.

R0 = (P(contact) x P(spread)) / P(recovery)

Where R0 is less than 1, the disease will dissipate. Where R0 is more than 1, the disease will spread through the population.

Policy makers have in their databases different R0 for a different diseases. Measles spread very fast and have a R0 of 15. HIV is a much slower 4. The higher the R0 the more thoroughly a population needs to be vaccinated.

Since I have no access to the original paper, I can only make educated guesses on how the analysis took place.

We have no idea what goes into determining P(contact) and P(spread), but I suspect in 2017, the basic reproduction number was much higher than 1 and this led to the cryptocurrency market overheating. In 2018, the whiz kids figured out that R0 had dipped below 1.

What does this mean ?

• It likely means that folks who are exposed to an ICO paper or cryptocurrency trading idea are not longer taking action on making actual trades. This is most likely due to the number of scams out there in the cryptocurrency world.
• Alternatively, folks actively trading cryptocurrencies are leaving the market in droves. Why risk everything on Bitcoins when REITs give a steady 6% every year?

Armed with this model, we might be able to predict whether the FIRE movement would meet the same fate as cryptocurrency trading. 

I would characterise the FIRE movement this way :

• Becoming financially independent is still not mainstream in Singapore with just a few businessmen making a profit out of teaching folks how to do it. So, rightfully, P(contact) is low and limited to the BIGS and Seedly communities.
• Some folks might be turned off by dividends investing if it too slow. Right now the industry is still experimenting on a better message to drive investor action. Even my own solution involves leverage to speed things up to motivate the younger investors to do something about their lives. I would peg P(spread) as being so-so. A trainer's success is in managing his P(spread).
• While my personal bias may get in the way, I believe that FIRE will catch on because P(recovery) is so low, it is close to zero. Seeing money drip into a bank account has been so addictive, it's dominated my life for the past decade or so. 

A small P(recovery) is the reason why "Dividends are the opiate of the capitalist masses. " 

FIRE will survive as a movement and grow stronger simply because once a person starts seeing some results, he's likely to persist until he becomes financially independent. I know because I'm almost a drug peddler myself, getting my own dad to dividends about a decade ago and now seeing it in some of my students. Monitoring his stocks is what keeps my dad alert in his old age.

Pursuing FIRE while in a relationship.

There is one question that I am not good at answering :

How does one pursue FIRE while in a relationship with someone else?

The first problem is that finance experts are generally not relationship experts, you should treat all relationship advice from financial experts with a pinch of salt. ( Of course, I freely dispense relationship advice because I want to keep readers entertained. )

The second problem is that financial experts who solve these problems within their own marriage can only describe their solution based on one data point. This kind of wisdom is not empirical at all.

There are two obstacles towards crafting a satisfying answer :

The first obstacle is that, generally speaking, academic studies suggest that spendthrifts ends up marrying tightwads. This is unusual because we tend to marry folks who have the same political views and personal values. It's just that when it comes to money, opposites attract.

The second obstacle is that men and women have different spending patterns. For example, men like to put their discretionary spending on sports goods and woman spend more on maintaining their personal appearances. Having different priorities often leads to conflicts. You can't just tell your wife to cut down on cosmetics unless you want to spend a week at the doghouse.

I also do not like the solutions offered on social media that prioritises "better communication" and that "since everyone is different, the answer depends on the individual". These are not answers. It suggests that the person dispensing the advice might not be knowledgeable at all.

FIRE is hard, but it has a particular bias for technology professionals. You can read about the saltiness of American women who say that the FIRE movement seems to only work for white males in Silicon Valley ( Even though FIRE was invented by a hippie woman called Vicki Robins who inherited wealth ). In fact, if you have MBTI profile of INTJ, I suspect that FIRE is somehow twice as easy for you than someone else like me who is ESTJ/ENTJ. Even right now, I suspect that my method I teach to help folks achieve financial independence is particularly useful for BBFAs because it's not hard saving and investing if all you do is lock yourself in a room and play the console and watch anime all day.

For my own personal situation, like many folks, I watched my parents fight over money all of time while I was growing up. I know how hard it is when my mother's siblings always seem to be trying to borrow from my dad all the time.

So I grew up knowing that whatever plans I have to become wealthy, they needed to be executed while I was still single. Financial independence is a solo achievement, not a team sport.

As for the ladies I meet in my workplace in the 90s and 00s, let me get flamed for saying this - Gen X Singaporean women I encountered when they were single in the corporate world WERE LARGELY, IN MY OPINION THEN, FULL OF SHIT ! 

I want to be Ally Mcbeal !

My life is Sex in the City !

[ I must remind female readers that I may have been immature when I was a single engineer in my late 20s ]

They scare me.

They were just too overconfident, too busy indulging in their spa-obsessed scuba-diving lifestyles, and getting point to point on taxis, leading a happening life of salsa dance and salsa culinary delight. I calculated that if I fell in love in one girl from this environment, I'd be a corporate slave for the rest of my life which would fun in my 20-30s but hell in my 40s.

This is why I did so many weird things as a single eccentric guy :

a) I transferred my CPF-OA to CPF-SA because I don't want my future girlfriend to see a single cent in my CPF-OA and push me to buy a private condominium. Today, I get over $10k from the CPF board on my interest alone for my SA and MA accounts.

b) I was able to cut down my expenses within $1,200 and spend within my dividends when I was barely 32 years old. There was no way I could have been able to do that if I had a mortgage to pay.

c) I refused to travel, figuring out that volunteering for outsourcing projects would cover my holidays when I was not running projects on a weekend.

So if I use my life as a data-point, it may be better for a guy to just FIRE as a single male then look for someone who can tolerate his strange approach towards personal finance. Even then, I have no qualms when I was building my wealth that there is a large chance that I would be a BBFA today.

But I didn't.

Is it something I would do again if I can live my life as a Millenial?

Hell yes.

Should I recommend my extreme approach to relationships to guys reading this article?

Probably not.

Goodhart's Law and the folly of using Investment Benchmarks

Charles Goodhart is an Economics Professor from the London School of Economics. He said that "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes" One interpretation is that when a measurement becomes a target, it ceases to be a good measure. 

I was expecting to lose money when I ploughed my trainer's fees into the portfolio created by my third batch of students. After all, the Capricorn effect is long over and REITs have already completed a fairly good run in the markets.

Furthermore, the worse decision we made as a class was to keep First Reit in our portfolio. It subsequently lost me about 7+% over the span of less than a month, likely due to the perceived problems from its sponsors. Interestingly, the class kept it in the portfolio even when their senior batch happily excluded it from the final list of stocks to buy into.

So I was quite surprised that my portfolio is still on positive territory today.

Frasers Logistics and Industrial Trust did very well  not because it was especially well run but because it was expected to be joining the FTSE EPRA/NAREIT Global Developed Index. The news of its inclusion in the index came out on 4 March 2019, about slightly more than a week after I built the portfolio. It's full inclusion will occur on 19 March 2019.

Interestingly the positive movement in the counter began as early as 27 February 2019.

This phenomenon explains the relevance of Goodhart's Law. As investors rush into REIT ETFs and begin benchmarking their performance against popular indexes. It becomes possible for smart investors to follow news on the inclusion of a REIT in a major index and then perform trades based on that fact by front-running the index investors. Passive investing based on a benchmark, thus, makes someone a patsy.

This is possibly one of the more convincing arguments active fund managers will level against ETF passive investing and you can bet your bottom dollar that they have a personal interest to spread this story around, even inducing their salesmen lapdogs to do the same. Sadly, from my perspective, the alternative to active investing is not passive investing, but DIY investing. Even if benchmarking becomes an investing trend that can be exploited by some front-running, the cheapest way to do it is to trade in the counter directly.

Over the next few days, we shall see whether Goodhart's Law to hold true over Frasers Logistics & Industrial Trust. If Goodhart's law is correct, we should see Frasers Logistics revert to lower value after 19th March 2019.

The Model Thinker #9 : Network Models

A fully blown discussion on Network Analysis goes beyond what is possible for a simple blog article.

I'm only going to focus on qualitative analysis of networks and just one trait that is important for layman readers. 

The betweenness of a network is defined as the number of paths of minimum length connecting two nodes of a network that passes through a node. This is mathematically expressed as a percentage. The higher the betweenness of a node the more powerful or influential a node is.

People or communities that have a high betweenness score wield extraordinary levels of power and  influence within society. This trust is not earned by just being at the right place and the right time, but a genuine effort to build trust is required to succeed. 

Later this evening, I will be attending a dinner hosted by Seedly. And in complete honesty, I will be looking for opportunities to see if I can collaborate with them over the medium or long term. 

Seedly is an an example of a node in the financial blogosphere that wields an influence far above any individual institution or blogger on its own. Even the folks who work in Seedly seemed surprised that their last event sold 1000+ tickets within 48 hours, effectively establishing themselves as the de facto hub for Millenials seeking information on personal finance. It was also very exciting for a speaker/trainer to address a much younger and energetic crowd because we're all too used to talking to jaded senior investors who keep wanting to know how to market time their investment purchases.

In my opinion, the power that drives the network effects that pushed Seedly to its prominent position is its unflinching commitment to being unbiased, which has become a bugbear to the commissioned financial advisors on Facebook. I would imagine that most banks or insurance companies, even with their large amounts of capital, would find it a struggle to attract young investors these days because  people are aware of that conflict of interest that comes from building a relationship that they know would result in sales commissions going to whoever is talking to them. 

In this case, the game plays well to Seedly's strengths : They do not need to be totally unbiased, just more unbiased than the Financial industrial complex present in Singapore today. 

Very far behind Seedly in terms of influence is The BigScribe Community that I personally love very much ( I own shares in BigS ) . BIgScribe is actually more unbiased in that we do not have commissioned advisors in our team of admins. BIgScribe's network effects are weaker because we have deeper and stronger financial discussions and denizens are expected to keep the quality of the discussion at a high level. This means that Bigscribe has a much lower appeal to the mainstream audience. 

The lesson for bloggers is that, one way or another, you can drive traffic and influence by playing on both Seedly and BigScribe's strength. 

When it comes to networks, it is not a zero sum game. If you can game this and become something that forms a link between these two networks, you should be able to find a way to in win in whatever you are trying to do. 

Is Polytechnic Education the New Normal Stream ?

First off, I am very pleasantly surprised at Ong Ye Kung's gesture to slay the sacred cow of streaming in Singapore. My kids are now spared the PSLE T-Score and the possibility of being labelled a "Normal" the next time they visit relatives in Chinese New Year.

For the new system to work well, I hope that all Singapore students can sacrifice one or two weak subjects and still be able to go to JC. In my personal case, if I was allowed to do CL2 at the Normal(Technical) level, I would have been able to take on one additional humanity and science and possibly even qualify for medical school later. This was because CL2 was so hard and took up so much of my time in the 80s-90s. ( Heck if you asked me to take up US Advanced Placement test for Physics, Algebra and Calculus, I would have considered this way easier than CL2 )

Having all students study in one broad Express stream will definitely remove the social stigma of being Normal. And being Normal is hardly normal in a competitive society.

The question that now remains is whether parents will shift their focus to the next differentiator in the education system :

Will Polytechnic education become the new Normal Stream ?

This is a subjective test that does not cast Polytechnic students or polytechnic education in a negative light. It is simply a question of whether the attitude of parents will shift in the future.

There are certainly some arguments that this will not be the case, but I will not dwell upon them here :

a) 20% of polytechnic students do end up in a local university.
b) The government invests more in Polytechnic students than JC students ( Got to data.gov.sg if you don't believe me, )

I'm going to examine the possible reasons why I think kiasu parents will make JC-Poly-ITE the next differentiator after 2024.

a) Polytechnic Alumni seems weaker than top JC Alumni

When it comes to receiving an education, we're not just in a race for more financial capital. Alumni programs bring a lot onto the table. The strongest case to study in Raffles, Chinese High or ACS are the networks that a person can join. Social capital in the UK divides the aristocracy against the middle-class tech professionals because things are going to be different if you know someone in the C-Suite later in middle life.

This played a major role in me recommending JC over Poly to my friend's kid who is ironically actually a very successful Poly graduate.

b) JC students and Poly students traffic in different cultural currency

While it is not too obvious to parents, you will notice that different education bands traffic in different cultural currency. The 1990s, the JC cohorts may have subtly different tastes in music. Generally speaking, during my JC days we loved Nirvana and Def Leppard. Polytechnic students who come from Chinese speaking families have have a greater affinity, perhaps, with a band like Beyond.

( Of course, both JC and Poly students loved Guns and Roses )

So much so that my only cultural currency of Dungeons and Dragons is only appreciated by a narrow band of GEP and possibly Bukit Timah school students. I would even say that this crippled my ability develop close friendships in Swiss Cottage Secondary School. You can imagine how painful it is to be an extrovert but also a cultural outcast in a government school.

Ultimately, what cultural currency becomes valuable can only be demonstrated by this urban rumour I heard about this law firm ( I will not name this firm) whose partner would quiz legal associates on Shakespeare and mark down those who cannot identify where a particular verse is from.

Corporate workplaces are full of biases. You can lose a promotion because of your English accent.

c) Parents of JC students may be richer than parents of Poly Students

The most brutal reason may simply be that even if you eliminate streaming in secondary schools, parents will still hot-house their kids to enter a JC. If you look at the top JCs in the Bishan-Bukit Timah-Dover Axis, it is surrounded by landed property.  It should be also noted that these days, parents also use Whatsapp groups to form coalitions to challenge school teachers and complain about the way their kids are taught.

The closest analogue to this is the assortative mating problem where you are starting to notice that top university students are marrying each other. As even parents will benefit from networking with each other, this slants the value towards JC education in a more pronounced manner.

If you notice the arguments in this article, you may see a pattern.

I did not talk about the capabilities or quality of Polytechnic students because it is very high today by any international standard. I focused on the three ways to look at capital in sociological studies in the UK : financial capital, social capital and cultural capital.

Where there are inequalities in all three forms of capital, the perception of our parents will shift to turn this into a differentiator. This cuts across all cultures and is part of a fundamental problem of capitalism.

I doubt that we can come up with a policy to address these inequality for now because Polytechnics and JCs are fundamentally different. Polytechnics are designed to work with our local economy, JCs are meant to prepare folks with critical thinking skills to take on higher academic work.

But, right now, I'm happy that  my kids are spared the stigma in Secondary School.

Is there a solution ?

I crack this joke about dividends that come from local companies as a purest form of meritocracy in society. My REITs and company holdings will not pay my kids a lower dividend if they fail to get into Raffles Institution or NUS. They certainly will not be paid more even if they do.

Owning stocks is more meritocratic than working in corporate workplace these days and we should expect a greater shift to better university grades in the future when our kids hit the workforce.

Personal Update

I thought it would be a good time for a personal update since we're into our third month of 2019.

a) Work falling into place

At this point in my career, a broad strategy is falling into place.

This blog will remain fairly niche that will discuss the use of models in financial markets in 2019. If I get to do any quantitative backtesting, I may share some of my results and insights here. Occasionally, I will do an article that will provoke most readers - right now I am not done with Polytechnic students yet, but I would also talk about reforms to secondary school education. I don't need this blog to hit a large number of views, but I want to attract that few readers who appreciate the more abstract articles that I run every week.

The successful talk in Seedly has gotten me to think about these activities, that I do for free, as a means to drive more traffic into my courses. To promote more brand awareness, I have decided to make every public talk as unique as possible and integrate all the new stuff I learn from the latest books. Right now I am challenging myself to make my public appearances like the Avengers Movies, with content being standalone but a logical sequence for fans who attend previous talks. "Dividends are the Opiate of the Capitalist Masses" may be the working title of my next performance.

The freemium model for my talks should ultimately drive more brand awareness for my course materials that are undergoing a major revamp right now.

b) Spending has hit the roof

Coincidentally, my spending has hit a new high because of my toothache I had last month. My dentist had to perform a surgical extraction and I ended up paying $1,250 for the procedure to end the pain. Interestingly, everything seems to be deductible via Medisave, but I am very likely to make a voluntary contribution to CPF this year as $1,250 is a pretty hard hitting penalty for not maintaining proper dental hygiene.

I experienced another hit when I spent $1,130 on a new pair of spectacles. I figured out that I should not try to be frugal with something I wear 16 hours a day, and this time the spectacles were especially costly because I developed presbyopia over he past 4 years and did not want a separate pair of specs.

Otherwise, my spending patterns are usually dependent on new RPGs published. This month, Monte Cook Games released a PDF that costs $100 USD ! I have been wanting to read Invisible Sun PDF for a very long time because don't have the shelf space to accommodate the large physical product. Reading RPG books seems to be my only form of leisure these days.

c) My Creative SXFI Air

My Creative SXFI Air finally showed up and even though I was satisfied with my purchase, it did not result in taking any long positions in Creative Technologies.

The 3D Holography sounds great and was different from ordinary sound, but setup was quite painful and the use of the headphone was not intuitive. It took me a while to figure out how to get my bluetooth to work and I still cant get music on a MicroSD card play.

If Creative licenses this technology, I think another company will build 3D holography headphones that works intuitively and may even incorporate noise cancelling features. If a noise cancelling version of the SXFI Air arrives, it would be the headphone to end all other headphones.

d) What am I watching and reading

I watched Season 2 of Dragon Prince which was really good, but I am also watching Season 3 of Overlord which was quite a let-down.

I am also reading an excellent book called The Intelligence Trap by David Robson which will likely play a major role in future articles on this blog.

The Model Thinker #8 : Models of Value and Power

Suppose we are trying to get a board of six directors to agree on something. In this case, the board is has six members. Faction A has three directors that act in tandem. Faction B has two directors that vote together. Faction C has only one director.

Suppose to pass a resolution, 4 votes are required.

Suppose you are trying to influence the board and they slowly come round to agreeing with you, the Shapeley-Shubik index of power can be used to measure the influence of each faction.

If you convince Faction A first, you will have three votes. This is insufficient to get your resolution passed. But if you can get Faction B next, the resolution will pass, then Shapely-Shubik index for Faction B increases by 1 because they are pivotal for the resolution to be passed. In game parlance, B scores one point.

( For the folks who actually know this Shapely-Shubik index, Faction B's score actually increases by 1/6, which is the number of permutations by which each faction can slowly come round to agreeing with a resolution )

If you create a table of all the possible ways each faction can come round to agreeing with your resolution, we get the obtain following table :

-->

Order	A	B	C
A B C	0	1	0
B C A	1	0	0
C A B	1	0	0
A C B	0	0	1
C B A	1	0	0
B A C	1	0	0
Index	4	1	1

From the diagram, you will find that Faction A has the most power, but Faction B and C have the same amount of power even though Faction B has twice the number of directors as Faction C. Also if you want to convince a group of people to act, you only need to convince Faction A and Faction C.

After learning about these models of power, I regret that this was not taught in Law School.

In Schemes of Arrangement that determines whether companies can be taken private, similar factions can be found amongst shareholders, but we do not have a way to determine how to influence each faction to vote in such a way as to allow a Scheme to be passed. Of course, as we are dealing with a much larger set of shareholders, a simple computer program may be required to determine which factions must be appeased the most to make the procedure a success.

After meditating on this chapter for a number of days, I realise that this Shapeley-Shubik index of Power has a powerful way to explain financial independence.

The basic expenditure you need to create an ordinary lifestyle functions like a voting threshold.

Getting employed will allow you to meet the needs of basic living. This also means that for many Singaporeans, your day job has an almost vice-like grip of power over you. So much so that your life is being regulated by your company. Great if you work for a good MNC, but not so great if you work for a shitty corporate culture run mostly by locals. ( Don't believe me, you can read up on how we Singaporeans torture our maids. )

Here's the thing : If your day job does not even give you a satisfactory lifestyle, your boss actually has very little power over you because you are already living in hell and can easily swap out one hell for another. ( This is why polytechnic and ITE graduates may find running a small business better than being a slave to a badly run SME. )

If you start working on your financial independence, your passive income will not make a difference to your golden handcuffs unless it can exceed your your basic living threshold. This is a very strong argument to lower "your voting threshold".

For those living in corporate hell and relying on one day job to make a living, passive income is often not enough to unshackle yourself from your corporate chains - you need to be able to live on some kind of side gig plus passive income to up your bargaining power.

That is a fact of life.

Of course, to keep you loyal, the countermove from HR is to ensure that you are not allowed to take a side gig.

Seedly Event 2019 - Talk Cock Sing Song Ba Long Long ?

I was still recovering from yesterday's talk and the traction for this Seedly event has been amazing. At this point of time, bloggers have already beaten me to this game, and there is at least one summary that I think it's worth reading if you missed yesterday's event.

Interestingly, I don't have any negative things to say about the speakers before me. I typically conduct a critique of other speakers in the pane in a blog article that follows the event. Initially, I felt that some of Victor Chng's approach towards calculating yields based on original cost did cause me to balk quite a bit, but I went back and did some maths and his logic seemed sound after some close examination.

( One of my quirks is that I never bother about yield on cost. The past is the past and there might be another counter with better yields. Do you sell and buy the other counter ? )

a) Really regret not showing up in the morning

My only regret was that I wasn't too confident of my performance two nights ago, so I decided to spend Saturday morning rehearsing my speech. I figured that not making an impact as the final speaker that evening would have been a major disaster for my personal brand and it would undermine the faith Seedly had on me.

Because of that I was unable to attend the talks in the morning. I would have really wanted to hear Christopher Tan's presentation because I think he fired a major salvo against the commissioned sales industry.

b) Some of the shit that came out of my mouth worked !

Some parts of my performance were better than I expected.

"Dividends are the opiate of the capitalist masses" was unplanned but had some viral quality to it.

The origin of this quote was when my sociologist friend read my older books and said it was very similar to the Communist Manifesto. I have also said it few times in some other conversation under a different context. I think that this slogan has some potential and I may find a way to turn this into a fully blown 30 minute presentation in a future event.

c) Whether we speakers "talked cock" that day depends on your behaviour after the event.

While I was pleasantly surprised that Millenials are willing to spend 8 hours on a weekend to learn about personal finance. However,  I also believe that 99% of the audience would not really take action after the event. Some cynics have even started saying that because many of the speakers conduct courses for money, we were holding back some crucial data to help folks bridge the gap.

Naturally, my 30 minute presentation cannot attain the same depth as my 2 day Retirement Masterclass, but I was not the only speaker that day. I think that an attendee can combine the information from all the speakers that day, and along with help of some sponsors, make at least one investment.

d) I am taking concrete action after the Saturday event.

At this stage, since I have a business relationship with Dr Wealth, I can no longer toot the horn for Alvin Chow. I think his very clear presentation spoke for itself on Saturday.

When it comes to taking action, I should be leading the way.

Instead, I will be buying 8,800 shares of TLV first thing tomorrow morning. I won't follow Alvin's advice to sell though, because it actually pays a tiny dividend every October.

Incidentally, the engagement ring I got for my wife was from Taka.

e) Every speaker did not sell their seminars on Saturday - except me.

This is where I really tip my hat to the other speakers - other than myself, no one created a single sales slide to promote that offerings. It's really amazing that the industry is so willing to come together to share the good stuff to everyone.

But readers of this blog know that I am not a saint. I worked fairly hard for weeks to prepare the material and it was with the understanding that I was allowed to put in one slide and spend 1 minute to toot my horn.

Anyway, If you are one of those who wanted to get tickets to me free preview this Saturday.

The link is here.