Tuesday, March 05, 2019

The Model Thinker #8 : Models of Value and Power

Image result for break your chains

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.


  1. This will also explain why most retail will vote No to the current Hyflux SoA :P

  2. Yeah, let's see what happens next.