Monday, September 14, 2020

When geeks over-optimise

Hacking Life by Joseph Readle is a really good read and should be one of those non-finance books FIRE folks should get their hands on. I liked it so much after borrowing from the library, I bought a Kindle version for reference. The book is really a no-holds-barred work that spills the beans on modern-day gurus. 

One underlying theme in the book is the notion of over-optimising something at the expense of the big picture, I will share two particular examples that I enjoyed reading very much.

The first example is Seth Roberts who experimented on himself with butter. He figured out that 60g of butter improved the speed by which he solved simple maths problems from 650 ms to 620 ms. This enabled him to publish a book called The Shangri-La Diet. Well-meaning cardiologists have been telling him that he's killing himself with the kind of diet he is putting himself up with. As it turns out, traditional medicine turned out right - Seth Roberts died at age 60 from coronary heart disease and an enlarged heart. 

The second example is our favourite guru Tim Ferriss. He outsourced arranging and coordinating of dates to competing teams all around the world, even designed a nifty way to pay out bonuses to his army of virtual assistants. Some of his mistakes were hilarious - he had so many dates a day, he forgot that one date was an orphan and asked about her parents on their second date. Of course, he is still single today. 

I think it is a disappointing omission that the author did not have a section on money. This is something I am guilty of before. 

One of my dumbest ideas over a decade ago was my aim to be paid a dividend every month. Those days, the only stock that paid on January, April, July and October was the problematic shipping counter First Shipping Lease Trust, I lost a lot of money on that folly. These days, I am happy to be paid 8 out of 12 months of the year.

We have some instances of over-optimising in the in financial blogosphere :

  • Obsession with credit card miles and cashback money. Maybe matter not to spend the money in the first place.
  • So much drama when a bank revises the terms for their multiplier accounts and nerfs your deposit account. If you buy the bank stock, you are effectively taking the other side of the bet with a % dividend.
  • Quibbling over ETF expenses when they are already really low. I think once you buy a UCITs counter like IWDA, further differences of less than 0.% should not matter too much.
  • So much ink spent on the 4% safe rate of withdrawal. Plenty of time to lose sleep over this after you can live within your dividends.
  • You may not agree with me on this: That incessant whining and bitching over accrued CPF interest for folks who buy their homes using CPF. 
The rise of technocratic software developer types is possibly the root cause of over-optimisation. Computer Science and Engineering teach us to master a system and then use the rules of the system to milk it for a powerful advantage. As the role of software developers begin to ascend, a new kind of data-driven technocratic guru will take over the non-fiction literary space. Many of these fixes can solve an immediate problem that you have, but can quickly lose the big picture. Case in point, negging a chick can get you laid but does nothing to build a long term relationship. 

This is also a reminder that I should not go too far when building quantitative models which is really starting to distinguish my programme from competitors. 

My students sign up because they want a shot at early retirement and the kind of lifestyle improvements it entails. That's really the big picture of why people pay for investment courses.



  1. Hi Chris,

    On the four percent withdrawal rate, how can ppl lose sleep after they know that they can live within the dividends? I thought it is simple and relaxed with the knowledge that the generated dividends cover their expenses.


  2. Living on dividends is unsafe as your rate of withdrawal would be closer to 6%.

    My take is stretch your limits to live on 50% of dividends lah.

  3. better, not matter...

  4. Hi Chris,

    50% of dividends is akin to 2% withdrawal rate which is feasible and nice to have for one. I think that one can supplement the expenses with some part-time employment or side hustle which are also good for one's well being. It will allow one to have some form of link with the corporate world in the form of part-time employment. Having options with the knowledge of the buffer in the form of the investment portfolio gives one the peace of mind as per my perspective.