Friday, June 29, 2012

Malaysia's Billionaire Crony Problem?

Volume 4 Issue 27: Intelligent Investing

The chart below is appalling, though I must say, not entirely surprising (HT: Ezra Klein). The circles on the left measure the total net worth of billionaires (in USD) and the proportion of the net worth compared with each country's GDP. 

Before the economist in you starts griping about how meaningless it is to compare the ratio of a stock variable (net worth) with that of a flow variable (GDP), let me just preemptively stop you. While on its own, it doesn't mean much, but it is possible to use it as a relative measure, as in this case. To give you examples of such ratios, in the world of speculation, analysts discuss concepts like the "PE ratio", which is the ratio of  price (a stock variable) over net income (a flow variable). Again, on its own it means nothing. But it is often used as a relative measure to compare what the market's expectation of earnings of various companies. 

But in this case, the proportion of total billionaire's net worth compared with the country's GDP just measures how concentrated wealth is among the richest bunch in the country. It is no surprise that Russia tops the list at 20.0% with all its oil tycoons and oligarchs. 

Surprise, surprise, Malaysia is No. 2 on this list! Malaysia only has NINE (actually supposed to be TEN, but   I am not exactly sure when the net worth was measured because Vincent Tan comes in 10th with a net worth of USD1.2 billion. It also depends on the methodology and exchange rate and what not). So, with just nine billionaires, the net worth of these nine people forms about 18.3% of Malaysia's GDP, not very far from Russia. The subsequent countries are far behind. What this shows is that Malaysia's wealth is heavily concentrated among these nine or ten people.   

So, who are these nine or ten people? See the list below. I am sure they are no strangers to you.

Rank Name Net Worth (USD billions)
1 Robert Kuok 12.4
2 Ananda Krishnan 9.9
3 Lee Kim Hua 6.5
4 Lee Shin Cheng 5.2
5 Teh Hong Piow 5.0
6 Quek Leng Chan 4.2
7 Syed Mokhtar Al-Bukhary 3.3
8 Yeoh Tiong Lay 2.6
9 Tiong Hiew King 1.5
10 Vincent Tan 1.2

Out of the ten names above, how many of them are cronies? I am not going name any names, but this just goes on to show how cronyism has concentrated the wealth among a few of Mahathir's good friends. In fact, this is just a small piece of a bigger puzzle. Income inequality has been rising rapidly over the past three decades, which is evidence of the utter failure of the NEP. This issue is very well-documented at Economics Malaysia. Granted, it is relatively wonkish, and definitely not for the faint-hearted. Hisham has shown that income inequality is not just a phenomenon that is apparent across ethnic groups, but it is also just as pronounced within each ethnic group itself.

Source: Economics Malaysia
The Gini coefficient measures income inequality, where 0 indicates perfect equality and 1 indicates perfect inequality. The chart above shows that income inequality has not improved since the late 1980s. In fact, it is on sort of a downward trend since around 2003.

The mega projects under the ETP would only serve to enrich a few and lead to even more inequality. Trickle-down economics is just exactly as its name suggests. The lower to middle income earners will only enjoy the scraps from the tables of those that have been awarded those mega projects. Mere trickles from a waterfall of fortune.

Thursday, June 28, 2012

Why Spain Will Win Any Penalty Shootout

For many years, I have believed penalty shootouts to be sort of rubbish and a game of chance. I always thought that penalties were more or less 50-50, depending on whether the goalkeeper guessed the right direction or not.

I was a fool to believe that. Everything changed when I watched the Spain vs Italy penalty shootouts in Euro 2008. Spain won the shootout 4-2, courtesy of two saves from Iker Casillas. Even the ones that went in, Casillas dove in the right direction. Was lady luck smiling upon Casillas that night, or was there something more to it? 

Well, I don't know about those world class coaches, but after thinking about it quite a lot, I realized what was Casillas' secret. From then on, I have always had faith that Spain will never lose in any penalty shootout (almost never, I suppose). This was because Casillas will dive in the right direction almost every single time. This was again exemplified in the Euro 2012 shootout between Spain and Portugal.

How can Casillas consistently dive in the right direction? Well, after today, this will no longer be a secret. If you are footballer, pay attention closely to what I am about to reveal. Just before you kick the ball, assuming you are using your in-step, you would have to plant your feet next to the ball. Observe where the toes of your planted foot is pointing to. Yes, it is pointing to roughly the direction you are aiming. There is no way around this, unless of course you intend to kick with your out-step. But no one with common sense would do that in a penalty shootout.

Just imagine, if you are a right footer, and you plan to kick towards the right, there is NO WAY your planted foot can be pointed to the left. It would be a very awkward kick. But of course, if you were aiming to the left, which is the natural direction, your left foot would not be aiming directly to the left, but rather closer to the middle. But you cannot deny that it is obviously pointing a lot closer to the left than if you were aiming to the right.

If all this is too tedious to imagine, just go to 2:10 in the second video above, or look at the picture below:

Pepe directed his kick to the right (of Casillas). It is not so clear in the screenshot, but if you watch the video closely, you can tell distinctly that Pepe was aiming to the right. It will take several viewings. But it is most definitely discernible.  

I think Casillas has figured this out after watching thousands of penalty takers. I am not a professional goalkeeper, but this is my two cents after considering how Casillas has managed to gain such a huge edge during penalties. Of course, this is not to say Casillas is going to save every kick. Even if he were to dive in the right direction, the power and accuracy still plays a role, as demonstrated above. Pepe made the shot. But diving in the right direction is infinitely better than diving in the wrong direction. Surely, you can't deny that?

I don't think the Germans or Italians are going to read this blog, so I am not worried about them discovering Casillas' secret and things may not even go to the shootouts in the finals. And even if they figured this out, and it went to the shootouts, I seriously doubt there is much anyone can do about it. You can't change the way you kick the ball naturally. If you tried, you would just lose a lot of power and accuracy and that could just be enough to see Spain win back-to-back Euros. 

Wednesday, June 27, 2012

Does Increasing Traffic Fines Make Sense?

So, the geniuses up there have concocted another brilliant plan to "reduce traffic accidents". Anyone with common sense can see so many things that can go wrong with increasing the traffic fines to RM2,000.

1. Unpaid summons

As of March 2011, there were still 17 million traffic summons left unpaid. What makes the government think that people will pay up if the traffic summons were increased? Aren't they just going to offer discounts all over again?

2. More incentive for bribery

At a fine of RM300, most people would pay about RM50 in "duit kopi (coffee money)" to avoid being fined according to anecdotal evidence. Assuming the proportions are unchanged, the police would now be able to "extort" about RM300 (slightly less than a sixth of RM2,000) in bribes. Otherwise, traffic offenders would risk being fined RM2,000.

2a. Bribery redux

A suggestion made by one of my friends was to legalize duit kopi for traffic offences so that the police will work harder to apprehend traffic offenders. My first impression is that this would not work simply because the police would start working "too hard" in apprehending traffic offenders. How can working too hard be a bad thing? Well, for the simple reason that all police officers will start wanting to become traffic police. Since being a traffic police would turn into a more lucrative profession because they are now allowed to openly collect duit kopi. Who would want the dangerous task of chasing after robbers and murderers when one can easily stop a traffic offender and collect free rent? This would be an epic fail.

I don't want to be accused of just being a whiner without proposing any solutions to the problem. But herein lies the BIG question. What is the real problem? Why do people commit traffic offences? I can see two main reasons. 

First, driver's education. On the surface, the technical driving skills are relatively easy to master. Most people would have no trouble learning how to drive and park, granted there are several exceptions. But the real education is in driving temperament. Queue-cutting, lane-changing without signalling, driving on emergency lanes, tail-gating are all rampant in Malaysia. Why are people in such a rush in Malaysia? Rather, why are people so impatient to get to their destination? Will five to ten minutes delay make so much difference that it is worth risking your own and other people's lives? We always tend to believe that it will never be us when it comes to accidents, until it actually is. Let's just say that the chance of being in a serious accident is 1/1,000 for a reckless driver. On the surface, that seems like a fairly small percentage. But if you think about it, if you drive on a daily basis, you are very likely to encounter at least ONE serious accident in three years. Over a driving lifespan of 30 years (assuming you survive that long), you would have encountered at least TEN serious accidents. Do you really think you can survive?

They make us sit through one whole day of "undang" but none of this is ever mentioned. Yes, I paid attention. The Ministry seriously needs to take a look at driver's education.

Secondly, overcrowded-ness. This is a long-standing problem in Malaysia. It is simple mathematics. The more cars you have on the road, the more likely it is for accidents to happen. The problem of too many cars arise from other issues such as poor public transport, subsidized petrol, and the "Malaysia Boleh" spirit in the form of Proton. I could probably write a short book if I delve into that, but I shall refrain today.

So what are the solutions? As the first problem suggests, we seriously need to reform driver's education. While the statistics are not meant to scare, it is useful to raise awareness on the actual risks that driver's are taking compared with the minuscule benefits that they stand to gain by driving recklessly. Of course, there are many other issues that must be addressed to train a driver's temperament and this cannot be tackled without proper study.

Now, assuming that the driver's education have been reformed, the penalty for repeating traffic offenders would be to go through the new driver's education system. While we are punishing traffic offenders, might as well ensure that we educate them appropriately so that they do not repeat their offences.

Also, if we are working on increasing the fines, I propose fines that are proportionate to a person's income/wealth. Switzerland practices this. In 2010, a Swedish millionaire was fined USD1 million for driving at 290 km/h, which was 170 km/h above the limit. This should be a serious deterrent for those who are driving fast cars and attempt to tail-gate everyone along the highway.

Of course, finally, all rules are only useful if they are properly enforced. All the proposals above do not work if the police officers do not stop taking bribes. This has to be tackled on the police force's end. The recruitment has to be improved. Malaysia needs to recruit police officers that are competent and reward them accordingly. Ridiculously harsh public qualifying exams need to be implemented and those that have passed the exam will be allowed a significant pay increment to reward their efforts accordingly. In short, meritocracy must be the word of the day, and rent-seeking must be eliminated. This is easier said than done, but admitting the rampant existence of such a problem is a first step. As long as the police force continues to live in denial of their incompetency, there is no hope for change.

Monday, June 25, 2012

Malaysia's Middle Income Trap

Volume 4 Issue 26: Intelligent Investing

There are many Malaysians who are in denial and strongly believe that Malaysia is not in a middle income trap. One of the foremost arguments put across is that Malaysia is still in the factor accumulation stage of economic growth. What this means in layman's terms is that, Malaysia is still in a developing stage that relies on investment expenditure in terms of machinery and infrastructure to generate growth.
(Wonkish note on Long-Term Economic Growth:  
Conventional economic theory suggests that long-term economic growth is based on four key ingredients: natural resources, capital stock, labor and productivity. First and foremost, it is reasonable to assume that the supply of natural resources are fixed for any particular country. There is only so much land you can plant on, so much oil you can drill, and so much coal you can mine. So, you can't really generate economic growth by increasing the supply of natural resources. That is fixed.  
Secondly, capital stock is the amount of fixed assets in the economy. This includes machinery and infrastructure. Typically, in countries undergoing industrialization, a lot of the economic growth comes from investment in capital stock, which is used for manufacturing, which transforms and adds value to raw materials, and subsequently translates to income growth.  
Thirdly, of course, every economy needs a functioning labor force to grow. As long as you have the raw materials, machinery and land, you can always produce more goods by hiring more people. However, you can only hire so many people in an economy. Also, there is a certain point where you will hit diminishing marginal returns, but I will not get into that today.  
Last, and most importantly, productivity. This is the most crucial ingredient for the sustainability of long-term economic growth. The gist of productivity is basically this: "How to produce more, with less?". You can achieve long-term economic growth by finding new ways to produce more goods with less input. This is in fact, the only way, because inputs are always scarce and limited.  
End of wonkish note)
The trouble with this argument is that we have been "developing" for more than 50 years. How long should one country be developing before it becomes of developed status? The figure below is obtained courtesy of the Economist

The graph measures a country's GDP per capita relative to the US after accounting for purchasing power. The World Bank report done in collaboration with China's Development Research Center, China 2030, defines a high income country as those having at least 43% of the US's GDP per capita. Since the chart is in log-income terms, the high-income barrier is marked by the 3.76 lines (log 43).

If a country is rated below 3.76 on the horizontal axis, that means that in 1960, it had not achieved high income status yet. But if it had exceeded 3.76 on the vertical axis, that means that it had already achieved high income status in 2008.

Countries in the top right box are those that were already high income in 1960, and have stayed there in 2008. Note that Malaysia is in the middle box labelled "Middle-Income Trap". This means that Malaysia was already a middle-income country in 1960, and had failed to escape the middle-income status even after 48 years of developing. Of course, this box is the most highly populated, clearly showing that Malaysia is not alone in being stuck in the middle-income trap.

This is no reason for us to give a pat on the back to ourselves and say "It's OK". It is NOT OK. We need to escape this mentality that it is OK because other people have failed too. In fact, I would argue that this is an even bigger reason to worry. So many others have tried and failed. Clearly achieving high income status is not as easily achievable as those illustrated in Idris Jala's pretty charts.

Ideally, we would like to be in the middle-top box, labelled "Middle-Income to High Income". This box represents countries that have been able to move from middle to high-income status and count countries like South Korea, Taiwan, and most definitely Singapore, even though it was not labelled on the chart.

It is time to stop relying on capital accumulation. Malaysia does not need taller buildings, longer roads, bigger computers and what not. Malaysia needs to focus on productivity. Malaysians need to work harder and smarter, so that we can start producing more goods with less input. And this can only happen if we stop subsidizing the cronies and stop rewarding rent-seekers with mega-projects. The culture of meritocracy must also be ingrained so that effort is justly rewarded. Otherwise, how can we produce more with less when lazy buggers are allowed to piggy-back on the hard work of others?

This is what the Economic Transformation Programme should focus on. Not the myriad of capital accumulation projects that Idris Jala can't stop talking about.

Borrowing iPads in Singaporean Libraries

You can now borrow iPads, Kindles and such from Singaporean libraries:
Apart from borrowing books and DVDs, the public can now get their hands on iPads, TumbleBooks Playaways and Kindles as part of the National Library Board's (NLB) efforts to help bridge the digital divide among Singaporeans.
One hundred TumbleBooks Playaways, 100 iPads and five Kindles will be available for loan from today at Bedok Public Library.
In Malaysia, you still can't even borrow a decent book from the national libraries. Of course this is slightly exaggerating, but this is a serious handicap in Malaysia. Books are expensive. In the last two months, I have spent over RM300 on books and I already feel the burn in my pockets. Libraries are important to enable accessibility to books that some people may not be able to afford.

Central Public Library, Singapore

In this respect, Singapore is centuries ahead of Malaysia. Just look at this multi-storey national library in Bugis. This is just one of the many, many libraries in Singapore. Singapore has at least 24 public libraries to cater to its population of five million people. I shudder to think how many functional public libraries Malaysia has. 

I used to volunteer at public libraries in Singapore and despite going there almost on a weekly basis, I continued to be amazed by how many interesting books there are and how easy it is to get a book that you want in any library there. This may be a bit bonus to a Singaporean, but I was rather impressed with the fact that you could request for a book to be delivered from another library to the library that is closest to your home so that you can borrow it at your convenience. You don't have to travel all the way across town just to get a book that is only available there. 

And now, they have iPads that are pre-loaded with 2.2 million ebooks. I don't even think Malaysian libraries have 2.2 million books. 

Saturday, June 23, 2012

30-Storey Building in 15 Days

The Western media would have you believe that China is still a very backward country full of country bumpkins who live under the rock simply because their media is censored. Honestly, media censorship is not uncommon in the world today. Even modern democracies like Japan practices some form of media censorship. Malaysia also practices very strong media intervention. The Western media would have you believe that people in China have no access to information.

The facts clearly show that China is no longer a backward-ass country. This article is another example of why this is so. Broad Sustainable Building (BSB), a Chinese architectural company will attempt to build the world's tallest building in 90 days. The building will be 220 storeys high, slightly more than the 209 storeys that the Burj Khalifa has.

BSB is arguably a leading innovator in architecture. The estimated cost for this new building is about RMB4 billion (USD628 million), much, much lower than the USD2.2 billion price tag of the Burj Khalifa. In case you are about to argue that it is because of the low wages etc, the new building is also cheaper than the USD1.5 billion Shanghai tower.

The lower cost is due to BSB's innovative building technique as well as their impeccable project management. The video below illustrates what I mean. BSB built a 30-storey building in 15 days. Imagine your apartment being built in less than two weeks! This is the kind of efficiency that Malaysians can only salivate over.

Saturday, June 16, 2012

5 Worrying Signs For Apple

Volume 4 Issue 25: Intelligent Investing

I am not an extreme tech enthusiast. Far from it. The Worldwide Developers Conference, or better known as the WWDC, is Apple’s annual event where they launch their new gadgets, or software and fun stuff like that. But based on yesterday’s news from the WWDC, I see a big sign of worry for Apple. Especially if you are an Apple investor.

As I said, I am not a techie. So if you were to ask me to discern the functionality of the iOS 6 vs the Android Ice Cream Sandwich, the best thing that I can probably tell you is that Ice Cream Sandwich has a far more enticing name.

But I pride myself in spotting macro-trends and here are 5 worrying signs for Apple as I see it:

1. Android x (Samsung + HTC)

As recently as three years ago, there was no serious competitor in sight to Apple’s iPhone 3 and 3GS. I am a (very unproud)owner of an iPhone 3GS and the only reason I got it was because there were no close substitutes to a web-capable mobile phone.

In 2009, Google tried their hand with the NexusOne and the reception was lukewarm at best. Google fanboys swarmed to it but Apple was still the king of pop when it came to “coolness”. Apple definitely got it right with ads like these:

Fastforward to 2012. Apple is no longer just up against the likes of Nokia, or Google’s half-hearted attempt at a smartphone. Samsung and HTC have combined powers with Google and have proven to be more than a challenge to Apple’s throne in the smartphone arena.

It is easy to see why. When you are the market leader, you can be certain that every one will be gunning for your back. And technology is one of the most competitive and fast-changing industries. Case in point: Nokia’s “demise” in the smartphone industry.

In fact, it is arguable that Samsung has definitely arrived at the “coolness” stage. The Galaxy S2, the Galaxy Note, the Galaxy Nexus, and most recently, the Galaxy S3 are more than serious challengers to Apple's iPhones. How do I know this is a legitimate challenge? This brings us to point No. 2.

2. Patent suits

The amount of lawsuits filed by Apple against Samsung just keeps increasing. While others may see this as a sign that Samsung "copied" Apple, I see this as Samsung is legitimately challenging Apple. Why else would Apple take Samsung to court over the most frivolous of disputes. How frivolous? Here are some samples:
a) A spokesman for Apple told Mobilized the Galaxy line infringes the 'Trade Dress' of the iPhone and iPad by using a rectangular design with rounded edges. Apple notes the black borders that adorn the Galaxy Tab are similar to those on the iPad.
b) They also believe Samsung has copied the use of small square app icons.
c) Even the slide-to-unlock feature that was first seen on a Nokia was disputed. 
After all, you could find thousands of other copycats out there, especially in China. Even Malaysia is getting on the tablet wagon with its 1Malaysia Tablet. The reason Apple has singled out Samsung is plain and simple. It is the biggest challenger and Apple is trying to take them out of the game. Being the cynic that I am, I think the main purpose is just to delay the launch of Samsung's products so that they can catch up. Yes, you heard me right. Apple is playing catch up right now. Samsung has come up with product after product with almost no real answer from apple after the iPhone 4.

3. No New Products?!

This one is sure to strike a chord with Apple fanboys. I am claiming that Apple has not launched anything revolutionary since the iPhone 4 and iPad 2. Since those two products, Apple has come up with the iPhone 4S and the "new" iPad. The iPhone 4S is just a souped up version of the iPhone 4 and is far from game-changing. It saw the introduction of Siri, which is more of a gimmick that has an entertainment value of two weeks or so, than an actual game-changer. There is great potential for voice-command, but more still needs to be done. The 3rd generation iPad, also called "the new iPad", is also just a souped up version of the previous iPads. There was nothing "gotta-have-it" about the new iPad. One has to question, did all of Apple's creativity move on to the next world with Steve Jobs?

The latest WWDC was again a let-down of sorts. While Apple is best known for its secret-keeping, the delay of the iPhone 5 hints of Apple's impotence in trying to catch up with Samsung. They took a look at the S3 and was like, "Holy Crap!". So it is back to the drawing boards for Jonathan Ive and his team of designers. The best they could come up with at the WWDC was, "We are going to upgrade the Macbook Pro" and "We will have our own version of Apple maps, but our web-based version will link you to Google Maps". By the time they come up with the Galaxy S3 beater, Samsung would be ready to launch their next Apple killer. The iPhone 5 is probably the last bet for Apple to flex its muscle. Without any game-changer ala Jobs, it does not bode well for Apple's future.

4. Cracking China

With 1.3 billion people in China with an increasingly bulging middle class, it is already a given that China is THE consumer market. All the big brands in all industries like BMW, Volkswagen, Adidas, Nike, Louis Vuitton, Hermes and Gucci want a piece of that Chinese pancake. But Apple finds itself a stranger in a country where imitation is free game. Apple has to come to terms with the fact that as soon as they launch a new product, some smart Chinese dude is going to get his hands on one, crack it open, reverse engineer the product and launch a rip-off that is half the price of Apple's product. And point No. 5 shows why this is a huge problem.

5. Fat Margins

One of the main reasons why ripping off Apple's products is a viable business is simply because Apple prides itself in charging fat profit margins. This is probably Apple's best non-kept secret. In the given link, page 43 of Apple's 2011 annual report (Form 10-K) shows that Apple's gross profit margin is over 40% while its net profit margin is about 24%. While most people may be OK with paying Apple that kind of premium, but economics dictate that such profit margins WILL be challenged. Samsung will continue to launch cheaper and arguably better products with HTC not far behind.

In an oligopolistic market, Apple is unlikely to descend into an all-out price war with the other two Asian upstarts. This partially explains why it needs to go through the patent-trolling route. It is fighting to separate itself from Samsung and HTC products as much as possible, to generate what economists call "perceived differentiation" so that it can continue to charge the fat margins that it has been charging all this while. Given the lucrativeness of this smartphone and tablet business, you can count on the fact that the competition is not going away. To be able to keep charging the premium that it has been charging, Apple needs to come out with equally deserving products. The iPhone 4S and the "new" iPad isn't going to cut it. 

Friday, June 15, 2012

The End Of The World As We Know It

2012 has often been touted as the year the world would end. When we think about the end of the world, our minds would typically jump to scenarios that we have seen in movies such as Armageddon, 2012, The Day After Tomorrow or even the Time Machine and Wall-E. Either a meteor heading towards Earth, or insanely volatile climate, or the breaking apart of the moon, or even an alien attack would kill us all. Or at least, it would reset the world to the Ice Age where giant cockroaches ruled the planet.

I must admit, I have pretty much rubbished the claims that the world would end at the end of this year. I might even venture a scoff if you tried to convince me of it. Many of the scenarios from the movies above typically originate from man-made errors. We consumed too much, were too greedy, and we were too late in realizing the error of our ways. Most of the scenarios above were designed in part to scare the living day lights out of us, so that we repent and perhaps start recycling (if you haven’t already), or start driving hybrid cars, etc.

Dani Rodrik, a professor at Harvard University, has a different take on how the world would end. His version depicts the beginning of the end from a less likely source, albeit still man-made. He extends the great European debacle into a apocalyptic scenario where all hell breaks loose and ends with an interesting quote:
Many years later, Merkel, who has withdrawn from politics and become a recluse, is asked whether she thinks that she should have done anything differently during the euro crisis. Unfortunately, her answer comes too late to change the course of history.
The political inaction of the Eurozone leaders will lead to a domino effect that would be the end of us all. Do have a read. What is scary is that, the scenario doesn't seem too far-fetched at all. I had likened the Eurozone crisis as being on the sinking Titanic, but perhaps, I didn't think big enough.

Building Your Resume - What's Your Story

Part of my soon-to-be ex-occupation involves interviewing candidates and reviewing resumes. One of the most common observations is that candidates tend to throw everything including the kitchen sink into their resumes. Perhaps this is the Malaysian culture, where people are supposed to be impressed with resumes that are 10 pages long, padded with every little thing they have done, including decorating the class notice board or something like that. At least, this was what one of my career guidance counselors told me in secondary school.

But many years later, I studied in the US and found out that the requirements over there are a lot more stringent. You are only given a one-page limit to tell your story. Subsequently, I began to believe that if candidates are not able to share their most important achievements within one page, that just means that they either have no idea how to prioritize, or have no idea which achievements matter. The more cynical part of me wants to believe that some of these candidates actually have no significant achievements, which is why they are throwing every little thing they have ever done into their resume.

Let me be clear on this. I am no expert in resume writing. I think after a few years of reading resumes, I have become pretty good at reading them. But writing requires a completely different skill set. Penelope Trunk gives some pretty good advice on resume writing. I have always wondered how one can stand out in the midst of the hundreds, if not thousands of resumes that employers receive on a regular basis. Of course, you can do something like this:

But of course, you have to be as awesome as Barney Stinson to pull something like that off. On a more serious note, I believe that your resume should not be a list of things that you have done in your life, be it during your schooling years, your university years, or your work. Your list of responsibilities is not your resume. Unless you are one of those guys who have to keep typing in 4, 8, 15, 16, 23 and 42 into the computer to keep the world from self-destructing.

I am not the only one who believes this, but I do think that your resume should tell your story. It should be a tale of who you are, and how to got to where you are, and how you plan to move forward. Interviewers are also people and people love stories. If you give interviewers a good story, they would be most certain to remember you. Of course, telling your story is no easy task. In order to tell a good story, you need to be convincing, and to be convincing, you need to tell the truth, and to know the truth, you need to know yourself very very well.

Apart from getting yourself remembered, telling your story helps you fill in the gaps in your resume. Most resumes that I have seen are just lists of the things that the candidate has done in the past 3-5 years or so. This may not be so relevant to a fresh graduate out of the oven, but for some of you who have worked at two or three places, the foremost question that is on your potential employers' minds would be, "Why did you change your job?". This will happen even before they call you up for your interview and the potential employers would start formulating their own hypotheses on why you have worked at three companies within 12 months. Are you a serial job-hopper? Are you a problem employee? And sometimes, these are the sort of little things that makes an employer hesitate when calling a candidate, no matter how many As you carry on your back. That is what is missing in most resumes. The turning points are usually not explained. While the achievements at your jobs and schools are important to demonstrate your capabilities, your motivation for change tells the employers about who you are.

So the question that remains is, how then can you tell your own story? My role is to get you started on thinking about that question. The first step you can take right now is to read this article here (pdf). This 7-page article entitled "What's Your Story", is written by Herminia Ibarra and Kent Lineback and provides a detailed account on why you need a story and how to tell a good one. I believe this article is crucial to get you started on preparing a great resume.

And telling a good story needs practice. Lots of it. It is important to be ready to examine yourself, and constantly improve your story. Be aware of your weaknesses and your strengths. Know yourself. Even if you are not thinking of a change right now, think about your story. Hopefully, by the time you need to prepare your resume for your next transition, you will have a damn good story ready.

Monday, June 11, 2012

Talk - Action = Shit

And Ibrahim Ali's version:
Talk + Shit = Talk + Talk - Action
                    = 2 x Talk - Action
which is:
"Twice the amount of talk, but still no action".  

Friday, June 08, 2012

Volume 4 Issue 24: Intelligent Investing

Education of Ministers

The past week of political news have been tragically funny, probably in a way that I should not be laughing. Based on the things that were said by some of our ministers no less, one can only wonder how and where they were educated. It was as if it was not bad enough that we actually have a Member of Parliament who talks like this:

Here are the news reports that surfaced in the last week or so:

On 6 June 2012, the Road Transport Department claimed that our Health Minister, Liow Tiong Lai must pay for the car number plates that he allegedly "bought". And the following day, this is what Liow said:

Great. This is ingenious. Needless to say, this will probably be one of those cases that is going to be swept under the rug and thrown in the darkest hole of the deepest dungeon and never to be heard of ever again, or at least, until after the elections.

Then the following day comes another "genius" who believes that freezing student loans is a great idea for making an example out of the opposition party. It is beyond distasteful and what happened the following day demonstrates the simple lack of common sense that is demonstrated by our Minister of Education no less.

Of course, the repercussions of such a move would have been disastrous. The stupidity was retracted the following day:

This is how I picture Najib after he read what Muhyiddin said:

Of course, this is nothing new to our infamous Deputy Prime Minister. He is well known for his brilliant deductive reasoning using basic "facts". This is another one of them:

Based on the above examples, the nauseating feeling that I get when I know that our country is relying on the best brains such as those above to run our country keeps me up at night. And then nostalgia dawns upon me, reminding me of the days when Malaysia used to point at Indonesia and laugh at how far behind they are compared with Malaysia.

The last 10 years or so tell a very different story about Indonesia. They too, once suffered for a long time under incompetent leadership, but everything changed after a severe Asian crisis that kicked them in the nads, and this woke them up.

So, I did a little experiment, and tried to find out where and how some of our ministers are educated, and compared this with our apparently "inferior" neighbors - see Table 1.

The Vice President of Indonesia has a PhD from UPenn, while our great DPM is a great graduate of our greatest university, UM, with a big Bacherlor's Degree. And I think the rest of the list speaks for itself. Given the huge difference in the quality of education between the ministers of Malaysia and Indoensia, is it any surprise that Indonesia has been outperforming Malaysia year after year?

But of course, our great DPM would beg to differ. After all, Malaysia's education system is better than advanced countries isn't it?

Volume 4 Issue 23: Intelligent Investing

The Election Dream

With all the fuss about the General Election being around the corner, it has become impossible to go one day without seeing or hearing some politically related message, either from the newspaper, on websites, or even on Facebook.

If you lived in the world of Facebook, there appears to be an overwhelming feeling of anger/frustration towards the present government and if the world (or Malaysia, at least) revolved only entirely around Facebook, it would seem that the election results would be foregone conclusion.

The time for change is here. Governments all over the world are changing. It started with the Arab Springs in Tunisia, Egypt and then Libya. Then even Europe had several changes in government, albeit for completely different reasons. There was also Occupy Wall Street. There appears to be a general feeling for wanting change everywhere.

When I look at my News Feed, I get the feeling that the support for Pakatan Rakyat is overwhelming. Day after day, alleged scandals appear regarding ministers and cronies of the government. The feeling I get is that most people are outraged.

But what has always bugged me was that East Malaysia contained a disproportionate number of seats and in order for Pakatan Rakyat to make any headway, they need meaningful support in East Malaysia. In the 2008 Elections, Pakatan's showing in East Malaysia was abysmal. Just take a look at the results below:

Chart 1: 2008 Election results by number of seats won
First, let me state the obvious. We all know that Pakatan gained tremendous ground in most of the urban states (i.e. Penang, Perak, Selangor). They also won in Kelantan. But as Chart 1 shows, Sarawak, Johor and Sabah has the most number of seats up for grabs. Out of a total of 222 seats, those three states take up 82 seats, or 37% of the total. And in those three states, Pakatan only managed to win ONE seat each. So in those three states alone, BN had locked in more than 35% of the total seats.

But this is not what bothers me. What bothers me was that Sarawak, despite being a relatively large state, is sparsely populated. In terms of population, Sarawak has about 2.4 million people, which is about 8.8% of the total population. But the 8.8% of the total population are voting for 31 out of 222 seats, or 14.0%.

However, that is not the only state in which there is a huge discrepancy between its proportion of population against its proportion of seats available. No prizes for guessing, but Selangor is the other state, but only in reverse. In terms of population, Selangor has about 5.4 million people, or 19.6% of the total population. But in terms of seats allocated, it has a meagre 22 seats, or 9.9% of the total.

It doesn't take a genius to figure out that each vote in Selangor only has roughly half the power, whereas each vote in Sarawak has more than 1.5 times the power. Needless to say, despite Pakatan's overwhelming support in Selangor, it only has half the effect of what it should. And in Sarawak where BN swept almost clean in 2008, the effect is more than 1.5 times.

For those of you who are curious, the proportion of seats in all the other states roughly correspond to their respective population. Due to the skewed proportion of allocated seats, I started dreaming about an election where seats are allocated to correspond with their respective population size. So, I decided to take a look at the results if seats were allocated in that way to see if the results would have changed.

Even in my dreams, the outcome appears to remain relatively unchanged - see Chart 2.

Chart 2: Possible election results with seats allocated based according to population
I made the assumption that the proportion of seats won would remain the same. Of course, in this case, the margin that BN won by was a lot narrower. Instead of winning 140 seats against Pakatan's 82, BN would have won 128 seats against Pakatan's 95. Still a relatively wide margin. So that was the end of a fruitless dream.

Back to reality. So the next obvious question was, what would it take for Pakatan to win the next elections? Even if the number of seats were fairly allocated, Pakatan would not stand a chance if they still got killed in BN's fixed deposit states of Sarawak, Johor and Sabah.

So how many seats does Pakatan have to win in those three states if they wish to form the federal government? I started experimenting with Pakatan winning an additional 33% of seats in Sarawak, Johor and Sabah. Why 33%? No reason. Just arbitrary. Guess what?

Chart 3: What if Pakatan won an additional 33% in Sarawak, Johor and Sabah?
Now, things look pretty balanced. And indeed they are. In this case, Pakatan would win by the narrowest of margins. 112 to 110. The breakdown would be such that Pakatan would win 11 seats in Sarawak, 9 seats in Johor and 9 seats in Sabah. Nonetheless, I think this would be a disastrous result. If such a result actually transpires, it will start raining frogs. Members from both sides of the political divide would start hopping left, right and center. We probably wouldn't even know who would be the legitimate government two or three months after the elections.

Nonetheless, this is the bare minimum case in order for Pakatan to win. So, I started taking a closer look to see what it would really take for Pakatan to get that extra 33% that it needs. Table 1 shows the percentage of majority won for each seat in Sarawak. I am going to make the assumption that there will be only two parties running for each contested seat. This is not necessarily the case due to independent candidates. Based on this assumption, whatever vote that does not go to Pakatan, will go to BN and vice versa. This means that a 1% gain by Pakatan will result in a 1% loss by BN as well.

Now we are ready to test the assumptions. Assuming that since the last election 10% of the voters of BN have decided to switch over to Pakatan in this coming election. This would result in a 20 percentage point swing. Consequently, BN seats with fewer than 20% majority would swing to Pakatan's favour. This means that the eight seats highlighted in blue would swing over to Pakatan. This is short of the 11 that Pakatan needs.

Table 1: Sarawak Elections sorted by % majority
Moving on the Johor - see Table 2. With the same assumptions, Pakatan would gain a further 6 seats, ending up with 7 seats, a little shy of the 9 that is needed. If you notice, Pakatan won the Bakri seat by the narrowest of margins in 2008.

Table 2: Johor Elections sorted by % majority
Now, let's take a look at Sabah - see Table 3. With a 10% swing, only 5 seats would change hands, giving Pakatan a total of 6 seats, quite a distance from the elusive 9. Once again, the seat that was won by Pakatan was again by the narrowest of margins. Who is to say that they may not lose the seat in the coming elections?

Table 3: Sabah Elections sorted by % majority
The above analysis of course assumes that there are totally no changes in all the other states. This is quite unlikely. But I really have no idea how each and every state would vote and I am just simply going to assume that there were no changes.

Hence, based on the analysis above, Pakatan has a Herculean task ahead of them. It isn't even sufficient if it gets a 10% swing in the highlighted seats above. Even if it does get the minimal number of seats that it needs in those three states, the frog party that ensues would be catastrophic.

If I were Pakatan, I would start targeting the seats that would have the most impact. For starters, it would be those highlighted ones. After that, those that are slightly above the highlighted ones. Pakatan needs at least a 15% swing in order to even stand a chance of forming the next Federal Government.

It appears that there is still a lot of work to be done. Nonetheless, the results are not entirely disheartening. We all noticed the political tsunami that happened in March 2008. With the winds of change blowing right behind, Pakatan might just get the push that it needs. There is simply no room to rest upon its laurels, if it has any to begin with.

NB: I did not update the election results with the 16 by-elections that has happened since the 2008 elections. The analysis above is for illustration purposes only.

Wednesday, June 06, 2012

Volume 4 Issue 22: Intelligent Investing

Are We Successful Or Just Lucky?

Michael Lewis is one of the better non-fiction writers of our time. He constantly demonstrates an uncanny ability to transform what is "merely" an interesting life story into a vivid and engaging tale of lore that seemed borderline "too good/bad to be true". So much so that Alphaville calls him a "non-fiction stylist".

If you haven't heard of Michael Lewis, he is the author of some books on which several great movies were based on. You may have seen The Blind Side:

He also wrote Moneyball:

Both these movies are great, and I highly recommend them. But today, I would like to share a speech that Michael Lewis gave recently at the Princeton commencement. In it, he highlights the importance of luck in success. Very often, many successful people believe their success to be self-made. But success always has the element of luck baked in it. Of course he is not saying that all success is due to luck. Not by a long shot. Here is the whole speech:
Thank you. President Tilghman. Trustees and Friends. Parents of the Class of 2012. Above all, Members of the Princeton Class of 2012. Give yourself a round of applause. The next time you look around a church and see everyone dressed in black it'll be awkward to cheer. Enjoy the moment.

Thirty years ago I sat where you sat. I must have listened to some older person share his life experience. But I don't remember a word of it. I can't even tell you who spoke. What I do remember, vividly, is graduation. I'm told you're meant to be excited, perhaps even relieved, and maybe all of you are. I wasn't. I was totally outraged. Here I’d gone and given them four of the best years of my life and this is how they thanked me for it. By kicking me out. 

At that moment I was sure of only one thing: I was of no possible economic value to the outside world. I'd majored in art history, for a start. Even then this was regarded as an act of insanity. I was almost certainly less prepared for the marketplace than most of you. Yet somehow I have wound up rich and famous. Well, sort of. I'm going to explain, briefly, how that happened. I want you to understand just how mysterious careers can be, before you go out and have one yourself.

I graduated from Princeton without ever having published a word of anything, anywhere. I didn't write for the Prince, or for anyone else. But at Princeton, studying art history, I felt the first twinge of literary ambition. It happened while working on my senior thesis. My adviser was a truly gifted professor, an archaeologist named William Childs. The thesis tried to explain how the Italian sculptor Donatello used Greek and Roman sculpture — which is actually totally beside the point, but I've always wanted to tell someone. God knows what Professor Childs actually thought of it, but he helped me to become engrossed. More than engrossed: obsessed. When I handed it in I knew what I wanted to do for the rest of my life: to write senior theses. Or, to put it differently: to write books.

Then I went to my thesis defense. It was just a few yards from here, in McCormick Hall. I listened and waited for Professor Childs to say how well written my thesis was. He didn't. And so after about 45 minutes I finally said, "So. What did you think of the writing?"

"Put it this way" he said. "Never try to make a living at it."

And I didn't — not really. I did what everyone does who has no idea what to do with themselves: I went to graduate school. I wrote at nights, without much effect, mainly because I hadn't the first clue what I should write about. One night I was invited to a dinner, where I sat next to the wife of a big shot at a giant Wall Street investment bank, called Salomon Brothers. She more or less forced her husband to give me a job. I knew next to nothing about Salomon Brothers. But Salomon Brothers happened to be where Wall Street was being reinvented—into the place we have all come to know and love. When I got there I was assigned, almost arbitrarily, to the very best job in which to observe the growing madness: they turned me into the house expert on derivatives. A year and a half later Salomon Brothers was handing me a check for hundreds of thousands of dollars to give advice about derivatives to professional investors. 

Now I had something to write about: Salomon Brothers. Wall Street had become so unhinged that it was paying recent Princeton graduates who knew nothing about money small fortunes to pretend to be experts about money. I'd stumbled into my next senior thesis.

I called up my father. I told him I was going to quit this job that now promised me millions of dollars to write a book for an advance of 40 grand. There was a long pause on the other end of the line. "You might just want to think about that," he said.


"Stay at Salomon Brothers 10 years, make your fortune, and then write your books," he said. 

I didn't need to think about it. I knew what intellectual passion felt like — because I'd felt it here, at Princeton — and I wanted to feel it again. I was 26 years old. Had I waited until I was 36, I would never have done it. I would have forgotten the feeling.  

The book I wrote was called "Liar’s Poker."  It sold a million copies. I was 28 years old. I had a career, a little fame, a small fortune and a new life narrative. All of a sudden people were telling me I was born to be a writer. This was absurd. Even I could see there was another, truer narrative, with luck as its theme. What were the odds of being seated at that dinner next to that Salomon Brothers lady? Of landing inside the best Wall Street firm from which to write the story of an age? Of landing in the seat with the best view of the business? Of having parents who didn't disinherit me but instead sighed and said "do it if you must?" Of having had that sense of must kindled inside me by a professor of art history at Princeton? Of having been let into Princeton in the first place?

This isn't just false humility. It's false humility with a point. My case illustrates how success is always rationalized. People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don't want to acknowledge the role played by accident in their lives. There is a reason for this: the world does not want to acknowledge it either.

I wrote a book about this, called "Moneyball." It was ostensibly about baseball but was in fact about something else. There are poor teams and rich teams in professional baseball, and they spend radically different sums of money on their players. When I wrote my book the richest team in professional baseball, the New York Yankees, was then spending about $120 million on its 25 players. The poorest team, the Oakland A's, was spending about $30 million. And yet the Oakland team was winning as many games as the Yankees — and more than all the other richer teams. 

This isn't supposed to happen. In theory, the rich teams should buy the best players and win all the time. But the Oakland team had figured something out: the rich teams didn't really understand who the best baseball players were. The players were misvalued. And the biggest single reason they were misvalued was that the experts did not pay sufficient attention to the role of luck in baseball success. Players got given credit for things they did that depended on the performance of others: pitchers got paid for winning games, hitters got paid for knocking in runners on base. Players got blamed and credited for events beyond their control. Where balls that got hit happened to land on the field, for example.

Forget baseball, forget sports. Here you had these corporate employees, paid millions of dollars a year. They were doing exactly the same job that people in their business had been doing forever.  In front of millions of people, who evaluate their every move. They had statistics attached to everything they did. And yet they were misvalued — because the wider world was blind to their luck.

This had been going on for a century. Right under all of our noses. And no one noticed — until it paid a poor team so well to notice that they could not afford not to notice. And you have to ask: if a professional athlete paid millions of dollars can be misvalued who can't be? If the supposedly pure meritocracy of professional sports can't distinguish between lucky and good, who can?

The "Moneyball" story has practical implications. If you use better data, you can find better values; there are always market inefficiencies to exploit, and so on. But it has a broader and less practical message: don't be deceived by life's outcomes. Life's outcomes, while not entirely random, have a huge amount of luck baked into them. Above all, recognize that if you have had success, you have also had luck — and with  luck comes obligation. You owe a debt, and not just to your Gods. You owe a debt to the unlucky.

I make this point because — along with this speech — it is something that will be easy for you to forget.

I now live in Berkeley, California. A few years ago, just a few blocks from my home, a pair of researchers in the Cal psychology department staged an experiment. They began by grabbing students, as lab rats. Then they broke the students into teams, segregated by sex. Three men, or three women, per team. Then they put these teams of three into a room, and arbitrarily assigned one of the three to act as leader. Then they gave them some complicated moral problem to solve: say what should be done about academic cheating, or how to regulate drinking on campus.

Exactly 30 minutes into the problem-solving the researchers interrupted each group. They entered the room bearing a plate of cookies. Four cookies. The team consisted of three people, but there were these four cookies. Every team member obviously got one cookie, but that left a fourth cookie, just sitting there. It should have been awkward. But it wasn't. With incredible consistency the person arbitrarily appointed leader of the group grabbed the fourth cookie, and ate it. Not only ate it, but ate it with gusto: lips smacking, mouth open, drool at the corners of their mouths. In the end all that was left of the extra cookie were crumbs on the leader's shirt.

This leader had performed no special task. He had no special virtue. He'd been chosen at random, 30 minutes earlier. His status was nothing but luck. But it still left him with the sense that the cookie should be his. 

This experiment helps to explain Wall Street bonuses and CEO pay, and I'm sure lots of other human behavior. But it also is relevant to new graduates of Princeton University. In a general sort of way you have been appointed the leader of the group. Your appointment may not be entirely arbitrary. But you must sense its arbitrary aspect: you are the lucky few. Lucky in your parents, lucky in your country, lucky that a place like Princeton exists that can take in lucky people, introduce them to other lucky people, and increase their chances of becoming even luckier. Lucky that you live in the richest society the world has ever seen, in a time when no one actually expects you to sacrifice your interests to anything.

All of you have been faced with the extra cookie. All of you will be faced with many more of them. In time you will find it easy to assume that you deserve the extra cookie. For all I know, you may. But you'll be happier, and the world will be better off, if you at least pretend that you don't.

Never forget: In the nation's service. In the service of all nations.

Thank you.

And good luck.   
I think the deeper message that he is trying to put across is that, in order to be lucky, we must also seize the opportunity when it presents itself. In the words of Jose Capablanca, ex-world chess champion, and one of the greatest players ever:
"The good player is always lucky."
Or one of my favorite quotes by Seneca that is often used by Benjamin Graham:
"Luck is what happens when preparation meets opportunity."