Volume 4 Issue 12: Intelligent Investing

Gambling Like A Value Investor

For those of you who think this is a shortcut or a method to break a casino by playing blackjack, I say, "Run, you fools!"

This is a story of a man who "broke" Atlantic City by winning USD6 million in a 12-hour run. Before the run at Atlantic City, he also took Borgata for USD5 million and Caesar's for USD4 million. 

On the surface, many of us would marvel at Don Johnson's skill at playing blackjack. One or two of us may even be inspired to try our hand at becoming good at blackjack. But as the article says, Don Johnson is very far from being a top-notch blackjack player, whatever that means. 

No matter how skilled you are, the odds of a blackjack hand are still around 50-50. And anyone who knows anything about gambling must certainly know about the Gambler's Ruin. Basically, it is a probabilistic concept which governs any betting scenario, even ones that have positive expectations (which means, the player has a higher probability of winning a hand compared with the banker). So here are some possible outcomes of what this Gambler's Ruin is all about:

• The original meaning is that a gambler who raises his bet to a fixed fraction of bankroll when he wins, but does not reduce it when he loses, will eventually go broke, even if he has a positive expected value on each bet.
• A gambler with finite wealth, playing a fair game (that is, each bet has expected value zero to both sides) will eventually go broke against an opponent with infinite wealth.

If you are curious about the reasons, just go ahead and click on the link provided above. Yes, that's right. The odds are highly stacked against the player simply because the casino's wealth is approaches "infinite" when compared with a typical player like you and me (or we call, "the Main Streeters")

So the only logical conclusion on how Don Johnson defeated the three casinos must be because he had more wealth than the casinos. Or is it? Here is how I see it. 

1. Skill

First, it goes without saying that Don Johnson is no fool. He may not be the best blackjack player in the world, but he is a good enough player. If you asked Warren Buffett if he is the smartest man on the planet, he would be the first person to tell you that he isn't. Like investing, blackjack does not require a lot of smarts. Just simple mathematics. So, armed with a slightly mathematically inclined mind, Don Johnson was ready to break the casinos. 

2. Wealth

Second, Don Johnson is a high roller. This means that he has millions and millions to spare, which is to say, the gap between his wealth and that of the casino, is significantly narrowed. As a result, the probability of the gambler's ruin being applied to Don Johnson is much much lower compared with a Main Streeter.

3. Margin of Safety

Third, Don Johnson applies one of the most fundamental rules in value investing. He keeps a huge margin of safety. If you get through far enough in the long article, you will see this:

Johnson is very good at gambling, mainly because he’s less willing to gamble than most. He does not just walk into a casino and start playing, which is what roughly 99 percent of customers do. This is, in his words, tantamount to “blindly throwing away money.” The rules of the game are set to give the house a significant advantage. That doesn’t mean you can’t win playing by the standard house rules; people do win on occasion. But the vast majority of players lose, and the longer they play, the more they lose.


Sophisticated gamblers won’t play by the standard rules. They negotiate. Because the casino values high rollers more than the average customer, it is willing to lessen its edge for them. It does this primarily by offering discounts, or “loss rebates.” When a casino offers a discount of, say, 10 percent, that means if the player loses $100,000 at the blackjack table, he has to pay only $90,000. Beyond the usual high-roller perks, the casino might also sweeten the deal by staking the player a significant amount up front, offering thousands of dollars in free chips, just to get the ball rolling. But even in that scenario, Johnson won’t play. By his reckoning, a few thousand in free chips plus a standard 10 percent discount just means that the casino is going to end up with slightly less of the player’s money after a few hours of play. The player still loses.

But two years ago, Johnson says, the casinos started getting desperate. With their table-game revenues tanking and the number of whales diminishing, casino marketers began to compete more aggressively for the big spenders. After all, one high roller who has a bad night can determine whether a casino’s table games finish a month in the red or in the black. Inside the casinos, this heightened the natural tension between the marketers, who are always pushing to sweeten the discounts, and the gaming managers, who want to maximize the house’s statistical edge. But month after month of declining revenues strengthened the marketers’ position. By late 2010, the discounts at some of the strapped Atlantic City casinos began creeping upward, as high as 20 percent.

“The casinos started accepting more risk, looking for a possible larger return,” says Posner, the gaming-industry expert. “They tended to start swinging for the fences.”

Johnson noticed.

“They began offering deals that nobody’s ever seen in New Jersey history,” he told me. “I’d never heard of anything like it in the world, not even for a player like [the late Australian media tycoon] Kerry Packer, who came in with a $20 million bank and was worth billions and billions.”

When casinos started getting desperate, Johnson was perfectly poised to take advantage of them. He had the money to wager big, he had the skill to win, and he did not have enough of a reputation for the casinos to be wary of him. He was also, as the Trop’s Tony Rodio puts it, “a cheap date.” He wasn’t interested in the high-end perks; he was interested in maximizing his odds of winning. For Johnson, the game began before he ever set foot in the casino. 

So how did all these casinos end up giving Johnson what he himself describes as a “huge edge”? “I just think somebody missed the math when they did the numbers on it,” he told an interviewer.

...

Johnson did not miss the math. For example, at the Trop, he was willing to play with a 20 percent discount after his losses hit $500,000, but only if the casino structured the rules of the game to shave away some of the house advantage. Johnson could calculate exactly how much of an advantage he would gain with each small adjustment in the rules of play. He won’t say what all the adjustments were in the final e-mailed agreement with the Trop, but they included playing with a hand-shuffled six-deck shoe; the right to split and double down on up to four hands at once; and a “soft 17” (the player can draw another card on a hand totaling six plus an ace, counting the ace as either a one or an 11, while the dealer must stand, counting the ace as an 11). When Johnson and the Trop finally agreed, he had whittled the house edge down to one-fourth of 1 percent, by his figuring. In effect, he was playing a 50-50 game against the house, and with the discount, he was risking only 80 cents of every dollar he played. He had to pony up $1 million of his own money to start, but, as he would say later: “You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.”

In his own words, this is the very essence of the concept of "margin of safety". Being a high roller, he twisted and twisted the odds in his favor, banking on the desperation of the casinos for his "business". With a 20% discount, the odds were already heavily stacked in his favor. And note this: 

“You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.”

He never plays until he goes broke. In essence, what he is saying is, every time he loses money, he would only lose 80%. But every time he wins money, he would win 100%. Essentially, even though at each hand, the game was 50-50, his expectations of winning are significantly higher. 

For those who are interested in the mathematics, His expected "earnings" for each dollar he brings into the casino are simply:

0.5 x (-0.8) + 0.5 x (1.0) = 0.1

What this means is that he is expected to make a return of 10% every time he goes to the casino. This is of course, assuming that he does not go broke, which goes back to my second point about having a huge bankroll to begin with. How many of us can have that kind of odds at a casino? 

4. "Luck"

Fourth, another point which is also one of the key concepts of value investing is what many of us think of as, "luck". But as the Roman philosopher Seneca says, "luck" is when preparation meets opportunity. Given his circumstances (i.e. being adept at simple arithmetic, and having the bankroll to play, along with an acute interest in gambling (how else would he know about such negotiating tactics?), he was presented with a "wonderful" opportunity in the sense of the casinos' desperation. The casinos were too desperate to make a quick buck of a big whale like Don Johnson and took more risk than they could truly afford by granting him all the tiny tweaks that he requested. If the casinos had not been suffering due to the recession in the US, this sort of opportunity would not have presented itself. 

5. "Greatness"

Fifth, and what I think is the most important of all, is what I termed "greatness", for the lack of a better term. I am not saying that Don Johnson was born great or anything like that. To me, having good "luck" is awesome, but it is very far from being enough. Don Johnson had the right skill set, the money to play, and the opportunity to take advantage of. But what separates Don from the rest, is the fact that he TOOK that opportunity. Some of us may call that balls of steel, guts, courage, instinct or what not, but I really don't care. I don't know the right term for it.

The key important thing here is the fact that he took advantage of an opportunity which presented itself in the midst of one of the greatest recessions since The Great Depression. This is one of the most important lessons I have learnt recently in my life, and I will most certainly write more on this in the future. 

But for today, the takeaway message from this issue of the Main Streeter is that the concepts of value investing applies just as well in other aspects of life. Think of value investing as a lifestyle. It is not necessarily just applied in the realm of investing, but it can be applied in any shape and form in pretty much every aspect of our lives. 

10 Things You Probably Don't Know About Introverts

If you are an introvert and you know it, click here.

If you are having a bad day as an introvert, you might even feel better after you read the link above.

Though, I do not claim responsibility for results.

Illogical Thinking - Part 1 (Love is a fallacy)

Logical thinking appears to be harder to come by more and more these days. For an analyst, logical thinking is extremely crucial because it is of utmost importance to be able to determine the link between cause and effect. We have to know that when one event occurs, it will directly lead to another, and not be deceived by the sheer coincidence of two events happening almost simultaneously must exhibit a causal relationship.

Below is an interesting story which demonstrates in a simple, lighthearted, but extremely useful example of how many people fall into logical traps and use fallacious arguments in their daily lives. In this special series, we first start by understanding what are the existing pitfalls in our arguments. Then, we shall proceed to examine several other issues which show the glaring logical mistakes made by very prominent publications (like the Star, one of the lousiest newspapers around). Enjoy the story below:

Love is a fallacy 
by Max Schulman

Cool was I and logical. Keen, calculating, perspicacious, acute — I was all of these. My brain was as powerful as a dynamo, precise as a chemist’s scales, as penetrating as a scalpel. And – think of it! – I was only eighteen.

It is not often that one so young has such a giant intellect. Take, for example, Petey Burch, my roommate at the University of Minnesota. Same age, same background, but dumb as an ox. A nice enough fellow, you understand, but nothing upstairs. Emotional type. Unstable. Impressionable. Worst of all, a faddist. Fads, I submit, are the very negation of reason. To be swept up in every new craze that comes along, to surrender oneself to idiocy just because everybody else is doing it – this to me, is the acme of mindlessness. Not, however, to Petey.

One afternoon I found Petey lying on his bed with an expression of such distress on his face that I immediately diagnosed appendicitis. “Don’t move,” I said, “Don’t take a laxative. I’ll get a doctor.”

“Raccoon,” he mumbled thickly.

“Raccoon?” I said, pausing in my flight.

“I want a raccon coat,” he wailed.

I perceived that his trouble was not physical but mental.

“Why do you want a raccoon coat?”

“I should have known it,” he cried, pounding his temples.

“I should have known it they’d come back when the Charleston came back. Like a fool I spent all my money for textbook, and now I can’t get a raccoon coat.”

“Can you mean,” I said incredulously,” that people are actually wearing raccoon coats again?”

“All the Big Men on Campus are wearing them. Where’ve you been?”

“In the library,” I said, naming a place not frequented by Big Men on Campus.

He leaped from the bed and paced the room. “I’ve got to have a raccoon coat,” he said passionately. “I’ve got to!”

“Petey, why? Look at it rationally. Raccoon coats are unsanitary. They shed. They smell bad. They weigh too much. They’re unsightly. They…”

“You don’t understand,” he interrupted, impatiently. “It’s the thing to do. Don’t you want to be in the swim?”

“No,” I said truthfully.

“Well, I do,” he declared. “I’d give anything for a raccoon coat. Anything!”

My brain, that precision instrument, slipped into high gear. “Anything?” I asked, looking at him narrowly.

“Anything,” he affirmed in ringing tones.

I stroked my chin thoughtfully. It so happened that I knew where to get my hands on a raccoon coat. My father had had one in his undergraduate days; it lay now in a trunk in the attic back home. It also happened that Petey had something I wanted. He didn’t have it exactly, but at least he had first rights on it. I refer to his girl, Polly Espy.

I had long coveted Polly Espy. Let me emphasize that my desire for this young woman was not emotional in nature. She was, to be sure, a girl who excited the emotions, but I was not one to let my heart rule my head. I wanted Polly For a shrewdly calculated, entirely cerebral reason.

I was a freshman in law school. In a few years I would be out in practice. I was well aware of the importance of the right kind of wife in furthering a lawyer’s career. The successful lawyers I had observed were, almost without exception, married to beautiful, gracious, intelligent women. With one omission, Polly fitted these specifications perfectly.

Beautiful she was. She was not yet of pin-up proportions, but I felt that time would supply the lack. She already had the makings.

Gracious she was. By gracious I mean full of graces. She had an erectness of carriage, an ease of bearing, a poise that clearly indicated the best of breeding. At table her manners were exquisite. I had seen her at the Kozy Kampus Korner eating the specialty of the house – a sandwich that contained scraps of pot roast, gravy, chopped nuts, and a dipper of sauerkraut – without even getting her fingers moist.

Intelligent she was not. In fact, she veered in the opposite direction. But I believed that under my guidance she would smarten up. At any rate, it was worth a try. It is, after all, easier to make a beautiful dumb girl smart than to make an ugly smart girl beautiful.

“Petey,” I said, “are you in love with Polly Espy?”

“I think she’s a keen kid,” he replied, “but I don’t know if you call it love. Why?”

“Do you,” I asked, “have any kind of formal arrangement with her? I mean are you going steady or anything like that?”

“No. We see each other quite a bit, but we both have other dates. Why?”

“Is there,” I asked, “any other man for whom she has a particular fondness?”

“Not that I know of. Why?”

I nodded with satisfaction. “In other words, if you were out of the picture, the field would be open. Is that right?”

“I guess so. What are you getting at?”

“Nothing , nothing,” I said innocently, and took my suitcase out the closet.

“Where are you going?” asked Petey.

“Home for weekend.” I threw a few things into the bag.

“Listen,” he said, clutching my arm eagerly, “while you’re home, you couldn’t get some money from your old man, could you, and lend it to me so I can buy a raccoon coat?”

“I may do better than that,” I said with a mysterious wink and closed my bag and left.

. . .
“Look,” I said to Petey when I got back Monday morning. I threw open the suitcase and revealed the huge, hairy, gamy object that my father had worn in his Stutz Bearcat in 1925.

“Holy Toledo!” said Petey reverently. He plunged his hands into the raccoon coat and then his face. “Holy Toledo!” he repeated fifteen or twenty times.

“Would you like it?” I asked.

“Oh yes!” he cried, clutching the greasy pelt to him. Then a canny look came into his eyes. “What do you want for it?”

“Your girl.” I said, mincing no words.

“Polly?” he said in a horrified whisper. “You want Polly?”
“That’s right.”

He shook his head.

I shrugged. “Okay. If you don’t want to be in the swim, I guess it’s your business.”

I sat down in a chair and pretended to read a book, but out of the corner of my eye I kept watching Petey. He was a torn man. First, he looked at the coat with the expression of waif at a bakery window. Then he turned away and set his jaw resolutely. Then he looked back at the coat, with even more longing in his face. Then he turned away, but with not so much resolution this time. Back and forth his head swiveled, desire waxing, resolution waning. Finally he didn’t turn away at all; he just stood and stared with mad lust at the coat.

“It isn’t as though I was in love with Polly,” he said thickly. “Or going steady or anything like that.”

“That’s right,” I murmured.

“What’s Polly to me, or me to Polly?”

“Not a thing,” said I.

“It’s just been a casual kick – just a few laughs, that’s all.”

“Try on the coat,” said I.

He complied. The coat bunched high over his ears and dropped all the way down to his shoe tops. He looked like a mound of dead raccoons. “Fits fine,” he said happily.

I rose from my chair. “Is it a deal?” I asked, extending my hand. He swallowed. “It’s a deal,” he said and shook my hand.

I had my first date with Polly the following evening. This was in the nature of a survey. I wanted to find out just how much work I had to get her mind up to the standard I required. I took her first to dinner.

“Gee, that was a delish dinner,” she said as we left the restaurant.

And then I took her home. “Gee, I had a sensaysh time,” she said as she bade me good night.

I went back to my room with a heavy heart. I had gravely underestimated the size of my task. This girl’s lack of information was terrifying. Nor would it be enough merely to supply her with information. First she had to be taught to “think”. This loomed as a project of no small dimensions, and at first I was tempted to give her back to Petey.

But then I got to thinking about her abundant physical charms and about the way she entered a room and the way she handled a knife and fork, and I decided to make an effort.
I went about it, as in all things, systematically. I gave her a course in logic. It happened that I, as a law student, was taking a course in logic myself, so I had all the facts at my fingertips. “Polly,” I said to her when I picked her up on our next date, “tonight we are going over to the Knoll and talk.”

“Oo, terrif,” she replied. One thing I will say for this girl: you would go far to find another so agreeable.

We went to the Knoll, the campus trysting place, and we sat down under an old oak, and she looked at me expectantly.

“What are we going to talk about?” she asked.

“Logic.”

She thought this over for a minute and decided she liked it. “Magnif,” she said.

Logic,” I said, clearing my throat, “is the science of thinking. Before we can think correctly, we must first learn to recognize the common fallacies of logic. These we will take up tonight.”

“Wow-dow!” she cried, clapping her hands delightedly.

I winced, but went bravely on. “First let us examine the fallacy called Dicto Simpliciter.”

“By all means,” she urged, batting her lashes eagerly.

“Dicto Simpliciter means an argument based on an unqualified generalization. For example: Exercise is good. Therefore everybody should exercise.”

“Polly,” I said gently, “the argument is a fallacy. Exercise is good is an unqualified generalization. For instance, if you have heart disease, exercise is bad, not good. Therefore exercise is bad, not good. Many people are ordered by their doctors not to exercise. You must qualify the generalization. You must say exercise is usually good, or exercise is good for most people. Otherwise you have committed a Dicto Simpliciter. Do you see?”

“No,” she confessed. “But this is marvy. Do more! Do more!”

“It will be better if you stop tugging at my sleeve,” I told her, and when she desisted, I continued. “Next we take up a fallacy called Hasty Generalization. Listen carefully: You can’t speak French. Petey Burch can’t speak French. I must therefore conclude that nobody at the University of Minnesota can speak French.”

“Really?” said Polly, amazed. “Nobody?”

I hid my exasperation. “Polly, it’s a fallacy. The generalization is reached too hastily. There are too few instance to support such a conclusion.”

Know any more fallacies?” she asked breathlessly. “This is more fun than dancing, even.”

I fought off a wave of despair. I was getting nowhere with this girl, absolutely nowhere. Still, I am nothing, if not persistent. I continued. “Next comes Post Hoc (false cause). Listen to this: Let’s not take Bill on our picnic. Every time we take him out with us, it rains.”

“I know somebody just like that,” she exclaimed. “A girl back home – Eula Becker, her name is. It never fails. Every single time we take her on a picnic…”

“Polly,” I said sharply, “it’s a fallacy. Eula Becker doesn’t cause the rain. She has no connection with the rain. You are guilty of Post Hoc if you blame Eula Becker.”

“I’ll never do it again,” she promised contritely. “Are you mad at me?”

I sighed deeply. “No, Polly, I’m not mad.”

“Then tell me some more fallacies.”

“All right. Let’s try Contradictory Premises.”

“Yes, let’s,” she chirped, blinking her eyes happily.
I frowned, but plunged ahead. “Here’s an example of Contradictory Premises: If God can do anything, can He make a stone so heavy that He won’t be able to lift it?”

“Of course,” she replied promptly.

“But if He can do anything, He can lift the stone,” I pointed out.

“Yeah,” she said thoughtfully. “Well, then I guess He can’t make the stone.”

“But He can do anything,” I reminded her.

She scratched her pretty, empty head. “I’m all confused,” she admitted.

“Of course you are. Because when the premises of an argument contradict each other, there can be no argument. If there is an irresistible force, there can be no immovable object. If there is an immovable object, there can be no irresistible force. Get it?”

“Tell me more of this keen stuff,” she said eagerly.

I consulted my watch. “I think we’d better call it a night.

I’ll take you home now, and you go over all the things you’ve learned. We’ll have another session tomorrow night.”

I deposited her at the girls’ dormitory, where she assured me that she had had a “perfectly” evening, and I went glumly home to my room. Petey lay snoring in his bed, the raccoon coat huddled like a great hairy beast at his feet. For a moment I considered waking him and telling him that he could have his girl back. It seemed clear that my project was doomed to failure. The girl simply had a logic-proof head.

But then I reconsidered. I had wasted one evening; I might as well waste another. Who knew? Maybe somewhere in the extinct crater of her mind, a few embers still smoldered. Maybe somehow I could fan them into flame. Admittedly it was not a prospect fraught with hope, but I decided to give it one more try.

Seated under the oak the next evening I said, “Our first fallacy tonight is called Ad Misericordiam (appeal to pity).”

She quivered with delight.

“Listen closely,” I said. “A man applies for a job. When the boss asks him what his qualifications are, he has a wife and six children at home, the wife is a helpless cripple, the children have nothing to eat, no clothes to wear, no shoes on their feet, there are no beds in the house, no coal in the cellar, and winter is coming.”

A tear rolled down each of Polly’s pink cheeks. “Oh, this is awful, awful,” she sobbed.

“Yes, it’s awful,” I agreed, “but it’s no argument. The man never answered the boss’s question about his qualifications. Instead he appealed to the boss’s sympathy. He committed the fallacy of Ad Misericordiam. Do you understand?”

“Have you got a handkerchief?” she blubbered.

I handed her a handkerchief and tried to keep from screaming while she wiped her eyes. “Next,” I said in a carefully controlled tone, “we will discuss False Analogy (a form of forgetful induction). Here is an example: Students should be allowed to look at their textbooks during examination. After all, surgeons have X rays to guide them during a trial, carpenters have blueprints to guide them when they are building a house. Why, then, shouldn’t students be allowed to look at their textbooks during examination?”

“There now,” she said enthusiastically, “is the most marvy idea I’ve heard in years.”

“Polly,” I said testily, “the argument is all wrong. Doctors, lawyers, and carpenters aren’t taking a test to see how much they have learned, but students are. The situations are altogether different, and you can’t make an analogy between them.”

“I still think it’s a good idea,” said Polly.

“Nuts,” I muttered. Doggedly I pressed on. “Next we’ll try Hypothesis Contrary to Fact (non sequitur).”

“Sounds yummy,” was Polly’s reaction.

“Listen: If Madame Curie had not happened to leave a photographic plate in a drawer with a chunk of pitchblende, the world today would not know about radium.”

“True, true,” said Polly, nodding her head “Did you see the movie? Oh, it just knocked me out. That Walter Pidgeon is so dreamy. I mean he fractures me.”

“If you can forget Mr. Pidgeon for a moment,” I said coldly, “I would like to point out that the statement is a fallacy. Maybe Madame Curie would have discovered radium at some later date. Maybe somebody else would have discovered it. Maybe any number of things would have happened. You can’t start with a hypothesis that is not true and then draw any supportable conclusions from it.”

“They ought to put Walter Pidgeon in more pictures,” said Polly, “I hardly ever see him any more.”

One more chance, I decided. But just one more. There is a limit to what flesh and blood can bear. “The next fallacy is called Poisioning the Well.”

“How cute!” she gurgled.

“Two men are having a debate. The first one gets up and says, ‘My opponent is a notorious liar. You can’t believe a word that he is going to say.’ … Now, Polly, think hard. What’s wrong?”

I watched her closely as she knit her creamy brow in concentration. Suddenly a glimmer of intelligence — the first I had seen — came into her eyes. “It’s not fair,” she said with indignation. “It’s not a bit fair. What chance has the second man got if the first man calls him a liar before he even begins talking?”

“Right!” I cried exultantly. “One hundred per cent right. It’s not fair. The first man has poisoned the well before anybody could drink from it. He has hamstrung his opponent before he could even start … Polly, I’m proud of you.”

“Pshaws,” she murmured, blushing with pleasure.

“You see, my dear, these things aren’t so hard. All you have to do is concentrate. Think-examine-evaluate. Come now, let’s review everything we have learned.”

“Fire away,” she said with an airy wave of her hand.

Heartened by the knowledge that Polly was not altogether a cretin, began a long, patient review of all I had told her. Over and over and over again I cited instances, pointed out flaws, kept hammering away without letup. It was like digging a tunnel. At first, everything was work, sweat, and darkness. I had no idea when I would reach the light, or even if I would. But I persisted. I pounded and clawed and scraped, and finally I was rewarded. I saw a chink of light. And then the chink got bigger and the sun came pouring in and all was bright.

Five grueling nights with this book was worth it. I had made a logician out of Polly; I had taught her to think. My job was done. She was worthy of me, at last. She was a fit wife for me, a proper hostess for many mansions, a suitable mother for my well-heeled children.

It must not be thought that I was without love for this girl. Quite the contrary. Just as Pygmalion loved mine. I determined to acquaint her with feelings at our very next meeting. The time had come to change our relationship from academic to romantic.

“Polly,” I said when next we sat beneath our oak, “tonight we will not discuss fallacies.”

“Aw, gee,” she said, disappointed.

“My dear,” I said, favoring her with a smile, “we have now spent five evenings together. We have gotten along
splendidly. It is clear that we are well matched.”

“Hasty Generalization,” said Polly brightly.

“I beg your pardon,” said I.

“Hasty Generalization,” she repeated. “How can you say that we are well matched on the basis of only five dates?”

I chuckled with amusement. The dear child had learned her lessons well. “My dear,” I said, patting her hand in a tolerant manner, “five dates is plenty. After all, you don’t have to eat a whole cake to know that it’s good.”

“False Analogy,” said Polly promptly. “I’m not a cake. I’m a girl.”

I chuckled with somewhat less amusement. The dear child had learned her lessons perhaps too well. I decided to change tactics. Obviously the best approach was a simple, strong, direct declaration of love. I paused for a moment while my massive brain chose the proper word. Then I began:

“Polly, I love you. You are the whole world to me, and the moon and the stars and the constellations of outer space. Please, my darling, say that you will go steady with me, for if you will not, life will be meaningless. I will languish. I will refuse my meals. I will wander the face of the earth, a shambling, hollow-eyed hulk.”

There, I thought, folding my arms, that ought to do it.

“Ad Misericordiam,” said Polly.

I ground my teeth. I was not Pygmalion; I was Frankenstein, and my monster had me by the throat. Frantically I fought back the tide of panic surging through me; at all costs I had to keep cool.

“Well, Polly,” I said, forcing a smile, “you certainly have learned your fallacies.”

“You’re darn right,” she said with a vigorous nod.

“And who taught them to you, Polly?”

“You did.”

“That’s right. So you do owe me something, don’t you, my dear? If I hadn’t come along you never would have learned about fallacies.”

“Hypothesis Contrary to Fact,” she said instantly.

I dashed perspiration from my brow. “Polly,” I croaked, “you mustn’t take all these things so literally. I mean this is just classroom stuff. You know that the things you learn in school don’t have anything to do with life.”

“Dicto Simpliciter,” she said, wagging her finger at me playfully.

That did it. I leaped to my feet, bellowing like a bull. “Will you or will you not go steady with me?”

“I will not,” she replied.

“Why not?” I demanded.

“Because this afternoon I promised Petey Burch that I would go steady with him.”

I reeled back, overcome with the infamy of it. After he promised, after he made a deal, after he shook my hand!

“The rat!” I shrieked, kicking up great chunks of turf.

“You can’t go with him, Polly. He’s a liar. He’s a cheat. He’s a rat.”

“Poisoning the Well ,” said Polly, “and stop shouting. I think shouting must be a fallacy too.”

With an immense effort of will, I modulated my voice. “All right,” I said. “You’re a logician. Let’s look at this thing logically. How could you choose Petey Burch over me? Look at me — a brilliant student, a tremendous intellectual, a man with an assured future. Look at Petey — a knothead, a jitterbug, a guy who’ll never know where his next meal is coming from. Can you give me one logical reason why you should go steady with Petey Burch?”

“I certainly can,” declared Polly. “He’s got a raccoon coat.”

Volume 3 Issue 24: Two-Cent Economics

The Downside of Being a High Achiever

This is one of the best articles that I have read recently. It is a very long article, so be forewarned. It is definitely worth the time.

Here is one of my favorite parts:

Focus on the Long Term

Major goals can withstand interim setbacks. When you are looking at the big picture, you often give yourself more latitude to make a few missteps.

One lawyer with a passion for civil liberties, Steven, told us of an experience writing a brief that was in an area of law that lay outside his experience. He was paralyzed by the prospect of looking incompetent to the members of the legal community he admired most. That the subject matter was only slightly out of his area of expertise made it all the more daunting—he felt he should know instinctively how to respond.

Steven realized that he had to grant himself the permission to be mediocre—an appalling prospect for achievers.

He weighed the possible consequences of a subpar brief against the broader benefits of expanding his expertise and making an influential contribution to the case. As it turned out, his work on the brief garnered him additional respect from his colleagues. It was a solid effort that demonstrated his ability to stretch beyond his comfort zone.

Long-term success requires some willingness to commit to necessary short-term risks. High achievers often let their fear of failure stop them from taking those chances.

That was the case with Rick, a respected professor but a dismal team player. His students loved him, but his peers were increasingly vocal about his refusal to contribute at an organizational level. He couldn’t be counted on to complete any work other than what was on his own to-do list. Rick consciously ignored his colleagues’ feedback, in part because he knew he was less talented at organizational tasks.

Mostly, though, he was just too self-absorbed to pay attention to anything other than his own teaching, research, and publishing agenda. Unfortunately, Rick’s inability to see the big picture was his undoing, and his contract was not renewed.

In his next position, Rick resolved to do things differently. He invested time and effort in shoring up his organizational abilities. Though he worried initially about not focusing his all energies on teaching, his farsightedness paid off: He’s now one of the most highly regarded professors in his department—on all counts. He still feels anxiety about his weaknesses—that’s who he is—and in a way it’s what makes him great. He’s never satisfied.

Doing the right thing poorly is painful for high achievers. It’s much more satisfying to do something well, even if it’s not the best use of your time.

Moving your A game to a new level or in a new direction takes humility, it takes practice, and it takes patience (not necessarily your strong suit). But it’s a necessary step on the road to doing the right thing well.

I have been preaching about long term thinking for a while now. This article just puts it aptly, among other amazing things.

Volume 3 Issue 9: Two-Cent Economics

Past and Present - Did Time Stop?

This is one of those posts where I let the pictures do the talking. I will show you a series of pictures of cities and the years when those pictures were taken. For starters, this exercize shows us how fast and how much the world has changed and advanced in the past few decades.

Atlanta - 1961

Atlanta - Present Day

Brazil - 1970s 

Brazil - Present Day

Hong Kong - 1970s

Hong Kong - Present Day

Houston - 1960s

Houston - Present Day 

London - 1997

London - Present Day

Manhattan - 1931

Manhattan - Present Day

Melbourne - 1921

Melbourne - Present Day

Moscow - 1997

Moscow - Present Day

Seattle - 1970

Seattle - Present Day

Yokohama - 1978

Yokohama - Present Day

Tampa - 1956

Tampa - Present Day

Tokyo - 1945

Tokyo - Present Day

I suppose up until now, you would not have been too surprised by the changes that you see throughout the above countries. After all, most of them are developed countries anyway. You must be wondering when I am going to show you China by now. Well, you don't have to wait any longer. Below, you will not only see China, but some of the other emerging economies as well, such as Korea, Singapore, Indonesia etc. Beware, some of these photos may be shocking. 

Shanghai - 1990

Shanghai - Present Day

Chongqing - 1998

Chongqing - Present Day

Makati City, Philippines - 1980s

Makati City, Philippines - Present Day

Mexico City - 1950 

Mexico City - Present Day

Dubai - 1990

Dubai - Present Day

Jakarta - 1960s

Jakarta - Present Day

And this may be shocking to you, but the picture below is Seoul, Korea in 1961.

Seoul - 1961

Seoul - Present Day

And the next picture is from our neighbor, Singapore. By now, one must wonder what has become of Malaysia in the last few decades.

Singapore - 1974

Singapore - Present Day

I guess here is the big finale. Maybe not so big. If you look at the picture below, many of you should recognize what we know as Chulia Street in Penang. 

Chulia Street - 1960s

Chulia Street - Present Day

Comparing Chulia Street in 1960s with that of today, you would probably think that time stood still for Penang. In fact, the trishaw from the 1960s is still there in the picture of present day Chulia Street. Compare Penang's performance with those of all the countries above and we wonder how did Penang fall so far behind. Chulia Street has barely developed in the past 50 years. It is indeed a sad case for Penang and Malaysia. Well, in the spirit of Malaysia Boleh, I have one last comparison to share. Below are pictures of a city that has barely changed through time as well. 

Greece - 1860s

Greece - Present Day

Yes, you read it right. Apart from adding a few more buildings, the skyline of Greece has barely changed in the past 150 years. This is the story of a more or less bankrupt nation. The next question to ask is, are we trying to become like Greece?

Volume 3 Issue 4: Two-Cent Economics

The Entitlement Attitude - Final Part

In the past two issues of the Mainstreeter (here and here), we saw how damaging the entitlement attitude can be and hopefully, you would have noticed how appalling it can be as well. It is definitely close to the top in the list of things an employer would hate to see when recruiting. For all our sakes, I hope that when you become an employer or when you are in charge of hiring, you would not have to meet with such candidates.

In addition, we also looked at how the entitlement attitude manifests and hopefully we are all able to take a brutally honest look at ourselves and be self-aware enough to avoid making the same mistakes. In this issue of the Mainstreeter, we will take a look at some measures to avoid this attitude of entitlement.

For starters, as I mentioned in Part 1, one of the most scary things about the entitlement attitude is the fact that the world is constantly moving forward. The moment we let go of our guard and be complacent, the world takes a step forward and consequently, we slip a step backwards. We are not just competing within the Malaysian context, but with the rest of the world. In this dog eat dog world, we must always be ready to compete.

To be competitive means to be able to contribute to what is demanded by society. Or else, we become redundant. So to stay competitive, we must always stay flexible, and adapt to whatever the situation demands. We must not insist on doing only what is required by our job scopes or what is written in our contracts. To be able to meet the demands of society will ensure that we remain relevant and that allows us to stay competitive. In essence, competitiveness is all about the mindset.

To further elaborate on what I am talking about, here is an excerpt from a speech by Singapore's Prime Minister, Lee Hsien Loong, on what flexibility means:

"Being productive means creating maximum value out of limited resources. If you want to raise productivity, you can either use fewer resources to produce the same value, or deploy the same amount of resources to more productive purposes and generate more value out of that. Singapore businesses cannot expect to save costs by employing more low cost workers. Instead, you have got to utilise resources efficiently, develop new markets and innovate.

Companies have to be nimble and adaptable to respond to changing market conditions. You have got to shift your resources to where they are most needed and most productive. When growth can be negative one year and more than 10% the following year – this is happening to us now – you need enormous flexibility to anticipate changes, adapt and do well. In other words, to underpin your improvement in productivity, you need enormous flexibility. Flexibility in skill, flexibility in wages, flexibility in mindsets.

Skills flexibility means training workers to master multiple skill sets, and be able to perform many different tasks. To enable workers to do this, firms have to strongly support workers’ training, and properly recognise workers who make the effort to acquire additional skills. Then, if you have flexible workers, the firms can deploy them to different areas depending on conditions, depending on business demand, and this will give you an important edge.

Take an example from the hotel industry: Ritz-Carlton, but probably others too. During the recession last year, Ritz-Carlton’s management and staff decided to multitask to reduce costs and save jobs. Business was slow, occupancy rates were low, but the Chinese restaurant still drew in the crowds at wedding banquets and Chinese New Year. It did not make sense to hire workers just for that period, or just for those parts of the hotel. So, all the hotel employees, starting from the General Manager and administrative staff, helped out in the restaurant so as to save on temporary staff and short-term hires. Room attendants also agreed to be deployed to do laundry work, because occupancy was low. Some employees were understandably concerned about handling very different tasks from their usual jobs, but Ritz-Carlton put in place a structured training programme to enable workers to pick up new skills and better understand the other functions within the hotel. And I think it not only helped them through the crisis, but helped with their teambuilding, and helped with their sense of camaraderie and corporate loyalty.

Another aspect of flexibility is wage flexibility. We have been working on this for a long time, since the mid-1980s. After years of patient hard work, many companies now structure their wages not just with a basic wage, but with monthly and annual variable components. And it has become part of the vocabulary for wage bargaining, for collective negotiations. The unions support this as a tool which will buffer workers against economic downturns. Flexible wage systems fully demonstrated their worth during the recent downturn, when more than half the companies froze basic wages, and many reduced bonuses. Along with SPUR and Jobs Credit, this helped firms manage their costs and hold on to most of their workforce.

Let me cite one specific example – CapitaLand. Last January, when the outlook was bleak, the CapitaLand management and executives took wage cuts of up to 20%, with the deepest cuts for management, but everybody being affected some, 3% maybe, but everybody chipped in. Throughout the downturn, CapitaLand worked with its workers and its union, the Singapore Industrial and Services Employees’ Union (SISEU) to cut costs. When performance and business outlook improved towards the end of the year, it reinstated and later on it raised employee wages. This is the model of labour relations that we must aim for – sharing benefits in good times and riding out difficulties together in bad times, with management leading by example.

So to be flexible, you need to be flexible in your jobs, in your wages, but especially in your mindsets. It is the most basic and critical flexibility, because we are in a dynamic environment, you cannot tell exactly what the demands will be, we cannot tell exactly what we need to get the job done tomorrow, which will be the most urgent, the most critical task. We have to quickly hoist in situations when they change, often unexpectedly, and be able to respond. And we cannot simply go strictly by what is explicitly spelt out in collective agreements, or individual contracts, or worse, work to rule, because however we try to anticipate and spell out and be explicit, there will always be unanticipated situations, and then we will have to use our good sense."

Source: SG Press Centre

Another way to avoid the entitlement mentality is to escape from the mindset that doing our best is good enough. Many of us feel that it is OK to fail once we have tried our best. This is one of the ways complacency can develop. For one, it is very difficult to determine what exactly is our best. Very often, we stop short of our best because we stop trying when things get very difficult. We would then be short-changing ourselves on our performance.

Furthermore, if we always stop at exactly at our best, we will always only be able to do our best, never better. This means that we would never be able to improve. As mentioned, with the world advancing at a scary pace, we cannot afford to remain stagnant. So, to improve ourselves, we must not only do our best every time, but also to push further after we have hit the wall that we think is our best. I was only recently made aware of this fact by my boss. Perhaps you can forgive my ignorance, but I just felt that I should give credit where credit is due.

This wraps up the series on the Entitlement Attitude and I hope that the lessons would prove useful in your efforts to become world class. Let us not stop at just being "jaguh kampung".

Volume 3 Issue 3: Two-Cent Economics

The Entitlement Attitude - Part 2

From part 1, we saw how Malaysian fresh graduates develop their entitlement attitude. In the last issue, we discussed the high demands of fresh graduates in terms of benefits and pay before accepting a job. In this issue, we will look at some further examples of Malaysian fresh graduates with extremely poor attitude.

Another common manifestation of the entitlement attitude is in the high frequency that Malaysian fresh graduates hop jobs. Typically a lot of these fresh graduates change jobs within six months of starting work. One of the most common reasons is that they feel that they are not interested in the job. Or in other words, they find it boring.

Usually, this is not so much because the job is mundane, but because in the first six months of a job, there is only so much a newbie can do. The fresh graduates have yet to pick up all the necessary skills and knowledge to contribute meaningfully to the business. In the mean time, they are stuck with what they think are basic and menial jobs to familiarize themselves with the workplace and culture. In less than six months, there is really not much they can learn about their job, much less learn about the career that they are trying to pursue. Such is the naivete and impatience of Malaysian fresh graduates.

What makes it worse is that they typically resign from their positions before they are able to get a new one. There is so much complacency that they would rather remain jobless for weeks and months on end than stick it out with their existing job. In the face of a little discomfort, Malaysian fresh graduates react in their ever-so-big shot kind of way with their nose held high by leaving their jobs without future plans.

Then they take a several month hiatus to go on a backpacking trip in the Andes or Alps or somewhere exotic like that. All under the account of their parents. There is seriously no embarrassment in being completely dependent on their parents. In fact, they still feel like their parents owe it to them.

Another main complaint from Malaysian fresh graduates is that their job is too troublesome. Some of these fresh graduates feel that going out of their way to complete a task is not within their job scope. They even have the nerve to cite the fact that the related task was not spelled out in their offer letter, therefore it is not their responsibility to complete the task. Did they forget that whatever the task that needs to be done is most likely for the sake of the clients? Be it in sales, or in manufacturing, or in the finance industry, the clients are the ones that ultimately pay their salary. If the company does not take care of its clients, then there will be no future business. If there is no future business, the company would then have to shut down, and guess who will be out of a job?

There will be times when we are called upon to go out of our way to cater for the needs of the clients. In fact, one should even feel proud to be able to render this extra service to our customers because we have managed to make their lives better. In doing that, they may even give the company further recurring business. One must not underestimate how a little effort can go a long way. I have already shared the story about great customer service  and first world thinking here.

Needless to say, the list goes on. My goal is not just to highlight the poor attitude that is inherent Malaysian fresh graduates. In fact, the group I am referring to may not even cover ALL Malaysian fresh graduates, but it is safe to say that many (enough) are in this group that they need to be made aware of the atrocities that they are portraying. So until now, the goal was to hopefully create the self-awareness to brutally examine our own thoughts and actions to see if we were guilty of such entitlement behavior.

In the next part, we will look at some ideas on how we can overcome this entitlement attitude in a useful and realistic manner.