Saturday, December 10, 2016

Tools for Titans #1 : Chris Sacca

[ I am starting a series on Tim Feriss's latest book Tool for Titans which has a section on becoming wealthier in life. There will be no full summary of the section, just a discussion of the key points. I encourage readers to pick the book up to join the discussion on this blog. ]

Chris Sacca is an early stage investor and is the first person mentioned in the Wealth segment of this book.

a) What i like - Sweet and Sour Summers 

Chris mentioned the way he was brought up as a kid. During his summer holidays, his parents would find him a decent industrial attachment where he was able to learn a lot and be treated very well. Subsequently, he would then be made to work in a horrible job where he was ragged. In this way, he learned that there are great opportunities in this world but a person can end up with really shit jobs if he was not careful.

We have a system which is close to what Chris went through, its called NS but there are no cushy internships here unless a parent can pull some strings for you.

b) What's worth debating about - Are you on the offense or defence?

The idea of offence or defence in personal finance is a false dichotomy but has some utility.

In my view, an offense strategy works on increasing your revenue while a defensive strategy works on containing costs. Many of us bloggers are biased towards defence because costs are easier to control but both strategies are important to expand our range of savings.

c) What I dislike - Good stories always beat good spreadsheets

This probably applies in the world of private equity where spreadsheets tend to be projections and there are not much revenues to speak of. It is entirely possible to invest without stories, which introduces its own bias. Numbers are critical when investors look at publicly listed companies.

A good screen filter backtest on Bloomberg can have a dramatic improvement over ETF returns. For example, it is possible to have extra returns if you filter for low P/B ratios and high dividend yields in your investments. One latest filter I tested returned 19% over 10 years with a Sharpe ratio of 0.91 after reading a academic article on the strategy - I can't share so much of it right now but will talk about it later.

I actually recommend being skeptical of most investment stories.

Friday, December 09, 2016

Personal update and what to look out for in this blog.

Ok, here's a quick personal update.

a) Finances

There is supposed a 100% probability that the Fed will raise interest rates before the close of the year. I think it's already built into the REIT prices so even if it happens, a rally for REITs should be around the corner. More worrying is Singapore's new found status as a sick man of the East. My position is that the downturn is built into the government goal to restructure the economy and not widen the rich-poor gap any further. If a recession is a deliberate strategy, then a more aggressive investment stance is justified.

Recently, most of us investors of Neratel got a massive pay-off in end November and the priority would be to diversify our portfolio's further. Much of the concern now is whether Neratel without it's payments business would continue to be a good dividend counter. The consensus from the stock market is "no" and it is one of the poorest performers in my portfolio for the past few months. I'm holding onto it as for now.

On the cryptocurrency front, Ethereum's performance was so bad it was comical, but I think the longterm potential of smart contracts remain and it might be an opportunity to make more strategic bets as the year closes on the currency. I am a believer that every hack makes a cryptocurrency stronger and more robust and a short term weakness should be viewed as a strength.

Overall, it feels good to reach my third year without eating into my investment capital.

b) Law School

Or rather the lack of school. I've spent the past few days being an unpaid intern for a startup which works with smart contracts and it's been quite fulfilling so far. Beyond doing legal research on electronic signatures, I'm picking up some coding skills in Meteor.js framework which allows me to quickly prototype websites in Javascript making this possibly one of the most unique learning experiences in my life.

Some of the things I learn can be quite disturbing at the broader level. You can pick up the latest textbook on a programming framework but the code and methods in their worked examples may be obsolete by the time you pick the book up. I've managed to instinctively complete the tutorials without following the instructions closely as they are no longer valid.

[ All the extra time I spent on events programming on Microsoft Foundation Classes and messing with Linux fifteen years ago paid off in spades. For the technically inclined, I wasted a few hours on setting Session variables on by web application because the ability to do this by default was disabled after version 1.3 of Meteor.  ]

At the end of the day, developers may be running on instinct and Google searches to solve engineering problems. IT is all about fooling around.

If you follow the news, NTUC is collaborating with General Assembly to bring programming bootcamps to the masses of PMETs but I doubt picking up specific coding skills would be helpful to build industry-ready software engineers. A lot depends on your mental flexibility and IT foundational skills honed over many years of general practice to know instinctively how to react when instructions fail. The strongest beneficiary of programming bootcamps will always be IT professionals and engineers and not non-IT types.

c) Future Talks by Financial Bloggers.

Work has started on planning the next talk which would be on mid-January. We are planning a session on Money and Relationships and will be sharing money management tips within the context of a family.

Can't share anymore as research on the topic starts this weekend for me but it should be fun.

d) What to expect on this blog

Beginning tomorrow, I'm going to try to post everyday.

I'm currently reading Tim Ferriss's Tools of Titans and rushed my way from the Heath section to the section on Wealth. I'm going to do a quick write-up on each wealth expert featured in his books and talk about whether I agree or disagree with Tim's writeup and the person's ideas.

Tim Ferriss is one of the most influential thought leaders in personal development today and I expect many readers of this blog to be big fans of the man. However, my personal view was that Tim made it really big too quickly and catapulted himself to the level of being a VC-level investor without a solid grounding in Finance. He invests more like an entrepreneur than an investor.

I would expect his advice to quite polarising and worth getting into on this blog.

Tuesday, December 06, 2016

Example on how to Review your Job and Relevance within your industry.

Just thought I would provide an example on how to review your current job and predict the degree of disruption which you will face over the next ten years. The example I will use is the task of a litigator and if you actually know some litigators, you will understand these are supremely confidant guys who will never believe that their work will ever be replaced by an AI.

So to review the work of the litigator, the first task would be to break the work of litigation down into multiple parts, which according to my reference book is as follows : documentation review, legal research, project management, litigation support, e-discovery, strategy, tactics, negotiation and advocacy. If you are an software developer you might end up with different tasks like : Feasibility Study, Business Analysis, Systems Architecting, Programming, Testing, Deployment.

For each component of litigation work, we try to determine what level of commoditization the work has reached. For example, legal research and documentation can potentially be done by legal processing outsourcing teams in India so fall into the packaged territory. Project management can be tracked using MS Project or Prima Vera or even conducted by a PMP instead of a legal professional. Advising on strategy and tactics remains a bespoke service which the customer expects from the litigator himself.

Litigation State of Commoditization
Document Review Packaged
Legal Research Packaged
Project Management Systematized
Litigation Support Standardized
Electronic Disclosure Standardized
Strategy and Tactics Bespoke
Negotiation Bespoke
Advocacy Bespoke

At least the full picture I tried to craft for the litigator looks like this. A smart litigator will focus on understanding his client more and find ways to offshore the document review and legal research part of the work, being good at the law is not enough. Thereafter, savvy law-firms may wish to look into non-lawyer headcount to do project management, litigation support and electronic disclosure.

More interestingly, whoever harbours ambitions to disrupt the legal sector should likely focus on the low hanging fruit like document review rather than to cut against the grain and try to take on tasks with a heavy client interfacing tasks.

I'm sure many legal practitioners will find an issue with the table I built to which I invite you for feedback. After all, I don't have any working experience in the legal industry yet.

But many readers can employ this approach to catalog the work you do for the company and start finding ways to do more of the bespoke work which leads to a higher income and lower odds of industrial disruption, if the bulk of your work can be easily packaged or completely commoditised, start making plans to either retrain or leave your company.

Sunday, December 04, 2016

Can your job be replaced ?

I've just started on my unpaid internship with a start-up that deals with smart contracts. The power of an unpaid internship is that it is very easy to fall into the trap of doing the bare minimum and I was very careful not to let it happen to me. My start-up has a a number of objectives which I can work towards which I intend to meet, otherwise I am spending my December trying to pick up two key skills :

a) The first is to pick up the MEAN stack of writing software using MongoDB, ExpressJS, NodeJS and AngularJS. Fortunately, I paid $26 four a course from Udemy which gives me a small taste of how to scaffold and refine a simple website with this technology.
b) The second skill set is to spend a months trying to think about the legal industry and the forces which are intent on disrupting legal work. The book I am reading is Tomorrow's Lawyers : An Introduction to Your Future by Richard Susskind.

Interestingly, the book I am reading on the legal industry has enough generic information which is useful to folks from the IT or finance industry and I think it would be useful to develop a generic framework that would give a readers an idea of how vulnerable you are to being replaced.

The book has an interesting framework to measure the degree of commoditization of someone's labour. Instead of just applying labels like bespoke and commoditized, the author suggests five ways to measure the degree of commoditization of the work you provide for your customer.

Bespoke work is what every knowledge worker dreams to work on. A litigator for a top firm does bespoke work and so does a top neurosurgeon. This is the safest haven for professional workers, but requires not just a lot of technical skill, it requires a combination of soft skills and domain knowledge to remain relevant. Every knowledge worker should strive to provide bespoke work to a customer.

One step below bespoke work is standardized work. No work is truly unique and there generally have to be the kind of work which looks similar to problem faced before. Sometimes, a lawyer goes through a checklist when drafting an employment agreement rather than to create one from ground up. A complex brain operation may have a complicated checklist which the surgeon must undergo. He is not creating new medical science. Similarly, what I have learned in software engineering is that most websites we create come from a common framework which we scaffold and modify later to the client's requirements. Standardized work is still a money spinner and a bulk of work falls into this category instead.

One step below standardised work is systematized work. Where the checklist can be automate and tracked using computers, the work become s systematised. IT Operations moved into this phase when ITSM was created and standard ticketing was done to streamline helpdesk operations. This is an emerging phenomenon in legal work when I was doing my pro-bono work with Criminal legal aid. Some sort of ticketing work flow exists to allow means testing to take place and have the lawyers perform data entry on the case in a CRM system. Automated document assemble of contracts comes into this category.

The next step is packaged work. At this stage, there is a sufficient degree of systematization which allows the work to be packaged and done online. One example of tax preparation. This work can reasonably be done by outsourced workers remotely.  Some of the work may not even require a a professional to perform it.

At the final stage is commoditization, where the work has become so commonplace that it may become open-sourced. Imagine a contract of employment which is so cookie cutter that it is available online for free and HR professionals can just download and modify it within 5 minutes before deploying into their organization.

This is a very useful model for all professionals to measure the risk they face from commoditization of the work they do. The trick is to not to look at the job they face but break the work down granularly to determine which parts can be done at a cheaper rate by someone else.

Say for example, the person in question is some sort of financial advisor, there is a trend of customers turning to robo-advisors to set up their portfolios. The work of calculating the stock ratios to determine the best stocks to buy have already reached the commoditization stage. The question is whether these robo-advisors can adequately capture the risk tolerance of a customer in such a way that the work of face to face engagement can be sufficiently systematized to kill off most financial advisory roles in the industry.

If you believe that your work is reaching the systematization stage, then it might be useful to see if it is possible to start advising something else instead. Currently advising on wills, trusts and settting up of a family office is not facing disruption yet.


Thursday, December 01, 2016

Motivating readers to take control of personal finances.

Many of us bloggers face the same problem, our readers are already fairly motivated to take control of their personal finances. the challenge is to be able to reach out to the folks who can benefit from our articles the most.

As such a mini-revision on personal motivation would come in useful today. The bulk of today's material comes from Barking up the Wrong Tree Blog. There are three conventional ways to think about motivation but I'm going to offer one novel suggestion.

a) Finding meaning in what you do.

You can construct meaning behind your financial planning by asking yourself what broader purposes lies behind your efforts to save money.

Everybody likes to have money, but most average folks just want what money can buy or travel to exotic locations. If the broader purpose behind money management is more consumption or coolness, your plans are unlikely to be sustainable. To work, the money in a savings account or a stock portfolio must somehow lead to a more secure future for any long term financial plan to work.

It's actually quite sad to construct the meaning of a person's life around brands like Apple or Prada. But I think a lot of Singaporeans have this problem.

b) Attaining sovereignty or autonomy in your life. 

Do something because you want to and not because someone wants you to. Specifically, having sovereignty and autonomy at work means having leeway as to decide how something gets done. If you are being micro-managed at work, it would be very difficult to develop the motivation to work hard for the organisation. This is why the government sector is full of deadwood managers who are surrounded by unmotivated workers who are ring-fencing experts. The salary becomes the only reason to get up in the morning.

You need to find corporate cultures which grant you that autonomy in your life. Entrepreneurs can work punishing hours and enjoy it because of the autonomy of they have which other workers don't.

Similarly, I prefer couples to have separate bank accounts, so that there is more autonomy.

c) Doing something tough is easier than thinking about how tough it is when you see other people doing it.

Sometimes, people just need to start doing something to determine whether it suits their lifestyle. When I was single and saving 80% of my income, it was much more motivating than saving 60% of my income although outsiders think that I am self-flagellating.

Something looks tough because you are a third party. When you actually start to do it, it may not be that bad.

d) Self-Esteem as a cornerstone of your identity and allows you to weather the storms.

I have a fourth suggestion which came from watching Westworld and talking to a down-to-earth classmate who was a cop in his past life.

In Westworld, the best hosts are those with a personal tragedy programmed into their AI. I think that this is wrong, the best folks to sustain the best money habits are those who have minor victories in their personal memories. These victories reinforce their self-esteem and makes them grittier in life.

If you have done well in your PSLE in the past or won trophies in sports, you will always have something to turn to when you are facing adversary and suffering in the hand of other people. This cornerstone provides the resilience to sustain a regime which can brutal. If your boss chews you up, you might want to think about points in your life where you have been very successful to take whatever an asshole throws at you.

In summary, motivation readers to manage money better is not easy because it is a marathon and not a sprint. People also find very creative ways to sabotage themselves in their lives.

These four points provide a foundation in figuring out whether a person can be easily motivated to accumulate wealth or would simply be destined for a simply and mediocre life.

Wednesday, November 30, 2016


Ok, my exams are finally over and I am moving into my final semester beginning next year.
Starting tomorrow, I begin a short unpaid internship stint with a startup. I hope I would be able to learn something significant this year end holidays with some programming high on my list of priorities. It has been a largely relaxed semester so there's no need for any break this time round so off I go...

Of late, there has been much talk on the PSLE exams and how demotivating it is for the majority of the primary six students who had to take it. I have been ranting for the past year about the anti-PSLE movement where people share their low scores to console the students who did badly, but they are just taking this opportunity to get some old fashioned humble-bragging into Facebook.  Instead I just want to spend some time sharing with readers two things about the PSLE.

a) PSLE's biggest problem is that it summarises a 12 year old's entire worth as a human being into one T-score metric. But therein lies its genius.

I think the most onerous part of PSLE lies in its ability to summarise the value of a 12-year-old into one simple t-score number. It sucks to do badly but making matters worse, parents invest so much money and time into this game doing badly is also a reflection of how bad the parents are.

But the PSLE's genius is the T-score itself. With one metric, the education system can be bound  to one national agenda and future changes to adapt to the new economy can occur with a simple adjustment to the subject syllabus. This is how Singapore's education system can achieve such ratings with PISA and yet incur so little overheads and explains why we spend so little of our tax payer's money on educating our children.

Imagine administering hundreds of primary schools and  you are not just required to educated these students, you also need to use the system as a sorting machine to ensure that the best secondary school places go to the most deserving kids (and every parent thinks that their kids are the most deserving.) As even the most highly paid management consultants will be hawking a Balanced Scorecard to MNCs, implementing one metric is genius.

Adults, of course, are extremely unhappy with such an arrangement, but society itself is more like the PSLE than we would care to admit. Closer to home in SMU, if a law student scores a GPA less than 3.0, we cannot practice. Another example are dating apps like Tinder and OkCupid. The way men look at female profiles employ one simple metric as well : Men only go for women with good looks. Some of my friends complain that they only get matched with "Pork chops" when the "Pork Chops" at least would be more willing to look at other traits beyond a guy's appearance.

b) The folks who do badly talk about how demotivating the PSLE is but it's become politically incorrect to talk about how much it boosts the self-esteem of students who do well. 

We have a different problem with western liberals in Singapore. Singapore is caught up with it's own form of political correctness which is bordering on Fascism this year. Instead of Black Lives Matter, in Singapore, it is (PSLE T-Score < 220) Lives matter.

I don't disagree with the idea that poor grades should be played down to preserve a kid's mental health, but not a single posting on FB talks about positive effects of doing well in the PSLE.

I am going to provide two alternative perspectives.

One of my ex-colleague's son scored 266 for his PSLE and I sensed a lot of pride in his kid's result. He was quite mischievous, first baiting us into asking by pretending that his kid did badly. I think he earned it because unlike the other parents in his batch of engineers, my friend and his wife focused on coaching his son instead of blazing ahead in his own career. His son's results goes beyond that guaranteed seat in Hwa Chong Institution, it is also an important source of self-esteem for the my colleague who made the career trade-off. It gives a source of self-esteem whenever he encounters his peers who are directors in their respective companies.

My niece has also done remarkably well at 258. My wife's side is Malaysian and my niece is on the way to getting into a IP program. If you think about it, at least the PSLE makes the T-Score a criteria for entering into the best schools. Malaysian Chinese who stay in Malaysia have to do an extra year in secondary school purely for racial/linguistic reasons (This is known as the one year removed penalty mostly imposed on ethnic Chinese). My niece is quiet and shy, and now at least, she has done something significant to give her an anchor to say that she can make it if she puts enough effort to get something done.

Ok, that's all for ranting about PSLE for now as my own exams were over just this morning.


Friday, November 25, 2016

Financial Bloggers meet-up with SGX.

On Wednesday evening, financial bloggers were invited to meet up with SGX over and informal dinner session. This event was coordinated by Timothy Ho of Dollars and Sense, so I am grateful to him for giving me the opportunity to meet up with SGX.

As this is an informal session, I was speaking to the SGX representative as to what she intends to achieve with this session and came away with the impression that they really just want to get to know financial bloggers better and have no desire to really find out where we stand on key issues.

I thought, perhaps collectively, it would be beneficial for SGX to know the following things about us :

a) Financial bloggers are diverse and seldom have achieve consensus on many key issues.

I thought the most important view is that we seldom agree, but we get along really well with each other in spite of that.

Investment Moats have views on which dramatically differ from mine when it comes to transferring CPF-OS to CPF-SA. I think what's more important is to figure out why we have a different points of view and let the public be the judge of that. At the expert level, personal finance is highly contextual and a financial plan is generally bespoke and tailor made for the individual.

I expect a lot of healthy disagreement with my friends in the future.

b) Financial bloggers are often wrong individually, but collectively we can be really smart.

The mark of a great investor to me is how great his investment mistakes are. I scoff at some folks I meet in law school who make bold claims that they would not rookie investment mistakes. A real investor will punch himself quite hard and turn his mistakes into war stories to be shared with others. I certainly still make rookie mistakes.

Individually we can be quite stupid with our investments, but collectively I think we are smarter than any individual CFA-endowed hedge fund managers. Opposing views are shared and the better argument can often win the day.

And I do happily change my mind if some blogger writes a convincing counter argument to my investment idea. The trick is to read as far as possible the volume of articles we product everyday to get an idea of what we are thinking about as a collective hive-mind.

c) Financial bloggers have the ability to say that the Emperor is not wearing any clothes

As more of us gain financial independence, we will become bolder. And,  If I ever get a practicing certificate, I will start helping my bloggers stay out of trouble from lawsuits, that's something I want to do as they made me so much money in the past.

We've always been very candid with the insurance industry, clashing with them with ideas like "Buy term and invest the rest", pointing out the folly of buying Integrated Health Shields and warning buyers away from picking up ILPs.

Over time, this boldness will find itself in our ability to point out the faults in a particular investment without fear or favour. Fund managers and journalists face a lot of career risk when they say negative things about an investment product.  We do face much lower risks when we write our articles.

d) We have no idea on how to help with poor trading volumes.

Unfortunately, due to my exam preparations, I did not think too deeply as to how we can carry this relationship further beyond dinner. But I doubt anyone of us can help SGX with their big elephant in the room which is their problem of low volumes in the stock-market.

To a great extent, financial bloggers love dividends investing is one of the  major reasons why volume was so low in the first place. When I showed my dad how to just invest passively and collect rent every three months with his portfolio, he just stopped listening to his broker and trades no more than 2-3 times every month.

In the dinner session, I have tried to propose that the government increase the amount of leeway some of us can use our CPF to invest in the markets, or loosen up with policing the markets but that is not ultimately within SGX's control.

Readers are encouraged to share their views on how to improve trade volumes in SGX here. I will find a way to consolidate it and share it with SGX.

Looking towards the future, my personal wish is that some of us get to be invited to sessions such as those sessions which discuss dual classed shares, we might be able to contribute positively to the discussion.