28 February 2010

Weakness Is Not Hypocrisy

"Desires give birth to sin. When sin is allowed to grow, it gives birth to death." James 1:15
One temptation that I have trouble controlling is sugar. I love chocolate and Coke. When I was a little boy I admit I was addicted to processed sugar. However, as a young adult I believe I have controlled my desires well. I still have refined sugar every now and then but much less than before.

I was having light refreshments after a seminar a few days ago and someone offered me a can of Coke. I refused it, saying I didn't want to have any refined sugar. The person then accused me of being a hypocrite because he saw me drinking Ribena--which has refined sugar in it--weeks earlier.

He said, "How can you say you don't drink sugar when you drank Ribena three weeks ago? You are a hypocrite."

I admit that I have temptations and I don't always succeed in suppressing my desires. However, this does not make me a hypocrite. To be a hypocrite is to pretend you have an opinion that you don't have. My opinion or policy is that I want to try reduce how much refined sugar I have. Just because there is a moment of weakness and I have some sugar it does not mean that I didn't try to not have it.

The same applies with savings.  I try to avoid spending on things that are not necessities but that does not mean I do it all the time. I try to do it.

A good analogy I like to use is to compare myself to an athelete who tries to run one kilometer as fast as possible. Quick and dirty Googling reveals that the world record for running one kilometer is 2 minutes and 23 seconds. An athelete may train hard and try to beat that record. Just because a particular athelete tries to beat the world record and insteads runs a kilometer in 3 minutes, does that make him a hypocrite? Instead of disrespecting him for his failure, why not respect him for his effort?

In a similar way, when I try to reduce spending on luxury items or reduce consumption of refined sugars, I am like an athelete trying to achieve a personal goal. Just because I have 5 grams of refined sugar in one particular day instead of the goal of zero grams, it doesn't mean that I shouldn't keep trying to reduce my refined sugar intake.

When my friend at the seminar claimed that I was a hypocrite, he tried to argue that I should drink Coke, that I should give in to my desire to have sugar. Just because you fail in an attempt to reach a goal, does it mean that you should give up and just give in to failure? You could, but then you miss out on the benefits of the goal you are trying to achieve. The athlete could give up on his attempt to run faster, but then he would miss out on the gold medal. I could give up on my goal to reduce my refined sugar intake, but if I do that there is a risk I may become fat and suffer from cardiovascular diseases in the long term like stroke or heart attacks.

27 February 2010

Blind Optimism

A 17-year-old has gone to the Invested forum and posted his goal of being a millionaire by 20:

I'm 17 years old and I have a goal of making one million dollars before I turn 20. That gives me just under 3 years.
...at the moment I am interested in learning about the share market and trading silver and gold.
Quite a few people told him being a millionaire by 20 is extremely difficult and he would likely have to do risky things, e.g. borrow money from the bank to trade gold.

However, what surprised me was the number of people who lept to the kid's defense, saying that his ambition was admirable and that he should forget about those who warn him of the dangers and go to the goal regardless of the risks.

This is like a drug lord asking you to transport heroin from one country to another. The drug lord claims he will pay you $250,000 if you transport the drugs, but if you get caught by police you may spend decades in prison or, in some countries, be executed. The drug lord will use all the same arguments: forget about the risks, aim high, you can do it, etc.

My point is that it is important to not be blindly optimistic and ignore the risks that other people may point out to you. Suppose you have a desire to commit a crime that may profit you immensely, but the risks may put you in prison. Some people who know about your criminal plans (e.g. your parents) may try to warn you not to proceed with the crime. The idea that you must believe in yourself, ignore everyone who says you cannot do it, and just do it regardless of the risks, is very dangerous.

If a friend of yours decides to transport heroin from one country to another (i.e. be a drug mule) and you try to discourage him because of the risks, and it actually turns out that your friend is successful and scores $250,000, it doesn't mean that your trying to discourage him was somehow wrong. You notified him of the risks. It also doesn't mean that you suffer from tall poppy syndrome because your motive for notifying the friend of the risks may be because you are concerned about him. The risk-return tradeoff is a fundamental concept in finance theory. It pretty much states that in order to make a lot of money you will have to take on much more risk. Just because a person can cite a story of a successful drug mule who is a millionaire from all the drug trafficking he has done, it doesn't mean the risk-return tradeoff is disproven. If a potentially lucrative activity is risky, for all the success stories you can find you will be able to find hundreds of stories of failure. If you hear of a story of a millionaire who won the lottery and you think that buying a lottery ticket is a worthwhile path to riches, you should balance this idea with the stories of the millions of lottery ticket holders who do not win and spend their lives buying lottery ticket after lottery ticket hoping they could win.

My main point is to have a goal but to be mindful of the risks. An appropriate risk management framework is essential for most businesses, so why shouldn't an individual think about risk?

21 February 2010

Heroes vs Villains Ep 2 - The Importance of Leadership

This blog post contains Survivor spoilers.

CBS has started putting HD versions of Survivor Heroes vs Villains on Youtube, which I think is good because it allows me to watch the season from Australia. Watching the season on CBS does not work because, for some reason, CBS does not allow non-US citizens to watch their shows, which to me makes no sense because CBS is reducing the exposure of their shows and thereby are reducing potential advertising revenue.

The contestants in this season of Survivor come from previous seasons. They are divided into two tribes: Heroes and Villains. The Heroes tribe are players who are thought to play the game with integrity and honor while the Villains are amoral, deceptive, backstabbing, and so forth. Clearly everyone has a different opinion on what constitutes a hero and a villain. In my opinion, Cerie Fields, in the Heroes tribe, is a villain. In terms of physical strength she is very weak but has shown through her history of playing Survivor that she is good at staying in the game for a long time by making alliances with other weak players and voting off stronger players. I also think that another Heroes tribe member, Amanda Kimmel, is a villain. I also thought it was surprising that Coach (real name is Benjamin Wade and also known as the Dragon Slayer) was put on the Villains tribe since he makes a big deal about playing the game with honor and integrity. Nevertheless, the name of a tribe or team makes little difference. There is no doubt that members of the Heroes tribe will have to resort to villain behavior.

Episode 2 of Survivor Heroes vs Villains showed that leadership is important. The Villains tribe yet again won the immunity challenge because their leader Rob barked out orders and everyone followed. In the Heroes tribe, J.T. the leader in charge of the challenge, barked out orders but his subordinates dissented and argued back. Based on my experience at work and in life in general that strong leadership (or even dictatorship) is efficient. Last year at work I was put in a team of four people to do a project. The team decided that we didn't need a leader. What ended up happening was that nobody did much work because nobody knew who was responsible for what. Without a leader telling them what to do, they resorted to doing nothing. Hours was spent in meetings just talking and debating what needed to be done. Eventually the work was completed but the quality of the work was quite bad. Luckily for us the project was not that important for the organisation. Next time I am in a similar situation, at the very beginning I will step up and say, "Guys, we need to elect a team leader. Does anyone want to volunteer?" If there are multiple candidates, then I suggest a vote. If there is only one person who wants to be leader, that person is leader. This even works for non-work situations. For example, during a Friday night when my friends and I are walking around in the city trying to figure out where we should eat, some people prefer one place and other people prefer another place. The arguments and debating can go on forever and nothing can be done. At times I have said, "Let's elect a leader who will decide where we will go."

Anyway, back to Survivor. After the Heroes tribe lost the immunity challenge, they decided to vote off Stephenie, the person who dissented. Even though she dissented I believe that they should have voted off Cerie instead since she is clearly the weakest in terms of physical strength. Stephanie's mistake with dissenting can be fixed quickly but Cerie's physical weakness cannot be quickly fixed.

Update 21 March 2010: Based on a secret scene I watched, even though JT was leading the Heroes in the immunity challenge, Tom claimed that he didn't know what he was doing and asked for help, after which Stephanie decided to step up and help.

13 February 2010

Living the Simple Life - Reducing Food Costs

This family is excellent at keeping costs down. They grow their own food, use solar power, buy second-hand clothes, and use biodiesel. They don't need to worry if energy prices go up.

I don't take detailed notes of what I spend my money on (I plan to start actually taking note of what I spend) but I have made the following estimates:

By far my biggest costs are the cash I pay to may parents as informal payment so that they in return let me live in their house and food. Food is really an area where I can cut a lot of fat because this food cost is actually due to me eating out at work at restaurants. I could get my parents to make me food from home but the food they make does not taste good. I don't blame my parents for making bad food for me because it is not their responsibility nor do they necessarily have much incentive to do so. I am trying to cut costs and as such I should expect poorer quality goods. It is also difficult for me to decline an invitation by co-workers to eat out because I have packed my own food from home. The type of people I am friends with at work like to eat out.

One strategy I have adopted to reduce food costs is to never buy any drinks and to drink water instead. I really hate it when restaurants serve disgusting water in disgusting cups. In order to be hydrated I keep a water bottle on my desk and refill it with free water at work.

Nevertheless, I estimate my monthly cost of living currently to be around $555, which is pretty reasonable. I could probably do better. Passive income produces around $260 per month, so the shortfall is made up for with my income from work.