Insights

Want more? Wait

In the 60s, Walter Mischel conducted the well known marshmallow experiment to study the effects of delayed gratification. He gathered a bunch of 4 year olds and gave them a marshmallow while promising to give another if they waited 20 minutes before eating the first. He then tracked their progress till adolescence and discovered that those who were able to wait were better adjusted, more dependable and scored higher in tests. The results seem to support the conventional wisdom that willpower and good impulse control are important to succeed in life.

Good things do in fact come to those who wait. Maybe if I wait long enough, I can get an iPad?

Getting the order right

In any business, ultimately the aim is to be profitable. You need to figure out how to make money so that you can break even, expand and keep it running. At the beginning, the order of the day is to save money. Why? You need to figure out how to use less and get more. A trader will buy goods at a lower price and sell for profit to consumers. A barber will charge an amount that he will be able to pay his rent and have some left over for food.

Once you figured out how to make money, the next step is how to spend the money to grow the business. Investing in more goods and a bigger warehouse will allow the trader to increase revenue and generate more profit. The barber can hire helpers to increase the amount of haircuts per hour.

Some businesses (e.g. funded companies) seem to have the order reversed. These companies start with a bunch of cash in the bank normally from investors and venture capitalist. They will hire more people than they need and spend on things simply because they can. To make matters worse, most of them don't really know how they will generate income.

After a few years (if lucky), money will start to run out and the management panics. They will frantically attempt to save money by cutting costs, firing employees and scaling down operations. All this happens because they thought, with the money given to them, they can somehow skip the first step and ignore the whole point of doing business, which is to generate wealth not consume it.

This don't only apply in business. You need to get the order right in things you do. As they say, you can't run until you can walk. And most importantly, don't forget the bottom line.

Will it work?

Everyone has some idea of their own, be it a brilliant business plan or an ingenious way to turn off the lights from their bed. If you have problems coming out with ideas, you should read this post from Seth Godin about fear of bad ideas. You need to come up with lots of bad ideas before you find one that's good. Having an idea is the first and last step for many. Some people are so protective of their ideas that they miss the chance to improve and get feedback on it. An idea is nothing until you turn it to reality.

To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions. - Derek Sivers

Knowing all that, working on an idea takes enormous effort and often requires an unhealthy dose of optimism. If your friends, family and cat start questioning your sanity, you are probably on the right track. No one knows if it will work out or not, so the best way to find out is to try it.

Every really new idea looks crazy at first. - Alfred North Whitehead

If you have some ideas you been wanting to try, stop worrying if they will work out or not and start focusing on their execution.

Altruism

Are we inherently altruistic? Philanthropists donate millions of dollars every year to charity. To understand this behavior, economists designed an experimental game named Ultimatum to see how 2 parties interact when asked to divide a sum of money. There are also variations of the game called Dictator and Trust Game.

Ultimatum - Alice is given $10 to decide how much to split with Ben. Ben can either accept or reject the offer. If he rejects, neither of them get anything.

Dictator - Similar to ultimatum but this time Ben can't reject the offer. This is puts Alice in control hence the name.

Trust Game - Variation of Dictator game. An additional step is introduce before the 2 parties proceed with the Dictator game. Ben will offer an initial gift in hopes of getting more back.

All three games show that we consistently prefer fairness and mostly offer a portion of the initial sum to the other party. But things start to get confusing when an economist named John List tweaked the experiments a little.

Dictator 2.0 - Alice can additionally choose to take a dollar from Ben. This shouldn't matter since most of the time Alice decides to share some with Ben.

It turns out that in this variation, less dictator decide to share and one out of five took money from Ben. What John List has discovered is that, with a little variation to the game rules, he can influence the behavior of the participants.

He didn't stop there and did a bunch of other experiments to illustrate that the results of the experiment is affected by its set-up. You can read more about it in Superfreakonomics. I honestly do not know if we innately altruistic but I do hope you will donate to help the earthquake victims in Haiti.

What really matters

One rainy afternoon, a certain ninja enlighten me with the art of Minimalism. A minimalist strives to live a simple, uncluttered and more sustainable lifestyle by reducing excess, removing distraction and focusing only on the most essentials. Minimalism is about simplifying your life and detaching yourself from unnecessary possessions. The one aspect of minimalism that attracts me is the focus on things that really matters. Once you eliminate all the distractions, wastes and excesses, you are giving yourself the chance to go after your dreams.

So, if you are trying to clock up that 10,000 hours, it might be wise to water down your life with a little minimalistic juice.

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In the book Outliers, Malcolm Gladwell argues that the reason for success lies in the accumulation of experience and practice on a specific task. He said in order to be good and successful at something, you need to spend around 10,000 hours doing it. In one of his research, he discovered a disproportionate number of elite Canadian hockey players are born in the first few months of the calendar year. (e.g. January to April) The reason for this was since the hockey leagues determine eligibility by the calendar year, someone that is born in the beginning of the year will be bigger compared to someone born in December. This is often enough to identify the children as better athletes and once they get into training camp, they get an head-start in accumulating practices and experience. Gladwell refer to this as the accumulated advantage.

If he is right and if practice does in fact leads to perfection, shouldn't you get started on what you always wanted to do and be good at? We don't get to decide which month are we born in but we can decide when we start practicing. The best day to start was yesterday but starting today is definitely better than tomorrow.

The Great Timing Belt

One night, while I was waiting for the auto-gate to open so I can park into the porch, my car engine decided to go to bed before me. Later I found out it has something to do with the timing belt, but the first thing that came into my mind was, man it could have waited till I got my car into the porch. Then as I was heading back to my room, I realized how lucky I was to have it died right in front of the house instead of anywhere else. Being a rational and logical person, I do not believe in luck. Or rather, I do not wish to believe in luck if possible.

A rationalist will argue that I should have replaced the timing belt before it had a chance to breakdown. I agree that I could have prevented the manifestation of bad luck from having my car breakdown in the middle of nowhere. But what about those lucky moments you experience in life like having it break down right in front of your house?

Bad luck don't travel alone

The way to look at this logically would be to consider them coincidence. If something can go wrong randomly, it can sometimes get lucky too. My gripe is that a lot of people do not attribute their success to being lucky. The world is very complicated and so inter-connected that how can you be sure it was all you that made it happened?

So, yes I do believe luck plays a role in both successes and failures. My stand would be try to minimize the chances of bad luck from happening (e.g. changing your timing belt on time) and put yourself in a position that you can enjoy the benefits when the planets decide to align themselves for you but most importantly, never ever rely on it.

Little did I know how a timing belt can remind me of how lucky I am sometimes and how there are things that you simply can't do anything about. The Great Timing Belt indeed.

What are we paying for?

Did you ever stop to wonder why things we buy are priced that way? The hardcover version of a book cost more than the paperback version even though the content is the same. In fact most books are around the same price range regardless who the author is or what's inside. Are we paying for the content or the medium? This is also true for things like CDs, DVDs and even the digital revolution did little to change that. iTunes sells all music at the same price and Rphasody offers a subscription model.

Companies like Apple and Nike know that we are willing to spend on better designs and cooler branding. Occasionally, we'll splurge on innovative products like Dyson vacuum cleaners.

Quite often, the price we pay have little to with the quality or content of the product. Maybe we don't really want to pay for the content or it's just too hard to determine the price . But if you are given a chance to change the price of one thing, what will that be and why?

Choke and Clutch

Picture the final game between 2 top ranked badminton players. (or whatever sports you are familiar with) One of them is leading far ahead and seems to have the championship trophy within reach. All of a sudden, he start to lose his cool and begin missing shots that he been delivering perfectly all night. At the end of the game, he seems to be reduced to nothing more than an average player. In sports term, he choked. Choking is attributed to anxiety and failure to perform under pressure. There are however players that excel in high pressure situation and have the ability to turn things around. As you might have guessed, these are clutch players. Clutch refers to the superior play executed by the player under high pressure which dramatically effect the outcome of the game.

In a high pressure situation, do you clutch and rise to the occasion or do you choke and crumble into failure?

Externality

By now, everyone should know what global warming is or at least heard of it. It's a problem that is hard to solve by nature because pollution is a negative externality.

Externality is the spillover or side effect of an economic transaction that impact parties not directly involved in the transaction

When your neighbour decide to burn their trash, the smoke is the externality. If you tell your kids to never burn in the open, that's will generate positive externality as the society benefits from well behaved citizens.

Our world is so complex and well-connected that each of us generates negative externalities whether we like it or not. If you drive, you contribute to the congestion and air pollution. As I was typing this, power used by my computer, lights and fan might be produced by an air polluting coal power plant somewhere else.

I do not know the answer to reducing negative externalities. Instead I think we should focus on creating positive externalities. If the things we do can somehow benefit some parties somewhere else, I think and I hope eventually that will enough to out-weight the negative effects of our complicated lifestyle.