Betting on our Future

In a world where sentiment plays such a decisive role, is it unlikely that sometimes action is worse than inaction? It’s not a view life coaches would share, but one Warren Buffet might.

Warren Buffett | Image Source

On the last day of 2017, the Oracle of Omaha officially won the wager first placed in 2007 that an S&P500 index fund would outperform a group of hedge fund managers and their fast computers, and he was right. In the end, the fund, consisting of the 500 largest companies on the New York stock exchange, returned an annualized 7.1% versus the 2.2% of his counterparts.

It was a bet originally for a million dollars, but the pool ballooned to over $2.2M over the course of the ten years. In the end, neither party took any winnings. The real beneficiary was the Girls Inc. of Omaha, a non-profit group which became millions richer overnight.

This story isn’t about how hedge funds have no place in finance. In fact, one of the many sensible explanations of this “defeat” is that hedge funds, as their name may suggest, perform better in sluggish markets, but that’s empirically difficult to prove. Maybe the story would’ve been flipped had we experienced another recession in the last few years. But again, maybe not.

I’ll try to describe my thought process here, but take it with a grain of salt.

To me, the first fundamental understanding is that investing is not about chasing the products with the highest returns. To give you an example – My apartment in Vancouver appreciated by over 30% in 2016, but that doesn’t mean we should all be in real estate because it could go the opposite way next year. Therefore, what we care about is not absolute returns but risk-adjusted ones. In other words, how do we achieve growth without seeing crazy high fluctuations?

There are more details here regarding different types of risks, but we can ignore that for now. The bottom line is that based on historical performance, we know that we can eliminate a lot of risks by investing into about 20 large companies of different sector and space. This is diversifying. It makes things easier for us because we don’t have to put all of our eggs into one basket, but we can go even further.

According to Benjamin Graham (Warren Buffet’s mentor), there are two types of investors. One who spends all their time analyzing stocks and watching the news, and the other who has no interest in the market and looks to invest in passive portfolios that require no supervision.

We may be inclined to think that the former is more successful based on the description, but the key here is that we want to be one or the other, and never in between. Since most of us have jobs and obligations that take up our free time, I would argue that we should err on the passive side.

Knowing that, what investment vehicle do we have that is well-diversified (20+ companies) and could free us from any decision making? The S&P500 index fund that Warren Buffet loves is a great place to start. By siphoning a set % of our income into a fund every paycheck when we’re in our 20s, we would be well on our way to leverage the benefits of exponential growth.

Passively managed index funds like the S&P500 are a newer class of investment option that holds an advantage over traditional mutual funds. Not only are we free of the usual 2-3% management fees, index funds have also just outright outperformed against actively managed ones. It’s not that fund managers are stupid, it’s just very difficult to beat the market by the margin of your fees.

For those who want more control of their portfolios, ETFs (exchange-traded funds) are also worth looking into. They are a subset of index funds that trade on the market like any other stock. ETFs represent a basket of stocks/bonds that could track something as high-level as the entire S&P, or something more specific like ‘North American Large Cap Resources’. This way, investors can play around with their macro ideas without having to pick individual stocks.

To sum it up, I think investing (and budgeting by extension) is a skill for everyone. With even a few hundred dollars, anyone can open an online brokerage account and start investing. By buying and holding index funds and not giving a damn about what Trump tweets next, we are already well ahead of many peers earning abysmal returns in their savings accounts.

Nothing is certain and some years will be worse than others, but as long as our investment horizon is long enough, historical performance will skew heavily into our favor.

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Myers-Briggs and the Zodiac

Among the funniest LinkedIn designations I’ve seen on people’s names, the “INTJ” guy probably tops that list. For one, that’s not even a certification. And secondly, I haven’t heard of any half-serious company these days that considers applicants based on behavioral test results.

The good news is that most people now recognize intelligence and personalities as intangible ideas, which leave these quizzes mostly in the realm of online forums. It’s a good place to be for some casual and trivial entertainment, but I think the issue becomes much more troubling once we start to categorically define people through the likes of Myers-Briggs.

In a similar way how a fortune-teller can prime us to see a certain life event as either a negative or a positive, personality quizzes are a self-fulfilling prophecy that governs how we should think and interact. By buying into whatever stereotypes we fit into, we give up some control of our lives.

When I first moved to Canada, my mom was surprised to see that I was a “quiet kid” on my report card. Looking back now, I can say that this was almost entirely attributable to me being in a new country trying to speak a language I didn’t understand. And as I got older and started business school, I realized that I would need to develop myself to have any chance of success. So I started speaking out more while constantly embarrassing myself.

Halloween in Taiwan, around Grade 2/3

I still have ways to go, but I’m convinced that our behaviors are much more fluid than we’d like to believe. We all have the mental capacity to behave differently depending on the circumstances of our environment. As prosaic as it sounds, the challenge for us is to look past the solace in being able to explain away our insecurities and be on the lookout for things that make us better.

Trying to build off of this, I started thinking more about how the developments in my life led me to who I am. If moving to Canada was the first major catalyst, the second one would be growing up in a moderately wealthy family. My parents do a good job of grounding me, but I have an advantage in life that many people (and certainly most outside of North America) could only dream of.

Beyond the freedom to play any instruments or sports, my personality was also immeasurably impacted by this beginning (or as we would say in gaming, accelerated progression). Two things that stood out to me were my risk-averseness and my unmaterialistic attitude.

Playing chess with my brother

I was practicing interview questions with a friend awhile back and we came across one which asks “what is the greatest risk you’ve taken”. It was easy for her, but I blanked out. I babbled on about how I moved between four cities in a span of two years, but I knew myself that it was hardly a risk. Relevant work experience at my age would trump any “risks” of being temporarily away from home.

To weave in a chess analogy, it’s not a sacrifice if you can see a checkmate in 2 moves. The risks are only real when you give up something in return for an indirect advantage that may or may not even materialize in the end. And at that, I was terrible. When your backup plan is to take over the family business and live comfortably, the motivation to drive forward can be fleeting.

The other difference I noticed about myself is my unmaterialistic outlook. The pursuit of wealth is inherently materialistic, but growing up with it is sort of a different story. There are two lenses to see this in, and I think both have equally shaped my life.

Family photo taken a few years back

From a positive side, it’s straightforward for me to disregard material ownership as an indicator of someone’s character because I grew up more or less indifferent to what I had. By not placing a value on my own things, I don’t see anyone else’s any differently. This in turn helps me focus more on myself and my interactions with others as the basis of all relationships.

On the opposite end, this perspective also meant that I can be very wasteful. As my girlfriend or roommate would tell you, I leave unfinished food on the table, lights and heater on when I step out of the house, and buy things spontaneously that I would barely use. I don’t do it on purpose, but I find it to be an active decision to remind myself that this is something I need to do.

When it comes to nature vs. nurture, my experiences skew heavily towards the latter.

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Menlo Park, California

View of the Golden Gate Bridge from Marshall Beach

Since moving down to the Bay Area over two months ago, my natural impulse has been to caveat my ignorance of the neighborhood by sheepishly explaining that I was new to the city. And 9 times out of 10, the conversation would continue along these lines:

Them: Oh cool! Where did you move from?
Me: Vancouver… in Canada! (sensing their hesitation, I would add).
Them: Nice, how do you like it here?
Me: Well – it’s definitely a lot warmer.

As far as small talk goes, this is an easy one for us Vancouverites. There is just so much material to work with: the lack of sports teams, the skyrocketing costs, and of course, the terrible weather.

I would then get a polite chuckle out of the Raincouver pun, and there began my limited social life.

On the whole, I’ve really enjoyed my time here so far. It’s not without its flaws, but between a pretty interesting job and a much healthier lifestyle, I think California is a great place to live in at this point in my life.

My small tank ft. Touchdown Tom

Here is a tally of my “2-month accomplishments”:

• 64 episodes of Netflix (Stranger Things!)
• 19 tennis meetups
• 16 home-cooked meals (Blue Apron)
• 5 trips to San Francisco
• 1 functional fish tank (ft. Touchdown Tom)
• 1 semi-functional used car

After spending a summer in Asia where all I did was eat out and drink bubble tea, playing tennis consistently was a nice change. The lack of take-out-friendly restaurants also forced me to cook more, which my girlfriend assured me was a good idea (I’m not so convinced).

What I am still trying to figure out, though, is how these two cities are different. They’re often compared because of their diverse population and beautiful geographic features (oceans, beaches, mountains), but I think each has its own fundamental and subtle characteristics.

The first distinction is the type of people that San Fran attracts. It’s debatable if the area can still be considered as the hub of the new American (start-up) dream, but there’s no denying that it’s an appealing place for young adults. Being here means that the people you meet are more career-driven, more open to new ideas, and less clique-y with their circle of friends.

The beautiful AT&T park during Discovery Day

Looking past the people, San Francisco is also a more dynamic city than Vancouver with its deep history of sports and cultural events (museums/festivals/concerts…). The fisherman’s wharf alone I think offers more than the measly two blocks that is downtown Vancouver, while the AT&T park that hosts the San Francisco Giants is a venue really with no parallel.

Presidio and the Golden Gate Bridge are somewhat comparable to Stanley Park, but San Francisco has a bit more interesting neighborhoods to stroll through such as Hayes Valley and Mission. Both cities have their respective sketchy neighborhoods in Tenderloin and East Hastings, but I’m not rating them b/c of insufficient exposure (thankfully).

Now – onto the not-so-fantastic. (A quick reality check stopped me from saying bad).

Sunset at Lands End with Minyoung!

For all the things the Bay Area is, it’s not a city on its own. The 101 highway freeway connects a number of cities along the bay, including Menlo Park where I live. Because places are so scattered, it’s very hard to find good areas to eat or hangout without going to the city. There are nice spots along the way, but it’s missing something that holds it all together. The inconvenience also extends to driving in traffic here, which is different hair-pulling experience.

The accessibility issue can sort of be circumvented by living closer to the city, but then you’d run into the crazy housing market. Vancouver is also way up there with its housing prices, but I think San Fran edges out a slim victory here. I pay US$1300 (a lot of CAD) for a 2BR with my roommate to live near the ex-murder capital of Cali – East Palo Alto.

Oh and forgot to mention, damn expensive toll bridges everywhere.

Hopefully not lost on me in all of this is the recognition that for all the praise that this city gets, we live in a left-leaning, tech-centric community plagued by issues of sexism and inequality. The honeymoon period had past for most and many of my co-workers are talking about moving away. I’m not in that position right now, but I agree that the fascination here is at least a little overblown.

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BCom in Review

Some nights when I get tired of flipping between tabs, I think about how differently my life might have been. It serves no purpose other than to feed my curiosity, but at least that’s more interesting than winning imaginary arguments against my mom (I think).

There were always little thoughts like wondering about which university I’d go to if we moved to a different city, or about how I might’ve taken up engineering if it wasn’t for my brother. But what really stuck with me was noticing how much of my life is out of my control. If it wasn’t for a series of decisions that my parents made, from immigrating to Canada to taking entrepreneurial risks for our financial freedom, I would not be writing this today. I was lucky and born into the right family.

Me and the handsome Jin Lee in Toronto

In light of all the could haves and the might haves, May 2017 marks the end of my UBC education in at least one instance of this multiverse – a place where I spent 6 years to study, work, and travel abroad. It’s hard to say if delaying my graduation was a good idea, but knowing my risk averseness towards being unemployed, I really can’t argue against the outcome.

This is not meant to be some analogy of the road less taken, but more of an entry for myself about my experiences, what I’ve learned, and my sense of the world as a 24 year old.

Overall, I would describe my education as some weird exponential function where I spent the first few years sucking on my thumb clueless and the rest of it playing catch up. I saw the passing grade as a testament to my “progress”, without realizing that I couldn’t retain or apply any of it since my learning habits were so short-sighted. These were the years I wish I could have back.

Looking all tense before skydiving 🙂

In hindsight, what I did in my first few years had very little bearing on my future. Beyond meeting the requirements for my major, I am sure now that I had all the time in the world to explore other interests in academia and student communities. Rather than choosing course work based on “GPA boosters” and convenient timetables, I wish I continued with poli-sci and creative writing past the introductory levels and maybe joined a leisure club like UBC StarCraft.

The turning point of my degree was probably when I decided to delay my graduation. It felt like pressing a panic button where under the guise of going on exchange and Co-op, I got myself a few extra semesters. Needless to say, I ended up with way more than I bargained for. Not only did I get something to put on my resume, the extra time added context to almost everything else I did.

Looking back at all the site visits I had (where someone from the office visits the employer to make sure we’re not destroying the school’s reputation), one question I hated being asked was this: how did Sauder prepare you for success in this role. I hated it because it felt like I always had to spin an answer that amounted to “I don’t know…”, and I’m pretty sure that’s not the right answer.

The reality is that there is something there. I just didn’t know how to explain it because I couldn’t attach it to a course number or an extracurricular commitment.

To me, the most important thing that UBC taught me is learning how to learn. I don’t remember much from the courses I took, as my professor prophesied in Econ101, but I know that studying became gradually easier and was taking up less time. I learned that note-taking wasn’t my strength, and that I’m better off thinking in the showers than staring at my binder.

This was a key for me because the luxury of knowing exam dates doesn’t apply in real life and that we’re often asked to come up to speed as soon as possible. Therefore, it’s almost essential to know how to digest information and be useful. To quote from an earlier post: employers today don’t rely on what we know, but our capacity for learning.

Sukiyaki (?) with my dorm mates in Tokyo

That was the first thing. The second light bulb is recognizing that effort does not equal results. In school, study hours will likely have a linear relationship to grades because of how courses are, but that’s not true anymore. I shouldn’t try to “out-study” my competition because being successful at my job is much more dynamic than being “smart”. There will always be someone better at certain things, so I should aim to prioritize my time and play to my strengths.

The advantage of being in Co-op is multiple, but probably none more important than getting an easy transition to the working life. I worked over 20 months in full-time positions while in school, and so graduating was far less anxiety inducing. I look forward to the long summer break I’ll have, but I will be refreshed and inspired to take on the world.

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Carl Sagan – Contact

(A Book Review)

There is probably as much science in science fiction as there is in Scientology.

But if you can get past that technicality, it’s hard not to appreciate the breadth of this genre. Sci-Fi is a staple in modern literature that uses the premise of a far distant future to highlight challenges beyond our current horizon. Contrary to its name, it is seldom about science. Instead, it depicts an alternative version of our world which urges us to think creatively about our future.

Carl Sagan’s Contact is no different. It follows a similar setup as many other Sci-Fi novels, but has a definitively different focus and feel. The basic premise is straight forward – A scientist working for SETI discovers a signal one day from a nearby system containing a manual for what appears to be a transportation device. The world then erupts over disagreement on what to do with it, which leads to international turmoil and great political/scientific maneuvering.

The book is conveniently divided into three parts: the Message, the Machine, and the Galaxy.

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Image Source | The novel and the 1997 movie adaptation

What I liked:

  1. Ahead of its time

For a book published in the 1980s, the use of a female protagonist in a science-heavy role was a bold move. I’m sure it was Sagan’s intent to push back at sexism in science, but he nonetheless created a very relatable character in Ellie Arroway. She was strong enough to stand on her own, but not so overwhelming as to dwarf the competence of others. I thought that was a nice balance especially given the large gender divide in STEM fields today.

  1. Dynamic perspectives

For a lack of a better word, this novel did a fantastic job of taking an extraordinary event and using it as the basis to analyze various social and cultural behaviors. In particular, the book highlighted a number of themes that are fresh to the Sci-Fi genre: the relationship of science and religion, how governments jockey for position, how science can be communicated to the public, and so on.

The number of themes may feel overwhelming at times, but each idea was sufficiently concrete to be viewed independently. Sagan also took a very realistic approach to the themes above, which at times equals less-than-exciting narrative. For example, the fact that signals travel extremely slow meant that it took years for a coherent message to even come through.

  1. Beautifully written

Not to be overlooked amongst all the substance is a beautifully written book. When I usually read novels that have certain elements of suspense (Dan Brown, Agatha Christie…), I tend to skim parts fairly quickly to find out what happens next. Here, I found myself re-reading passages because of how elegantly they were written. Words alone certainly can’t portray the beauty of our planet, but reading Contact left me in awe of the vast space we look up into.

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Image Source | A scene from the movie

What I didn’t like:

  1. A little fantasy would be nice

For all the detailed analysis of probable scenarios under such an unexpected event, there were also numerous parts in the book where a little imagination was allowed. In particular, the third section of the book titled “the Galaxy” could have been a playground for experimental ideas. But instead of hypothesizing on how unearthly things could work and look, Sagan took a more conservative path that left me a little disappointed.

Sagan’s background as an astronomer may have discouraged him to take a leap from reality, but I think the appetite for it would have been all right given its very Sci-Fi appeal.

  1. The balance of science and art

A combination of Sagan’s background with the books arguably bloated number of themes meant that the read can be dry at times. And while I can appreciate the detail in explaining the complex themes around politics and governments, the actual scientific explanation for some of the cosmic observations were way beyond me. I skipped those parts.

Rating: 7/10

To sum it up – Carl Sagan’s Contact is a book that really can’t be spoiled. The entertainment value of it doesn’t come from a clever twist towards the end, but with Sagan’s take on how the public, the governments, and the scientific communities will behave.

I mentioned in the beginning that Sci-Fi is often a forum for abstract discussions of our future. To that end, Sagan was outstanding. The discovery of a message is very conceivable (compared to an invasion of alien fleets), and the resolution was both satisfying and insightful.

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