May 22, 2011

more kneejerk reactions in singapore

by stillinnewyork

What a sight to behold. After the sea-change that is the recent general elections, we first had the very dramatic resignations of MM Lee Kuan Yew and SM Goh Chok Tong, seemingly without consultation with the cabinet or even PM Lee. Then when unveiling the new cabinet, PM Lee announced the retirements of DPM Wong Kan Seng, Minister for National Development Mah Bow Tan and Minister for Transport Raymond Lim – those deemed responsible for the election hot topics of housing, public transportation and Mas Selamat. Now a committee is being set up to review ministerial salaries, yet another sore point for many Singaporeans.

1) It is important to review ministerial and civil servant pay

But not for the reasons that voters gripe about. If spending $45million on cabinet salary helps reduce risk of corruption and attracts the best talent, it is but a tiny price to pay for the country’s future. Any good businessman would make the same decision (assuming the former brings the latter). However, there are problems with our current pay scheme.

The first is that extremely high ministerial and civil servant pay shifts incentives in a negative direction. A highly paid permanent secretary drawing more than a million Singapore dollars a year is strongly incentivised to minimise mistakes. Their primary concern becomes career risk. Why would anyone challenge their superiors when they risk losing their sinecure. As a result you breed a group of yes-men. True visionaries that the country needs needn’t apply (they certainly lose any incentives to ‘do the right thing’).

The second reason is more nuanced and less discussed – high pay breeds internal discontent and unhappiness within the civil service. The Singapore civil service is split into an elite core (administrative service) who are the designated leaders and the rest (professional service). Officers in the former are on the fast track, with a significantly higher pay and performance bonus than their peers who are not. A junior officer can thus make more money than his superior by virtue of being in the administrative service. Conversely, if you are denied admission into the admin service (one gets a few tries) your career in the civil service is capped. This unhappiness/rift within the service itself isn’t mentioned in the press, but is and will continue to be a structural fault that hampers the service.

Finally, high pay creates easy targets. When you are paying a minister more than $100k a month (which many Singaporeans cannot dream of making in a year), you create unrealistic expectations of perfection. This is not conducive to constructive dialogue. Consider the situation of Tin Pei Ling. Nevermind her competencies (or lack thereof) – this is a hard problem for voters to ‘solve’, so they don’t (has anyone bothered to review her 6years of work in grassroots?). On the other hand, it is plain for all to see that she is 27, will earn $15k a month tax free as a member of parliament (what she has implied may be a part time gig), while most Singaporeans themselves are not. How can they not be infuriated? Status at work again.

2) However it won’t win votes
As the saying goes, a stitch in time saves nine. This is not to diminish the importance of a pay review, but populist effects are questionable at best.

This is typical Singaporean logical response by the government. Concerns that old guard is still running the show in PAP? Fine, they announce their resignation. Unhappy with housing and transportation? Okay ministers are retiring. Minister salaries obscene? Sure let’s put together a committee to review them. But what are the underlying causes of the dissatisfaction? Is it PAP arrogance? Do citizens feel like that are being treated as idiots and cogs? Perhaps it is the power that social media and technology has transferred to the masses via information and connectivity? Something else? Most probably all of the above. Until the PAP starts understanding the subtext of citizens’ dissatisfaction, they are pushing at strings addressing election talking points.

The good thing is they have 5 years to find out and respond. We’ll see how they perform.

May 20, 2011

rationality, linkedin, glencore, politics

by stillinnewyork

Mark Thursday 19th May 2011 as the turning point. Two of the most closely watched companies IPOed -> LinkedIn was underwritten at $45/share, opened at $85 (%86? %87? I don’t know) and touched $120, or up 160% at one point. Glencore, on the other hand, opened at 530p, struggled to touch 550 (when analysts were calling a 5-10% pop) and has since been flirting around the underwritten level.

LinkedIn’s emphatic price action stirred the new media – tweets, blogs and an incessant stream of comments on facebook from new experts on tech sector. The noise aside, I liked this Buttonwood column on the rational man

AS LinkedIn closes its first day of trading on a valuation of 36 times sales, some of us can feel a wave of nostalgia coming on. Restricted float? Yep. Only 10% of the stock was on offer. New valuation method? Check. The FT says the stock is valued at “more than $100 per user”. Remember “price-per-click” and all that nonsense? It is possible that your blogger is listed as one of those users; I had to join once to try and track down the landlord of some noisy neighbours. The revenue LinkedIn has (and will) generate from me is zero, save if it sells my name on a mailing list in which case the purchaser of that list will face a disappointment.

Back in 1999 and 2000, of course, it was argued that dotcom mania wasn’t a bubble because investors were rationally pricing in the future growth prospects of the companies concerned.

But who are these rational men? The London Times today reports that Harold Camping, a former engineer and radio preacher, is predicting that the world will end tomorrow (rather a blow for those who bought LinkedIn shares) after a massive earthquake in New Zealand. All this was forecast in the Bible, Mr Camping has calculated, written a couple of thousands of years before New Zealand was discovered by Europeans and given that name. Some calculation.

Now, of course, these kinds of eccentrics come around quite regularly. More alarming was the paper’s report that

30 to 40 per cent of (Americans) regularly tell pollsters that the Bible contains a specific timetable for the end of the world

If you believe that, a price-per-user ratio of $100 may seem quite reasonable. Now some academics would argue that there may well be naive investors in the market but they merely provide the cannon fodder for the smart money that drive prices back into line. But Sir Isaac Newton also thought he could calculate the end of the world by analysing the Bible text. He also lost a fortune in the South Sea Bubble.

So if one of the smartest men in history can be that irrational, what does that say about the rest of us?

Indeed, what does that say about the rest of us. Brings me to my topic du jour, du mois, de l’annee – how is democracy rational or optimal? Consider this treatment by Bryan Caplan, the gist of which is this:

The data — along with personal experience — have convinced me that the political scientists are right — no matter how much you know about a voter’s material interests, it is hard to predict how he is going to vote.[7] In contrast, if you know what a voter thinks is best for society, you can count on him to support it.

Before we can infer that the policies that are best for society will actually prevail, however, we have to add the very assumption I am challenging: that the beliefs of the average voter are true. If his beliefs are false, his good intentions lead him to support policies that are less than optimal, and possibly just plain bad.[8]

In other news, 1 in 5 Americans think the Sun revolves around the Earth. Trust these people to run economic policy? No can do.

(oh by the way I think both Glencore and LinkedIn price actions point towards a frothy market ripe for a correction)

May 20, 2011

PAP bloodletting

by stillinnewyork

2 days ago PM Lee Hsien Loong announced the new cabinet for the next parliamentary term. Most prominent were the retirements of DPM Wong Kan Seng, Minister of National Development Mah Bow Tan and Minister of Transport Raymond Lim. They had apparently told PM about their desire to step down even before the GE, so now is the appropriate time for them to exit the scene gracefully. PM Lee also thanked them for their contributions to Singapore.

Obviously, it escaped no one’s attention that they helmed the ministries responsible for some of the hot topics in the past GE – Mas Selamat’s escape, rising cost of housing, bursting public transportation system.

This is a chilling turn of events. They could of course have signaled their desire to step down. But what if this was a reaction to the elections, a necessary consequence of having lost popular support by infuriating voting Singaporeans? Consider Raymond Lim, who has only served 1 full term as Minister for Transport. Is the transport situation really his fault? For one, infrastructure works are multi-year projects, so perhaps we should punish his predecessor? Neither does it come free. If it turned out that Ministry of Finance had turned down their budget requests, should we sack the finance minister as well? Finally, what control does he have over the country’s immigration policy, arguably the biggest cause of congestion in the country?

We are on slippery slope. The words of Robin Hanson echo my thoughts

They [our descendants] will be amazed … [at] how we preferred a political system, democracy, designed to emphasize the hardly-considered fleeting delusory thoughts of the median voter rather than the considered opinions of our best experts.

May 16, 2011

Dominique Strauss-Kahn theories

by stillinnewyork

Some observations about the Dominique Strauss-Kahn arrest through the lens of human nature

1) Media presumption of guilt not innocence
That the initial media coverage of the incident leaned negative there is no doubt. More interestingly, why did the media, one that is largely liberal + jewish choose to take down one of their own? After all, DSK is a high-status jewish socialist male. Presumably, humans’ need for association with high status should at the minimum have granted DSK the assumption of innocence.

Unfortunately, the narrative pitted DSK, a high-status overlording male against the lower-status, fairer sex 32-yr disadvantaged black chambermaid. When you have so uneven a match, our underdog-supporting instincts cannot help but rear itself. Plus the reality that causes for women (against sexual violence in this case) are distinctly high-status in the feminist liberal world that we live in, naturally we line ourselves up this way.

DSK 0 : High-status seeking behaviour of humans 1

2) Le Grand Seducteur?
DSK is known as Le Grand Seducteur for a reason. He has been accused previously of sexual harassment, had an affair with a subordinate at the IMF and apparently frequents swinger clubs in Paris. A veritable womaniser, and he has admitted as much.

Seduction is a game. As anyone who has ever played a competitive game knows, satisfaction derives as much from winning as it does from the skillful decisions taken that brought the win. It is because winning implies mastery and superiority over one’s opponents (through the clever decisions we made) that we feel such a sense of joy when it happens. Conversely, someone who wins by cheating, while savouring the victory, cannot shake away the chilling knowledge of his deception (and hence non-superiority).

If DSK is indeed Le Grand Seducteur, he would never favour coercion over seduction (the ultimate of games). Where is the pleasure in that?

3) Other incongruencies
That he would try to rape a chambermaid (instead of using more gentle techniques) is unconvincing but possible. To imply that he was in such a hurry to leave that he left behind his cellphone, yet had the composure to check himself out of the hotel, then have lunch with his daughter, before calling the hotel about his misplaced phone before his flight just sounds incredulous. And this risk, for a man at the top of his world who’s soon to announce his bid for the French presidency. Doesn’t this sound positively imbecile?

When the news first came out, the media lined up the details nicely to point at guilt. The rich luxury-loving womaniser, with a history of dalliances and missteps, attacking a helpless chambermaid, before fleeing in such a hurry that he left behind his cell phone in order to catch the first flight back to France. I am ashamed to say I was convinced. But seriously, if he needed to get out that urgently, did he have to wait 4 hrs to go to France? Just get the hell out! It doesn’t matter where!

4) Finally, does this look like someone who is guilty to you?

Arrogant yes. Pissed off for sure. But guilty?

Verdict: there is more than meets the eye. Stay tuned for more scenes of human nature from this fascinating drama…

May 15, 2011

rulers vs ruled

by stillinnewyork

Buttonwood at The Economist has this post about the ironies of the Dominique Strauss Kahn arrest – living quite the high life for a man charged with enforcing austerity and fiscal prudence as well as representing the socialists. To be honest I don’t find any of this surprising – ultimately humans are first and foremost self-interested, and seek to maximise their own utility. Even the most noble of us have powerful skills that allow us to rationalise away hypocrisies when it applies to ourselves.

In the same vein, the ruling elite have much more in common with their political foes than they do with constituents. There are many social markers in society, race, language, religion, etc. Perhaps the most powerful might be status. If you think Sarkozy identifies with the pig farmer in Brittany more so than with Berlusconi or Merkel, you are mistaken. Likewise, you are naive if you believe that Singapore’s burgeoning opposition will forever be in touch with the people. They too will change as they grow in power. Champions of democracy in Singapore, be careful what you wish for.

May 14, 2011

in charge till the end

by stillinnewyork

Much has and will be said about MM Lee Kuan Yew and SM Goh Chok Tong’s decision to retire from the Singapore cabinet. It will be interesting to speculate on the consequences, although we will never have the counterfactual to validate the views. I wonder if this was a unilateral decision made by MM and SM, or if PM Lee and his core team chose to retire their elders, but granted them the dignity of deciding upon their own exit. I guess the former. Notice the characteristic unapologetic tone.

MM Lee Kuan Yew and SM Goh Chok Tong to step down from Cabinet

We have studied the new political situation and thought how it can affect the future. We have made our contributions to the development of Singapore. The time has come for a younger generation to carry Singapore forward in a more difficult and complex situation. The Prime Minister and his team of younger leaders should have a fresh clean slate. A younger generation, besides having a non-corrupt and meritocratic government and a high standard of living, wants to be more engaged in the decisions which affect them. After a watershed general election, we have decided to leave the cabinet and have a completely younger team of ministers to connect to and engage with this young generation in shaping the future of our Singapore.

But the younger team must always have in mind the interests of the older generation. This generation who has contributed to Singapore must be well-looked after.

The last sentence amuses me. If we go by MM’s evolutionary and pragmatic tendencies, we needn’t care for the older generation anymore, since they can no longer contribute…

May 12, 2011

“Nothing In Life Is As Important As You Think It Is, While You Are Thinking About It”

by stillinnewyork

I like Daniel Kahneman’s take on the question “What scientific concept would improve everybody’s cognitive toolkit?”. He talks about the focusing illusion, where humans overweight the importance and impact of an event, relative to its likely impact (in the grand scheme of life). This ties in with the near-far effects that Robin Hanson has written about.

Evolutionarily speaking, I can see how the illusion has been useful. Suppose there are 2 groups of humans. The first can rationally value having a million dollars at its ‘fair value’. The second group overestimates the utility. You would expect that the second group would thus be more ‘motivated’ on average to achieve this goal. Obviously some will fail trying, and the ones who succeed will realise they get less utility than they thought. But this is enough to confer an evolutionary advantage on group 2. Gene propagated!

Relatedly, we see politicians exploiting this human tendency in the latest elections in Singapore. MM Lee’s dire warning that Singapore would fail if the opposition gained power, WP’s clarion call for a ‘first world parliament’, numerous cries against the hefty pay of ministers. These matters are important, but politicians exaggerate their consequence to serve their own cause.

Not surprisingly, we see the same characteristics in the financial markets – the death of the US dollar, the demise of the euro, the inexorable rise of China and BRICs, etc. Fertile hunting grounds for the rational investor with long term capital.

“Nothing In Life Is As Important As You Think It Is, While You Are Thinking About It”

Education is an important determinant of income — one of the most important — but it is less important than most people think. If everyone had the same education, the inequality of income would be reduced by less than 10%. When you focus on education you neglect the myriad other factors that determine income. The differences of income among people who have the same education are huge.

Income is an important determinant of people’s satisfaction with their lives, but it is far less important than most people think. If everyone had the same income, the differences among people in life satisfaction would be reduced by less than 5%.

Income is even less important as a determinant of emotional happiness. Winning the lottery is a happy event, but the elation does not last. On average, individuals with high income are in a better mood than people with lower income, but the difference is about 1/3 as large as most people expect. When you think of rich and poor people, your thoughts are inevitably focused on circumstances in which their income is important. But happiness depends on other factors more than it depends on income.

Paraplegics are often unhappy, but they are not unhappy all the time because they spend most of the time experiencing and thinking about other things than their disability. When we think of what it is like to be a paraplegic, or blind, or a lottery winner, or a resident of California we focus on the distinctive aspects of each of these conditions. The mismatch in the allocation of attention between thinking about a life condition and actually living it is the cause of the focusing illusion.

Marketers exploit the focusing illusion. When people are induced to believe that they “must have” a good, they greatly exaggerate the difference that the good will make to the quality of their life. The focusing illusion is greater for some goods than for others, depending on the extent to which the goods attract continued attention over time. The focusing illusion is likely to be more significant for leather car seats than for books on tape.

Politicians are almost as good as marketers in causing people to exaggerate the importance of issues on which their attention is focused. People can be made to believe that school uniforms will significantly improve educational outcomes, or that health care reform will hugely change the quality of life in the United States — either for the better or for the worse. Health care reform will make a difference, but the difference will be smaller than it appears when you focus on it.

May 10, 2011

persuasive and leading arguments by WP

by stillinnewyork


The Worker’s Party successfully defined an identity for the Aljunied voters that resonated – that of an intelligent, educated and equal electorate that cares about the future of their country and wants to do their part. For voters who saw in themselves this likeness (and many did), it would have felt extremely incongruent to vote PAP. PAP after all is associated with arrogance, prescriptive/non-consultative policies and elitism, notions antithetical to how they see themselves and how they would want to be treated (as intelligent equals).

How did the PAP counter the opposition? By rational logic. They highlighted the successes the PAP achieved the past 50 years, the lack of resources at the disposal of the opposition to run a government and even threatened unspoken consequences. Cogent arguments, but how persuasive? When you pit the logical versus the emotional, our lizard brain always wins out. Chalk one to WP for winning the hearts of the electorate.

Obviously the same argument can be made in the other contested seats, yet Aljunied proved the only success for the oppositions. The point to be made here is the trend shift in popular sentiment away from the PAP. Even if WP had lost in Aljunied, there is no doubt that the relative power balance is shifting, in part due to electorate unhappiness, in part due to smart opposition politics. The next 5 years will be very interesting.

May 7, 2011

election in singapore

by stillinnewyork

Besides the personal stakes involved which made 2011 Singapore General Elections so exciting, the campaign developments offered some amazing glimpses of human nature. Case in point, the intense dislike for Tin Pei Ling and her ‘beauty contest’ with Nicole Seah highlighted a few of these human tendencies

1) Raising personal status

Putting down Tin Pei Ling is a status enhancer for many people. She is PAP, purveyor of a special brand of Singaporean democracy/benevolent dictatorship. Championing democracy (even without understanding what it means and the consequences) is associated with the western developed world, which is high status. You see this exploited by the Worker’s Party in their calls for a ‘first-world’ parliament.

Tin Pei Ling is objectively higher status than most Singaporeans (higher status than many women because of her young age and decent looks, higher status because of her education, higher status because of her high-flyer husband), bringing her down implicitly raises their own status relative to hers.

The fact that the online traffic is overwhelming pro-opposition and anti-Tin Pei Ling make support for her a risky proposition and decidedly low status. How many people will help someone being lynched? Safer to join in (surely she must have done something wrong to deserve such treatment!).

2) Emotional decision making

‘she is too young’
‘she was throwing a tantrum in the video!’
‘her greatest regret is not bringing her parents to disneyland!!’
‘her husband is principal private secretary to LHL that’s how she got her in’
‘how can tin pei ling be worth $15,000 a month?’

A large proportion of the online voice against her comprises ad hominem attacks, on her age, her looks, her husband, her facebook pictures. Rational voters should have asked to see her record of having spent 7 years in the grassroots – her competence will most directly affect voters over the next 5 years (not her fashion preference). Of course nobody did or cared.

Contrast this with Nicole Seah, or new MP Pritam Singh of Aljunied. They talk a good talk, but what have they done in the past 7 years of their lives that would make them good MPs? Unless you know them personally, the responsible voter should have tried to find out.

3) Rooting for the underdog/sense of fairness

Many Singaporeans dislike Tin Pei Ling because her candidancy reeks of ‘unfairness’. This is related to PAP’s incumbency, perceived arrogant attitude, unfair political tactics, etc. After the matter of the casinos (steamrolled through without much public consultation) and the government’s open door policy to immigrants (pushing up home prices and clogging up public transportation), it is infuriating that the PAP is once again doing ‘whatever they want’ by parachuting in Tin Pei Ling. After all, how can she be an MP when heavyweights like Chiam See Tong can (and did) lose?

So root for the underdog. If they win you’ll be a part of creating history, if not, hey that was always the expected outcome. In geek speak, the bet has positive skew.

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