We envision an end point and we want to be there already. We think of time as a barrier. The fact that parts of the steps take time annoys us. We rather it takes less time as though it is better when it is faster.
And then on the other hand, we acknowledge that timing is everything, when to strike a ball, jump to defend one, meet your potential spouse, ask for a promotion and all. Time is an input, not just the passage of time but point along time.
So let us reconcile our views on time. Where things are taking time, let us recognise it is an ingredient that enriches and enables the outcome we are trying to move towards.
There are areas of our ignorance we are aware of, but there are also vast spaces of our ignorance we are unaware of. This area is perhaps where we would exhibit the Dunning–Kruger effect. It is really important for us to know and understand our circle of competence, and to create boundaries and rules for ourselves to navigate within, and beyond this circle.
Think of it as comparing a person who lives in a town for many years and know his way around it by his senses and strong local knowledge, against an out-of-towner who had got hold of a map and managed to navigate successfully to a few places of interest. The guy who is new in town tend to overestimate his understanding of the place and might make overly risky decisions or commitments as a result (eg. showing friends around, or bragging loudly about his knowledge of the best local foods).
One of the critical skills that we need to acquire especially as we are new to a space, and trying to grow ourselves, is to be able to develop not only the self-awareness but the toolkit to navigate a new space when one runs the risk of getting into the Dunning-Kruger effect. In fact, even as kids, we should already be conscious about what is happening and how we can deal with such struggles.
Been at a few business functions lately; far more than I’ve been the past two years. It’s becoming a less surreal experience as the world eases into the state where covid-19 is endemic. Restrictions have eased and culturally, people are less wary about mask-wearing. The common flu and other cold bugs are back, ordinary immunity is probably improving.
I welcome the return of physical interactions as much as I discovered how many of them are actually easily substituted with online means. It is true that most of the online interactions lose out so much rich details and non-verbal dimensions of communication. In fact, especially for new connections and interactions, having that physical connection might be useful.
From just those physical functions, I discovered so many more companies I’ve never heard of. There are activities in the industry I wasn’t aware of from just reading materials online. A lot of chance encounters in the physical world are simply not possible online. In fact, I thought the online networking tools where you scroll through a list of conference attendees as poorly designed. Imagine in a real world when you try to go towards someone you want to speak to while the person is unaware and they are trying to talk to someone else. And all the responses are not exactly synchronous. Physical distances and actual visual observations in space performs a coordination function that technology has not been able to replace.
Insurance seemed like betting against your death or misfortune and some people don’t want to bet on your personal downfall so they don’t want to buy insurance. For years, the industry have been trying to change the story and they settled on the idea of protection, financial protection against those misfortune.
In principle, that works theoretically but the issue is that a lot of what you pay for is sales and distribution. The structure of the industry is such because insurance works well only when the risks are being pooled. That means having lots of people paying the premiums in order to support payouts during adverse events. As a business though, it means that the firm is ultimately a sales and marketing organisation. Costs will have to weigh disproportionately on the distribution side of the business.
This is a shame because the society needs insurance. Yet it is a market failure; the market system allocates resources poorly in this market. It can be better designed through a mix of regulation and making it mandatory to have certain amount of cover. The government should not think the market will help reduce cost of insurance through competition because the basis of competition in this market isn’t so much pricing. It is more sales, marketing and tactics.
But isn’t it just like many other products? For luxury products, yes. Basically for things people don’t actually need, you can allow the whims and fancies to be shaped by the market. But when it comes to insurance, you want the market to deliver an outcome so you need to design the boundaries and structure to make it work.
The story of insurance should be that of mandates, regulation, and basic necessity and right of people. We come together to live in highly urbanised environment and it should be a no brainer for us to risk-pool and mutually insure. There’s no excuse for this market to be hijacked to support high-flying salespeople.
If someone came along and asked you for money, saying, we’re pooling little bits of money from everyone in order to get a really big pool. We’ll then pick one of those who contributed money to get the entire pool of money. Will you contribute? Well, depends on how they are doing to do the picking. It would probably be some kind of random mechanism.
Maybe it also depends on your trust in the system and what is the intention of doing this pooling. Or the known results of this pooling. What if I told you that the beneficiary of the funds-pooling routinely loses all the money and his or her life is destroyed by the sudden windfall? Would you still go ahead to contribute? To what extent would you contribute in hopes that you are the recipient of that windfall?
Well, I’m effectively describing the lottery. Millions of people are still on it around the world. For the simple narrative of buying a slice of hope. Yet if you go out there suggesting that we take micropayments from everyone to make a single person rich, no one will actually support you. It is curious how shifting the storyline works so well. And the lottery is basically a manifestation of how the right storyline sells.
How do you determine what to do in a business? Is it based on what the boss decides? How do we decide when an idea is good and worth following? Is it when everyone agrees or when there is so many disagreements? What makes a good idea anyways?
In a company, especially an organisation that exists in a marketplace for talents, good ideas must win in it. This is true even for public organisations: government ministries and agencies, non-profits, and special entities that seem to have no market competition. This is because they are still in the marketplace for talents. They rely on smart and capable people to get things done. Such organisations need to structure themselves to harness the best ideas and allow them to win, in order to keep their talents, and continue producing results worthwhile of their existence.
When they allow authority and bosses to win, then they forgo the ability to attract and retain talents. No one would work for a boss or environment where the only way to win was to amass lots of power and authority. So regardless of how much you might think the bosses or those with authority have got the information and the right intentions to make the decisions, the real winning decisions are those backed by good ideas and supported by the best people with the best intentions.
In economics, when there’s even some monopoly power, the business can set prices and still have people buy their products. There is monopoly power everywhere; local convenience stores can price the way they do because there are some customers who are unable to switch providers or move. And so the businesses can price their products and somehow structure the pricing to be two-part tariff, which mean they can charge you a fixed fee and then layer on additional charges per unit of consumption.
They can take various forms. For example, a bakery can charge you $10 annual membership and give you 10% discount off the breads that you buy from them for the entire year. This way, they charge you a fixed fee and then get you to pay for more per marginal unit of consumption. The gym charges you a single registration fee and then monthly membership. Even devices such as reMarkable which is an e-ink writing tablet is selling its tablet and then charging people for a monthly subscription that allows people to sync their notes to various platforms, have unlimited storage, etc.
Even the smart phones involves getting you to pay for the device, then charging you for apps or gaining more revenue from additional services you use on the phone. The tariff structure has an alluring quality of pricing the overall good at almost marginal cost. Or does it? That’s what economic theory suggests but it is unlikely to be the case on digital goods and services. They are probably being priced at the long run marginal cost plus a premium to support long term development and innovation. Is that an efficient outcome? It’s hard to say.
What is more interesting, is that the two part tariff structure creates more stickiness for the customer to the producer. Having already paid for the first part, the customer tries to make more use of that, averaging down his/her cost per unit of consumption. This is the use of sunk cost fallacy and faulty thinking to trap consumers.
An externality is deemed as a cost or benefit caused by a producer that is not incurred (financially) by the producer. The view is that because the producer is not paying for the portion of costs, or receiving the portion of gains from that economic activity, it is under or over-produced.
Of course, there are further variations of consumption externalities where it is happening on the consumer side of things.
The manner economists perceive these effects are based on analysis in a single snapshot of time, considering only a very narrow dimension of financially accountable cost and benefits. The typical solution prescribed on paper is to provide a tax or subsidy to close the gap: or to internalise the externality.
What if an externality actually isn’t external to begin with? That through time and the interconnectedness of people, organisations, nature and environment, would bring the costs or benefits back to the producer? After all, won’t reputation or enployer branding matter? Would it matter if an all-knowing government discloses the truth about how much pollution a company is causing? If the government in the economic analysis can close the gap, then there isn’t actually a genuine externality because somehow, within the system, the level and details of the externality is known.
And how are compensatory funds to be used by the government? For example, should carbon tax revenues be used to innovate in further development of low-carbon technologies to make it easier for companies to emit less carbon? Or should they be directed towards mitigating the impact of climate change? Eg. Building levees to buffer sea level rises? Should the role and impact of the externality have any say in that?
You might have seen solar panels ground-mounting on vacant land in Singapore. Today I was on a cab when the driver told me about this and thought it is such a waste of land in Singapore.
So I explained the idea that our government agencies had and the tender they designed. The projects are actually to maximise the use of land rather than waste them. In Singapore, there are plots which are left vacant for future development – they may not be empty for the full period of a solar farm, but at any one time in the island of Singapore, there should be enough space to hold a certain amount of ground-mounted solar. So the plan is to move the panels around to a vacant lot once an existing solar farm land is needed for development.
Such a model seems common sensical but requires a great deal of coordination and detailed thinking. But in the grand scheme of trying to produce more green electricity for our island state, this is not exactly a great solution. And this is an example of the challenge that Singapore faces when it comes to being innovative and scaling solutions. We have requirement for unique solutions that serves us well but probably no one else – nor are we able to easily adapt our solutions to other places.
Not sure who else would want to be moving their solar panels around.
I once argued that education should be reimagined and redesigned. It is no wonder why Einstein was attributed to say he doesn’t allow schooling to interfere with education. The content of our education is at its best when it is not prescriptive but more about the process that students get to go through.
And along that process, we want them to learn things about themselves, about the world and how to interact with others. One of the key topic amongst this, is around disagreement. How to disagree is a useful skill and one that a human being, since being a kid would have to face.
My colleague has a 1.5 year old girl who struggles when her parents say no to her. She just finds it difficult when her will is impeded and she is helpless. To a certain extent, her way to take back that agency is to break down and cry. To a large extent, the type of tantrum is a kind of power-grab. And we intuitively know that. Except like all power-grab, this sort of emotional violence is not exactly the healthiest way of interacting.
So kids will and should learn how to disagree, and to feel a sense of agency over the situation even when things are not according to their will. Are parents capable of teaching that? How about schools? Why are we leaving that only to the domain of experts or psychologist? Shouldn’t that be a universally taught skill?
Again, we don’t like to teach or train people along metrics we cannot measure. How to disagree isn’t exactly something that can be easily quantified. So no one wants to teach that. It’s a shame because it is probably way more important than the nucleophilic substitution reactions we learnt in Chemistry.
