Kevin L, Author at Kevin Low

Principal-agent Issues

I wrote about misaligned incentives, but the more specific situation I was describing is the principal-agent problem that is so rife these days. It might have to do with marketing, and influence. More attention is paid to what people say than how people are actually paid. As an economist, I think it is still important to see what is the incentive structure behind people’s actions. Of course, the incentives involves other elements such as sales targets, the kinds of conversation and culture an organisation is having.

As we think about how the new industrialism is going to be weighing even more heavily on production from capital, the value that labour brings will likely be oriented towards selling. This is challenging to me because it has an impact on the distribution of rents and gains towards those with capital, and those with ability to sell. And organisations will have to think of how to incentivise and help their people sell more. This naturally seem to pit the people against the interest of their customers at least in the short term. Reputation and longer-term sustainability needs to be added into the equation.

Insurance policies needs to be designed well, with the best interests of the customers in mind in order to ensure the reputation of the organisation remains good and keep customers flowing. But customer experience at the point of commitment cannot be determinant on the decisions or such products. To me, the sales agent is providing a service and the only way his interest can be aligned to the customer is when he is paid a fixed fee by the customer to provide that service.

Standing out

I had people I’m coaching ask me why they should put their hobbies or interest in their CV – how is it relevant? To be fair it probably doesn’t matter what you say there though it does show your personality. And to be a bit more candid, your prospective employer probably has a better view of your real hobbies by following or checking your social media account than reading your CV.

Either way, I think your interest and hobbies section shows a bit more of your personal side and your personality. And it allows you to stand out, to be a person rather than just a cog, to allow others to take an interest in you as a human and not just a worker. In fact, if your hobby is swimming, go ahead and state your favourite stroke; if you’re interested in classical music, mention your favourite classic piece; if you enjoy DJ-ing, list down your ideal 5-track mixtape. Go all the way, show you care, and not just have a hobby listed because everyone has it there.

The way you approach your hobby bears a hint on how you might want to approach work; there should be moments of light-heartedness, enjoyment, amidst the seriousness. Your identity and personality will also leave a mark in the work that you do, just as your hobby will contain that mark.

Misaligned Incentives

I had a chat with a friend who turned into a financial planner (which of course has become a bit of a new title for what we used to call ‘insurance agents’). I realised soon based on what he described of the industry, that insurance, much like property, has the feature of growing naturally alongside a growing economy.

And insurance agents, like property agents/brokers, have the advantage of earning their income through commissions which are linked to the underlying transaction value. In the case of insurance agents, it is the premiums. And of course, premiums are functions of insured sum, and everywhere we know, financial protection is often calculated on the basis of income capacity (rather than in expenses). This means a growing economy and rising incomes will raise the financial protection needed, and raise the premium payments, thereby naturally uplifting the commissions of insurance agents in absolute sum even though there might not be a change in the value of the service rendered.

More significantly, I’ve always been against the way the incentives are structured in this industry. Sales commissions on the basis of insurance sales is simply an unsustainable way of incentivisation and there’s fundamental misalignment of interest between the agents and the customers. I’m still a champion for Do-It-Yourself when it comes to financial planning. While I do think you can free up your mind-space on financial planning by going to a financial planner, I’d rather go to a fee-based financial planner rather than someone whose incentives are based on sales/product commissions. Especially not one who is subjected to sales targets.

Bigger better?

I wrote about scaling laksa in Millennials’ Narrative, and then I reminded us that we need to consider what we are scaling and are we really doing ourselves and others a service when we try to scale things. Infrastructure is one thing that originally appeared to be the sort of things that benefit from scaling. After all, they are more cost effective when distributed across more people. And they are a good way to distribute wealth.

But is bigger necessarily better? What sort of utilisation levels are we expecting, and how can we be sure that the trends in demand for the piece of utilisation will continue? What sort of income, positive externality and wealth will it create?

Today, infrastructure is too often about politics more than economics and we are worse off because of that. When we don’t properly size projects before working on them; when we focus overly on a piece of infrastructure than the overall system of infrastructure. Thinking long term about the maintenance, the lifecycle of the asset is important. How many governments are thinking through that enough?

Burning at both ends

More of us are burning out; and we’ve been burning at both ends. There’s work and the strain of being at home. We can’t find breathing space. Meanwhile we are running out of fuel and the fire is still burning.

Stop. We have to stop. And we need to accept we don’t need to keep working and there is no shame or guilt about it. There is no shame that we need to take a break. So please ask for one. Please ask for less work; make it known to the higher ups that their working style is not promoting a healthy environment and culture; at least not during this season of pandemic.

There should be no fear of appearing like a lousy worker. This is not the time to be concerned about competition and work ourselves to death. Our mental health matters; and as the Chinese saying goes: “if we preserve the highlands and forests, we’d never run out of timber for fire”. Preserve our minds and bodies, the ultimate sources of our motivation.

Basis of competition

In school, there seems like there’s only one basis of competition: grades. But there are other elements surrounding that in the school environment: friendships, relationships with teachers, appreciation of music and arts, sporting capabilities, popularity, leadership ability, strategic thinking, time management, charisma, etc.

Schools are supposedly little societies and a microcosm of the world that they eventually live in. But of course, being part of a bureacracy, a system, even an instrument of the state, there is top-down direction to skew the basis of competition towards one thing rather than another. It has to do with merit as defined by the prevailing “ruling class”. And since the ruling class is typically made of those who had good grades, that factor gradually gets amplified in importance.

But in overall society, those other basis of competition are still relevant. While the impact of grades might be persistent and have cascading impact in education, they can be compensated by confidence developed in the children from doing well in the other parameters in the “competition”.

Educator at heart

Those who have followed my blog, my mentees and coaching clients would know I’m an educator at heart. And I had some really dated education products still listed for purchase. Now, I’ve just completed a really jam-packed intense 9-day email course design which I’m doing a bit of a soft launch here on my site. This is the first of my coaching products after getting really good feedback on the ebook which lays an important foundation for the materials I teach in this email course.

For a limited time this month, I’m pricing it at US$100; but it will be increased to US$120 after that. Reason is that I want to test run this new e-commerce engine I’m using so as to make sure the delivery is smooth and I want to make sure I compensate you for any inconvenience; while also giving you the full value of the course.

This course will normally take me at least 4 hours of coaching to impart the concepts. It also features an accompanying workbook which will allow you to get the most out of the course if you work on the exercises alongside as the email comes in.

Industrialisation & labour

When a country industrialises, it pulls workers from the farms and agricultural sector to a city or industrial core and draws upon some of the various economies to eventually drive some degree of prosperity. Such as the economies of scale, economies of agglomeration, and efficiencies coming from technical advancements whose costs are maintained by concentrating a lot of labour in a small space – a factory with a single line shaft for example.

The benefits of industrialisation and the surpluses of products do not naturally go towards the workers. As long as there’s influx of workers from the rural areas, wages are held down. And living conditions in cities were really bad. The means by which the masses gained affluence was usually not by the benevolence of the capitalist but the fact that government, industry associations and other influences pushed up labour standards and the bargaining power of labour. Public investments in infrastructure, education, healthcare helped to improve quality and sustainability of labour.

Jobs are ways to increase production; but they are also a means of distribution in the economy. Unfortunately, they are not always distributing the spoils of the economy in a sustainable way that helps us thrive. Because there will be a time when industrialisation and economies drive out labour in favour of capital. Imagine when goods can be produced purely by capital. Then employment no longer is a relevant metric; rather, ownership of capital determines ability to consume. Labour cease being a valuable factor of production.

More significantly, market economics tend not to provide a good way to distribute income (and by extension, wealth), even if it allocates limited or scarce resources well given most (but not all) context. Public economics helps to plug the gap; but we need more and better brains there to work out all the learnings we need outside a market-based dogma built over the decades of market triumphalism. The point of industrialisation we are at calls for a different paradigm towards jobs, production, consumption and distribution.

Good Schools III

Is every field a good field? Is every job a good job? I think we have to admit that the notion of goodness in schools has to do a lot with this society’s worship of grades by parents and this naturally transmit to the younger ones.

Giving up on suggesting every school is good might be a step in the right direction to acknowledge that the problem lies with a society whose values need some updating. Yes the “elite” schools have Oxbridge interview guidance but is that what every student needs?

What we need is to tear down the hierarchy where academics represents a hygiene factor on which other attributes such as sporting or music excellence can only serve as bonuses. And it is not just an issue of the system. The system changes the government implemented shows a good commitment to the desire to change our culture.

So maybe the next step is to clamp down on the private education sector like the way China did?

PSLE Woes

It is PSLE season during the pandemic year again – and the kind of response just shows that we once again failed to change the culture. MOE tried to change the stakes with the new system, but they need to target the culture that needs changing; the culture around what it means to win, and what it means to be ‘good’.

What is good for a kid has become whatever gets the kid good grades rather than what gives the kid a good challenge and enables them to deal with adversity. This is why we have people crying over spilled milk even when they are in their 40s. A better approach to parenting would be to encourage the child and say, you’ve tried your best and I’m proud of you braving through this. In the first place, the crying of the kid and the pressure she felt is a reflection of the kind of expectations she sense from the parent. And having the parent exhibit this sort of ’empathy’ by crying alongside reinforces to the child that throwing a tantrum at undesired outcomes is the right thing to do.

That was a missed opportunity to teach a kid how to bounce back, how to be brave, and to encourage rather than to assign fault (to someone else). I really liked the recommendations and thoughts from the counsellors towards the end of the article. Whatever pain a child feels from a difficult exam, is not an affliction from the school or MOE, but from the parents and the expectations that is placed upon the child. It is only right for SEAB not to comment. They don’t have to answer to anyone for the level of difficult of an examination.