“Bean counter” is an expression in English language referring to “a person, typically an accountant or bureaucrat, perceived as placing excessive emphasis on controlling expenditure and budgets”. There are people who are mission oriented by focusing on the vision of a future but there are also bean-counters who are obsessed with measuring along certain identified metrics without recognising whether the metrics make sense or not. And that is the problem with our relationships with KPIs.
Let’s start from school. Today, we have more students than ever who are going through education system just to get a grade – not out of curiosity or a zeal to learn, but full of anxiety about a devastated future due to missing the grade. Why is the grade even an indicator and what is it indicating? Have we taught our students what the grade really mean? What an award or a prize really do to them? Thinking meta is important – and I’m definitely not referring to the metaverse.
Then businesses. There’s more than financial disclosure and accounting these days; there’s a lot around climate and impact related disclosures. At Enea, we help some of our clients navigate the requirements but more importantly, we advise our clients from first principles how to think about their business’ impact and interaction with the environment so as to report meaningfully to their stakeholders. Yet there are always consultants or companies who are focused on just taking a KPI which is popular out there and then using it – even cherry-picking the ones that look more favourable without a clear sense of what those measures are actually for.
Finally, there is the government, focused on giving a good report card to their political masters to show constituencies. There is still the traditional obsession with GDP and the growth figures, targeting job creation and so on. In fact, the term ‘statistics’, have more to do with the state than to do with the concept of numbers. Policies will really need to better articulate why metrics adopted are a good representation of the policy objectives and that results are not just reported when they look good, or for metrics to be chosen only after results are in. Being mission-focused is also more important than just sticking to a set of metrics. Because Goodhart’s law still applies.
Are you recognising the bean-counters amongst you? Those who are overly obsessed with the numbers without really appreciating what they mean? It’s probably worth focusing first on the parents who are obsessed with their kids getting an A.
At the recent presentation I gave on ammonia as the new low-carbon maritime fuel, I was asked about the ability to scale production over the next couple of years. I think the time horizon we should be looking at is over the next 8 years up to 2030 and then 10 years after that, how things are likely going to change. We as consultants are often asked to look into our crystal balls and envision the future. We try our best to do it using data, looking at trends, making assumptions and all.
For ammonia, the demand is expected to more than double over the next 28 years. That’s still a fair amount of time, and as long as it grows by a rate of about 4% per annum, the supply will be able to meet demand in 2050. Not inconceivable though from historical trends on the production figures, it seems far fetched. But that is because ammonia has traditionally been demanded only as an industrial feedstock and for production of fertilisers. The people concerned about the competition with the existing agriculture or food industries have misplaced concerns because those are the guys who have been using grey ammonia and perfectly happy to continue to do so. The new demand is likely going to require green hydrogen; which means we are going to start growing new supply of this ammonia from scratch; no legacy issues of waiting for existing facilities to ramp up.
Then there are people pointing out the challenge of getting green electricity which seem short in supply to begin with. That is true to a certain extent; Singapore is having to import electricity from neighbouring countries, using actual physical transmission lines. But most of the time, this is caused by the fact that renewable resources may be scarce where the power demand centers are. If there are far flung locations rich with renewable resources, we can still capture these sites to produce green hydrogen as well as green ammonia, then ship them out.
So I’m actually pretty optimistic about trying to hit those demand and supply numbers over the long time frame that we are talking about. It might well surpass those numbers when the market really takes off. But the key is ensuring there’s clear price signals; and if there’s proper legitimate demand for green hydrogen, then someone will have to certify it and audit the production.
I was listening to the first part of Barry Nalebuff’s interview on ‘People I mostly admire’ and it turned out to be pretty cool and insightful, particularly that very rapid sharing of his thinking that developed Honest Tea. It reflect how important simple ideas were when taken seriously and scaled up. And it also helped to demonstrate how an economics (and strategy) professor use his intellect to take calculated risks in entrepreneurship.
He was probably oversimplifying but considering Honest Tea as a product that basically makes use of three simple economic principles:
Diminishing marginal returns/benefits (on sugar or the taste of sweetness)
Principle of maximising the value of the content of a fixed cost container in order to maximise the overall value of the bottled drink
Navigating trade-offs on the marginal utility curve: Convincing people to trade off the lower sugar for the fact that the drink had lower calories
That is pretty brilliant as a way of thinking about a market and a product; those ideas are simple and yet profound precisely because the world had not evolved solutions around a combination of these ideas prior to Honest Tea.
For new readers, you might not have realised that I have a coaching practice. I call it career coaching but it could well have been performance coaching, or work coaching, or whatever you might call it. I’m now working with an coach to help me with English for business but I’m essentially being coached to align my messages more with my communication objectives. At the heart of coaching, is the ability to help our clients identify and crystalize their objectives, and then focus their attention and resources on meeting them.
Meeting our objectives often require us to take a series of actions or adopt certain behaviours to maximize the chances of the outcomes we desire. We may not be too sure ourselves and so we hedge our bets; we prefer not trying than to try and fail. Coaches help to reduce incidence of that thought by helping us reframe and focus our attention on the work that needs to be done rather than fretting over the outcome that we cannot control directly.
So it is on my career coaching practice; I work with you to identify and crystallise your career objectives and then work out what actions or behaviours are necessary to get there. We then try to focus on developing those behaviours and undertake the actions that maximises the chances of you getting there. Even when you might think it could be a waste of time, or if you’re afraid the investment of effort would not pay off. It’s not about the immediate returns on your investment, but recognising that investment in yourself is a case where the returns come through from yourself rather than from the job you find. In fact the job or role you eventually take on, is merely a means by which you contribute your value to this world.
When I was studying in London and the States, I always thought that working and earning an income in those countries beat being in Singapore and earning the low salaries that starting graduates were given. In fact, I was paid so much in my gross salary during my internship at a bank in London that on market exchange rate basis, I only got back to that same level of monthly salary in the 5th year of my scholarship bond. Even if my salary was stagnant for 6 years at the bank and I was paid like an intern, I would have earned more.
But would I have been able to earn more in terms of disposable income? How about disposable income minus the critical expenditures like rent and the premium for food that I didn’t have to pay in Singapore? How about the high level of taxes in those countries? Now, people may say that after doing the Math, they realised that as a percentage of the total income, the cost works out to be roughly the same, and so you save the same percentage of your income.
Yet that is not exactly the same. The same percentage of a higher income at market exchange rates implies that you do have a higher amount of absolute savings. And this is where it starts to matter because capital markets are largely global and the pricing is consistent across the world. This means that if you’re able to amass a higher absolute amount of savings at market exchange, you have greater purchasing power for public securities and other financial products. The advantage of being able to enjoy lower costs of living does not outstrip the disadvantage of a lower absolute savings.
Thomas Curran researches elements of psychological impact of our society’s perfectionism. While we tend to admire people who are perfectionists and pushing themselves up higher and higher standards. In his interview with Adam Grant in the WorkLife Podcast, he talks about the deficit thinking of us being inadequate is consuming us and damaging us.
In his talk at TED MED in 2018, he criticized the dangers of performance metrics which pushes people to do better but also foster that sense of inadequacy that characterises so many of out high potential youths today.
I think this problem plagues the Singapore society especially; the creation of insecurity, amplification of imperfection and continual emphasis on appearing perfect. Our search for mental wellness must address this obsession with perfectionism that we as a society has been nurturing, or it is doomed to fail.
One of the most powerful ways for people to influence others to do something about certain causes is just to measure it. The most successful example being the creation of GDP as a concept to measure the economy. Suddenly, it displaced the more traditional metrics of population or military might (which involved more quantities than just number of troops involved).
There are always issues with measurements created. They do not perfectly measure the underlying thing we’re trying to quantify for two reasons:
The measurement is inaccurate due to poor instruments used (proxies, poor surveyors etc)
The measurement does not reflect the actual underlying concept we are trying to quantify.
The first point can be improved over time. The measurement accuracy would not be perfect but over time, as long as the measurement required is well-defined, we would be able to capture the quantity or at least get really close to it.
The second point is trickier and it is going to always be imperfect. And herein lies the danger of trying to make things measureable. The Goodhart law features an important observation we ought to be constantly reminded of as we’re bombarded with figures like GDP growth, inflation etc. It doesn’t mean they are false! But the key is to be able to distinguish the measure from the underlying concept of what the measure is supposed to imply.
In Singlish, there’s a question that typically stresses people out and has answers varying significantly based on the interpretation of the questioner’s purpose. But at the heart of the question “why like that?”, the questioner is questioning reality. And effectively trying to pit the answerer against the reality at hand.
In fact, implicit in the question is that the answerer should not be accepting reality as it is but to do something about it. That assumption is something worth some attention and awareness. For one on the receiving end of the question, bringing to attention is assumption takes a bit of courage but immediately resolves the internal tension and cast it back on the questioner.
So the answer becomes “why not?”, or “what did you expect?” Maybe just done a bit more politely.
When I was in primary school, I have this problem of doing mental sums. Calculations done in my head that I didn’t write on paper in my answer scripts. When the teacher marks my script, she’d penalise me for “skipping steps”. Well, those steps were taken but just not on paper.
It is very different in the real world where we also get penalised for skipping steps:
Trying to submit an application without sufficient documentation
Rushing to give customer a proposal without first understanding what is truly needed by them
Booking your vacation without thoroughly checking your calendar for conflicting commitments
In all of these cases, steps were indeed skipped, intentionally or not. And there are going to be consequences to them. Often, the time or money saved may not be worth it to deal with the consequences.
However, if you are able to perform those steps through other means which is more efficient and brings other benefits, such as what I did in school with math problems, then you can still get to the results well and good. That’s actually useful in the real world. The nuance that we need to learn from this childhood lesson is that you can short-circuit a process only when you can address every step adequately.
Financial capital: either through passive investments or actively starting and reinvesting in a business
Knowledge: by pushing the boundaries of what you know and applying that towards your decisions (whether it is to challenge how things works or put your money on things you believe will work when others don’t).
Time & efforts: by spending time and effort to build something. Maybe it takes some money but mostly just your time and effort. And the value of what you build as a result is worth way more than the time and effort your put in. Or it may not be.
Reputation & connections: by selling or recommending people in your network and connection some product or services to earn some returns. The product or service might work out for them, it might not.
Whether you think of it this way or not, you are already taking risks in life. Being mindful of how and what you take risks on might be a useful skill you missed out in school.