Investing into the status quo II

We optimise and invest into the status quo over and over again as we reinforce our behaviours, go to our favourite places, consume our favourite products. And this status quo is that of a carbon intensive, high carbon economy that spews out lots of carbon dioxide around me and across the world. Investing into this status quo makes sense because of the past investments. It is easier to make a car that already runs run faster than to make a new technology that will help get a stationary box to start moving.

But when you invest into the status quo, it makes it harder and harder to change and move away. When you’ve mastered Microsoft Excel, it is hard for you to adopt a new spreadsheet tool. And because more people have mastered it, the tool becomes more and more entrenched because someone else can share the file with you and you’d understand too. So you continue mastering it, and getting better at it.

A lot of the economy, the whole industrial complex works this way. But then at some point you might detect a crack in the status quo. Maybe it is cracking under its own weight or perhaps it is increasingly being used beyond its original design intent. Many have tried to build complex and clunky models inside Excel when it is more efficiently served by other programming language. So then status quo might break down by itself.

Or in other cases, the status quo does not break down but create problems for those who are perpetuating it. In the case of climate change, our status quo of a carbon-intensive economy is creating huge challenges for us right now and for the future generations. To get out of the cycle, we need to make changes; we need to invest in new areas that may not be as attractive as the status quo. We will need to spend effort thinking through old problems and solve them with new ways. We will need to tie up some of our options, and cast old solutions aside.

Are you ready to do that?

Investing into the status quo

When you spend effort figuring out the position in the train station you should stand to catch the train in order to alight at the optimal position at your destination, you’re investing. And you only would find it worthwhile if you take from the same point of origin to the destination over and over again. The reason is that each time you follow the rule you created for yourself, you reap the benefit of that first problem solving. And over time, the gains compound. You save the extra walking and the time.

But in having this figured out, there’s more inertia to moving workplaces, thinking you’ve already got used to commuting and knowing you are comfortable with the way to travel to that same place every day. It might be foolish to care that much on which station you’d alight for your workplace but you still do. And that can be because you’ve invested in that status quo, to the extent you can autopilot to the location you’re supposed to be.

When we learn to drive a car, operate a machinery, use the interface of a new OS, we are investing into some sort of status quo, or what will become a strong status quo for us. It will be hard to change, because we change the calculations involved on what it means to change whenever to optimise for a particular result. It might be annoying, or boring, but it works.

But upsetting that status quo every now and then, getting your mind to crack and solve new problems, or rethink ‘old ones’, makes for a better mind, and a better life.

Resource-rich

There is always this age-old question of what you’d do if you’re rich. And then you might give an answer of an outcome that is already within your reach so then wanting to be rich is more about the identity that one would like to associate with.

What if you were resource rich? Like having lots of friends, or lots of land, or lots of cars, or collectible figurines? Do you think of those resource or things in terms of money? What if they don’t easily convert to money like friends or time? Does it matter?

How do you steward the resource that you are rich in? Does it matter if you can monetise it? Or whether its benefit is depleted by some actions you undertake? How do you think about it? What does it mean to “cash out” on your resources?

We all have a common resource and that is our atmosphere’s carrying capacity for carbon dioxide before climate goes completely amok and make our planet inhabitable. Sacrificing it could give us some money and maybe some comfort to certain extent. How would we steward it?

Sprinting downhill

I was 13 when I met this senior in my Secondary school (it is kind of like a combination of middle school and high school in Singapore) who taught me that I need to open my strides when sprinting downhill. I had to pass my 2.4km run but it was a point in my life when I was a little overweight and not exactly a fast runner.

The distance was not long enough to win out just purely by stamina, and yet not short enough to be completed with just a crazy dash. It was challenging, especially when we have to run a course that included some elevation at different points of time. It was hard to maintain a consistent pace when running up and then downhill but because I was slower uphill, I needed a way to gain more ground downhill when logically, one could be faster.

So I learnt that opening up my strides allows me to cover more distance even as the gravity was pulling me down. Every step forward kept me from falling while taking me closer to the finish line. It was a great feeling, though my lungs were screaming for air, I could keep my leg muscles going.

There are points of life when a lot of work you had done previously have taken you to a point of elevation. You’ve been putting in the hard work, and built up to that point but there hasn’t been any results yet, you don’t seem anywhere close to the finish line. Perhaps you’ve prepared yourself to that point where you can now sprint downhill, where the force of gravity could take you to the finish line with a lot more natural momentum even if it may still take efforts.

Are you ready for the sprint downhill?

Sense of loss (of options)

There are things you once have and then gone. But there are also options that gets discarded when a choice is made. The choice you made cease being an option but just the path you go down. So you are losing all the options when you make a decision.

Our modern, liberal, capitalistic society celebrates some kind of freedom in the form of optionality. But life is essentially about removing options continually. In fact, as I learnt from Oliver Burkeman, the latin word for “decide” has the element of “cutting off” which is why it looks similar to “homocide”, and “suicide”.

The question is how we experience losing this optionality as if it was an actual thing we had. The problem with holding on to options is that we never really get to enjoy what they actually stand for by holding it. In order to move forward, we actually have to embrace a decision and sacrifice optionality. That is a gain rather than a loss.

But for some reason, that is still so strongly felt as a loss. The framing is probably a result of a lifetime of being conditioned into thinking that we should always be trying to build more options for ourselves. Even in school, we have more options when we do well and in many cases, we wanted to have more choice over the subjects we can do by doing well academically. What is less obvious is that shedding those options, and coming to a focal point on what to do became incredibly painful when one spent a long academic career amassing options. We can’t seem to appreciate that life is really about eliminating options – but sooner or later, we will have to.

Independence of time

Time is something we experience through our memories but because we measure it, time became independent. Independent of our experience such that it goes by whether we feel it or not. And we then treat it as a resource to use or to waste. Yet it slips by even when we don’t use it, so we consider it wasted. Or is it?

Was time ever ours? And in trying to use it, and pressured to use it well, do we end up rendering our experiences empty and meaningless instead? And when we have a looming deadline we think time is short and there is always so much to do.

What we have to do is given by ourselves though. And if we had gone the other way around and measured time by the work we do instead, will we actually get more out of time rather than get things out of shorter time?

So should we treat time as independent from our experience or to let it be something that is there only because we experience it? Much to ponder.

Cost reflective

Are our energy prices cost-reflective? In many countries where low energy tariffs are results of subsidy, there is not cost reflection. Government continues to mask the subsidy by controlling prices. It is not clear if this is good but besides the fact that market signal is not properly expressed, it is also not a very equitable way of spending taxpayers money.

Subsidies on goods and services like energy and water often are regressive because the rich tend to use more of these resources. By keeping prices low, those who can afford to consume more takes a lion share of the subsidy. When fuel is subsidised, those who have more cars and can drive more miles will receive more “funding” than those who do not even drive. The ones who have large houses with lots of appliances consuming lots of electricity and water will get more of that subsidy through low prices than poorer households.

Making sure even the strategic and essential goods are cost reflective helps to ensure transparency of subsidies and also allocate subsidies to the right group of people, those who needs them.

Chicken and egg

There is the chicken that laid the egg, and the egg hatches into a chicken. Which one comes first? Which one do you need first to start a cycle? That’s the challenge for so many different areas of life, and the energy transition.

We need to find the loose bricks that allows us to tear down the existing systems which perpetuates carbon intensive systems.

We need to identify the first part of a value chain to support and push through to get the rest of the activities through. For example, what should the government subsidise to get the hydrogen industry going? Would it be to subsidise the production, or the use of hydrogen? We need to figure out where is the bottleneck to deal with in order to break the cycle.

That’s one of the areas we are hoping to target and deal with. And that’s why blunomy was created.

What kind of competition?

Imagine an economy you preside over where everyone hones their skills in violin-making and produces violins. Everyone in the economy works really hard to make and sell violins. They do so many other things such as growing their own food, trying to sustain themselves, just to make violins. In the economy, there is no other markets; no one is producing food to sell, no one providing laundry services. Money is exchanged only to buy and sell violins. And only violins have a price.

That sounds absurd. Because if only violins have a price, then money is only worth violins. Then what is the value of money in this economy? Yet, without answering such questions, if we were to allow the metaphor to continue, say you are supposed to spur productivity of this economy, what would you do?

You could do things that enhance the labour productivity. This means everyone produces more violin in the economy, thereby driving the prices down and causing violins to be worth less vis-a-vis the currency in circulation.

Or you could start getting people to perform other work for others. That enhances productivity of the system overall as the ones good at violin making gets to outsource parts of their chores so that they are freed to make more violins. You allow more goods and services to be priced using money hence allowing more things to be exchanged and money becomes more valuable too. The higher productivity raises overall wealth measured in money and allows people to demand for more violins or pay more for them, enriching the violin makers.

Before I go further, you must be wondering what I’m talking about. I’m thinking about education, where grades are the only thing that matters, where students are expected to focus on grades despite having to fulfill other requirements such as CCAs, including sports, student activities, leadership activities, etc. All these while trumpeting that different students have different strengths and then consigning a future michelin-starred chef to the E-bucket and having him sent to vocational school.

Our system ties up and stifles talents, force everyone to be denominated and priced using just one attribute of their capability: intellect/academics (or test-taking). And so if you want to improve the system, do you still force everyone to produce more and better grades?

Feeling helpless

Things are happening to me. When we experience that, we lose sight of our agency. We were not consulted, we’re not in control, not any semblance of control. We don’t seem to have a choice. We feel helpless.

Recently, I was attending an investor conference that was focused on the topics around impact, sustainability and ESG (environmental, social, governance). There was a broad spectrum of attendees; some were well-versed in the topic tossing out various acronyms while others were confused, lost, frankly a little unhappy about how the investing industry is taken over by metrics beyond the financial ‘fundamentals’. Personally I think that capital can act differently from a while back and that we have the responsibility to ensure that it is no longer perpetuating the system as it is.

Of course, there would be naysayers who dismiss impact, sustainability and ESG as fluffy, intangibles which are running counter to the money-making that investing is all about. But even the naysayers, confronted with climate science would acknowledge there is a problem we are facing with climate change and all. Naysaying helps them soothe themselves because at least if there’s nothing much they can do, the eventually downfall of the earth is not on them. We choose to be helpless that way; even when we do have a choice.

The better road is towards action. When it comes to the climate challenge, a strong and useful key message is that it is not too late to make that impact and make the change.