Wednesday, March 24, 2010

How To Live Longer

This would probably be my first non-investment related post. Well, it’s sort of related bcos in order to reap the full benefits of value investing, time is a terribly important component. So by living longer, your investments can compound for an extended period of time and you get richer! Remember Warren Buffett only got famous around 1980s when he was already 60 plus. Then finally attend icon status after the dot com bubble burst, when he was closer to 80 years old!

Btw, much of what’s below is lifted out from some CLSA report. Much as I dislike having non-original content, this list is too good not to be shared around.

Anyways, here is real deal:

A researcher called Dan Buettner spent a lifetime studying people living in what he called Blue Zones where the population life expectancies are much higher than average. Here are the things that he found out:

1. Exposure to sunlight: his studies showed that people living in places with a lot of sun tend to live longer, like Hawaii, Okinawa, Mauritius whereas people in Norway, Siberia are not so lucky.

2. A little alcohol every day. But not too much. I think this is quite well-known.

3. Big breakfast. Not too sure why is it so impt, but I guess all those diet programs emphasizing less food during dinner do ring a bell here.

4. Eat more vegetables. Not exactly zero meat, but more vege definitely do our bodies more good than bad.

5. Eat a lot of tofu. This is the only food that can slow aging somewhat. There are 99 processes that age human beings and no one pill, food or treatment can reverse all of these processes. Tofu comes up top though.

6. Have a social circle. With a group of close friends or relatives looking for one another definitely helps to improve life expectancy I guess. And this is not about your 501 Facebook friends, but real buddies and kakis that you really like to hang out with forever.

7. Choose your friends well too. No point if your best friends are thugs or serial-killers I guess. Even obese friends are not so good.

8. Get married. Married people significantly outlive singles. But not sure about those who are married multiple times though.

9. Sleep 7 hours a night. Not too much though. 10 hours apparently doesn’t help. But 4 hours is the other extreme. Napoleon died at 52.

10. Have a purpose in life. Retiring is not a good idea, statistically the year you retire is one out of the two years in life that people are most likely to die. The other being the year you are born!

11. Be optimistic.

What not to do:

1. Exercise too vigorously – like going for marathon every week. Moving naturally is good enough.

2. Smoking – Takes 8-10 years of life away.

3. Diet programs – doesn’t work. What is needed are long term changes to eating habits, eat more veges and less in total.

I always believed in the Grand Theory of Balance. Basically, do everything in moderation. For each of these points, you cannot overdo or underdo. Like alcohol, sleep etc. So to live longer is then really about living life in moderation.

Thursday, March 18, 2010

Wealth, innovation, hardwork and others

This post serves as clarifying some economics concepts for myself also. It has to do with wealth and how it links to being rich and famous and getting adored by the masses.

Imagine that the world has only 2 pple: 1 farmer and 1 fisherman. The farmer harvests some rice every day and the fisherman catches some fishes. The farmer will sell some rice to the fisherman and vice versa. So the money supply in this world has maybe like $4, $2 with the farmer which he gets from selling 2 kg of rice and $2 for the fisherman who sells 2 kg of fish.

So the question is how can either of them get richer?

This is quite easy to answer, say the farmer is the aspire-to-be-rich kind, so he contemplates to be richer than his other companion on this lonely Earth. Well, what can he do? He can raise prices.

Say previously he sold 1kg of his rice for $1 to the fisherman. Now he can sell $2 for 1kg. Then he will be earning twice as much! How wonderful. But then since there is only one other person on this lonely planet, i.e. the fisherman, he will raise prices too unless he is stupid or something.

Then we get into a situation called inflation. Nothing really changed just that things got more expensive. It doesn't mean that if you have more dollar notes, you are richer.

So how does the farmer REALLY gets richer than his companion?

1) He can work harder than his companion, he harvests more rice and sell more to his companion. But since his companion may not be as hardworking, i.e. the fisherman only catches the same amt as previously, he will not be able to sell more fish to get more money to buy more rice.

The farmer's wealth in this world is restricted by the total money supply of $4 so the farmer get "richer" by way of having more free time since he can store up his harvest and wait for the fisherman to have more money to buy from him.

Or he can sell more rice on credit to the fisherman and now he gets more dollars in his safe deposit box while the fisherman has some debt.

2) He can cross pollinate the rice grains and sell a new grain of rice which is more delicious and charge his companion more for each kg. The fisherman "naturally" has to understand the quality difference and is willing to pay more for delicious rice. But again bcos the fisherman may not fish better quality fishes, he is again limited in his capacity to spend and the farmer gains by having more free time or getting money on credit again.

So in other words, the farmer get richer than the fisherman either by working harder, by thinking harder (innovate a new grain of rice) or by luck. Well, the farmer can get lucky and somehow the rice mutate by themselves into a better grain and he then sells it more expensive to the fisherman.

Well there is a fourth way, but it delves into immorality like by cheating the fisherman, telling him the rice is a kind of new grain but in fact it is not. Sadly, a significant proportion of rich people actually amass wealth through this fourth method.

So how can both of them get rich?

It can only be through improvement in efficiency (or technology advancement) for both of them. Say both the farmer and fisherman somehow managed to harvest and fish much more in the same time versus previously, they can then sell to each other in higher volume and get more dollars from each other (i.e. an overall increase in wealth).

If you think of these issues in our world today. Usually most people get rich by through their own hardwork or innovation or luck (or some through deceit), and they managed to amass wealth ahead of the population. But bcos the population is not as advanced as these rich people are, the poor simply gets left behind, becoming poorer in a relative sense. In our 2 pple world, the money supply is restricted bcos there is only 2 pple so the rich farmer can only get more free time or earn money on credit. But in the real world, the rich amass fortunes from 6bn other poor pple. So they get a lot of dollar bills - which are credit to buy services from the society.

The true accomplishment would be the raise the bar for all pple so that everyone gets richer. But this is a feat that is difficult to achieve. Why would the rich raise the bar for everyone so that they become poorer in the relative sense? But for those that do that, we gotta take our hats off to them.

Monday, March 01, 2010

More On Financial Freedom

This is a continuation of a previous post on financial freedom.

So it seems that financial freedom helps to achieve the 3 important things that we want in life: Time, Money and Happiness. This is achieved by trading away 10 to 30 years of doing some job. Someone capable can do it in 10, for most of us, it's 30 years, my dear. Or to put it in percentage terms, if we lived to an average of 80 years old, the solution then is to trade 10-40% of your life to achieve financial freedom. And if considering that we start thinking about this at age 20, then the denominator is not 80 but 60, and the solution becomes to trade 20-50% of your life to achieve financial freedom.

I would think that a better solution would actually be looking at this issue more holistically. Specifically, changing the way we look at the Job part of the matrix. To most people, a Job is solely income generation, Job – brings home the Money, takes away the Time, and that’s that. People talk about work-life balance. Work is work, Life is life. Outside work is our true Life. Work and Life cannot mix.

Actually, Work is 10 hours out of 16 hours that we are awake. Work is Life!

In Maslov’s famous hierarchy, the top echelon is some big word which is also very much coveted. I will try to spell it: Self Actuallyrealizingmoneyisnonotion or something. Let’s just put it down as Purpose.

If you think about it then, the true intention of financial freedom is to actually have the Time to do our Purposes in life, without having to worry about Money.

This Purpose can be as simple as witnessing your kids growing up, or creating art, or doing charity etc. So the ultimate motive of financial freedom should then be trying to replace Job with Purpose.

Then you have a beautiful matrix where you have a Purpose in life, you have Time, Money and also Happiness.

Of course, this is ideal talk. I can hear readers yelling Get Real! Wake Up! Most Purposes need Money, not bring in Money. That is true.

Nevertheless, as a start, I think we should try to find our own Purposes in our Jobs. If you totally hate your job, cannot find a good reason to go to work everyday you wake up. Please. Change your job. Life is short. Eat dessert first.

Well it’s quite difficult to pull your Job to your Purpose in life if your job is to clean toilets or to entertain some HNWI’s dog. (HNWI: High Net Worth Idiots) I cannot imagine anybody who thinks his Purpose in life is to make toilet bowls in Singapore’s Kopitiams sparkle like a 24 carat diamond or become an idiot's dog's best friend.

Let’s put it this way. Most of us don’t know our Purpose in life. Some lucky fellow might. He woke up on his 15th birthday and decided he should be a doctor and save lives. For the rest of us, we go to school and get psycho-ed to study Engineering and ended up being a HR manager. Some find that helping people adjust to their jobs might not be too bad, and grew to embrace their jobs as HR managers. Their Jobs became their Purposes.

Well, for others, not so lucky. What they really wanted: is to be a rock star. And here they are stuck as a HR manager. Ok, for such cases, being financially free also cannot help. Pai-seh. Please go and join Singapore Idol.

I guess what I want to say is: Think about how you can embrace your Job as your Purpose, if that cannot be done no matter what, change your job and work towards what you really want. Saving enough or through shrewd investing to get passive income enough to support your lifestyle? It is a gimmick. The truth is, it usually takes more than a quarter to half a lifetime to achieve that.

All things come in packages in life. There are some things you like about your wife, and some things you don’t, but you married her anyways. So similarly, there are some things you don’t like about your job. And surely there must be some things you like about your job. From there, we can try to work to find our Purposes.

Financial freedom means you need not worry about money. But when you can have all the money, all the time in the world then what? If you don’t know your Purpose, how do you find Happiness with your abundant Time and Money?

Financial freedom is then, not about the money. It is a term cooked up to make us think we need more money but in fact, what we need is to find a Purpose that can help us balance the Time, Money and Happiness.