Stampede of One

I’m in the middle of a weight loss contest with JK, with pride, a trophy, and possibly a vacation on the line. We’ve been tracking our weight, our eating patterns, and our calories pretty actively. So far I’m pretty disgusted with myself, but that’s to be expected since Christmas and New Year is always the absolute worst part of the year for dieting.

To achieve my goal of losing some 15 lbs, I need to be averaging a caloric intake of 1750 calories with a vigorous exercise program. So far I’m averaging above 2000 calories and my exercise was very sporadic the last week or so. I managed to up my road work to 20 miles, but pretty much only because I ran 8 miles along the Kamogawa River and then my 13 mile trip around Lake Kawaguchi. The good news is that I’ve come back from Japan at about the same weight as I went, which breaks my tradition of gaining 5-7 lbs there.

Bottom line: I need to find some activity that gives me an excuse to run around and sweat for a couple hours at a time, most likely taekwondo and maybe even extra training with competition team. I just can’t find anyone who can keep up that long in tennis and I don’t think I can motivate myself to work out so hard regularly on my own.

So what’s the strategy for dieting? Nothing too crazy – smaller portions, less carbs, cook more at home, and substitute in healthier options (i.e. fruits for snacks, bread instead of rice/pasta, etc.). The key is to find food that satisfies and makes me feel full without packing on calories.

But on that note, here are some things that I want to learn to cook: wasabi mayonnaise, jellyfish with sesame sauce, and coconut panna cotta. I also want to become a chicken master. I have cooking steak down to a science but my chicken comes out very inconsistently and I don’t have a good feel for it. I know that only the jellyfish satisfies my dieting strategy, but that’s how it is.

Thought: Japan can be very high calorie if you let yourself go. It’s just that Japanese people don’t eat very much and they share or have leftovers. Aki can eat one onigiri as a meal. I consider three to be a decent snack.

Thing I like about myself: I can adapt in a pretty big way.

This trip has become something of an annual tradition so I now have to separate it out by year. I’ll start with the more trivial lessons and get more profound toward the end, so you can stop reading whenever you want but at least you’ll have gobbled up the little morsels.

-spend more than $5 on tempura. It’s totally worth it.

-Japanese people are still pretty traditional in navigating streets by landmarks rather than intersections (a feature of GPS). It’s pretty tough if you’re not used to it but it is surprisingly useful. After all, humans are still more conditioned for narratives than laundry lists.

-my proudest accomplishment: a 13 mile run on December 31 around Lake Kawaguchi. A good way to end the year.

It was not only my longest run since high school, it has to be in the top 5 of beautiful runs I’ve ever done in my life. This is what I was looking at as I ran:

-I became a small god at Kinkaku-jin Temple because they have this little bowl about 5 meters from the walking path where you’re supposed to try to throw money into it. It’s that carnival game where you try to throw coins onto the plates, but somehow I managed to throw a coin and get it into the bowl, drawing a cheer from the crowd.

-the theme for this year will be beauty through simplicity. Doing things superbly in a simple way is actually quite difficult but it is perhaps something I should master. The remaining points are pretty much all things that I talked about with Aki’s dad. Man, I’d love it if I could just spend 2-3 years living in Japan near them and just osmosing knowledge. But I’ve realized that his best quality is that he can take tons of information, distill it, come out with a single simple point that can easily be adapted. So it’s not so much the quantity of knowledge that makes him wise so much as the senses built with the learning. I’m a little different in that I’ve become a storehouse of information but I’m not sure I can distill it into simple tasty points. I’m a Four Loko of knowledge right now and I need to be clean, crisp sake.

-Aki’s dad has been doing deals for Japanese companies to aggressively expand abroad, especially to the US and Europe. This is a developed strategy for several reasons: the yen is at historical highs, Japanese firms have too much cash, poor Japanese demographics leave few opportunities for high growth, the global economy is at a particularly weak moment (especially the US and Europe), and he expects this window to be open for 2-3 years so Japanese companies should start sowing the seeds now for foreign expansion. His role is that he’s trying to establish his name brand so that when Japanese executives want to look abroad, they call him to ask for advice. It’s less private equity (which is still equated with trash in Japan) and more investment banking. Nobody wants to sell their company to him, but they’re willing to hear him out when he talks about partnerships to help acquire foreign firms.

-America and the EU seem to be reaching for easy solutions by weakening the dollar and euro. This is actually a parallel to the early Great Depression when the Great Powers raced to devalue their currencies; it’s an easy way to boost exports and artificially raise competitiveness while justifying public spending by pouring money into the economy. But devaluing the currency is a dangerous game. The Treasury criticized Japan this week, but Aki’s dad treated it as mostly just gnashing teeth and politics. Ben Bernanke already knows he’s not smart enough to know how hard to press and when to stop, and that’s a very good reason to not play. A problem with being the center of the global economy is that devaluing the dollar will confuse global markets and US society, and the bottom could fall out at any moment. The US might do it anyways because there’s nothing else better to do, but it should be stopped and discipline re-imposed by the rise of Asia. As I constantly fear, our problems are big and nobody at the top knows how to fix it.

Also, the other “easy” solution is to expand the military. If you’re talking about hiring lots of useless young people, investing in industries to give them goods, and providing society with reasons to accept lots of harsh new rules, this solves lots of problems at once. It’s worth pointing out that this was the dark shadow of the New Deal and something that all the Great Powers did to actually implement Keynesian policies successfully. Uh, you’d hope for more of the 1980s (i.e. no war) than the 1930s.

-Aki’s dad also pointed out that the European Union was always a political thing. It never made sense economically and wasn’t designed to be a profitable venture so much as try to promote peace by sharing the prosperity during good times and prevent disaster by sharing the burden during bad times. But now that political will is being severely tested as Europeans struggle to decide how much they want to pay for other people’s problems. He thinks ultimately they’ll make it just because the political consequences are just too costly for any quitters. But it’s ironic that Germany wanted to be the master of Europe, Greece wanted to be Europe’s basket case, Italy and Spain wanted to be the scandal-prone drama queens of Europe…and they all got what they wished for.

-Also, 2012 is a hugely significant political year. Almost all of the OECD have major elections and currently almost all of the OECD leaders are predicted to lose their jobs. Obviously we know about the US election, where Obama’s chances are polled at 50-50. Merkel’s chances in Germany are about the same and she would pull through for the same reason (i.e. her opponents are incompetent). But for France, the UK, South Korea, Italy, Taiwan, Japan, Israel, etc., their leaders are on notice that the public is very unhappy with how things are going and they are on track to lose badly. But even for non-democratic countries, China also has a pending leadership change in 2012 and there is LOTS of politics in the Politburo.

-Aki’s dad grew up in Minamata in the late 1950s, when there was a scandal involving mercury poisoning. The long and short of it is that Chisso Corporation was dumping mercury into the river where the locals got their fish. People started exhibiting strange symptoms and dying, and a long House-like investigation ensued. Chisso knew the people were suffering from mercury poisoning and that they caused it but they blocked the investigation and denied to the bitter end. They even built a fake water filter but kept their political donations up to prevent closure of the factory and regulations to stop polluting the river. In the end, they paid huge settlement amounts to the victims in Minamata, after de facto nationalization by the Japanese government (i.e. they bailed them out so the company couldn’t declare bankruptcy but simply took all their profits until the debt was repaid).

This leads to two separate points:

-this aided in the democratization and equalization of Japanese society. The scandal was so bad that it basically reversed the trend of growing inequality in an emerging market, so Japanese corporations instituted the current system where they pay workers generously and don’t pay management exorbitantly like you see in the US. It was basically a crime against the very poor, because the worst incidents of mercury poisoning were in fishing families and the destitute, who tended to eat shellfish on the ground and fish offal (which you shouldn’t do even before pollution).

-this provides the model that will probably happen to Tepco in the wake of the Fukushima disaster. Let’s be honest, it’s far worse than they’re saying and everyone knows it. They released a detailed timeline of the disaster last week (i.e. burying it under New Year’s news), and it showed a lot of man and machine incompetence. For instance, the computers automatically shut down after the earthquake, but it was still rebooting when the workers on site got a tsunami warning, so they manually shut down the computers. Some of these workers were killed in the tsunami, but they didn’t tell anyone they had overridden the computer and manually shut it down (which requires a manual restart). Hours later, Tepco officials were scratching their heads wondering why the computers didn’t come back online like they were supposed to (all other Japanese utilities did). When they finally asked, the workers admitted they turned it off and had forgotten to turn it back on. But the point is that Tepco will be paying the citizens of Fukushima for a very long time, and probably the Japanese government will take them over at some point. Although interestingly, growing voices in Japan are calling for deregulation as a result, so that the Japanese taxpayer isn’t on the hook for Tepco’s F-ups.

-on to corporate governance and Olympus. There’s no sugar-coating that Olympus is a mess but it demonstrates such incompetence that it’s unusual. How can 15 sophisticated board members sign off on a merger deal where the lawyers get paid 30%, $1.5 billion? It’s crazy, so crazy that he suspects that there might in fact be Yakuza involvement, or some kind of other extreme corruption lurking beneath the surface.

We talked about different types of governance between the US, Japan, China, and the EU, but the first principle of governance is always the same – you’re looking for high-quality people to lead and manage, with accountability to some majority and enough flexibility to listen and respond to the minority when it has a good point. The obvious fact is that Olympus does not have any of these things but it’s difficult to change things.

-as far as economists and opinion pieces, Aki’s dad says he reads and listens to their analysis and presentation of facts, but he ignores all of their conclusions. Pretty much, intellectuals and academics are very good at extracting data and presenting analysis, but they never live in the real world so they’re awful at predicting the future or drawing meaningful conclusions. Most of it is that they think logically and assume events occur in a linear fashion. Any length of life experience proves this is absolutely untrue, and the lack of linearity affects people’s perception of events. Anyways, it’s kind of stupid to lean on someone else’s opinion as a basis for your own, you should take the data for yourself and come up with your own educated guess about what will happen. From your own life, you should already know if you are good or bad at predicting the future and good or bad at taking action on that (i.e. gambling).

-he also had a fairly mixed view of the Occupy movement. He expected something like this to happen but he was surprised that it didn’t excite the imagination of the public, that people were almost resistant to it. There’s a strange disconnect that Americans are very conceptual at thinking about inequality and most would probably favor some redistribution of wealth, but when someone sticks their hand out and says “give me money”, they’ll flatly refuse and then nothing will happen – this means that “the poor” in America aren’t too badly off. So in this regard, he thinks Europe is the place to really watch in 2012 about how modern society will be altered, because when people say no to the poor in Greece, they riot.

-This point was inspired by watching a special on Japanese news about gold speculation. They showed a Japanese trader from a bank and a Chinese day trader in early December after the ECB lowered interest rates to 1% and started the long slide in gold prices ever since (from $1755 to ~$1500 today). In the end, the Japanese trader bet before the announcement but lost his nerve when things initially went against him, so he only made a $10k profit. The Chinese day trader looked at trading patterns in a quasi-mathematical way and ended up losing $20k.

-Both of these guys are immature and stupid traders. The proper way to trade is chart analysis, to try and hoard as much knowledge as you can to make educated predictions about the market. What you really want is a narrative constructed from what affects the markets and how, and then to predict the future from that narrative and adapt.

The Japanese guy is stupid because he has a very limited story (i.e. “the ECB will cut interest so gold prices will fall”). He doesn’t know the future so making a position before the announcement is just gambling, so his whole narrative could be wrong from the very beginning. He also doesn’t use the enormous resources at his disposal to figure out who is buying and selling gold, which he could find out because he works at a bank. And then he is satisfied with his performance because he made a profit, but he doesn’t know that he’s just a damn lucky fool. But his profit is nothing, it doesn’t justify his office or his computer or salary, because he did something that a child can do. Markets are a 50-50 shot, either the price goes up or it goes down. Any idiot can just guess. But when you let a bank invest your money, you’re not paying for guesses (or you shouldn’t be).

The Chinese guy is just ridiculous because he eschews even publicly available information and just trades on trends. This is the kind of sucker that banks love because he always buys if the price goes up and then sells when the price drops. He’s also the reason why bankers get paid so much, as living proof that amateurs can never match professionals. He made his fortune speculating on gold but his wealth is a castle made of sand, it will disappear one day as quickly as it appeared.

-monetary policy is a support for the economy, it can’t lead and rebuild it. The basic problem is that the economy is broken because of supply and demand problems – we built too many homes and now nobody is spending their money, which is problematic because US GDP is 70% consumption. The government can’t just fix that by injecting money into the system. The theory is that GDP = consumption + investment + government spending + trade, so if consumption is down, the government should just spend to rebalance the equation. But that’s totally conceptual and it has no real-life application. I mean, where should the government give money? To consumers, just hand out $600 checks again? People won’t spend it in a sustainable manner so that fixes nothing. To GM and other money-losing companies? Are you crazy? The best thing might be for the US government to invest in healthy companies, leveraging high-growth opportunities so that they have even better growth and then use that to hire more workers. But why does the government need to take that risk?

But anyone who says more spending will work is totally ignoring the glaring example of Japan, who also tried to reverse deflationary pressure with lots of public spending. The problem is that even with public works, workers know they are only temporarily hired so they hoard their money and don’t spend it. You can only spend on consumer goods if you expect to have a stable or growing income. If you are uncertain about your job status, it is just stupid to spend money. And that’s exactly what we’re seeing.

The approaching problem is that our globalized world has connected lots of very different kinds of systems and now things don’t fit quite right. This has put lots of pressure on the social nets in the OECD countries and inevitably they will change. The question is how and whether people can accept that. Japan has tried many times and now their government is a revolving door as politicians are kicked out whenever they raise the issue. America is starting to shift its weight uncomfortably. And in Europe, you see much more tension as people prepare to get really angry.

Thought: I will distill these points into a more coherent post.

Thing I like about myself: I’m much smarter and wiser than I was a week ago. Also tougher and more handsome.

It’s time to review the year. As I grow through it, a couple things stick out. First, it was overall an excellent year and yet it feels like I could have done better. I suppose it’s natural to have that kind of instinct and it’s good if it keeps me from becoming complacent but it’s not strong enough for me to lose perspective.

As always, first the good news, my list of accomplishments:

-became a certified bookkeeper (passed 4 exams)
-passed 2nd dan TKD test
-became a realtor
-got certified as Intuit ProAdvisor, gold level
-passed CMA exams (2 exams)
-passed CPA exams (4 exams)
-Nike+ running promotion to green level (> 155 mi)
-bought 2011 Hyundai Sonata (with Aki)
-managed to keep my job the whole year through tough times

On total, it’s a very impressive list and I feel pretty good about it.

Now for the memorable events:

-the trip to Chicago, playing Magic and training at a boxing gym with Jeff
-being a groomsman at Jeff and Wai’s wedding
-being a groomsman at Yasu and Loan’s wedding
-the trip to Kona, talking to Aki’s dad about global economics and setting some goals
-going to Yao and Ellen’s wedding
-Kenny and Winnie’s visit to Berkeley
-the Family Dinners and hanging out with the Sippers
-watching J-Money graduate from law school, pass the bar, start working, get promoted, and learn to punch a witness and turn him into smoke
-grabbing lunches with Albie and seeing him off to Harvard Business School
-hanging out with Patrick and my parents in LA

There’s a lot more, obviously, and I apologize if anyone wanted to be on the list but isn’t there. This is just a brief list.

I’m most proud of the fact that I’ve made big strides in terms of my maturity and attitude. I think I’m much more disciplined and mentally stronger and sharper than I was at the beginning of the year. I don’t consider myself quite at the level of being a master at anything but I’m getting there, or I should be thinking about how to get there.

But overall, I would say the world is in a very precarious position and it’s worth pointing out because I want to start fitting my skills in the context of how I can make society better. Even if it’s just doing my part by being a productive citizen. But the world is heading for a place where things will be very unstable and a lot of our old thinking is showing large cracks. Can we take it for granted that our society can provide for the young, for the old, for the poor, for the sick, for the unlucky, for the gullible, for the foolish, for those on hard times, and for everyone else who says they need help? I honestly don’t know, I don’t think so. I mean, who does that leave to pay for all this? The 1%? It reminds me of the Watchmen when Rorschach proclaims “All of the whores and politicians will look up at me and shout, ‘Save us!’ And I’ll look down and whisper ‘no’.” But that’s being dramatic. I think more probably society will have to re-examine many of the promises it has made to itself. This process may be painful and people won’t like the answers, that’s for sure.

To end this on a slightly brighter note, I will say this. Our society needs help, it needs sensible, capable people who can lead it back to a good place. And here I am.

This is the time of year where I start to compile my Year in Review and push out my goals for next year. I’m still waiting on a couple things before I can fully review the year, but I’ve already mostly planned the things I want to do next year.

The first is an evaluation of where I stand.

My current weight fluctuates between 168-172 depending on the time of day, so pretty much I weigh 170 lbs. This is much too heavy and I’ve felt it recently. I played tennis against old rivals Patrick and Miller and I went running with Patrick, and I have to admit that I’m not a particularly good athlete any more. I’m not weak but I would definitely not call myself athletic, and this is something that I want to actively work to change. Ideally, my weight should be around 155 lbs. As for standards, I want to be able to do 40 pullups, 120 pushups, 500 situps, 200 squats, 100 burpees, run a mile in less than 6 minutes, and run 3 miles in less than 20 minutes. I think I will set weekly goals that are measured by daily averages. The key here is continuity – being able to maintain a program where I am constantly striving to achieve goals. As with most people, I’m in a place where I get gung ho for a couple weeks and then fall off when my improvement slows and working out turns into a grind.

As for exams, I’m pretty unhappy that I won’t get my CPA or CMA in 2011 – even if I passed the last exams, it’s probably too late to finish off all the paperwork and crap before the new year. And that’s a damn shame. I’ve decided that I’m going to make 2012 the year where I become a Pokemon master and start collecting some serious certs. It will probably mean studying my ass off like I’ve never done before, and that’s a place where I want to be. I have a lot of mental horsepower but now I need to master some tradecraft so I can put it to good use. Our society needs people who know what they’re doing and I want to be one of those people. I’m astonished at the widespread ignorance and I’m currently just another guy in this.

And hobbies. I juggled a bit in 2011 and I’m still fair at it, but I didn’t learn any big tricks. My cooking skills improved quite a lot over the year but I wasn’t very active in the last few months. I’m pretty pleased that I’ve kept my math skills sharp and I laughed in Aki’s face that she didn’t know anything about geometry or calculus when she watched me do some stuff on Khan Academy. I also migrated my journal recently from Excel to Google Docs, finally acknowledging completely that my computer use is inseparable from the internet. But other than cooking, none of these hobbies really helps me express myself in a meaningful way. I run through some stuff and it’s kind of bleak – I’m awful at drawing and I’m afraid of what might happen if the FBI or my future children got a hold of a Daydream Journal. I guess I could try writing short stories but let’s face it, I’m likely to end up rehashing the Big Play where the trombone player gets owned in the end zone in every story.

Finally, the soul. An often neglected part of my training, as I just assume that the hardships I impose on myself will build character on its own. It has to a certain degree but I think I should do more to mold my personality, sort of related to the point that I don’t express myself as much as I probably should. I’ll need to ask for more feedback on how I can improve myself before I make any plans here.

Thought: But definitely more blogging than once a month, for crying out loud.

Thing I like about myself: I ate a Whopper meal and I wasn’t ashamed of myself at all.

Across my band of knowledge, I think there are a couple things I can call myself when it comes to business, an economist and an accountant (arguably also a statistician). But these are backward looking fields – that is, they process data that already exists and use it to draw conclusions. When economists or accountants or statisticians get drunk, they occasionally make bold predictions about the future, usually very foolish predictions.

I’ve expressed my life dream here before, which is to help a company make very good decisions. And it requires a little bit of evolution and wriggling from my chosen education. What I really need to learn is finance. And right here, right now, I’m going to lay down the foundations of finance. If you know this, you have the foundation and all you need is to fill in the details with technical tools or analysis.

Finance comes down to three big decisions – investing, financing, and dividends.

Investing is choosing where to put your resources, projects that will return more than some minimum acceptable rate. This acceptable rate reflects the riskiness of the asset – your bank can offer you 1% interest because your money is guaranteed but you may invest in a start-up only if they offer you much more because it is much more likely that you’ll never see your money again. It also reflects where you got the money, a difference between your mom or your credit card. The return needs to be a reflection of cash out, timing, and side effects. The bottom line here is that you need to get more money back than you are putting in. Strategy and market share have some meaning, but if a project can’t make the numbers work, then the discussion is over.

Financing is raising money – debt and equity. You must decide the balance and mix between debt and equity, which should minimize the acceptable rate. The type of debt is the simplest and cheapest you can find, anything else makes it more complicated than necessary.

Dividends is the process of returning money, which is another way of saying “don’t force the issue”. The acceptable rate is an absolute bar – if you can’t make more than that, then pull out your money and go somewhere else. There is no glory in the sake of growth. Companies are legal entities that exist to make profits. If they are worth more dead than alive, then they need to be killed off or they will be a drag on society.

None of this should come as a surprise and none of this requires mind-blowing insight. Shrewd business people have always understood these principles – they may not have the tools but all you need is the intuition, which is why successful people don’t necessarily come from elite schools. Finance is also a very focused discipline because it has a singular objective: money. Back to Adam Smith, you simply believe that maximizing your money makes society better because if that were not true, someone would stop you – government can shut you down or people can stop buying your goods.

But the way this focus comes out will change over the life cycle of a business. Mature companies earn most of their returns from existing projects and so their goal is ensure stability. Early companies spend most of their time trying to make the right decisions because so much more of their resources are tied up in the future. So for instance, Facebook is constantly exploring new ideas, they have no debt, and they have no returns. They earn a reported $200 million in operating profits every year and that constantly gets reinvested back into the company. By contrast, AT&T does not try many new projects, they have 60% debt, and they give back 45% of their profits to investors.

These are the basic principles. Pretty simple and they are broken at your own peril. Nothing can change the fact that any venture needs to make more money than it originally cost if it wants to survive. People may think they’re smarter than the rules but they’re not.

Thought: Need more educational posts!

Thing I like about myself: I have flashes of brilliance.

P.S. Photo of the day. This is SlayerSBoxer, a StarCraft professional known as the Emperor. This picture illustrates why people love him:

This is him at a tournament after a tough day in pool play. It is 230 AM. No fans, no players, the competition is over for the day. And he’s practicing by himself.

Today is Halloween, which is my favorite Facebook holiday of the year because it’s a time for women to dress up in slutty costumes and act out. It’s a great general holiday because everyone gets to relieve the pressure and act out a little – kids get to beg strangers for candy and binge on their loot, teenagers get to act like the boneheads they are on the streets, and adults get to acknowledge in the workplace that they’re faking the whole thing.

So what have I been up to in the last couple months? I took the (hopefully) last of my CPA exams. I also had some other landmark achievements – I got my 2nd dan in taekwondo, I’m officially a realtor, I finished the CMA exams, and I renewed my other designations. I’ll write up a full list soon, because I need it for my own records now that I’m starting to forget a few deadlines. There will also be a whole list of goals that I want to achieve in the near future, which currently roughly includes becoming a professional statistician, getting the CPA, getting another fitness certification, .

But there’s a small gap in here and Aki says that my achievements are kind of selfish. I’ve been feasting on knowledge and hoarding achievements, but I’m incomplete because I’m not really using them to help other people or produce something tangible. So it’s not really doing anything for me, which is true enough. I’m not sure if the next step is a new level of learning or if it’s just getting into practice by managing and helping people. I probably should just start small and help out with the UC Open. Or I’ve been thinking about trying to be a little more active with a podcast or website. This will require a little more thought before I commit to anything.

I’ve also been a patron of the arts. I watched Infernal Comedy: Confessions of a Serial Killer on campus with John Malkovich portraying serial killer turned famous writer turned serial killer Jack Unterweger and classical opera pieces interspersed between monologues. Like Malkovich himself, the performance was weird and brilliant, poking fun at society in a variety of ways. I also watched Margin Call, an indie film about how an investment firm reacts when it realizes that it has a serious problem and the S is about to hit the fan.

Thought: I can do better than this.

Thing I like about myself: I love gummies.

A couple thoughts the day:

1) Aki’s dad was correct that QE3 would not happen. Instead the Fed today announced Operation Twist, basically a swap as the Fed sells its short-term Treasury holdings and buys long-term Treasury holdings. This flattens out interest rates and disguises the fact that the US has a long-term debt problem, which might be paving the way for more spending or at least delays the punishment for not fixing our long-term deficits.

To be honest, I actually agree that more spending is necessary, but I hate the arguments for it. Let’s be plain, the next decade is going to suck as the US has to revamp large portions of how society deals with debt, large purchases like homes or education, and health care and retirement costs. Government programs are a nice way to ensure that the bitter pills go down easier and that society doesn’t suffer too much while our leaders figure out what to do. But to act like there’s a silver bullet in monetary or fiscal policy to solve all our problems at once is just ridiculous.

2) My latest project is trying to see the world in a new way, and I’ve started by picking up my reading. The books that I am currently reading are Adler Mortensen’s How to Read a Book, Bruce Barnbaum’s The Art of Photography, and Satyajit Das’s Extreme Money. All three books ironically have the same thematic elements about sticking with the basics – brains, hard work, experience, intelligent self-surgery. All three criticize that too many people consider schooling and education to be equivalents, the intellectual laziness of using credentials rather than vision and experience as measurements of knowledge. They all seem to far prefer the school of hard knocks, using school only as a basis for learning to learn. Mastery is the point where you can teach yourself without guidance; that when faced with a problem you can’t solve, you figure out a way to break it down and get through it.

Mortensen’s book is probably the most enlightening so far, since reading is a skill that most people take for granted. But people will avoid material that they can’t understand, sometimes admitting to being intimidated but usually casting the work aside as boring. It is sort of the same way that people will avoid the bench press or certain weights in the gym, finding excuses to never try them.

Barnbaum’s book is also excellent, particularly for me because I have very little knowledge about photography and don’t know how to appreciate it as an art. Maybe the toughest part is this strange disconnect between trying to understand what the photographer is trying to communicate and the free flow that there aren’t any real standards to judge photography.

Das’s book is nice if you need more reasons to hate arrogant bankers. The book takes no prisoners in castigating various aspects of finance and displaying that the whole enterprise is a mix between the worst frat party ever and a whorehouse (is that a sorority? lol). But it’s a exposition about how smart people can delude themselves that money and brilliance are the same thing, and their greed and laziness can morph driven people into a career where they produce nothing and don’t care about making society better. Worst of all, their intelligence and drive can persuade others to join their cult, sucking the talent out of society. In short, the book is pretty bitter about how bad people can be with money and how gullible they are to believe that they can get something for nothing, whether it is gambling or speculative investing.

3) I went to LA last week for the wedding of one of my high school friends. After an otherwise pleasant weekend that reminded me of all the good things about Los Angeles, the wedding reminded me of the one glaring fault: the people. While people were very nice, the wedding dripped with insincerity and Aki summed it up as “low class”. All 12 members of the bridal party were asked to give a speech after dinner – 5 were rejected because they were too drunk and at least 5 of the others slurred their words or were cut short because they were also drunk. Of the final 2, one was a generic rambling happiness speech and the other made a crude sexual reference. Aki was also pretty upset when everyone squealed and danced to Justin Bieber but promptly abandoned the dance floor when some classic R&B was played. Other stuff was so contrived that it bordered on fake. The bride and groom said extra toasts to each other before the first dance and expressed their undying love for each other, which would have been beautiful if they weren’t reading it from a piece of paper. But in all fairness, it was a beautiful wedding with lots of frills and fanfare, and they planned it from Taiwan with less than a month in the US, so they did a really amazing job. I might just be a party pooper because I don’t drink very much.

4) One of my high schools friends started very recently at Harvard Business School. Beyond the name-dropping though, the school is jaw-dropping in price – it is $55,000 in tuition per year plus another $30,000 for room and board. My friend insisted it was worth it because the school informed them that the “average” graduate in finance makes $150k in base salary and can expect $3 million in bonuses. I put average in quotes because it is a ridiculous summary and I have a campaign that averages should always come with a variance. Put it this way – if one student out of 100 made a $300 million bonus and everyone else made nothing, then $3 million is an “average” but it’s highly misleading.

Thought: It’s a weird habit of mine to focus on the negative when something is very good, probably related to my relentless drive to improve. Aki hates my preference for complaining rather than generic positive platitudes.

Thing I like about myself: People think I’m lucky. I’m not.

Some lessons learned this weekend:

-StarCraft 2 is turning into more and more of a real sport and is bridging that gap between physical and mental training. The bottom line is that Koreans are better at the game than everyone else and it has entirely to do with the simple fact that they practice more than anyone else. Korean pro-gamers average 12-14 hours per day training for StarCraft tournaments, whether that means playing the game, practicing individual strategies, or talking it over and thinking up new possibilities. It has gotten so bad that StarCraft parlance has “foreigner” meaning “non-Korean”, and everyone is rooting for a foreigner that can plausibly compete evenly with Koreans, which hasn’t happened yet.

Why this is important is that StarCraft is essentially about resource management, unit control, and crisis management. Korean pro teams have a strict regimen of developing players to do well by constantly pushing them out of their comfort zone and forcing them to learn to do things more smoothly and quickly until the new pace becomes the norm to them. If you’re paying attention, this is almost exactly identical to the principle of overtraining that athletes use to get better. The bottom line is that if you want to get better at anything, you need to take this approach.

-On a related note, I was inspired this weekend about accounting and how to take it much more seriously. There isn’t much to it that will be surprising – hard work, dedication, and focus. But I need this constantly drummed into me, with the point that what separates smart people from stupid isn’t just quickness of mind or strong logic or good memory (although these help enormously with productivity), it’s the ability to concentrate on a single task for a long time. Put simply, being disciplined doesn’t necessarily mean you’re smart but being undisciplined means you’re stupid.

-Drinking is a terrible habit. It’s expensive and it turns you fat, slow, and dumb. However, that doesn’t mean drinking is useless. If you’re succumbing to the stresses of adult life and realizing that you did your entire life wrong, you should drink to numb the pain and silence that voice. Because it’s all good times. As you grow older, this will make increasingly more sense. Just don’t drown out that voice so much that it loses its feedback value.

Thought: I’m lucky to have such people around me.

Thing I like about myself: I’m a take-charge kind of guy.

More thoughts from Kona:

-To put it bluntly, the US is in the exact same hole as Japan. The reason why the Obama administration is so stuck is that they tried everything that the academics said Japan should have tried and then they tried everything that Japan has tried, and none of it has worked. My father in law says he doesn’t think Ben Bernanke will do QE3 and he is pretty much admitting in private that QE2 didn’t work and was a bad decision.

The thing with Bernanke is that his research has covered two main topics – the Great Depression and 1990s Japan. And he was very critical of Japan, claiming that the Bank of Japan was being incredibly stupid for not unleashing the printing press in the early 2000s to stuff the economy with liquidity and that the Japanese government was incredibly stupid for not simply unleashing fiscal policy to stuff the economy with large stimulus packages. But now that he’s in the Fed, he is starting to see the severe pitfalls of losing fiscal and monetary discipline and especially the fact that in a deleveraging period, stuffing the economy with money only serves to shred asset prices and therefore value even faster.

And this last part is the bottom line. The US economy needs to shred probably $60 trillion in asset values before things are properly priced. And this shredding needs to be done briskly but not excessively, because excessive causes bank failures, bond spikes, street riots, and wars. This is a process that is likely to take decades, especially as the government is increasingly forced to admit the postwar social structure has failed and tries to modify it. The thing is that when I say “failed”, we may only be talking about 5-10% of our civil society, so a full-fledged revolution that rips the entire fabric of society may be unnecessary and preventable.

So what’s the bad-case scenario? The shredding causes so many social problems and possibly a bank crisis, so that the government finds it necessary to step in, freezing everyone’s assets and then simply deciding the new price of things. It would be shocking in the modern time, but pretty much exactly what happened to fix the global economy in the late 1930s. If you notice, governments took over because they went to war. And yes, this would be much closer to literally re-fighting World War II without the war. To be honest, leaders around the world have been looking at this as an option. The problem is twofold:

1) How will people react? The rich will flee and the poor will cheer (because they lose nothing but the gap between them and the rich is closed). But what you fear are the middle class of people who lose everything and know they’ve been screwed as well as the most dangerous class of strong young men. This wasn’t a problem in World War II because strong young men were taken out of society to go to war and die on the battlefield.

The distressing problem with these worldwide riots is to see how people respond to government force. When people in the UK back down at the mere threat of having to fight the military, that’s some relief. When people in Syria and Libya are willing to war with their own government, that’s very scary. Nobody is sure where Americans would fall, with their widespread ownership of guns but their strong respect for the military.

2) Does the government know what it is doing? Short answer: no. There is a lot of discussion but nobody knows what social structures need to be changed and how this can happen in an acceptable way. Hence, society has become very shaky as people know that something is wrong and that the government doesn’t know how to fix it. So the immediate question becomes whether people will accept a strong government that starts absorbing huge segments of commodity markets. Note that Obama’s hands are tied and he has no room for new policies until after 2012.

But how did Bernanke get to this point and why did he ignore Japan’s experience? To put it shortly, because he thinks Japan is stupid and America is great. All the other analogous countries are even worse – to compare US policies to Zimbabwe or Argentina is laughable, even if we’re ending up with their solutions. But now he has to admit that this thinking is wrong and unfortunately Japan does not have a satisfactory policy conclusion that we can copy.

It appears that society is moving away from the stable, prosperous period of post-World War II and moving to a new era that is very unstable and frightening. This is good in some ways – these types of challenges usually help eliminate the wealth of the undeserving in our society and bring about new heroes and leaders. But it can be painful and the new leaders can be very bad.

As I keep saying, this is also very scary because it will decide the course of our adult lives. If the government does a bad job, it is our income growth over the next 30 years that gets taken away to pay for the manmade problems of the 21st century and we could be left with nothing in the end. This should be sufficiently unacceptable that if it is raised as a possibility by the Boomers, you should be angry enough to torch something in the streets. The increasingly vocal complaints about taxes are implicitly a complaint that people have lost confidence in the government to wisely use the resources they are semi-voluntarily providing for society.

-But is the challenge bad? Not necessarily. This is something that probably should happen once in a generation and society has been long overdue. The interesting thing is that Baby Boomers are now the establishment and it is Generation X and Millennials that are carrying the banner of change. As I write this, news is coming from Libya that Tripoli has fallen and Gadhafi will probably be captured or killed in the next week. This is the type of thing that happens – the old establishment is torn down by young guys and new leaders will emerge who shape their society. Young people in the US should also start to rail at the bad system and clamor for certain changes.

-I had another long talk with my father-in-law about my career situation. My company is in a critical situation and it is likely that it won’t survive. But as the controller, I’m in an interesting position – if I leave, the company will definitely fail; if I stay, the company will probably still fail but it has a fighting chance. He thinks it is best for me to stay and learn to fight it out. For one, being through a company that has grown dramatically and is now fighting for its life is the best way to learn accounting from a variety of perspectives. Being an accountant for a large, stable company is easy – you’re essentially just a bean counter. But to manage the accounting for a company that experiences wild swings in fortune and especially the tough times requires a much stronger grasp.

As for career advice, he says I should start with a broad philosophical goal and go from there. For myself, I want to help grow a company through effective resource management, using good accounting and data analysis. Being part of such a company contributes to society by providing goods and services that people want and possibly hiring people to provide it to them. I want to be the kind of person that reads feedback objectively and accurately so that society improves itself, even if I tell people things they don’t really want to hear.

-On a more micro level, I did a lot of thinking on the beach about my goals for the rest of 2011 and how I can achieve them. The vast majority of my goals involve academic tests so the obvious first level is that I have to focus on studying. The thing that needs to be improved the most my endurance with discipline. I need to be able to study harder for longer periods of time – my mind has grown slower and wearier with all the distractions and I kind of have to admit that I’ve taken a few steps backward. I need to struggle and overcome, with the perspective that this is important because I’m learning my tradecraft. Without these basic tools, my goal above is impossible.

This means that I need to fulfill my potential with hard work. I have the maturity now to accept that people expect more out of me and that I should be more than other people – I have an uncommon amount of talent, I have an uncommon drive, and I have an uncommon enthusiasm and optimism. And I know that there are actually only small differences between being good and being great, but that small difference makes for large differentials in results. But this means I have to lean a lot less on my talent and learn to do things the right way, perhaps trying to pay attention to things other than results.

-In my fantasizing mind, I like to think that I am the Terry McGinnis to my father in law’s Bruce Wayne. During this trip, I’ve been assigned to do all the driving, carry the golf bags, and generally walk around with my father in law. But he’s been imparting a lot of wisdom during this trip and I like to think that I’m ready to be his next Batman.

Thought: I need to blog more often because the lengths of these last couple posts has been ridiculous.

Thing I like about myself: I’m also uncommonly funny. And uncommonly weird.

Hello all, I am currently typing this after a long few days in Kona. The nice thing is that my in-laws rented a gorgeous house with a breath-taking landscape. But as they say – mo’ money, mo’ problems. The house is poorly maintained and it’s obvious that the owner only utilizes about 10% of the house’s potential.

I’ll go through the big points one by one:

-I’ll start with the poorly maintained house. The pool is filthy – whoever designed the pool never thought about the wind or the surrounding vegetation, because there are several trees in a very windy area (right next to the ocean) that basically blows leaves nonstop into the water. The owner obviously never cooks because ants have infested the kitchen. It’s a clear sign because ants hate the most commonly used herbs and spices – black pepper, paprika, parsley, etc. If you use these things frequently in the kitchen, they won’t wander around. Also, the gas grill is huge but the flow of gas was very slow because of non-use. I burned all the hairs off my right arm trying to light this thing. I will say that having smooth skin is pretty nice.

But don’t let that get you down. This is the dark underbelly of having a huge house – someone who has $5-7 million in cash to buy a house like this doesn’t need to know how to cook. It’s pretty obvious that the house is both an investment property and a pantie-dropper.

-Speaking of dropping panties, this is a part of Hawaii that is frequented by Japanese celebrities because it is very dry (i.e. no rain), very private (i.e. not many tourists), and very beautiful. And I saw one, a model named Nozomi Sasaki. She is ridiculously, absurdly beautiful in real life. If she asked me to leave Aki and go with her…well, I wouldn’t because Mr. Minoda’s ninja assassin would kill me on the spot I love my wife.

Pretty sure I saw her checking me out.

-Speaking of my father in law, I had a chance to play some tennis with him today. On his tennis schedule, I am actually his first opponent since playing with the Emperor of Japan, which is quite an honor for me. But while we didn’t have a challenge match (which I’m fairly confident I would win), we played for a while and then had a really nice chat about his work. It’s a nice glimpse into the CEO of a large private equity firm and I want to share it.

On a day-to-day basis, probably about 60% of his time is taken up with appointments, meeting various people. Mostly it’s analysts and colleagues who want to pitch him an idea or tell him how a project is going. But he also meets executives from large companies and investment banks, along with politicians. He really sold me on the value of networking, because he’s meeting these people for a variety of reasons. The primary reason is simple human contact, to have a large net of contacts and talk to people from a lot of different perspectives. This leads to the other primary reason, which is that he’s gathering information – he gets the pulse and trends of the economy by talking to market makers and important decision makers to get a feel for what they see, like whether they feel there are a lot of opportunities, how the business climate is, and what they seem to be doing that is either working or not working. It’s also important to gauge how people view you and your company.

And the reason for doing all of this is because his business is to pick companies for acquisition and he gets paid for having good instincts and making good decisions. When he picks a company, the due diligence may involve 3-4 months of work for a team of skilled people. A frank “no this is not a good idea” is a very bad answer because it means all those people used all that time just to prevent a self-made disaster. So good instincts are cultivated through informed opinion.

As for how a private equity company makes its decisions, the first level is from metrics. The targeted company must be profitable, must have positive cash flow, and must be presenting accurate numbers. If it doesn’t have these things, there must be a determinable factor for why – which means pointing out a problem that can be fixed. The second level is the direction of the company, whether market trends are favorable for the company’s products. And the third level is the human beings in the company, whether management and/or the employees just need a little push to make it to the next level.

What makes private equity good in the economy is that it is a disciplinary force. Most often, the thing holding back a company from being successful is low productivity, which means the company either has lazy workers or bad managers. And this is when people become hostile to private equity, particularly in Japan. People often do not like hearing frank words that they need improvement, that they need to work harder for less money. But it may be a necessary thing for them to hear and not many people in the economy will say it.

But a funny feature is that my father-in-law has been on the television news a couple times and it helped him tremendously. A few executives that were previously hostile softened afterward and said “I saw you on the news last week. You must be very important”.

-And for talk of the economy at large, my father-in-law is very pessimistic. There are a lot of challenges and it seems very few solutions to meet them. The most viable solutions all contain paths that could lead to a very large war.

But what we have is a very transformative period where the US is facing the end of the era where it is the world’s only superpower and it becomes merely the greatest of the Great Powers. There also needs to be a sustained discussion about what to do with entitlements, particularly education, housing, health care, and retirement. There may also be an adjustment where the dollar is no longer the world’s reserve currency. If the next president or two gets it wrong, the US could face decades of misery paying for the problems created in the 21st century. Which means my lifetime and probably the adulthood of most people reading this blog, because the new taxes will fall hardest on our income growth over the next 30 years. Even if the US gets it right, there could be some severe curtailments of entitlements that we thought could be taken for granted. It’s a very difficult situation.

-I reached a new height of my cooking skills with two barbecues. The first was for my father-in-law’s 60th birthday and the second was a rehearsal dinner for the families and friends to meet. Cooking for 25 people is no trivial task but I managed to pull it off nicely. I hit a nice stride with the meats and had brilliant timing with the chicken and steaks and even some salmon.

-And speaking of that, I would be remiss if I didn’t mention that I became Vietnamese through marriage today. The Vietnamese family was actually a little hostile at first but they opened up nicely after the barbecue and especially after the wedding itself. My newest nephew-in-law and I had a nice talk about his woes in high school and how he feels lonely and depressed because his parents can’t relate to him at all and don’t understand his problems. But of course, since he’s now part Korean, I had to let him know that we have standards and he has to figure out what he wants and then try like hell to be the best at that (or at least find out what he’s bad at and then don’t do those things). I also had a nice talk with his father, my newest brother-in-law, about how he feels sad about his inability to connect with his son and how he tries to push his son to do all the things he wanted to do when he was young but couldn’t because of their poverty in Vietnam.

But it was an all outdoor wedding and it was very pretty. It was a very simple affair with few guests, in fact only six people came who were not family or in the bridal party. But it makes me appreciate that my own wedding was extremely well run.

Thought: My vacation is only half over.

Thing I like about myself: I’m very handy on the grill.