08.19.07
Posted in Freakonomics, Investment at 2:55 pm by ngkaboon
Many may not understand the impact behind the recent fall-out on the sub-prime loan but it is a classical bubble case. Bubbles are best understood as objects that take up volume and continue to do so until they burst. Before they burst, everybody think it will keep growing and continue to need more real estate, i.e., volume. Once they bursts, nobody realizes how much volume it had taken up because these bubbles were hidden deep below. Overtime, the bubbles with impact the layer above and subsequently, it would reach a point that the structure collapses and everybody realized what is happening.
In this case of sub-prime loan, we are giving people money that they are unlikely to pay back. This easy credit creates a situation of over-supply (in this case of houses) against a somewhat artificial or more appropriately, hollow demand. When this demands disappears, the supply chain collapses. The funny part about economy dependency is that when you give people easy money, the money circulates around for all kinds of unrelated things like sport players’ transfers fee, mergers and acquisition, stock markets investments, etc. Once the easy money flow disappears, the rest of the unrelated things are impacted. Fortunately, in some cases, the value is huge but not substantially huge until it kills off everything else, so the impact diminishes as it propagate down these unrelated economic activities. Unfortunately, in some cases, it gets blown out of proportion. It is not so long ago that we were all killed by money being paid for 3G licenses across the globe.
I will not be surprised if this current spate of bad news about the subprime loan fall-out eventually impact the sports’ transfer market. The key here is not on the locality of the fallout but the actual value of the fallout. Given that central banks are putting tens of billions to fill in the cashflow gap, you do get the feeling this is of the same magnitude as the 3G fallout. As such, it is not hard to imagine a worldwide recession being felt in the next one to two years, especially after China, who has been the last bastion of strong economy, loses it immunity when the Olympics begin!
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09.04.06
Posted in Freakonomics, Readings at 8:36 am by ngkaboon
I have been reading books specifically recommended to me by people. I also have spoken to a friend on the type of books I like.
 (This post has spoilers…)
In general, books that appeal to me would have a main thesis showing ALL of the following characteristics:
1) Contrarian to a point of being controversial
2) Non-obvious
3) Based on sound reasoning (subjective).
Take the book, ‘The World Is Flat’. It is a highly recommended book.  It introduces a few non-obvious ideas but the problem with this book is that though there are many anecdotes that do not stand up to scrutiny because it covers an area where I have personal experience in. Things on out-sourcing and China are not as close as I what I have experienced. Therefore, it scored low on having sound reasoning and in places where the writing is believable, they turn out to be knowledge already obvious to me.
Take another book, ‘Economic Hit Man’. This is a recommended book but it is written in a controversial style. On surface, the prose and style it is written in give you the feeling that the material is exaggerated (ala Michael Moore).  In reality, having little experience with most of the countries mentioned, I find the material hugely entertaining.
Another book I am reading is ’Guns, Germs, and Steel’. This book re-introduces an old idea on the reason behind the world powers today but the reasoning approach is interesting. Instead of basing the reasoning on the existing European powers, it focussed on the lesser known geographic regions and explained why they could not flourish into current powers.
I am a lazy and impatient reader. The thicker the book, the better it has to be. For example, it was a real pain struggling through “The World is Flat” compared to a possibly fluffier book say “Freakonomics”.Â
One thing I also realized is the age of the books. Old books that are recommended tend to be better than the new books that are recommended.
Having said that, I am not saying that books I like are good books and neither am I saying that the books I dislike or are neutral with bad books.
Neither am I truly scientific. I have a tendency to believe ideas that are controversial easily with little evidence. As a computer scientist, I am more interested in deduction and inferencing and would care less about statistics. Hence, well-crafted anecdotes explaining cause and effect is sometimes sufficient to convince me. Convincing statistics, on the other hand, raises my suspicion.
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01.18.06
Posted in Freakonomics, Data-driven reasoning, Statistics at 12:41 pm by ngkaboon
Someone came up to talk to me recently because I was holding on to the Freakonomics book. According to his reading circle, the book was highly recommended.
As for me, I think the book is good (not bad and not very good either). I have a soft spot for books that present facts in a controversial way. These facts are semi-facts because though the reasoning is eloquent and backed with good supporting evidences, the truth is that there are always hidden assumptions not revealed or perhaps even not known to the authors. It is not a very good book because I am familiar with causality, correlation and data sampling, having read them from other sources.
Freakonomics brought out correlation and causality very often throughout the book. The problem with us is that we always like to seek reason and for that reason (pardon the pun), we always see things with a causality perspective. There is a lot of times “may” is used in the book but I think, for the average reader, it is often overlooked. The reader tend to read through the anecdotes and form their causality chains unknowingly and wrongly. The worst part of this matter is that as people like controversial facts, these controversial facts get propagated quite quickly over lunches and drinks.
One thing that I have not seen it mentioned in Freakonomics is sampling. We are using sampling to derive information about the population (and remember in Freakonomics, the population is at best Amercian citizens and not all human beings). There may be flaws in selecting a certain sample (which may only be realized much later).
Of course, this post is meta-prophetic. I am trying to bring in controversial ideas about a controversial fact book being not as good as it seems.
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01.15.06
Posted in Freakonomics, Buzz Marketing at 11:40 pm by ngkaboon
This reminds me of a posting I read somewhere (too lazy to find out where) on VCs meeting potential startups. If they are hearing 3 times of a particular startup from 3 different clique of people, they will call the startup to meet.
I recall I saw Freakonomics at a bookstore some time back and was quite sold in by its tag line - “A rogue economist explores the hidden side of everything”. Then, I started bumping into some blogs where people are reading Freakonomics and I think not too long ago, someone told me about Freakonomics again. Finally, I bought the book today.
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