Sunday, February 28, 2010

Six logical fallacies that cost you money everyday

I came across this interesting article of Six Logical Fallacies that Cost You Money Everyday at It is a light-hearted article that may not be taken seriously. You may or may not agree to its findings, because it is about some of the decisions we make everyday. Naturally, you may think that we are making such decisions logically and correctly. Instead of changing your behaviour right away, these notions are at least worth pondering.

The basic observation is that human beings are evolved from animals. Our brains are adapted subconsciously to living in the wild. Human civilization developed only in the last short ten thousand years. Thus our brains often act on instantaneous responses that do not necessary fit the present day lifestyle, and tell you to do some things that will keep you poor.

Fallacy No. 6 - Think The Future Is an Urban Legend
Natural selection in the wild taught us to take things now, and that the future was less reliable. Rotten meat available now was more valuable than fresh meat to be hunt a week later. Today, the future is more predictable as governed by laws and contracts. However, if a man in nice suit offers to pay you $100 in a year, or $50 right now, our brain will tell us to go for the cash now.

This is called hyperbolic discounting. There are industries that rely on your inability to think rationally about the future. Our whole economic crisis was kicked off by borrowers taking on loans they could not afford, after lenders offered them lower payments, or even no payments, for the first year. Credit card companies still rely on your brain to make purchases now that you will not be able to pay for at the end of the month.

Fallacy No 5 - Sunk Cost Fallacy
We have a brain that worried about making sure we don't waste money we've already spent, or money that's not yours anymore. Say you have been a Mac user and recently bought a $600 wireless Apple keyboard. Now, even though you like everything better about changing to a Dell, with its own wireless keyboard, and it's twice as cheap as the nearest Mac equivalent, your brain will tell you not to waste the money you spent on the keyboard. In the name of not letting the keyboard go to waste, you buy another Mac.

This is known as the sunk cost fallacy: a mechanism in your brain that tells you to spend money on something, simply because you've already spent money on it. In the above scenario, if you were perfectly rational, you would realize that the $600 were gone. The only thing that should figure into any economic decision is the money and possessions you have in the present tense, and how they can be best used to make your life better in the future.

Fallacy No. 4 - Can't Get Rid of Useless Stuff
This is the brain mechanism that tells you to wait for a better price on something that, in reality, will never go up in value. Investors suffer from this all the time; when a stock is losing value, instead of selling it and taking what they can get, they hold onto it. It is not optimism that the stock is going to go up, but rather being reluctant at the idea of selling it for less than they paid.

It's the same impulse that makes people hoard useless stuff, unable to grasp the fact that it'll never be useful again. There is an industry profiting off our malfunction: self storage companies. Your brain is willing to pay $200 a month to store a bunch of useless crap you no longer want or need, instead of just selling it or donating it to charity.

Fallacy No. 3 - Throws Good Money After Bad
We have a brain that loves to compete, and is good at convincing itself that it's right. In the financial realms, when these two instincts collide, your brain will play a game that economists termed "irrational escalation of commitment".

When faced with the prospect of a $3,000 repair on your old car, or purchasing a slightly better used car for $2,500, your brain will tell you to go with the repairs because you "already sunk $10,000 into your old car." But what happens the next time your car needs a repair? Owing to what the behavioral economists termed post-purchase rationalization, your brain will have convinced itself that the last decisions was a great idea. And since you've now sunk $13,000 into the old car, it seems like an even better idea to keep piling up the bad decisions. Throw in a little competitive instinct and pride, and it's not hard to see how this can go horribly wrong.

The real world implications are numerous. It can justify the escalation of a war. In 2005, the US President said that we "owed" the 2,000 American soldiers who had died in Iraq to "finish the task that they gave their lives for." Regardless of what your politics were, to a certain part of your brain, that sounds like a logically constructed argument. It seems that these men have to die because these other men died.

Fallacy No. 2 - Has No Idea What Money's Worth
It turns out your brain is bad at understanding that a $20 and twenty $1 bills are the same thing. That's why entertainment venues make you use tiny denominations: they know you'll spend a lot more. This is called the denomination effect. Scientists conducting an experiment by giving two sets of people either a $5 bill or five $1 bills and watched as the people with the fives held on to them, while the folks with the ones spent comfortably on popcorn and soda. This leads scientists to the depressing conclusion that your brain basically views the amount of money you make as a number, instead of what that money can actually buy.

This is called the money illusion. In reality, your money is only as good as what it can buy. If you have twenty dollars in your wallet, you should be thinking of it in terms of what twenty dollars can buy. Your brain prefers to just stick with the number, and assumes that a higher number means more expensive stuff.

Fallacy No 1 - Sucks at Figuring the Odds
These are the gambler's fallacy and the focusing effect. The gambler's fallacy is the belief that short term actions have an effect on long-term odds. It is a permutation of the focusing effect, also known as anchoring. Your brain has a tendency to latch onto something and never let it go. It served humans well back in the day when we were likely to see both the negative and positive consequences of people's decisions, like good or bad farming practices. But in modern times, we are less likely to see the negative consequences. You hear about someone winning $30 million Mark Six and your brain latches onto that, conveniently forgetting that for the one guy who paid 20 dollars and won $30 million, there are 29 million or so losers who might as well have paid but lost.

Thursday, February 11, 2010

Global food crisis

The National Geographic at its June 2009 issue carried an article on the global food crisis. A few weeks ago, a friend told me that he thought the article was discrediting China as one incident it reported was the traditional celebration dinner of a Chinese company treating over 3000 employees at a banquet of 13 courses. The incident could be true as some Chinese industries were very successful a few years ago. But it is also a reminder of the global food crisis we could be facing.

In the 18th century, there was Thomas Robert Malthus, well-known then for the term "Malthusian collapse". The world was enjoying the success of the French Revolution, and many academics predicted that there would be a continued improvement of human conditions. Malthus did not think so. He observed that the human population was increasing at a geometric rate doubling every 25 years, while agricultural production increased arithmetically, or slowly. It was a biological trap that human could not escape. He wrote that there would be a strong and constantly operating check on population from the difficulty of subsistence. Malthus thought such checks could be voluntary, such as birth control, abstinence, delayed marriage; or involuntary, through the scourges of war, famine, and disease. In short, Malthusian collapse states that the growing population would collapse when there was not enough food; and that it would re-adjust itself automatically through catastrophic means. This happened many times in human history.
(Egyptians crowding a kiosk selling government-subsidized bread)

Malthus was proven wrong and his theory went into the dustbin. The growing world population did not lead to a catastrophe. The first saviour was the industrial revolution. Mechanized farming opened up more land for agriculture and the amount of food production increased dramatically during that period. But it was the green revolution that truly made Malthus a laughing stock. Since Malthus' time, the world population increased by six billion more people. However, owing to improved methods of grain production, most of the population were fed.

The green revolution was not the present day cult of environmentalist movement. The last world famines occurred in the 1940's, when four million people died in Bengal and India had to import millions of tons of grain to feed its people in the next two decades. The green revolution came in the mid-1960's. Under the co-operated effort of the Indian researchers and the American plant breeder Norman Borlaug, high-yielding wheat varieties were introduced. Crop production was tripled. The new crops grew fast as long as there was plenty of water and synthetic fertilizer and little competition from weeds or insects. As such, the Indian government subsidized canals, fertilizer, and the drilling of tube wells for irrigation and gave farmers free electricity to pump the water. The new wheat varieties quickly spread throughout Asia, changing the traditional farming practices of millions of farmers. This was followed by new strains of miracle rice, which matured faster and enabled farmers to grow two crops a year instead of one.

Gradually, the green revolution lost steam and crop production stabilized. But the world population kept on increasing and the supply of food was being stressed again. The sudden surge of food price in 2008 was a wake up call. During a three year period leading to 2008, the price of wheat and corn tripled and rice climbed five-fold. This price spike came in a year when the world's farmers reaped a record grain crop. However, after years of drawing down stockpiles, in 2007 the world saw global carryover stocks fall to only 61 days of global consumption, the second lowest on record.

High prices are the ultimate signal that demand is outstripping supply, that there is simply not enough food to go around. The underlying problems of low stockpiles, rising population, and flattening yield growth remain. Climate change is projected to reduce future harvests in much of the world, raising the specter of what some scientists are
now calling a perpetual food crisis. With world population spiraling toward nine billion by mid-century, the experts of the green revolution now say we need a repeat performance, doubling current food production by 2030. In other words, we need another green revolution. And we need it in half the time.

On the face of the urgency, the adverse consequences of the green revolution emerged. With the use of synthetic fertilizers and pesticides to nurture vast fields of the same crop, it created the practice known as monoculture. In India, over-irrigation has led to steep drops in the water table, while thousands of hectares of productive land have been lost to salinization and waterlogged soils.

Many crop scientists and farmers believe the solution to our current food crisis lies in a second green revolution, based largely on our newfound knowledge of the gene. Scientists hope that genetic modification, which allows breeders to bolster crops with beneficial traits from other species, will lead to new varieties with higher yields, reduced fertilizer needs, and drought tolerance. Remaining areas of land to be developed for agriculture are in Brazil and Central Africa, with the price of destruction of the tropical rain forests. Ecologists are much alarmed at the push for a new green revolution in Africa.

Notwithstanding the elusive solutions, the challenge of putting enough food in nine billion mouths by 2050 is daunting. Two billion people already live in the driest parts of the globe, and climate change is projected to slash yields in these regions even further. No matter how great their yield potential, plants still need water to grow. Climate studies projected that heat waves which could wither crops would become more common in the tropics and subtropics. In the worst-case scenario, water shortage could decline yields for some grains by 10 to 15 percent in South Asia by 2030. Projections for southern Africa are even more dire. All the while the population clock keeps ticking, with 2.5 more persons to feed born every second.

This inevitably leads us back to Malthus. The horrifying thought is that Malthus could be right after all. Eventually, the population will out-grow food supply and there will be a painful adjustment.

Monday, February 8, 2010

The Book of Totally Useless Information

The Book of Totally Useless Information
by Don Voorhees

Just by its name, one would expect this is a dull book talking about very trivial matters. If you look at the book cover, you will be convinced that it is so, because the design of the book cover is very plain and dull. It must be a useless book.

Surprisingly, it is a fun book to read. There are many questions people ask but unable to get a satisfactory answer. However, as the questions are trivial, no one bothers to go at great length to find out. As a result, there are many urban myths leading to people believing in the wrong reasons, or letting many misunderstandings have their roots buried deep in people's mind. But what the hell. These are unimportant matters anyway and the information is useless even if known. Luckily, we still have Don Voorhees doing useless researches to get to the bottom and let us have the answers to these trivial questions. As such, the answers are short, usually last only one page, making the book very easy and interesting to read.

There are hundreds of answers and I can only quote four as some short reading notes.

Is it dangerous to go swimming after eating?
The conventional wisdom of digesting food taking blood from the muscle to the stomach, causing cramping and possibly drowning, is not true. The danger of cramping comes from cold water and fatigue. Eating increases blood sugar level and decreases fatigue, and also help keep the body warm. A little food can keep the swimmer safe. Just do not gorge yourself, as always.

Is it illegal to kill a praying mantis?
Kids are taught at very early age that killing a praying mantis is an offense subject to a fine of a few hundred dollars. In fact, praying mantis is not protected by law. Some well-intentioned people would preach not to kill a praying mantis because it is a beneficial insect. The truth is that the mantis is praying to kill. The posture is a prepared attack to other insects, whether good or bad. It is a ferocious insect which kills everything in its way. The female even kills the male while mating.

Why is a score of zero in tennis called love?

The word has nothing to do with the affection to the losing tennis players. It is a distortion of the French word oeuf, which means egg, representing zero.

Why do we say god bless you after a sneeze?
People do not need blessing after a sneeze. That is no such custom for cough and hiccup. In ancient times, there was a superstition that the soul would leave the body at sneezing and the evil spirit would take the chance to enter. During the Dark Ages, it was believed that the heart would stop momentarily when one sneezed. He was dead for an instance and had to be blessed. Sneezing is the response of the body to irritation to the nasal passage, causing the lungs to compress a sudden blast of air. This blast will cause mucus-laden air to spread to the surrounding, together with viruses. Those who are next to the sneezer should need the blessing instead.

Sunday, February 7, 2010


星期五晚 (5/2/2010) 聽葉詠詩指揮香港小交響樂團演奏貝多芬第九交響曲,是一個不錯的經驗,總算值回票價。貝九其實是一首很容易欣賞的音樂,貝多芬的音樂天才充份發揮,保證好 聽,樂團只要落力演奏都會有不錯的效果,而規模較大的樂團較有優勢。小交並不是一個很龐大的樂團,但總算合格。



Saturday, February 6, 2010


幾年前,當校本管理條例草案還未通過時,我在一個培訓講座問及校本管理條例和政府管治的關 係。講者認為校本管理是一個管理學的題目,而當時的爭議是政治角力,各論點都和教育無關。當時各派議員大多支持通過草案,因為建議是一個較民主和透明度較高的管理方法,但反對激烈的卻是數名民主派議員,其背後壓力來自教會。早於草案尚未正式推出時,教會已經公開大力反對,經歷這麼多年而又在法案通過之後反對聲音仍舊不絕,可想而知這個條例對教會學校影響巨大。





天主教區指校本條例違反基本法第136、137、141條,剝削《教育條例》賦予辦學團體在校董會的權力,提出上訴。上訴庭副庭長司徒敬昨在判辭中指出,2004年通過的《校本條例》並無取代現有的教育制度,只是在原制度上提出新管理架構,校本條例無侵犯基本法保障的香港教育制度特色。對於教區指校本條例 違反基本法訂明,宗教組織可按「原有辦法」繼續辦學校,司徒敬認為,「原有辦法」說的只是宗教團體可一如以往的繼續辦學,並非只是維持一貫的辦學方法。司 徒敬強調,辦學團體的自主權沒有被校本條例剝削,因為學校的決定權依然在相關的教學團體手上;另一方面,受政府資助的學校,在絕對自主權與提高透明度及對公眾交代之間,應有所平衡。



明年7月死線 教局可委校董

Tuesday, February 2, 2010

Water policy

Fresh water is scarce. We often hear this remark from environmentalists. The ensuing social issue has been elevated to a moral issue: use less water or you are destroying the world. In fact, domestic use of water only accounts for a small proportion of fresh water use. Majority of fresh water is consumed by industries and agriculture. Water is a major issue for the business sector.

In the December 2009 issue of the Mckinsey Quarterly, there is an article on the next-generation water policy for businesses and government. It looks at the water scarcity problem from the business perspective. Part of the solution will come from new technologies for the better management of water as a resource. In order to harness the water issue within the business environment, some companies are trying to develop water standards acceptable to the society and that they can meet in their operations. While companies have to manage water efficiently, society needs an equitable, efficiency-stimulating, and predictable legal and regulatory environment that governs all water uses. Such framework will facilitate the development and implementation of technologies which can enable society to get more product and services per unit of water.

There are three broad categories of technologies being developed to this end:

Productivity-enhancing seeds and agricultural technologies
Agriculture accounts for more than 80 percent of water consumption in the developing world. Productivity gain of the last round of agricultural technologies has lost its momentum. Innovations on better water use by agriculture are now vital to future growth. New productivity-enhancing seeds and associated agricultural technologies are now required. The importance of genetically modified GM crops is illustrated by the contrasting performance of corn in Europe where GM crops are not allowed, and in Iowa where 90% of crops are GM species. In the last ten years, corn yields in Europe have stagnated, while in the United States productivity has grown at over 2 percent a year. Existing GM crops use substantially lower amounts of fertilizers, pesticides, and water. Some new-generation crops will be better able to thrive despite water stress.

Technologies for treating water and wastewater
The supply of fresh water can be enhanced with technologies on desalination and treating of wastewater. The process of desalination illustrates the importance in this area. It is possible to desalinate seawater by using only 25% of the energy currently required to do so through new technologies. If new developments in nanotechnology and membranes allow some of this potential to be realized, the cost of desalination will fall to a level where most cities and industries in coastal areas throughout the world can turn to it as the new source of choice. These technologies can similarly be applied to the treatment of wastewater for the purpose of recycling it.

Just-in-time and just-what’s-needed information
Some companies are developing the capability of providing users with just-in-time information on the probability of rainfall, soil moisture, water, and fertilizer requirements. This is essential for energy consumption, domestic use of water, and for agriculture. Precision agriculture can produce much more crop per drop than traditional methods can. Industries and cities can use much less water by accurately monitoring their water use.

A growing number of companies have engaged with policy makers to ensure that key policies, including tradeable water rights, intellectual-property rights, and efficiency-enhancing regulation, are implemented. The key to facilitate a better use of water is a legal and business policy environment that stimulates the development of the next generation of water efficiency technologies.