Quote of the Day 2010-1-31

It is certain that intuition can be trained and developed. The bewildered novice in chess moves cautiously, recalling individual rules, whereas the experienced player absorbs a complicated situation at a glance and is unable to account rationally for his intuition.

-William Feller

Bonus trivia: Feller is one of the few mathematicians outside of the Soviet Union to appreciate the importance of probability theory, and his texts popularized its study in the United States. He also fled Germany in 1933 after refusing to sign a Nazi oath, so maybe he did know a thing or two about probability. HEYO.

Japanese folklore: Hachiko

Hachiko is a monument outside of Tokyo’s Shibuya train station that memorializes a dog with amazing loyalty. He was brought to Tokyo in 1924 by his owner Hidesaburo Ueno, an agriculture professor at the University of Tokyo. They established a pattern where Ueno would walk with Hachiko to the station in the morning, where he would commute to work, and Hachiko would greet him at the same station in the evening, where they would walk home together.

However, in May 1925, Professor Ueno did not return and would never go back to Shibuya station because he died of a stroke during the day. Hachiko was given away to another family, but he routinely escaped and return to Ueno’s old house. After some time, Hachiko began to show up at the Shibuya train station. He would show up at the station for the evening commuter train that Ueno used to take, waiting for his master. He continued the routine for over 10 years, surviving from scraps fed by passing commuters, especially as Hachiko became an evening fixture at the station.

In 1932, Hachiko gained notoriety in Japan when Ueno’s former students noticed that the dog continued to show up at Shibuya station as a sign of intense and extraordinary loyalty. After Hachiko died, an artist created a bronze statue of him that is erected outside of Shibuya train station, reportedly where the dog used to wait.

Today, the statue of Hachiko is a common meeting place for people in Shibuya, instantly recognizable to any resident of Tokyo. In the evening, hundreds of people can be found daily in the plaza where Hachiko sits.

Japanese folklore: New Years work day

On the first working day of the year, Japanese company men and women are required to go to the nearest temple and pray for the well-being of the company. It is usually a corporate event, so entire offices walk together and crowd into temples in amazingly long queues. Corporate executives also take the time to mingle in other offices, meeting with other executives to gladhand and wish each other well over the year. It is usually an informal opportunity to network with former mentors and colleagues.

Lines in front of the shrine. The queue at this temple goes out around the block.

Quote of the Day 2010-1-16

The best teacher is the one who suggests rather than dogmatizes, and inspires his listener with the wish to teach himself.

-Edward Bulwer-Lytton

Bonus trivia: Bulwer-Lytton coined the phrase “the pen is mightier than the sword” and the introductory line “it was a dark and stormy night”.

Lessons Learned from Tokyo

A little bit overdue, but here are the lessons that I learned from my new year’s trip through Tokyo

1) Success isn’t about being fast, it’s about making deliberate decisions that move in a good direction

I’ve alluded to this in previous lessons learned and some of my quotes of the day, but my new father-in-law lives and breathes it. I realized that he’s not particularly smart or talented, and he’s not the hardest working person either. But what’s made him so successful is the fact that he always makes good decisions and sees them through without dithering or self-doubt. His decisions haven’t always been right in an absolute sense, but they always go in the right direction so there’s something to build on. In his opinion, the worst thing isn’t to make a bad decision, because even folly can be built on by simply doing the opposite. The worst is wavering and being unsure, having a good idea and mucking it up because you can’t follow through.

2) Get a wide range of experiences

The theme for our trip was to get a flavor for everything in Tokyo, from the $3 ramen to the $1500 per night luxury suite. The lesson is that your whole life should be like that, especially when you’re in your 20s and starting to get a taste for good quality. What’s important isn’t price or spending vs frugality, it’s getting an understanding of value. You want to understand the difference between a $2 shirt from K-Mart and a $2000 shirt from Burberry. What does each say about you and more importantly, is the difference in quality and value worthy of the difference in price? It isn’t always so, and having good acumen means you’re able to distinguish between price and value. Good fashion isn’t just wearing big name clothes, it’s about appreciating good value.

3) Speak in a reasonable way with well-organized thoughts

Sort of obvious, but this is the quality where I think Aki’s father shines the most. When he speaks, it is always very reasonable and his thoughts are extremely well-organized. It comes from a desire to make decisions from rational and strong but subtle and sophisticated disagreement. No matter what industry or occupation you’re going for, there’s always a place for being able to make a clear and persuasive argument. This is especially important if you’re trying to affect changes that disagree with the current management. Simply shouting “you’re wrong and you’re stupid” isn’t a good way to persuade someone to see things your way.

4) His prediction on the stimulus plan is that it’s a bubble

The stimulus plan was undoubtedly good, necessary because the government’s job in a free-market economy is to stop the bleeding when the economy goes into a recessionary cycle. This cycle starts with a sudden downturn in demand leading to oversupply, so employers lay off workers, which further depresses demand and continues to lead to oversupply – this is how a recession turns into a depression, so there’s no argument that government should try to prevent it. The problem is that more medicine is not always better, the world doesn’t always work by linear regression. That $800 billion led to 4 million jobs does not mean that $1.6 trillion will lead to 8 million jobs created or saved, just as a double dose of antibiotics doesn’t mean you’ll recover twice as fast.

The problem is that the government is quickly losing sight of its goals, especially as public unrest grows impatient for results. So what we have with the green shoots isn’t a recovery, it’s artificial government-created growth on top of the market economy, which hasn’t stopped falling. The problem is what happens when the government doesn’t have any more money to fund growth and we’re left to rely on the market economy. So you’re seeing a lot of clever accounting and statistical tricks by the government to make it look like things are getting better when really the market is still failing and nobody knows why.

As an individual, what you should take away is that the world of 2005 or the mid-1990s is over, and attempts to bring back those days are futile. What we have today is the new reality. Deal with it. The job market is adverse, but the plus side is that there is always room for talent. So hopefully the downturn will lead to American workers becoming more motivated, more talented, and more aware of what they want and what’s good for them.

5) Pachinko is like being shot in the face. Literally.

Pachinko is probably the worst game in the history of human games. When you walk into a pachinko parlor, every one of your senses is assaulted with the sound of explosions, seizure-inducing flashing lights in your eyes, the taste of cheap cologne, the feel of people bumping you constantly, and the pervasive smell of tobacco and greed. You will also lose your money very quickly unless you know what you’re doing. Unfortunately, because it’s de facto gambling, nobody is allowed to tell you the rules or how to play.

6) Tokyo is as close to utopia as you can get. That’s exactly the problem.

My impression of Tokyo is that it has all the elements of the perfect city – clean streets, low crime, no inequality, high employment, bustling business, and everyone is well-educated and has affordable health care. But there’s something missing. Sandy suggested passion but that is definitely wrong – people take a lot of pride in their work and their attention to exquisite detail requires a lot more than just talent. On the contrary, judging from the food and the art, I’d say Tokyo is bursting with passion. I think it’s ambition. The city could wake up unchanged in thirty years and still be quite content with that – in fact the city is basically unchanged from 1992 and it is still very happy with itself (I watched Shall We Dance, a Japanese movie from 1996 and Tokyo looks exactly the same, minus some horrible interior decorating ideas and clothing from the 90s).

Aki’s dad agreed with my assessment and colored in some facts. Basically, Japan is not just complacent with what it has, it is deathly afraid of losing it if it is forced to change. The idea is that if Tokyo takes any risks, it is unlikely to gain very much if the risk works out well, but if they take their shot and miss, the city could lose everything. Nobody wants to see an increase in crime, unemployment, or inequality, but that makes it very difficult to grow. Inequality is a particularly difficult issue, because not all jobs are equal. For instance, we saw a news report that Japan’s sewage system was built in 1937 and the pipes are cracking from age, but nobody in the public works department wants to go into the holes to patch up the pipes. And since everyone in the public works department is paid exactly the same and treat themselves like a family, nobody wants to order some poor bastard to crawl through some sewage pipe. The manager considered hazard pay but decided it was unfair to the other workers; why should one volunteer get paid double when everyone else works too? So nothing gets done.

And what’s wrong with that? Well, the US economy is 3x bigger in 2009 than it was in 1992. China is 9x bigger. South Korea is 6x bigger. So basically the world is passing by Japan, which is stuck in neutral.

7) The big question for 2010

Which brings me to this, the big question that society needs to address: how do you motivate people to work? The contrasts are the US banking system of bonuses, the Japanese system of family, and the Chinese system of authoritarianism.

The US banking system pays a good salary but employees really get paid by yearly bonuses. The idea is that it motivates the best talent to the industry and gets them to work very hard for profit. And it works – Wall Street regularly attracts some of the finest minds in America and pays them accordingly. This downturn has put a big damper on it, however. It’s obvious that the bonus system may encourage overambitious risk-taking, that it’s best to take crazy risks and try to get a big reward if it pays off. As an example, you can have one guy who has a brilliant year and earns $300 million for his firm, getting a $10 million bonus. But the next year, he loses $300 million for his firm and gets fired. He still walks away with $10 million and can tell future employers that he averaged $5 million bonuses over his career, which looks attractive. So the system sort of works but it has big failings.

The Japanese system is to pay equal salaries and the promise of moving up the ladder in lifetime employment. The idea is that everyone in the firm is a family, so everyone should work hard for the well-being of the company and in return, each individual gets to keep moving up at an equal pace. It also works, you get a big pool of workers who are all motivated to do well to maintain the promise of the company. The problem is risk-taking; in essence there is none, and the system encourages aversion to risk. If a manager takes a risk and it pays off, he gets nothing as an individual. Whether he earns $300 million or $0, he’ll be paid his annual salary, so long as he does not lose $300 million. If he loses that money because his risk fails, he loses everything – his job, his future, and his “family”. Also consider that the manager fears making things worse for his employees, especially as he may have climbed from the bottom ranks himself. This is the situation where Aki’s dad found himself when he returned to Tokyo from London – nobody in the bank was making any money except him. They were content with 0% returns, just so long as they didn’t face any possibility of losing money.

The Chinese system is to have the government give orders to the workers and fire anyone who fails to comply. The idea is that the government knows best and individuals are promoted based on performance, which is not necessarily based on profits. So individuals can feel free to risk large amounts of money, so long as it can be justified. The problem is an obvious lack of freedom and the possibility of corruption. When you base performance on the judgment of another human being without real regard to results, you can sometimes get skewed perceptions. In the current recession, China has done the best, so it has tempted a lot of other governments to copy parts of their system, including the US. Enlightened government can be better than greedy bankers or conservative managers, or so politicians like to think.

Quote of the Day 2010-1-4

In regards to bringing syndication loans to Japan:

The first was Citibank, absolutely. But Citibank could never be considered as the pioneering deal of syndication because they didn’t explain it in that way; they didn’t call it that. What I did was main stream. Sometimes, doing the deal is not important; the record that you did a deal each year is not important. How that deal affected the entire market, how that deal gave imagination to the people, that is more important, that’s the key. They might insist: “We did the first syndicated finance”. So what? Whatever they did, it did not have a significant impact on society. And it’s the impact on society that counts.

-Shusaku Minoda, from “The Paradox of Foreignness” by Jesper Edman