Happy Amnesia

A little bit of psychology to begin our day. The recency bias is our psychological tendency to give more weight to recent data or experience, than to earlier data or experience.

For example, suppose it's the end of the year and your boss is assessing your work performance. His impression of your work performance will probably be much more heavily influenced by what you did in the 2nd half of the year, than what you did in the 1st half of the year. This is despite the fact that what you did in both halves should matter equally.

Recency bias also affects the way people invest money. Suppose for example the stock markets have been in a bull run for the past two years. The masses will tend to forget other, less-recent years when bull runs turned abruptly into market crashes (eg the NASDAQ crash of 2000). Since all the recent data and experience indicates a charging bull, the masses will tend to develop the expectation that the bull will keep on charging on.

You might know this saying - "Those who never remember the past are doomed to repeat its mistakes." It's a neat encapsulation of the recency bias.

In the past two years, the Gods of Money have been very kind to Mr Wang. Thank you, sirs. Today, Mr Wang will start getting out of the markets. He senses mania.

ST May 15, 2007
STI hits high after China eases investment rules
Regional markets also shoot up in anticipation of massive outflow of new money

By Markets Correspondent, Goh Eng Yeow

SINGAPORE'S stock market hit a record yesterday after a landmark decision by China's banking regulators sparked a Manic Monday rally across the region.

Investors piled in to local shares to drive the Straits Times Index up 54.18 points to close at 3,501.1 - a rise this year of 17.3 per cent that has added $77 billion to the market's value.

The bulls were primed to run wild yesterday by a historic decision announced in Beijing last Friday: China's bank customers will be allowed to buy shares in overseas markets - mostly via funds - for the first time.

Such purchases will initially be confined to the Hong Kong market, but bourses from Mumbai to Sydney shot up in jubilant expectation of what could be a massive outflow of new money.

'We are witnessing history in the making - a move that may eventually open the floodgates for some US$2 trillion (S$3 trillion) of Chinese domestic savings (looking) for better opportunities,' said Mr Loh Hoon Sun, Phillip Securities' managing director.

Mr Loh forgot to mention that for starters, the Chinese government is going to allow China's bank customers to invest only US$7 billion overseas, over 12 months.

In terms of global stock markets, US$7 billion over 12 months is quite small peanuts. You can see from the ST article that the Singapore stock exchange itself grew by 11 times more (USD 77 billion) in market capitalisation, in the 1st five months of 2007 alone. And the Singapore stock exchange is quite small, relative to many other stock markets around the world.

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Why Mr Wang Upsets People

I love psychology. I think that it is a fascinating subject. One of my favourite daydreams is to make a lot of money, retire at 40 and then go study for a psychology degree. Just for the fun of it.

It was during my DPP days that my interest in psychology first developed. I dealt with criminals every day. Many criminals are mentally ill or psychologically impaired. So quite often I would get to read all their psychiatric reports.

These days, my interest has veered away from abnormal psychology, into positive psychology. I'm also quite interested in the study of personality - for example, the Myers-Briggs system. The Myer-Briggs system is one of those very multi-faceted things. You think you've got it all figured out, but every time you come back to it, you discover something new. Either about yourself, or the people around you.

Recently, I have been thinking about the most common ways I upset people, and the kinds of people who are most easily upset by me. You can analyse it in terms of personality. The category of people I upset most easily are the Guardians (the SJ family, meaning the ISFJs, ESFJs, ISTJs and ESTJs). Unfortunately the Guardians are quite common - they comprise about 40 to 45% of the population. Whereas my own category - the Rationals - are estimated at 5 to 7%. So I'm outnumbered.

Why would conflicts arise between the Rationals and the Guardians? Essentially, Guardians are defenders of the status quo. They like things to stay the same. They seek to conform, they follow rules, they administer procedures, they respect tradition, they are the loyal, practical workers, the round pegs in the round holes, the reliable little cogs in the wheels that keep the world turning. Here, for example, is Keirsey's description of Supervisor Guardians (one of the sub-categories):

Supervisor Guardians are squarely on the side of rules and procedures, and they can be quite serious about seeing to it that others toe the mark-or else face the consequences ...

Like all the Guardians, Supervisors worry a good deal about society falling apart, morality decaying, standards being undermined, traditions being lost, and they do all they can to preserve and to extend the institutions that embody social order. Supervisors are so in tune with the established institutions and ways of behaving within those institutions, that they have a hard time understanding those who might wish to abandon or radically change them.

The Rationals, on the other hand, are the change agents of the world. They are constantly exploring new ideas. They are the inventors and the innovators. They have an intuitive understanding of complex systems and are constantly driven to create improvements. Preserving what is, is of no interest to Rationals, because their powers of imagination tell them about what could be, and they see that things usually can be a lot better. Here for example is Keirsey's description of the Mastermind (one of the Rational sub-categories, aka INTJs, which is my personality type):

To the Mastermind, organizational structure and operational procedures are never arbitrary, never set in concrete, but are quite malleable and can be changed, improved, streamlined. In their drive for efficient action, Masterminds are the most open-minded of all the types. No idea is too far-fetched to be entertained-if it is useful. Masterminds are natural brainstormers, always open to new concepts and, in fact, aggressively seeking them. They are also alert to the consequences of applying new ideas or positions. Theories which cannot be made to work are quickly discarded by the Masterminds.

You can pretty much predict how a typical Rational-vs- Guardian disagreement would arise.

First, there would be a System. Rationals are naturally gifted at understanding systems, so they know how to step out of the System, look at it from different perspectives, and see how everything fits together. As the Rational's mind is always geared towards making improvements, he immediately zooms in on the flaws in the System and says, "This is bad, that is out-dated, this is irrational, that is wrong. All of these things must change - how can we allow this situation to continue?!". Because the Rational is both analytical and creative, he has no problems pointing out the flaws AND proposing a dozen new ideas to fix the flaws.

Then the Guardians get upset. Guardians don't like change. They are comfortable with what is, and they are afraid of what could be. They get angry with the Rationals and wish that the Rationals would just go away. For example, they might say, "Oh if you are so unhappy with Singapore, why don't you just leave and don't come back." Guardians are also loyal, dedicated followers, and they view the Rationals' ideas for improvement as disrespectful to the establishment and to tradition. So for example, the Guardians might say: "How dare you criticise the PAP? They have done so much for us, in the past 40 years."

Guardians desperately want the system to stay the same; so in a debate, they will keep making any argument they can, to keep the system the same, whether or not they really believe in that particular argument. For example, in order to keep homosexuality criminalised, they will argue that it is "unreasonable", "uncivilised", "unnatural", "worsening the aging population", "psychologically disordered", "immoral", "makes me afraid of getting raped by a man", "abnormal", "disgusting", "the law says it's wrong, so it must be wrong", "it disgusts me even if it happens in private and I don't know about it", and finally, even "I am entitled to be irrational in my hate for gays".

Another example is Edmund Khoo's letter. You can see that Edmund's overpowering motivation is to support Lee Hsien Loong. As I've mentioned, on that particular topic, it's possible to support or not support PM Lee, but whatever side a Rational takes, it will be on a rational basis. A Guardian, however, is more likely to take a position first (and as a result of his loyalty tendencies, he will tend to support the incumbent), and then simply make as many arguments as he can possibly think of, to support his leader (whether or not the arguments actually make sense).

I've generalised a lot. But if you read my blog and the comments, you'll note that very often, when readers disagree with me, the Rational-Guardian pattern seems to be at work. Guardians endlessly seek to guard the System from change; while Rationals endlessly seek to change the System to make it better. I, as INTJ, would be the Rational, while most of my regular critics, I suspect, are Guardians (the SF family).

These are the subtle patterns in our minds, the natural processes in our different brains that govern how we think and feel about approximately anything. Psychology is sooooo interesting.

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See What I Mean?

The young man in the wheelchair is Lawrence Leow. He suffered a tragic incident during his NS training.

Lawrence is now paralysed and he can't talk either. His condition is probably permanent. The Ministry of Defence is "compensating" him with a grand total of $500 per month.

Lawrence, who communicates by using small finger movements to type out words on a digital pad or handphone, wrote: "The $500 is not even enough for me to hire a maid!".

This case illustrates one of the points I made, back in September 2006. I wrote:

"Singapore forces its young men into military service, which in turn necessarily entails some degree of risk of death or injury. It is bizarre to me that the SAF has no standard insurance plan in place for NSFs. I think that it is only reasonable that the SAF buys life, disability and personal accident insurance for NSFs (at least for those in combat vocations, and for something significantly more than a few thousand dollars). In fact, the coverage should extend to active NSmen as well. As a fringe benefit, NSmen should have the option of continuing with the coverage (and paying for it themselves), when their NS liability is completed."

If you would like to help Lawrence in any way, please click here and contact his friend Edmund Ng.

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Our Honorary Citizen

This man is Dr Heinrich von Pierer. Until quite recently, he was Board Chairman of Siemens AG, one of Germany's best-known companies. Then he resigned amidst a corruption scandal that has already been going on for quite some time:

Siemens chairman Heinrich von Pierer resigns

MUNICH, Germany — Amidst rising pressure in the context of ongoing bribery allegations against Siemens top managers, the company's long-time CEO Heinrich von Pierer has announced to vacate his present position as supervisory board chairman. However, von Pierer pointed out that there is no connection to the investigations.

Von Pierer, who was CEO and President of the industrial conglomerate over most of the time the alleged contraventions have happened, announced Thursday night (April 19) he will step down as chairman of the supervisory board with the beginning of the next board meeting scheduled for April 25.

Though von Pierer always denied any involvement in the recent scandals, many observers see the move as a result of the ongoing discussions over his role in this affairs and the rising pressure to step back.

The scandal series took its start when in autumn 2006, police raided the Siemens headquarters over bribery allegations - according to the reproaches, the company in the past years had spent up to €420 million (about $567 million) to bribe potential customers in order to receive orders.

Another scandal came to daylight recently, when managing board member Johannes Feldmayer was arrested over embezzlement allegations: Feldmayer is said to have funded an 'independent' anti-union group in the Siemens works council with €15 million (about $20 million), which is a criminal
offense.

On the bright side, if life gets too unpleasant in Germany for Heinrich, he can always come to Singapore to live. After all, just six weeks before Heinrich resigned from Siemens, President SR Nathan made him an Honorary Citizen of Singapore.

The Honorary Citizen Award is the highest form of national recognition that the Singapore government can give a non-Singaporean. Honorary Citizens (and their family members) get the right to live and work in Singapore and to purchase property if they decide to stay here.

Makes you wonder how the Singapore government picks its Honorary Citizens, doesn't it?

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Mr Wang's Exam Surprises

While studying for my CMFAS exams, I had two surprises.

My first surprise was that the CMFAS syllabus requires students to study the rules on who is required to take the CMFAS exams. This is an examinable topic.

'Well, now, isn't that silly?" I thought. "If you are already studying for the CMFAS exams, surely you must be required to take them."

My second surprise came shortly thereafter. While studying this topic, I discovered that I am not actually required to take and pass the CMFAS exams. In other words, these exams should not be compulsory for me.

Duh!

Generally if your job is to provide "financial advisory services" to the average client in Singapore, you will need to take the exams. But:

(1) most of my clients are not even in Singapore,
(2) they are all "accredited investors", in other words, sophisticated investors with high net worth, not your average HDB grandmother ; and
(3) I do not advise my clients on anything.

My typical client is a hedge fund or a bank. In fact, every document that I send to my client contains "big boy" language. In this industry, "big boy" language means language that makes it clear that both sides are sophisticated parties; both sides are able to understand and assess the risks for themselves; and neither side is advising nor relying on any advice from the other side.

But since I have already been registered for the CMFAS exams, I'll just take them anyway. Even. Though. I. Really. Shouldn't. Have. To.

This is annoying.

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Self-Delusion

ST Forum May 11, 2007
Singapore stance correct on global war on terror

I REFER to the letter, 'Singapore's stance may offend friendly nations' (ST, May9), by Mr Retnam Thillainathan. The writer is alarmed at Prime Minister Lee Hsien Loong expressing his strong support for the United States' continued presence in Iraq, as he is afraid of a backlash from other countries against the occupation.

As a dynamic and pragmatic politician, PM Lee will surely be well acquainted with the reasons put forth by President George W. Bush to justify the rationale for war. These include ending Saddam Hussein's almost 40 years of human rights abuse; his track record of waging wars against his neighbours such as Iran and Kuwait; his production of weapons of mass destruction; his use of chemical weapons on Kurdish and Iranian civilians; his proven contacts with terrorist groups in the past; and warnings from Russia that Saddam was planning terrorist attacks against the US before 2003.

Among the other reasons are protecting the United States' allies in the Middle East such as Saudi Arabia and Kuwait; helping Iraq's transition to democratic self-rule; ending sanctions against Iraq (which hurt civilians the most); and delivering humanitarian support after the end of these sanctions.

The invasion of Iraq was touted by the US as part of the global war on error, launched as a result of the Sept 11, 2001 attacks. As a staunch ally of the US and knowing that Singapore, an iconic global city, is an attractive target for terrorists, PM Lee has clearly made his stand on the war on terror.

In Iraq, the government, police and military are unlikely to restore law and order any time soon. Bombings, murders and kidnappings continue to take place daily. A complete pullout of US soldiers will surely plunge the country into anarchy and civil war.

A fledgling nation's transition to self-rule, already in motion, will take time after nearly 40 years of tyranny.

I applaud our PM for boldly coming out in support of one of our staunchest allies. It sends a strong signal to the international community that Singapore is a sovereign nation, which does not bend in the direction of the wind generated by other friendly countries, and we have a leader who is not afraid to speak his mind.

Edmund Khoo Kim Hock

Should the US stay on in Iraq? And should Singapore express support for the US, if the US chose to do so? You could argue these questions either way, and either way, there is room for reasonable, intelligent arguments. Edmund Khoo's arguments, however, are severely misguided.

If I were PM Lee, I'd cringe. I would prefer to have no readers writing to the press to support me, than to have a reader like Edmund Khoo writing to the press to support me with such embarrassingly mistaken arguments.

I feel a bit exhausted looking at Edmund's letter. It makes so many errors I don't know where to start correcting them. History is so badly twisted in his letter that it doesn't even feel like history anymore, more like a tale from a parallel universe in a science fiction novel.

I feel like a teacher confronted with the ultimate F essay, an essay written by a student so stupid it's wrong to want to smack his head. I think I'll take the easy way out and let Jimmy Mun do the talking.

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More on Extradition

At this point in time, I don't have much to say on this topic. I'm posting the two articles below for my future reference. From the Jakarta Post:

S'pore extradition treaty and fight against corruption
Opinion News - Tuesday, May 08, 2007
Adnan Topan Husodo, Jakarta

Indonesia finally signed extradition and defense treaties with Singapore on April 27. Indonesia had previously signed similar extradition treaties with Hong Kong, Malaysia, the Philippines, Australia and Thailand. China and Canada are the next targets.

The new treaty reaffirms the public conviction that corruption is a transnational crime. It is undeniable that embezzlers have so far been free to carry the fruits of corruption out of Indonesia. They have even been able to launder that stolen money through various investments and businesses, which are -- to a certain extent -- very profitable for these people's host countries.

On one side, this kind of activity is very damaging to the country where the corruption originally takes place (locus delicti). Stolen state wealth can no longer be allocated for the social and economic needs of the population.

On the other side, that same money helps develop the economy of the country where corruption fugitives end up. As long as there is no international cooperation to combat corruption, imbalances and inequalities will remain between countries. This is what has happened between Singapore and Indonesia.

The extradition treaty between Indonesia and Singapore as a result needs to be looked at with the collective awareness that corruption can not only be eradicated in the country where the crimes take place. This is in line with the United Nations Convention Against Corruption (UNCAC, 2003), which emphasizes the importance of international cooperation in combating corruption. No less than 138 countries have ratified the convention.

Unfortunately, Singapore is not one of them.

However, Singapore's goodwill in signing the extradition treaty deserves our appreciation. The signing also shows Singapore's successful diplomacy and a more open attitude to solving problems related to transnational crime.

There are at least three important points of substance in the extradition treaty.

First is the list of economic crimes agreed to by Indonesia and Singapore.

Second is the 15-year retroactive period, which enables the government to hunt embezzlers from the Soeharto era, along with their assets.

The last is the agreement to return the assets to Indonesia. Because this is a reciprocal treaty, Singapore can also in theory get the same from Indonesia.

For the Indonesian government, there are some important things to take into account. The extradition treaty with Singapore will not automatically facilitate the legal processes to bring the corrupt to justice.

There are examples where Indonesia's extradition treaties have failed.

There is the example of banker Hendra Rahardja, an Indonesian tried in absentia for corruption while living in Australia. Hendra remained in Australia until his death because the Australian courts would not allow the banker to be deported to Indonesia out of mistrust of the integrity of
Indonesian courts.

Each country has its own different legal mechanisms. This factor can influence the process by which extradition treaties are realized.

Indonesia needs to anticipate from the outset all possible technical and legal barriers to extradition. This is important because many Indonesians expect much from the government to bring these fugitives back to Indonesia.

This extradition treaty is a strategic bilateral mechanism to effectively combat corruption. There are a lot of mega-corruption cases out there, both from the past and the present day. In particular its worth remembering the Bank of Indonesia emergency liquidity funds scandal (BLBI), which inflicted huge financial losses on the government.

Most of the BLBI suspects have fled Indonesia. One of their safe havens is Singapore. According to Indonesian Corruption Watch's (ICW) records, 43 of them are now residing abroad, 13 in Singapore. Some of them have become permanent residents.

Although we have already signed the extradition treaty, it would be impossible to depend on Singapore's political will alone to eradicate corruption. The government needs to be much more serious about bringing the crooks to justice. There is widespread public suspicion that criminals have been easily able to run away from Indonesia with the help of government officials.
This can happen because of poor coordination among state agencies, as well as bribery.

We hope the extradition treaty with Singapore will accelerate the process of legal reform in Indonesia. If we fail to do that, other countries will conclude that Indonesia is not serious about eradicating major corruption. If that is the truth, why should they help us?

The writer is member of the working committee of Indonesia Corruption Watch. He can be reached at topan@antikorupsi.org.

And from the Straits Times:

ST May 9, 2007
Jakarta seeks extradition of 15 over 'stolen funds'
New A-G lays out his priorities; getting those believed to be 'hiding millions in S'pore' among them
By INDONESIA CORRESPONDENT, Salim Osman

JAKARTA - INDONESIA will seek the extradition of 15 businessmen believed to be hiding millions of dollars in stolen state funds in Singapore, its newly-appointed Attorney-General said yesterday.

The extradition issue was on Mr Hendarman Supanji's 'to do' list when he laid out his priorities before reporters yesterday after being named Attorney-General in a Cabinet reshuffle the day before.

The top priority, according to a report in the Suara Pembaruan evening daily, was to set his own house in order by 'cleaning up' the prosecutors' office.

'One of my first tasks...is to take firm action against unscrupulous prosecutors who abuse their positions and break the law of the land,' said Mr Supanji.

He was referring to strings of cases involving prosecutors accused of demanding bribes and extorting money from suspects.

As for the extradition cases, he did not release details of the 15 on his wanted list.

But local media have identified them as ethnic Chinese Indonesians, many of whom owned commercial banks when the banking system collapsed nearly a decade ago during the Asian financial crisis.

An extradition treaty was signed with Singapore last month, but it has not yet become law. The document covers 31 crimes - including terrorism financing, bribery and related acts of corruption - and applies retroactively to crimes that took place up to 15 years ago.

Indonesia has also signed similar pacts with Malaysia, the Philippines and Hong Kong, and is negotiating similar treaties with China and Canada.

Mr Supanji became the top prosecutor in a Cabinet shake-up under President Susilo Bambang Yudhoyono aimed partially at countering allegations of being weak on corruption.

He made it clear yesterday that he would come down hard on other areas where dodgy practices are rife. His office would soon summon a number of businessmen who had not settled their loans from the state through Bank Indonesia's credit facilities, or BLBI, which caused trillions of rupiah in state losses.

The Koran Tempo daily website also quoted him as saying that he would target misappropriation of funds at government agencies and aim to stop 'leaks' from state budgets.

The new Attorney-General also pledged that his office would press ahead with a probe into the use of a Justice Ministry bank account for the release of millions of dollars to former president Suharto's son, Tommy, while he was in prison for murder.

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