Pursuit of Financial Freedom

I've been playing the virtual investment game Bursa Pursuit for a little over a month, and while it does teach me a lot about the stock market, it also revealed what a lousy investor I am! At this precise moment my gross profit and loss (more loss than profit, actually) is -RM10,903. Sure, I could blame the recent downturns but it does reveal my trading weaknesses.

First, I don't do any research. I already spend 10% of my workweek on non-work stuff (damn you RSS feeds!) and I can't be spending even more reading through market reports and stock tips.

Speaking of which, so-called stock tips are not anymore accurate than me randomly picking the top trader each day. It's really frustrating following all those "Buy" and "Sell" calls, which I really wonder if their researchers follow themselves.

And lastly, my own personal failure in cutting my losses is a factor as well. I followed a random stock tip in the daily news reports and it didn't take long for it to go southwards. But I held on to it, naively optimistic that it will reverse directions. 6 weeks later, I'm RM1878 poorer (and still holding until market conditions improve! hopefully!). I guess I wouldn't be so careless with real money, but human nature is pretty hard to beat.

Whether I'll actually invest real money after this game ends... perhaps. The lure of high returns is like a siren to my ship.

I just hope I don't crash into the sharp cliffs.

Too Convenient

In today's news, police reported that 80% of crimes are committed by locals, and only 20% by foreigners. This seems to me like an over-convenient application of the 80/20 rule, with no hard numbers quoted in the news item at all.

So I decided to put on my armchair economist hat and do some simple calculations to determine if we actually have more to fear from locals.

The number of crimes reported to the police (consisting of violent crime and property crime) (2004): 156,315
80% of that would be... 125,052, while
20% would be... 31,263

The number of legal foreign workers (2003): 1.1m
The number of illegal foreign workers (2005): 1.2m
So the estimated number of foreigners in the country is about 2.3 million.

The number of locals over 18 (2005): 15.7m


So... 125,052 crimes are committed by locals (15.7m) while 31,263 crimes are committed by foreigners (2.3m). If we assume that a crime is only committed by one person and the criminal only does it once, that would mean:

0.796% of locals are criminals, and
1.359% of foreigners are criminals (almost double!)

In other words, though the percentage is small, a foreigner is twice as likely to be criminally-inclined compared to a local. That's worrisome enough!

So in fact we *still* have more to fear from foreigners than locals, but not as much as I initially thought. There are a LOT of caveats to the numbers I used, so don't go quoting my page in any research paper you're doing.

Faith in Human Relations

I've taken quite an interest in general economics lately. Like most people not in the field, I always thought that economics have everything to do with a country's financial health, and little else. But after reading the excellent books Freakonomics and The Undercover Economist, it has really opened my eyes to the way this world works. I'm by no means an excellent one yet, but I've been more observant about phenomena around me and I'll catalog them under the 'economics' label. Actual economist might read such posts and say "Bah! That's NOT economics!", so I appeal to them to speak out.

To start things off, have you guys heard the radio advertisement that goes something like, "Mum, it's time to buy a Hyundai Atos! Auntie Sim, you should get the gutsy Hyundai Getz! Uncle Lim, it's the Matrix for you and your family! Now, remember to write my name on the entry form so I can stand a chance to win a new Hyundai Azera!" (The contest details can still be found on their website)

Does that make sense to you? Imagine for a moment I'm Uncle Lim, saying the following to the guy on the radio:

Why would I get myself into half a decade of debt just so someone else can stand a chance to win a RM230,000 car? And it's not guaranteed you'll get the car, mind you. What's my incentive for putting your name in? Are you going to share half the car with me?

I think Hyundai's marketing department designed this contest wrong. They can't use a scheme like those grocery products where the more you buy the better your chances of winning, because vehicles are not something that people buy in bulk. Among my first degree friends, probably only 1 or 2 is looking for a new vehicle. And of course, there's the absence of any incentives to put your name in and not mine.

2 things I learned from reading those books are:
- People respond to incentives (positive OR negative)
- People are inherently selfish (most of the time but there are divergent theories)

Do you have any other opinion on why this scheme would work or wouldn't?