Friday, December 03, 2010

Models of thinking Part I

I think it's a good thing to be multi-disciplinary. Besides adding flavour to your life, you can actually engage in meaningful discussions with many diverse people. I think the dabbling in a bit of this and that can expose you to different models of thinking. Models of thinking is the way you perceive things when doing certain disciplines, like psychology, science, maths, accountings etc. A lot of students ask me why they have to learn trigonometry and integration and differentiation, and that in real life you won't want to find the height of a tree or the rate of change of this and the area under a curve right? My reply is always the same. Most of the contents you learn in school are not important in real life. However, there are a lot of things that you learn while learning the contents that helps you tremendously in real life.

What are these 'shadow curriculum' that helps me in my daily life? Let me start by talking a bit more on engineering.

Since I'm a graduate from civil engineering, there's only one thing I remembered after all the years of not doing engineering related work. It's called factor of safety. For example, if a bridge is designed to hold a weight of 500N/m², you have to include a factor of safety into your working design, say 1.3. The main idea here is to overdesign the bridge just in case it is not used within the normal capabilities that the bridge is designed for. In other words, the bridge would be built to hold 650 N/m² even though the design capacity is 500 N/m².

Does this sound familiar? Benjamin Graham, father of value investing, actually make use of this idea in this margin of safety concept. Basically, the value investing means that you buy lower than the valuation of a company, thus providing a buffer zone to protect your capital against market forces.

It's important to know the cost of providing such a margin of safety though. In building bridges, if you overdesign too much, it will add extra cost to your project. So safety in construction comes at the cost of overpaying for something that might not even be utilised. In investing, if you provide too much margin of safety, you might miss the opportunity to buy into it. Thus safety in investing comes at the cost of missed opportunities. Engineering is not just all science, the art of deciding when to do what is necessary often requires much wisdom and experience.

As an engineer graduate, I tend to include in a safety factor in my daily life too. This happens pretty subconsciously and I don't really have to spend a lot of time thinking it through. I guess 4 years of training as an engineer really brainwashed me. Here's some examples on how I apply this in my daily life:

1. When I'm having an appointment that I can't afford to be late, I will overestimate the time taken to travel and the waiting time for the transportation to come. On top of that, I will add in an extra 10-15 mins to include obstacles that might just come along to trip me up. I do this especially for my daily trips to student's home. My time for travelling is usually very tight and if I cannot reach place A on time, then my schedule downstream will be messed up too.

2. For budgeting purpose, I tend to overestimate the expenses and underestimate my ability to save for them. In this way, in the event that it really happens I won't be caught off guard and unable to meet the commitments. In my wedding budget, I set aside 30k for everything, but in reality I really just have to fork out 25k and below for it. The thing is that I'll rather have a surprise on the upside than a shock on the downside. Therefore, the initial part of any tasks that I take will be stressful for me but as the project starts, it'll become gradually less and less stressful.

Confidence will radiate outwards and infect people around you. Same thing goes for lack of confidence.

The other thing about how engineering helps me in real life is the confidence that I can handle complicated mathematical equations with ease. In my course of work, I had to deal with pages of incomprehensible symbols. I remembered that I had a module called fluid mechanics (I really hate this) and the lecture notes are just pages upon pages of symbols that I had to take 1 hour to fully comprehend each page. But hey, after going through this, reading words takes on a different meaning for me. Thus, the confidence of being able to handle complicated stuff will always be in me although the contents of the modules had already fled a long time ago. In my line of work, I ever had to learn business statistics (even though I had never done such things before) and electronics engineering (with all the logic gates, capacitors and even complex number plus phasor diagrams thrown in) in diploma and university level so that I can teach my students who are struggling. How can I do that? It simply comes from the confidence that given sufficient time, ample examples and a killer's attitude, no matter how complicated a subject matter is, it can be done.

The final thing that the engineering discipline helped me is the fact that a lot of things can be calculated or estimated. The idea that things can be quantified is both a blessing and a curse. If you say you save a lot, I'll ask how much? If you say you exercise a lot, I'll ask how many calories did you burn? If you say you eat a lot of vegetables per day, I'll ask how many grams or how many cups does it fill? In the past, I see it more of a blessing but as I older, I find it more of a curse. I find that this can lead to over reliance on the illusion of safety and certainty that quantitative values give. It's simply boils down to an attitude that is something like this - if you see numbers, you can trust it but if you don't, you can't trust it. I think this can lead to a black or white kind of worldview, where there's no gray in between. This is both dangerous and unrealistic in reality.

I'll talk more about other disciplines and how it creates a mental model of thought for me in subsequent post.


Anonymous said...

This is a "good typical Singaporean."
The 4Ks-- Kiasu, Kiasi, Kiaboh,;
Sorry, I always can't recall the 4th.

Seriously, I try to practise the first 2Ks especially in investment and money matters, most of the time.
By the way what's the 4th K for you?
Ha! Ha!

JW said...

Haha, what you describe about yourself is very me too. I'm an electrical engineer!

AK71 said...

Hi LP,


What about Geography, English Language and English Literature? Hmmm...

Anonymous said...

An Extract from 20/20.

" One important feature of consciousness is that our experience of the world is mostly imagination._ _ _ _

"Can you picture 10 one-dollar bills laid out on a table? Most people can. But can you conceptualize what a million one-dollar bills laid out in a row looks like? No! Humans cannot- our brains weren't made to be able to conceptualize a number that large. When we think about a million, it becomes an abstraction. The whole world is made up of things and events we can only comprehend by abstraction or not at all. That is very quickly we must begin employing imagination in order to understand many issues in today's very complex and large world.

Knowing all this, we can't help but think: Which is the truer reality-the one out there or the one in our heads? Understanding consciousness reveals the importance of studying our emotions and practicing discipline with our investments. The more we know about ourselves, the less we can trust! Which is why the scientific method (or the attempt to achieve greater objectivity) is vital.

"There are no accurate math-based models to forecast how stocks will perform, and likely never will."

la papillion said...

Hi anonymous,

Haha, I didn't know about the 4Ks :) No idea about the 4th K, how about you? :)

la papillion said...

Hi momo,

Yea, I knew you're from engineering too :) All the engineering brothers unite! haha

la papillion said...

Hi AK,

The humanities taught me a lot of things, especially in recent years when I started reading voraciously on fiction. I stopped reading fiction since sec school, as I had the idea that it's all fake and all, so I preferred fact-tion then. But recently, I've been reading nothing but fiction. While the stories might not be real, the emotions and the theme are all very real. As i get older, I realised that facts is not the most important thing, it's how we deal with facts that are important.

And that is what I had learned from literature. I'm not sure if you get what I mean in the paragraph above, because I find it hard to describe it properly. Suffice to say, the humanities taught me how to be a human and to relate to one and to embrace my more emotional side :)

la papillion said...

Hi anonymous,

Interesting extract :) Sounds like socratic when the article mentioned that the more we know about ourselves, the less we can trust :)

Anonymous said...

Hi,la papillion,

The extract is from an investment book.

You said,
"As i get older, I realised that facts is not the most important thing, it's how we deal with facts that are important."

I agreed with you 101 %
You are really a wise man.
By the way, how old are you?

You see, for years, I have been meditating and try to practise this fantastic prayer by some great man.He prayed,

"No one reacts to things as they are, but to one's own mental images;
Keep me aware that it is not what happens to me in life that matters, but rather how I react to what happens. Amen."

This prayer, anchors me to look at the world in a " more balance perspective" whenever my vision going to be distorted by my emotions.
But I can tell you at times, it needs tremendous courage to put it into practice. One example was when it concern my "rice bowl"- my livelihood.(Pardon me I don't want to go into details.)

On the other hand, it helps me a lot in my "daily living"-including investment in stocks and making decisions about "human relating to human."
Thanks for your posting.

la papillion said...

Hi temperament,

Oh, you're the anonymous who gave me the extract :) My age is 1 plus the 12th prime number, haha :)

Hmm, that great man must have made a lot of sense. How does one practise that prayer?

I agree with you, it's easy to talk about it but hard to do it in practise. I think it's because when we're so caught up with the emotions, you forgot that you are actually having that negative emotion. It's like a fish swimming in the sea, if you ask the fish where water is, the fish wouldn't know even though it is swimming in it.

In my experience, the best way to control emotions is to learn to recognise when the emotions hit you. Once you recognise it, I will think of how life is too precious and too short to be caught by up such things and I'm so insignificant. Then I'll let it go.

That's how I settle arguments with my wife these days. It would last no more than 1 day, and either party would apologise and explain to each other what had happened and why we're angry with each other. The next step is that we will always forgive.

"I forgive you", I think that's the next three words that are important besides "I love you".

Anonymous said...

Hi la papillion,

Yes! "Then I'll let it go"
Every one should find his own way of "Then I'll let it go" no matter
what happens. The sooner the better.
I believe if not one will not leave this world without regret.

Congratulation, for you have found mutual understanding with your wife.

We have been married for 35 years and we have been trying to practise "let our misunderstandings go before the next sunrise.We can still talk about it after the sunrise, if either one of us still bear the misunderstandings. But we never bear grudge no matter what.
The Chinese also has this belief:
(Literal translation);
"Quarrel at head of the bed, make peace at the tail of the bed."
Ha! Ha! Don't husband and wife always do?

la papillion said...

Hi temperament,

What a good practice! I think being able to forgive is very important. Suddenly you are not burdened anymore and can get go and move forward :)

It's nice to hear you share about yourself...thanks :)