John Maxwell, Adam Grant. Give & Take, Originals, and The Power of Your Potential (Part II)

“If you’re too honest and say what you really think, it will ruin your career.”

-said to high-flying CIA analyst (real CIA, not tv CIA) Carmen Medina in the 90s by a well-meaning senior colleague.

Medina sincerely believed that information-sharing between departments at the CIA needed to be revolutionised: To cut down the risk of information leaks, the CIA at the time limited itself to paper printouts. Because of this, crucial information didn’t get shared quickly enough – an admittedly “undesirable” but mostly “acceptable” default status quo back then. Carmen Medina wanted to use an internet platform so information could be shared more effectively, real-time. She was shot down many, many, many times, even by people she counted professionally as “friends”.

In 2005 CIA analysts Sean Dennehy and Don Burke created Intellipedia (like Wikipedia, but for the intelligence community and closed to the general public) and contacted Medina for senior level support – in the 10 years or so since she first championed this particular cause, she had simmered down to a much more selective broaching of the topic……. while industriously plodding on, rising within the ranks of the CIA, earning respect and credibility through other achievements.

Took her 10 years. Almost Rockstar’s entire lifetime. That’s how long she kept at it despite being repeatedly and severely discouraged. 

Yet “The hallmark of originality is rejecting the default and exploring whether a better option exists” should NOT be confused with Rules-busting crazy risk-taking. 

Derivatives guru Satyajit Das, who wrote Traders, Guns and Money (some of the reactions to erm, “unfair layoffs due to mergers et al” are the stuff of Reality TV producers’ dreams) and conducted some of the trainings I considered myself privileged to have a chance to attend, used to call “safe” principal protected derivatives investments “slow death”, as opposed to the “fast death” of non-principal protected creations. (I did both, in Singapore and HK, but personally prefer “NOT dying from “fast death,” ie using the riskiest classification of assets to then create safer stuff, instead of v.versa).. What fascinated me so much was how much variety and opportunity there was, and it also changes irrevocably the way you look at everything. The balance of “give and take” given current market conditions.  All irrevocably linked to probability. Everyone trades, hedges, creates, based on the premise of the likelihood a particular risk event will happen, the likelihood you will get a return…

Case in point: I can create for you a product that fully protects your principal investment with a bank of your choice…. AND you’ll still get 1000% return. (This may be hypothetical, but did you know Weather Derivatives were a real thing? And that David Bowie securitised the rights to his songs decades ago? Bowie Bonds: How David Bowie Securitised His Royalties And Predicted The Future. James is not the only Bond and Securitisations are not really bonds but as I tell the kids in general, You Make It, You Get To Name It.)

But back to hypothetical 100% principal protected 1000% return investment – if the relationship between risk and return is irrevocable, where’s the catch?

I put your money in a bank of your choice. Fixed Deposit. With the interest earned, I go buy a couple lottery tickets <shrugs>. DON’T scream at me, probability is the point, and therefore the catch. The hotter the return, the lower the likelihood you’re gonna get it. So says No Free Lunch Mum. You cannot “cheat” the system but you can certainly find much better fit. I liken the skill of putting together investment products that actually make sense to… say, making sushi. With a super sharp knife. Now, I’m no true sushi connoisseur, but I have a deep respect for what goes into making it… It illustrates how being scared of using knives that are sufficiently sharp and potentially toxic ingredients like pufferfish gets you lousy food or worse, can make you deathly sick. With the right skill and tools however, you can create art, nourishment, out of something potentially deathly toxic. The lesson in the need for humility and training and research over a quick fix is a powerful one.

Now, instead of just lottery tickets for a potential upside on your principal protected investment (“lo-risk”), let’s throw in a pink stuffed unicorn.

(Fine, it has wings. Alicorn.) Figured if I threw an Alicorn in, no one could possibly still take me seriously and accuse me of a mis-sell. Yet there be method to the madness, in the illustration of how the landscape for derivatives investments completely changed following the financial crisis.

See, there were people who were irresponsibly represented to, and therefore needed and deserved help. There were people who selfishly thought about their own bonuses and deliberately sold rubbish that they knew to be rubbish. BUT. There were also the gamblers who deliberately took on excessive risk in the name of greed, lost their return fair and square….. and then tried to masquerade as the people who were taken advantage of. Those are the absolute worst, because they sow distrust and a loss of faith in the existence of honourable choices, robbing others with real needs of the limited resources available, causing institutions to have to withhold aid to ascertain whether the need (and complaint) is legitimate. There was so much energy put into avoiding being accused of a mis-sell (as opposed to creating new and better products) that in the end no one had that much time to create financial products anymore, and so they went into tech, the arts, cupcakes. You are familiar with the Sift chain among others, right? By a former investment banker, I believe.. (Hairy scary CDOs whose perpetrators creators everyone wants to squish indiscriminately… or cupcakes? This is hard.)

Goodbye Rant, Hello Pink Stuffed Animal… You can improve your odds of throwing a hoop over a bottle neck to win a prize, with practice (remember when it seemed like every other person at last year’s AIA European Carnival was bobbing about with one of these things as long as you were willing to wait through the crush of people playing it?) if you go for the pink stuffed animal… but you can’t increase your chances of winning the lottery unless you buy more tickets. More risk, more return and vice versa. A “safe” investment product only gives you so much. And if the bank you chose to place your deposit with isn’t as sound as you thought, you took on risk without knowing, for an un-commensurate low return. “Hi-risk” products that everyone on the face of it “knows will kill you” are way more honest – they tell you We Know This Is Junk. THIS Is Therefore The Return We Are Willing To Pay You For That Risk… The relatively big return allows you a lot more “meat” in the structure to buy cheap protection, move things around (tranche-ing), thereby reducing the original risk.

According to Grant, creativity and successful entrepreneurism has less correlation to taking huge un-prudent risks as common idea might have about the stereotype. In other words – no excuses all you budding entrepreneurs, you can follow da rules jus’ fine 😀 questioning a default status quo is not an excuse for rebellion, and rebellion does not necessarily a creative genius make. There are perfectly creative geniuses who are not rebels. In fact, Grant says you’re more likely to go wild, be creative in your ideas, if you are relatively secure in other areas of your life. T.S Eliot wrote The Wastelands while keeping his bank job in London, a position he remained in for 3 more years.  (Somewhere in there is a snark at what he must think of banking, but anyways… :D)

Adam Grant’s students at Wharton who created the USD 1.75bio pre-IPO Warby Parker (more below) all secured good internships in the early days in case their hugely-unconventional-at-the-time online store selling prescription eyewear didn’t work out. They took 1.5 years before even launching it, and they told everyone what they were working on (readily available on Youtube in a much lesser-watched clip where Co-CEO Blumenthal talks about what he learned from starting up WP). When asked why they would do that, what if someone “steals” their idea, Blumenthal’s response just makes the whole relatively zzz-worthy clip worth watching: “We’re not the smartest guys on the planet. If someone else didn’t launch it yet, the market probably wasn’t ready before…” “You’re always going to have other people working on similar concepts, and it comes down to execution…” Ironically, the “smartest students” on paper, Adam Grant quotes William Deresiewicz, “become the most excellent sheep.” The more you prize achievement, the more you fear failure. If you are too scared of messing up and “looking bad”, at some point you’re not going to try. What happens to all of us as a people, a society, when everyone doesn’t try? People who cry wolf – about mis-sells and what-not – increase the stakes people stop trying to create in the financial markets and… open more bakeries. (Though no contest, Warby Parker is such a simple non-rocket scientist idea..)

Q: Are you afraid of the big optical companies?

“No, we’re more afraid of 4 guys, just like us, sitting in a dorm room somewhere…..”

Speaking of executions... WPs “killer app” was to ask WHY a particular default position existed to begin with. Regarding lens pricing in a pair of glasses, there was inexplicably no real reason other than a monopoly – (When they say in the video above that the markup on a pair of prescription glasses is 10-12 times, did you initially register “10-12%” like I did? And then realise 10-12 times is a 1000-1200% markup?). The massive pricing difference didn’t take the “smartest guys on the planet,” it took one guy feeling the pain to his wallet from leaving a pair of glasses on a plane, and another guy doing social work for Vision Spring which provides glasses to the underprivileged (who doesn’t even need glasses himself) to connect the dots.

Adam Grant’s interview of entrepreneur Larry Page is another interesting one – Page, together with business partner Brin, were once incredibly reluctant to drop out of Stamford to pursue their “killer idea”, explaining how they had felt they were not yet sufficiently established (humility!) to properly execute. They happily went about college life building things like printers out of Legos.. Said “killer idea” they eventually launched, enriched by college experiences and numerous seemingly “meaningless” little projects along the way, was……….. Google. 

(eBay is another one that started as a hobby until Pierre Omidyar had the epiphany that his hobby was netting him more than his real job.)

I’ve got (a much more meh) one myself – as a young adult I felt my parents “forced” an Accounting major at the Singapore Nanyang Technological University on me and I swung between resentment and despair at not knowing what to do with it. I wanted to study Economics. Law. English Literature – was forbidden from becoming a teacher btw – my mother was a public High School English teacher her entire working life, a job she refused to leave… or couldn’t bring herself to. I don’t think she herself can really tell you which it was. She was out to “save the world” a lot. Sometimes my mix tapes disappeared when she had no time to shop for a personal gift for one of her hardworking students (when I say “hardworking” I don’t mean “top student.” I mean “showed up for free after-school tuition and could barely keep his/her eyes open from manning night market stall for parents until after midnight before getting home to do schoolwork.”) Lucky for her I was a pretty good kid except for a couple little pockets of rebellion… BUT.

I was angry at my parents for years  about the degree (never the disappearing mix tapes haha). Yet it was that degree (plus the unusual combination of an otherwise very “un-accountant-like” personality) that landed me on my first structured products team in OUB (Kevin Kwan, author of Crazy Rich Asians in pic below is btw a great grandson of founding director of a then-similar Singaporean local bank OCBC), inputting and very occasionally translating hundreds of financial statements off the Bloomberg into a proprietary software for evaluating corporate bonds in their own securitisation portfolio – one that was created – not by a long-in-the-tooth rocket scientist, but by a couple barely-30s (nonetheless strong students), one of whom was also a Commando Officer during Singapore National Service.

But back to the then-30-somethings who created the first Singapore securitisation – they opened textbooks, consulted college professors (and yes several experienced quants) and created what was at the time and to the best of my knowledge still is one of the most popular and successful local securitisations in Singapore. By now it would’ve been running almost 2 decades with no issues. (Not everything blew up; you only read about the ones that do because everyone’s too busy carrying on running the ones that don’t blow up to do press I guess..) Thing is, derivatives, computer coding… 5, 10 years is a lifetime in their development. They require a fresh, relatively young eye. Yet without also the wisdom of decades-old experience that can recall similarities and correlations from past market mistakes, the new creations are that much riskier. In other words, young and old need each other. (Yeah never said it was easy.)

In the case of Medina and the CIA, the devastating consequences of a potential information leak outweighed the benefits of timely information until the information and technological landscape changed drastically – Yuval Harari in 21 Lessons for the 21st Century writes, “Those who own the data own the future.” (Not to mention they also better figured out how to execute Medina’s original idea – can you imagine what the rash and imprudent might do with that data and ownership of the future..)

The other hidden lesson about execution was that Medina’s delivery was lacking in her earlier years – she failed to convince, because she “spoke like everyone had to agree with her,” without acknowledging the limitations of her own ideas. Just an aside that whether an idea lives or dies is uncomfortably more dependent on mode of delivery than we might otherwise expect.

I do however concede the seemingly similar successes of college dropouts like Steve Jobs. In the same way there are many ways to get through a wall. You can barrel through like a bull in a china shop, or you can figure out the weak spots and apply selective pressure… OR you can go work out the wave frequencies to break down the thing in some engineering class and along the way find other uses for resonance. Whichever best suits your personality. (And think I made the wave frequency thing up? It’s from Can Resonance Destroy Anything and you need to read the 30-odd comments beyond the physicist’s initial “nope”, some of which ends in the sinking of Atlantis.

Yes really. You know I’m not mad enough to make all this up by myself, right?) But back to the wall. If you discover Atlantis along the way, you might prefer to do that. (HT3 was directed by cartoonist Genndy Tartakovsky, also a film grad from Columbia College Chicago, and Michael McCullen, formerly of private high school Indian Springs, Alabama.) If you want to barrel through the wall though, you better have a VERY HIGH PAIN THRESHOLD. Otherwise, go to college 😀

Blumenthal of Warby Parker I believe was working with Vision Spring while still in college, and it was how he found inspiration when he doesn’t even need glasses haha

Next up: Correlations between birth order, parenting, professional mentors, and… Originality.

Some Guy Who Follows Baseball (and isn’t me) found a significant correlation between birth order and risk taking – as proxied by “base stealing” – in Baseball, players have a chance at scoring extra points for their team by “stealing bases”. Sliding into the base to “steal” it often risks heavy collision. Pain. A much higher chance of injury. The act of stealing a base is therefore considered an indication of the propensity to take risk, because a player only increases his team’s chances of gaining points by about 3%, for which he must risk pain and a possible benching. In other words, the risk-reward is such that you probably wouldn’t do it with those odds unless it’s in your personality. (Or pain threshold going through a wall) And it turns out that part of personality is related to birth order (also age gap) and the differences between how elder vs younger siblings are parented…

Identifying some 400 siblings who play the sport professionally, researchers adjusted for genetic similarities (“nature” – say, how much natural “ball prowess” the player likely had), noting also the slight edge older siblings appeared to have in ball control….. but the statistic that stood out was in base stealing. Risk appetite. Younger siblings “stole bases” a whopping 10.6 times more often, and were 3.2 times more likely to succeed at it as well. Oh, and it apparently holds true regardless of age or era – 80 year old younger siblings still had a higher propensity for risk than 25 year old eldest children. 

In other words, bring on the pressure – how you parent really matters. Samuel and Pearl Olliner, sociologists and education researchers, made it their life’s work to study the correlation between non-Jews who risked their lives to save Jews during the Holocaust, others who just stood by…. and how they were parented as kids. When interviewed, Holocaust Rescuers recounted in common the word “explained,” in the way in which they were disciplined as children.

So too the level of creativity – according to psychologist Teresa Amabile, parents of highly creative children set “one less rule”: Where “normal” kids might average about 6 specific rules covering homework, bedtimes etc, the parents of creative kids had a habit of emphasizing the value behind the rule (implying they leave “wiggle room” in how the child chooses to comply..)

Now, I’m not sure as a parent I want my kids to literally risk their lives to save anyone else’s child (come on let’s be honest)… lose a few fingers, maybe <shrugs>. They have 10, after all. 😀 (And lotsa hair.) 

ps: Speaking of which, we keep getting asked re HN having short hair and Rockstar relatively long hair. For HN, it was a lesson in going for a particular look and practicality (not needing to spend time drying or tying it).. you cannot “care too much” about how you look, ie how erm, pretty or not, if you are going for a particular purpose that requires you chop it all off…. and the flip side for Rockstar (his current style is… not style. Ugh. It’s just a compromise between not having to cut it too often and not having to tie it up; if he could live in just one look/outfit he would [insert eyeroll] think of all the closet space I would’ve saved).. And no he’s not queer 😀 but it’s true he likes computers way more than girls right now. He says computers are easier to understand haha).

 

*Elephant in the room, fine I’ll say something quickly about Crazy Rich Asians, besides the obvious fact that it’s awesome… Obviously there is a powerful push toward smart, strong young women nowadays, so I will point out that CRA is full of smart, strong women… who know when to selectively yield as well. AND to choose partners differently than before. It’s getting easier and easier to be a “strong, outspoken woman” as society becomes increasingly supportive, in a way it wasn’t in the past generations or even just a decade or two prior. However CRA highlights the role of women in the whole family – not just as daughters, but also sisters, wives, mothers, daughters-and-mothers-inlaw. No, it’s not all comfortable to think about, because we are all…. human and therefore selfish…

In raising “strong daughters,” or really, “strong children,” we might perhaps overlook the fact that if (and ONLY IF) they also choose to be spouses and parents, they have to also learn to yield selectively or to seek compromise. It’s easier to be the winner all the time than the (selective) yielder, to be sure.

CRA highlights a particular kind of “strong woman,” and to lesser extent “strong man” – because while our society traditionally rewards the rich, the super-busy, the high-achieving, it is the humble who hold the family together. Besides the main storyline of high-achieving women learning when to yield and cooperate (it’s after all much harder to shelf ambition than to not have any to begin with haha) Pierre Png’s role is as an average-achieving hardworking son-inlaw marrying a “strong woman” – high-achieving top student from a powerful rich family (“strong woman” for a time hides her family’s wealth seeking to make her husband feel better about himself – how many “strong” men would feel the need to do that? 🙂 ) only to chafe at being the lesser-moneyed partner in his marriage… and dropping the ball spectacularly is a powerful visual.

And when his “strong” wife finally owns her family’s Crazy Riches and tells him off for not being able to accept it, it is a quiet and surprising nod to the oft-overlooked ability of more moderate-achieving husbands to remain supportive in marriage and family alongside “stronger” partners as well.