More on education: incentives and linearity

I think I've written about education on multiple occasions, but let's revisit the topic again. So to briefly recap, the western education system is out of control. On one hand the fees universities are charging are growing rapidly, excluding the possibility of higher education for the masses. At the same time, the level of education when adjusted for the cost is questionable as MIT and Stanford are giving away lectures and materials online for free. This means that ultimately the student is merely paying for the stamp of approval that the prestigious university with its reputation is able to provide. Less reputable universities thus cannot charge as high prices as the elite universities. And in Finland all of this is moot as the government subsidises studies and the main problem here is how to get students to graduate as quickly as possible so they can start making money to pay taxes (i.e. become productive cogs in the system) and minimize the economic impact of their studies via costs.

Ultimately there is a crisis afoot here, namely because more people strive for higher education based on the assumption that higher education will give you higher salaries. Along with cost of education, unemployment is also on the rise meaning that for the benefits from potentially increased salary take longer to materialize. And at the same time we are straying very far away from the questions regarding what the purpose of education is, to the society, to the academia and to the students.

Reflecting on those points, I keep getting this feeling that the linearity of my studies is counterproductive. I'm selected at the age of 18 to start studying towards a MSc (Tech) without really any concept of what this stuff is about, what sort of skills I might need and the only way I can keep track of where we are going in e.g. mathematics is trying to tie the concepts down to concepts I already know. And then eventually further down the road I might notice that some of the things are in fact useful (e.g. it is nice to know the basics of matrices, eigenvalues and eigenvectors if you want to figure out which trends are central in generating and sustaining violent conflicts in the Middle East) and then you need to revisit the issues. But alas due to the linear fashion of studies, you already went through the "basic" courses years ago and revisiting the courses and asking more intelligent questions (as you now have a better understanding of applications, etc.) is looked down upon as you are merely wasting more resources.

So, to tease out what the problem is, we can cite Warren Buffet's partner Charlie Munger, who told us that to understand why things are the way they are and to predict where they are going, you need merely look at the incentives. And none of the larger institutions at the current stage really have incentives to actually teach the students anything real. It's only if the students pursue an academic career that they might with a certain degree of probability need the basic skills taught in Masters programs. And even then it's still most likely cheaper to teach the skills at the later stage again than to spend enormous amounts of effort in the earlier stages to make sure that the entire class understands the ideas and concepts in class.

Another point is the cyclicality: something should be done about that. The reason why Finnish engineers have traditionally been fairly good is mainly due to the fact that at a very early stage of their studies, the students often already go to the industry to work on real issues. Their work naturally gives them problems to think about, which they can then bring back to school and try to work out, creating a tighter linkage to their studies by giving more motivation that the things being studied are actually useful. It also benefits the industry because they get relatively cheap labor which also is very rapid in adapting and learning things due to the close link to the university and the framework behind the students which supports learning. So while bearing this in mind, it seems very counterproductive for the state to demand quicker graduation times from students, as that would wreck this dynamic. But on the other hand if education costs were shed upon the shoulders of students in the form of tuition fees of say 10 000 euros per year, this is also quite a high opportunity cost for having a support network you can potentially tap, especially when considering that a person who goes to say 20 courses a year actually generates more costs for the university than a student who merely takes, say, three courses a year. So this should also ideally be addressed when redesigning the education systems.

Sorry again for not having any real tangible solutions at this stage, but I thought it worth ranting about these subjects just for the record and for future reference when I go through these entries at later stages.

The reason for the unrests in London?

It's the same as the reason for many problems: people don't think things through. Even people who think they have nothing to lose have many things to lose. They just haven't thought it through...

Swimming briefs or not?

I am increasingly convinced that doing a triathlon next summer is a good idea. The exact variant is yet to be determined, but I'm starting to think that maybe a sprint distance at 750m swimming, 40km cycling and 10km running is a good way to get acquainted with the sport. So, why triathlons? The rationalized answer is because practicing the three different sports may in fact be more healthy in the long run when compared to only running, which itself puts a fair bit of pressure on joints and whatnot when running around the pavements in the Helsinki area. But that's not the real reason. The real reason of course is because I seriously want a new roadbike and what better way to rationalize the acquisition than to state that I absolutely need one for a triathlon.

Anyway, cycling and running should not be too difficult. The thing I'm slightly worried about is swimming and the fact that it's about a decade or so since I've last done any swimming. I'm just not that into the whole water business and I've never really liked spending time on beaches and such. You just get sand everywhere and you can't even dress like a human since it's too bloody hot and typically there aren't even shades around. But yeah, swimming is quite relevant from the perspective of a triathlon and fortunately enough it's also the first part of the shebang, meaning that if I happen to drown, at least I didn't waste effort in cycling and running. Fail fast, if you will.

So, swimming then needs to be tackled and naturally you need the appropriate attire to swim, namely the swimming suit. And oh joy, here we stumble on the age old argument about whether or not men can wear swimming briefs ("Speedos") or not, and of course I can't let a fight like this slide by without taking a stance. And of course the answer is that the only appropriate way to dress is with swimming briefs, or "Speedos". Period. End of story. It's as simple as that.

If you think about it, it's in fact quite obvious and I don't understand why there even is such a big fuss about the topic. First of all, swimming is exercising and when exercising, your attire is based on functionality. When training, it doesn't matter if you look stupid or not, the point is that you must dress in a functional fashion. I'm always baffled when you see women in polo shirts and sporting nail polish show up in gyms and pretend to work out. I go to gyms to work out and get sweaty, ergo I dress appropriately and don't really care whether it fits my sartorial image or not. And in terms of swimming, the appropriate and functional way to dress in in swimming briefs: they offer better movement ability and the fact that they are not a tent (unlike the things the Americans wear) you can actually swim more efficiently. And when you're done and leaving the swimming pool, they also dry fast and don't take as much space.

Now, someone will of course start bitching and moaning about the fact that they look ugly when you're on the beach and women will never like you if you wear "Speedos". Those just demonstrate prejudice and small mindedness. And besides, the point is moot since there is absolutely no reason why a civilized person would go on the sand to grill themselves in the first place. So that point is purely hypothetical anyway. Instead of being chavs, civilized men instead will spend their summers doing something productive, like sailing or playing sports, and dress appropriately. And when just lounging around, they shall anyway wear long trousers (preferrably linen or some other lightweight fabric) and polo shirts to look reasonable.

So there you go, the whole argument about briefs or not briefs when going swimming is hereby solved once and for all.

Decoupling and deconstruction

One of my pet theories is that the increasing level of infrastructure (security, transport, capital, ...) will decrease the size of companies. This summer it appears that the oil and gas industry is experiencing a trend of spin-offs and splitting of companies, without even regulator involvement. First Marathon Oil spun off Marathon Petroleum and in today's Financial Times ConocoPhillips announced its intention of splitting itself into two. Interestingly enough after yesterday's announcement the markets rewarded ConocoPhillips with and increase of 7.5% in valuation. So whereas nuclear scientifically fusion energy seems to often fail to materialize in the corporate world, fission certainly seems to have worked in this case.

But of course some caution should be applied before we dive into the theory of infrastructures and company sizes. Without being an expert on oil and gas, my guess is that the industry in itself is in the midst of a turmoil and from an investor perspective I would be careful as my common sense says that peak oil will have most likely already happened and that the industry, at least in terms of oil, will is already declining and buy-and-hold strategy will at this point would only result in tears in a matter of years. But another driver may be increased competition in declining markets and the inability for a large organism to adapt rapidly enough, further held back by the immense amount of effort wasted in internal communication and other functions which spin out of control as a function of company size.

It will, however, be interesting to keep an eye on what is happening and whether or not the benefits of these fission exercises will be sustainable, or whether the markets merely rewarded the companies for making any type of effort.

Don Quijote and EU's fight against credit raters

Amusingly enough EU seems to have been caugh with its trousers down by the credit raters, who have in the past weeks downgraded a couple of more EU members into the junk bond category. And as appears to already be typical for the eurocrats, the approach now is to focus on the annoying smoke by attacking the credit raters instead of addressing the real problem, namely that of the horrible state of competitiveness and finances of its member states.

As part of the latest news today, a couple of EU commissars have been making interesting statements. Firstly there is supposedly a cartel of the top three credit raters, according to Viviane Redding. Well, judging by the past few years, the level of competence demonstrated by the raters in regards to e.g. evaluating the credit worthiness of subprime mortgage CDOs and the whole shebang, one would assume that entry barriers for a new rater wouldn't be very high. That is assuming that a new entrant could provide more credible ratings. I'm not an expert, but I fail to see how a cartel would actually work here. Perhaps I'm mistaken, but in any event I do agree that maybe more competition would be better, but rushing out and calling cartel without credible proof seems somewhat weird.

Secondly the fact that raters will change ratings has apparently caught another commissar by surprise. Well, you know, assessing the situation and changing ratings accordingly is precisely what raters do, as surprising as it might be. And even more surprising undoubtedly is that if raters don't see improvements in the actions and the expected outcomes of the actions, ratings will drop. Perhaps raters could talk with the parties that are being rated about different things, but ultimately I understood that the whole point of having third parties perform ratings was that investors who want more information on which to act could get a somewhat reliable, unbiased and objective assessment of the situation. Interestingly enough, however, it appears that historically the raters, e.g. in the subprime case, may have had conflicting interests and biases towards rating subprime mortgage CDOs higher than they should have, which I think then comes back to the whole situation where I personally would like to see raters remaining somewhat detached and distant from the parties who are likely to gain or lose basing on the ratings.

But all of this is ultimately very much moot as the fundamental issue still remains: the EU has made a total hash of things and it should now focus on fixing the core causes of the whole trouble, i.e. increasing the competitiveness and entrepreneurial activities while decreasing the corruption and inertia in the troubled member states. If this isn't done, then ultimately arranging bail outs and negotiating loan terms is pointless as the loans will never be repaid unless the countries actually get their financial growth back on track. And while this is going on, maybe EU shold resist the temptation of lashing out at windmills...

Mobility and performance

Traditional view holds that from the perspective of an individual the best approach to career development is to move positions every three to five years. Less than three years and you will come across as an organization climber who will most likely have not had enough time to actually pick up the experience or the skills of the previous position. Or worse yet, fast moving individuals may move fast because they get canned as soon as it becomes apparent that they are little more than hot air.

But stick around in a position for much more than five years and very often development on a personal level grinds to a halt. I had the pleasure of serving two steps underneath a brilliant boss for a while and he held the view that you should do a single thing three times; on the third time your performance will peak. The rationale is simple. On the first round you have no clue what you're doing. The second time around you have some clue and can formulate a more educated plan. But it is on the third time around that you are able to truly refine the process and will have become increasingly adept in what you are doing. But on the fourth time people tend to get lazy, if we put it in a simplistic fashion. Efficiency and output quality may begin to deteriorate.

So extrapolating from those viewpoints, it is thus fairly logical that it is both in the individual's as well as the organizations' best interest to have individuals move around. But I recently read some interesting bits about why taking this approach too far is also very counterproductive. In a recent article the Economist talked about Barca, the football team, and how it has achieved success while emphasizing on local values and growing its own players, as opposed to using big money to attract high-fliers. The article continues and cites studies which show that successful individuals on Wall Street will very often suffer deteriorating performance when they switch to other organizations. This would then suggest that it may in fact be in the organizations' interest not to necessarily go along with the rapid ascent of individuals.

So, where then is the balance between acquiring fresh blood and new ideas versus cultivating a strong internal culture and values? The counterargument to the culture and value argument is that very often when organizations grow old and large, they tend to begin to detach themselves from the "real" world; they gather inertia, organization builds on top of organization and performance deteriorates. Amusingly enough literature is full of these cases. Just look at any piece of cutting edge management literature from a decade back and skim over the examples of successful firms. My hunch is that most of them will have succumbed and are either in trouble or have already folded. Of course if a company is able to keep its well functioning culture and cultivate it appropriately, superior performance should ensue. But take for instance Google. The question is that has Google already peaked? It may still continue and churn out very hefty profits, but has the rapid recruitment drive already hampered what originally was the coveted Google culture? Have large numbers of employees already lowered the average performance of individuals; has mediocrity taken over the company yet? If not, chances are good that it will in a while. Because examples of this type of dynamic are plentifully around.

Riddle me this...

If every company only hires (according to HR, anyway...) the top-of-the-class, top 1% of the population types, why isn't the unemployment rate at 99% yet?

Eras

Change is strange. It's sort of like an untrue, even dreamlike feeling booking meeting rooms and meetings with agendas such as "Debriefing/handover of responsibilities" and "Exit practicalities".

More random thoughts

• Capitalism and free markets aren't the problem. Big corporations and the fact that there are no free markets is the problem. Confusing capitalism with corporatism is a mistake that leads to many problems and incorrect conclusions.
• If we're optimistic, the drivers of individualism, education, and technology, amongst others, will drive the decline of large corporations and return the system to a functioning competition-based free market. This will be because the friction and missing infrastructure bits that big corporations were able to get past when small companies couldn't will be reduced.
• To enable the above, one must decide what type of a mechanism should be used to revitalize the system. Competition law and regulators are an obvious choice, but this requires the regulators to act more decisively and more intelligently in the future.

Random thoughts

• Most disruptions can be taken apart into smaller pieces, which in turn often are merely small linear, evolutionary steps. Just like the metaphorical boiling frog if you look at only the small delta, you miss the big change that can make things really hot for you.
• Flexibility and adaptability is crucial for survival. Interestingly enough people seem to cling onto ideologies even in situations where the pragmatic option would be to change your stance. Like in martial arts, fixing yourself into one stance will again land you in a tight situation when the circumstance changes.
• An offshoot of the previous and originally from some smarter person: communism for 20-somethings stems out of passion, but communism for 40-somethings stems out of idiocy.
• "I'd rather be a shareholder than a customer of [insert any bank here]." Because of incentives, banks tend to take better care of shareholders than customers.

Told'cha, ya shoulda killed me last year!

Why PS-accounts aren't selling?

Hmm... Could it have something to do with the unpredictable tax regime of Finland and the fact that the current climate seems to suggest that not only will taxes be going up but every succeeding government seems to aggressively change pension legislation. So excuse me while I don't see any point in locking my assets up for over 40 years with a product that very efficiently ties me to a Finnish banks, tax authorities, and government. If someone, however, offered good productized solutions for small investors to spin their savings into a offshore fund so that the government couldn't constantly kick your teeth. That I could be interested int.

Money

Many small, and large, companies have been ruined with too much money. --Jorma Ollila

Home ownership

One thing I've never understood is why the government absolutely feels that it is highly important to get everyone their own home. The latest subprime crisis in the US, which has its roots firmly tied to governmental practices of encouraging banks to lend to more and more people is a good example of what can ultimately happen (of course there were quite a few other factors in play as well, but the last couple of administrations have essentially shoved home ownership down the throat of just about everyone).

In Finland it may not necessarily be so blatant, but the government clearly encourages home ownership. Home loan interest is tax deductible to a certain point, first-time buyers get preferential treatment in the form of government backed loans, protection from increasing interest rates, and so on. And the profit from selling your home is exempt from taxation. With all these factors in play, is it really that strange that housing prices in Finland are what they are? Or is it that strange that in the past years news have emerged of individuals purchasing homes with little (less than 10%) or no own capital?

I talked about this issue at work with some people, and the general consensus that people appeared to have was that all of this is entirely acceptable. Buying property is very safe, prices nearly always rise, etc. Seriously. Only a few years have passed since we saw what this type of thinking can potentially bring about and already the lessons have been forgotten. Not too many people make the largest investments of their life with a leverage of over 9:1 in respect to their own capital. Especially in a market which appears to be a bubble that is being sanctioned and built by the government.

Based on this I'm having a terribly hard time seeing myself investing any of my wealth into Finnish property markets: 30-year-loans and state subsidies smack of a horribly bad idea. But I hope that if and when the bubble bursts, this time around we won't encourage moral hazard by bailing out any of the people who have voluntarily put their heads in the guillotine.

And what about home ownership in general? You are of course free to buy your home. But only if you can afford it. As of now, I don't feel that I can afford to purchase a home for myself and thus I will not buy one. Despite the fact that the banks would be more than happy to provide financing for just about any type of apartment.

Some ideas

I was listening to Simon Cole give a presentation earlier today about value creation in the media industry these days. Overall I think the message was very much in line with intuition, but the two items that I thought worth picking out from there were related to inertia and to democratization.

I've often talked about inertia and I'm increasingly confident that in the longer run the negative aspects of inertia will outweigh the relative benefits of being big once the basic infrastructure for companies matures and does not penalize for smallness as much as it used to. In respect to dinosaurs attempting to rejuvenate themselves, Simon cited the interesting anecdote about how Disney sets aside money to a fund from which some employees can request capital to launch their companies that aim to kick Disney underneath its belt. The assumption naturally is that if you succeed in doing that, Disney will own you and thus learn from it and potentially embrace the disruption you either identified or triggered. As an idea that is brilliant and I think more companies should actively try to spar themselves with these types of initiatives. The most recent example to come to mind is of Mark Zuckerberg making an investment in Diaspora.

The second thing was Simon's comment on how Sky News gives first priority to the time-to-market of news whereas BBC emphasizes qualitative issues and will spend time to double-check stories before running them. The interesting bit here is if you think about how this actually is another situation where the underlying dynamic is that of democratization and giving the people responsibilities and freedom, or in this case that the consumer should do the editorial bit of the news process themselves. Not surprisingly with everything that's floating around on the internet, I guess most are becoming very information-savvy and are, hopefully, able to do basic fact checking and apply common sense to weed through the news. So interestingly this links back to the dynamic where things are getting chopped up into smaller pieces and individuals are becoming more empowered and free.

Amusingly enough I guess neither of these points directly related to the topic at hand, but then again, weak ties are often the source of the most interesting things.

Progression

Considering that progressive taxes seem to be all the rage right now, I would in fact like to propose a very holistic approach to all of this: instead of using currencies like the EUR, we could instead move to percentages. A bottle of milk would cost 0.1%, for instance. In practice this means that regardless of income, the individual would pay 0.1% of their monthly income for the product.

This type of solution would permanently resolve these pesky issues of some people earning more money than others by ensuring that regardless of the amount of money that a person makes, they will still be able to get the exact same amount of goods or services as any other person.

You learn something new every day

For a while now I've been somewhat annoyed with the performance of ETFS Crude Oil (CRUD). With the Middle East Revolution Football league (sorry for stealing this) in play and the oil prices rocketing, CRUD has trailed by a fair bit. So what's the problem? Essentially the problem was that by buying it from Germany with a euro denomination, I ended up coupling the oil price to the EURUSD exchange rate. In retrospect my flaw was underestimating the correlation between the two: it appears that every time the oil peaks, people get jittery about the fact that the US is still heavily dependent on the stuff and thus USD dives and eats away at my position.

Having held onto the position for a while, I finally decided that enough is enough and took the small 20% profit and ran. The learnings? With oil, try to decouple the currency from the instrument so you have freedom to time the currency exchanges in the most beneficial way.

(As a side-note, there may as well be other factors in play. I guess I'll need to do some more reading as homework to check out if the phenomenon of contango is in play again with these derivative-based instruments...)

The ultimate overcoat

I absolutely must have someone tailor me a similar overcoat for next winter.

On politicians and companies

The parliamentary elections are upon us again, which certainly explains the amount of point gathering that is going on in the press again. Of especial interest to me are the comments that politicians are throwing around about the state of Finnish high-tech industries. They are certainly right: something needs to be done about it if we ever hope to become a world leader in the arena. Because we sure as hell aren't leaders, nor have we truly been leaders.

So, with the latest strategy change done by Nokia, which was widely publicized yesterday, many Finnish politicians are rushing in to say how they will mitigate the amount of unemployment that will arise from these changes, as it is obvious even when observed with your forehead that there are just too many people in the company doing the wrong things. Additionally the center party has been heard to say that they have "started investigating about how this type of structural change (or even crisis) in high-tech sectors can be turned around." Perhaps that's good, but the track record of politicians understanding what's going on and what needs to be done has been so appallingly bad, that I'm not entirely convinced that it's a good idea to have them anywhere near this situation.

What, then, should be done? The politicians seem to think that the software industry should be strengthened and that there will be an ample supply of engineers being freed up from Nokia which can create the software sector. But if we actually look at the situation, we will find that most of the problems that the company has faced over the past decade have been due to software. So I'm sorry if I sound a bit pessimistic, but pray-tell, what are the chances that this bunch is in any way actually competent with software.

The politicians aren't too worried about this. They have also figured out that education always helps, so they have thought up of a brilliant plan of devising new educational venues at which people can be trained in the skills of software. Ugh... I have a bit of a background in software development, even prior to receiving any formal education on it. I tend to agree that higher education in software will widen your thinking, but in actual software business, the best way to learn is by doing it. You don't need formal training for it. Instead, with software I believe that you absolutely need a passion for software: if you never felt like writing software on your spare time or just playing around with code, don't bother wasting precious resources on schooling yourself in software. 9-to-5 coders often end up making more problems than they are able to solve as they easily engineer themselves into a corner, introduce fatal flaws and bugs, and so on.

Then there is the slight problem regarding geographic region: the Finnish market is small and it is so far away from where things happen that it's not even funny. This means that any company wishing to actually grow will need to go abroad, and fast. For a startup this means packing your most extroverted guy in a plane and sending him to London with a suitcase and orders not to come back for the next couple of years. Oh, and the budget, as with startups typically, is shoestring. So it's not a picnic. Combine this with the hostile environment towards entrepreneurial activities in Finland: high taxation, tough labor laws, stigma associated with bankruptcy, difficulty with gaining access to capital (lack of angels and VCs), and the list goes on.

So yes, the politicians can do something, but it is more involved with changing laws and taxation to encourage entrepreneurial activities. The world is already so complex that you cannot merely say that "we will train more software developers!" and hope that the problem is solved. Instead you must carefully craft the boundaries of the system to encourage a certain type of behavior. Shoveling out government resources in the form of cheques to small businesses if they are able to navigate a maze of paperwork is also not good: it's not only one or two startups that I've heard about which have gotten fairly confused regarding who their customer is. In these cases the company has yet to sell anything real to a customer, but the government keeps subsidizing it and giving it more money. This isn't doing anyone a service: if the business plan isn't working out, it's in everyone's best interest to fail fast and move to the next idea. That's what entrepreneurship is about.

And as an interesting side-note, I'm actually starting a process of preparing a paper about these things during the Spring, so hopefully I'll be able to make a clearer argument about what I think the problems are and what should be done about them.

Can you say... Bubble...

Amusingly enough it's been over three years since this video was made. But with the social buzzword still churning on strongly, can you say... bubble.

Equality

With the elections just around the corner, the politicians and aspiring politicians are again at their favorite pastime: dividing and distributing other peoples' money. And one of the key themes again this time around is financial inequality, or how money should be moved from the top to the bottom. An interesting thing to think about here is what exactly the problem is and what do we want to solve. Gini coefficients have begun popping up in more international publications, but I can't really recall a single Finnish article mentioning them. Anyway, the basic idea is that a coefficient of 1 implies that 1 person gets all of the income and 0 means that every gets the same amount. With this metric, the inequality in certain regions has increased, but on a global level we've become more equal.

But which is more important: that we all earn the same amount or that the people worst off are supported enough that they are able to survive. I of course have my own strong biases and tend to feel that equal opportunities always beat equal outcomes, i.e. meritocracy is the way to go as long as everyone gets to jump from the same baseline. So in this regard I don't necessarily see high equality as something that is absolutely valuable, as long as everyone is kept in the same boat and not thrown out.

Related to this, another interesting aspect in this is that according to the Economist's recent article, in the US the inequality in the bottom 99% hasn't increased since 1993. This in essence means that what is happening is that the rich are getting richer, but at the same time the poor are also getting richer, although slightly slower. If we also think about the longer term trends, overall the world seems to be slowly becoming a fairer place, as a very significant portion of today's wealthy elite has in fact made their own fortune. And that, in my opinion, is a lot fairer than being wealthy because of the fact that you just happened to have been born into nobility or royalty. What more, the wealthiest people then tend to eventually give most of their money back to society in the form of charitable donations or in other cases by becoming angel investors and pouring their money into high-risk ventures which might otherwise not happen.

So, the name of the game isn't to optimize the Gini coefficient to 0. What more, there is even hardly any solid facts one way or another as to whether equality is that important. And as previously stated, I understand the welfare state as a system which inherently does not take a stance on anything else but ensuring the welfare of the citizens. But welfare shouldn't necessarily be defined to include everything and the kitchen sink, but instead enough to allow a person who has stumbled to still continue living, despite health issues or sudden changes in employment status, or similar situations.

Hope

Something rotten in the land of Den^W... HR

There will be no prizes for knowing the three fundamental factors of production, which of course are land, labor, and capital. My background is in software, which as an industry differs mainly from other industries in the sense that it is greatly immaterial, and with the democratization of IT systems, also the capital-related entry barriers have fallen. The implication is clear: anyone with a laptop and a shed can get into the software business, assuming enough competence. This essentially means that out of the three factors above, labor is most crucial. And within labor, one could use the term of human capital as the thing to focus on: you need highly competent and specialized people in order to ship great software.

The above naturally raises human resources to a pedestal and would seem to justify the whole Human Resources discipline, which itself is barely half a century old in the academic sense. Many pure software companies, i.e. companies with their roots firmly in software development, seem to acknowledge this these days. But then there are the other companies. Based on empirical evidence as well as many discussions with friends who have either been part of HR or who have suffered from bad HR in different companies, the conclusion is clear. Something is still fundamentally wrong with how human capital is managed these days in companies.

So, what is the purpose of HR. A quick googling will give us a Wikipedia definition:

... an organization's human resource management strategy should maximize return on investment in the organization's human capital and minimize financial risk. Human resources seeks to achieve this by aligning the supply of skilled and qualified individuals and the capabilities of the current workforce, with the organization's ongoing and future business plans and requirements to maximize return on investment and secure future survival and success.

It thus seems that HR would need to have a fairly good understanding of not only the current, but also the future needs of the company. So HR must be tightly linked to all other functions in a company: business (the bread'n'butter execution stuff), research, corporate-level stuff, etc. This just gives HR a view of the current situation. But the above definition states also that HR should have an intrinsic and very thorough understanding of the corporation's strategy and future directions, so as to be able to pre-emptively attempt to facilitate the future moves of the company and make them as smooth as possible. But let's face it, many HR employees seem to be very detached from business; some even have a certain proudness associated with the fact that they "don't need to understand that nerdy stuff." So unfortunately I remain ever so slightly skeptical of how well a large HR would truly be able to grasp the present, let alone the future, of a business.

One thing that isn't mentioned in the above definition is that HR should attempt to ensure that all employee-related issues are performed in a legal way. Meaning that when team leaders from other units recruit and manage their employees, HR should be there to support and address the needs of the leaders so as to keep everything legal. That is also why strangely enough when layoffs are about HR seems to stroll a nice and neat line of specialists to sit by the table to ensure that everything goes according to protocol. But very often HR also enforces various policies and to an extent restricts the movement of leaders, not because of legal issues, but because of company policies. Which again is fine, as long as the policies are good and can be justified. But as with every other organism, HR tends to have to fight for its survival: it must have a raison d'etre, lest it be relieved of its own headcount. So the incentive to create artificial work and enforce strange policies is there.

But surely HR must have a good deal of role in recruiting new employees? Perhaps, but my hunch is still that it is fairly limited. In interviewing candidates, I just cannot understand HR's role: as was established above, more often than not an HR person has simply no possibility to credibly judge whether someone has the required competences to survive and succeed in certain tasks. The best they can often do here is match the required buzzwords of recruiting leaders to that of the buzzwords in potential candidates' CVs. But this again may be counterproductive: I would much rather interview people whose CVs I personally selected as I am fairly capable of seeing from a CV whether a person might fit the profile regardless of the fact that they might have missed some key buzzwords.

Fortunately these issues have been acknowledged and I've heard of multiple projects where HR has attempted to devise various types of taxonomies for understanding what types of competencies are needed in different roles. My personal favorite story is of a position which required competence number 123: Humor. The person who came up with that certainly had a fair bit of humor. ;)

So yes: human resource management is an important field and the possibilities there are endless. But no, it is very often not done correctly. And in fact in many larger companies Human Resources units are ridiculed for been hives of bureaucracy, inefficiency, and for creating artificial work and hoops through which people must jump. Hopefully a new breed of HR will slowly emerge in the future. A breed that actually understands that human capital is a very critical asset and potentially a great source of competitive advantage. Because as of now, many HR units are merely destroying the competitive advantage...

Autarky

What is autarky on a personal level? Breaking free from the constraints of gravity.

Bureaucracy

Preparing for the upcoming elections, I've been trying to get a very rudimentary and basic knowledge of the bureaucratic world which previously has been entirely unknown to me. And to be honest, I'm getting somewhat worried about what the money we pay in taxes is actually spent on and whether or not some serious austerity and axing of budgets and scopes should be in line.

From 2002 to now, the budget of the Finnish government has soared from 35 billion to over 50 billion euros, and the trend is monotonous and rising. This quite a bit higher than what the overall inflation is while at the same time the amount of people employed by the government has remained at roughly at a constant level of about 120 000 individuals. I guess the last part is somewhat comforting, as it implies that at least the headcount isn't out of control. For comparison the municipalities employed about 430 000 individuals in 2004, so if we guestimate the level to have remained somewhat similar, we have over half a million individuals working in the public sectors. Some figures suggest the figure to be even higher at around 700 000 individuals. So for a country of about 5.3 million people, we have roughly 10% of the inhabitants working in the public sector. If we arbitrarily estimate the overall workforce to be e.g. 2.5 million, this is about 20-30% of the workforce. To be fare, I haven't had the time to dig up similar numbers for other countries, so I'm not entirely certain how Finland would fare against them. But just by applying common sense, I have a feeling that that number should be lower.

So the question is two-folded, then: 1) is everything that the public sector is doing absolutely necessary and/or even in the scope of the public sector and 2) could it be done any more efficiently with the proper application of e.g. technology? I have a hunch that if we compare the public sector to a barebones, minimum required set of functions to keep a country running, the current form has organically grown many times over the scope of a minarchist government. And point number two seems like a self-evident thing: public sector differs from the private sector in the sense that whereas private companies operate under the logic of maximizing revenue while minimizing costs to strive for maximum efficiency, the bureaucracies under the government intrinsically do not really have these types of requirements in place. So one thing to think about could be how these bureaucracies could be better incentivized to increase efficiency, since it can't be an impossible thing to do.

Relating to the previous, I also recently ran across the topic of Eurocrat salaries, which gave me quite a fright. I'd never before looked at the salary levels of this bunch, but the levels are quite amazing with the lowest of the low assistants already making around 2 600 euros a month, not including all types of allowances and other perks, which in the case of Finland already boosts it way over 3 000 euros a month and closing in on 4 000 euros at a rapid pace. Factor in the aspect that this group isn't under the normal taxation, the typical Finnish Eurocrat will in fact drag in quite a hefty amount of salary, with the higher echelons of them having a base salary of over 18 000 euros a month, not including allowances and other perks. Of course one could use the counterpoint of how the bureaucratic machine needs to be able to attract the sharpest minds in order to function brilliantly, but my apologies if I'm slightly cynical about the efficiency of even this machine (as an interesting exercise, a quick googling of e.g. "Lady Ashton" shows just some of the redundancy and waste that is going on in the EU).

Granted, this was just a very shallow scratch at the surface and I will need to spend some more time playing around with the numbers, but even this, I think, shows some of the issues associated with public sector spending.

Wikileaks

I've refrained from commenting too much about the Wikileaks case as honestly I've yet to digest the whole situation. On one hand I laud the transparency that the project has brought and how it is increasingly forcing big governments and big business to think about the ways in which they are conducting themselves. But on the other hand I also acknowledge that whereas in an ideal world we could have complete transparency, in our sub-optimal world many things can be a lot less painful if not done in the open.

From a big business perspective, I have a hunch that this is in fact a good thing. I've long held the view that companies adhere to a rather intuitive life cycle of birth, growing stronger, increasing inertia, and eventually falling. In the ideal case after a company reaches the threshold level of inertia, the resources are merely freed up to do other things in more efficient fashion. And that is natural. The problem often is that once big business reaches a certain size, it is occasionally difficult to let the company fall. And sometimes the companies may even begin to behave irresponsibly by abusing its commanding market position to help it stay competitive.

To tackle the problem of the undead incumbents, we have some authorities, such as the anti-trust authorities who enforce competition laws. They have been, to an extent, fairly toothless in the past. This has naturally enabled some companies and some individuals within companies to behave irresponsibly and do things that they shouldn't be doing. It is to this issue that I feel that the trend of leaking and whistle-blowing could offer a counterweight. If chances of getting caught if you do bad things gets closer to 1 and the penalty is heavy enough, this should be a clear demotivator for companies to behave in anti-competitive ways. And if this in turn helps to revitalize industries and create a level playing field once again, all the better.

I would apply a somewhat similar logic to the governments. It still may not solve the agency problem where big government fails to dismantle unneeded structures to increase available resources only to build more rigid structures on an already a very rigid system. But leaks and whistle-blowing will hopefully make big governments think twice about how to conduct its affairs and whether to engage in activities that cannot stand daylight.

Of course there may be multiple problems with the above. Perhaps the irresponsible people opt instead not to document any bad things they are doing and only rely on word-of-mouth instructions and guidance when coordinating their schemes. And perhaps governments may be less inclined to discuss diplomatic issues if they fear that they can't speak in a direct and frank fashion lest someone gets a hold of the material. But despite this, big business and big government is getting increasingly out of control and the checks and balances mechanisms are either not working or completely nonexistent. So maybe, just maybe, the media will now begin to take a more active role again in keeping these increasingly strong actors on their toes. I would like to think that this will have longer term implications and help bring more health to the whole system, but at the same time I am fearing the worst and thinking that maybe nothing large will change in the long term and that this is just normal oscillation within the system.

Requiem for a Tower

Rules

Nicholas Antongiavanni writes the following about how young men should dress:

For it is very ordinary and reasonable that the old should envy the young, to whom it is given to enjoy so many more pleasures, so much more intensely, for so much longer. Truly, we would marvel if they did not envy them. And this envy extends to dress, because old men wish to reserve to themselves the few pleasures which remain to them to enjoy. Thus they get angry when they see young men wearing double-breasted suits and French cuff shirts. It does not seem reasonable to them that young men should enjoy the trappings of eminence before attaining the reality.

He then continues at a later point:

In addition to those modes mentioned above, these especially are to be avoided by the young man: three-piece suits 8especially if the vest is double-breasted), contrast-collar shirts, two-tone or crocodile or anything but solid calf shoes, hats, pocket watches, bow ties, handkerchiefs, bold patterns and bright colors.

But some things are safe ground for young men:

... blazers and khakis, single-breasted suits, plain black shoes, shirts with barrel cuffs and button down collars, striped ties, belts, subtle patterns and somber colors. And if someone should complain that these rules leave him no room within which to make a profession of style but consign him to dreariness, I reply that necessity forces them on him.

Bearing the above in mind and by reflecting against them, I must note that I have scored very badly. Amusingly enough it seems that based on my experiences in Finland, it is the younger folks who tend to be offended by my dress whereas the older people tend to be fairly supportive of proper dress.

But I will concede and leave my elders with the pleasures of wearing hats and pocket watches. As for the other points, everything's fair game...

A trip down memory lane...

While clearing my closets at work I stumbled on a January 2007 issue of The Economist and got around to browsing through it. Some fun quotes below:

The [American] housing market downswing may not yet be over...

And:

The creation of new instruments, such as complicated derivatives, probably makes that financial system stronger in the long run ... But some of these instruments have yet to be tested by a sever revession or a big corporate default. ... there could be an almighty scrampble for the exits when the trend changes

What does a car sound like?

Everyone knows that cars have engines and the fast cars have engines that roar. A car sounds like something and the best car geeks can even determine what the engine and thus what the car most likely is based on the noise it emits. Yet now with the emergence of hybrids and electric cars, the sound of the car is changing. Some parties have now started to worry about whether pedestrians are able to hear the cars anymore and if they can't that this would have implications regarding public health.

What's the solution? Well, as they did with the Chicago river, the logical answer is to reverse the flow of the river. Or in this case to make electric cars emit a sound that resembles that of an roaring internal combustion engine. Voila, problem solved!

But seriously, are the guys jumping over the problem a bit too easily? I personally have noticed that it doesn't really matter what the car actually sounds like as most of the time in urban areas where the problem is most frequent, people tend to listen to their music players with noise-canceling headphones. So the problem actually isn't solved and with the increasingly widespread adoption of portable music players, be they iPods or mobile phones, the problem is getting worse, regardless of whether the electric vehicle sounds like a "real" car or not.

Perhaps another approach could be to go back to the drawing board and think about how the fundamental problem could be changed? But then again, I don't perceive it as a problem: if I'm listening to music, I'm still paying attention to the traffic. And as an engineer the idea of making electric vehicles sound like traditional cars is very silly, in my opinion.

Business 101: Finnair

The employees of Finnair are at it again. This time the flight attendants are on a strike protesting their apparently harsh and cruel working conditions and whatnot. And I'm sure everyone can agree that flying long haul flights requires time to adapt to the timezones and so on. But most people will also acknowledge that the people who have to fly for work will often not get these types of resting times. When the plane lands, off to the meetings you go. So should the flight attendants have their extra time and continue to work 90 hours a month and receive an above average salary (on the Finnish scale)? I don't know, but I do know the following...

Pricing is quite crucial in business. If you price too low, you forgo potential profits. If you price too high, you don't sell. If you price way too low, you sell at a lower price than with which you can sustain the business. Now, the first caveat of pricing is that many people think pricing has something to do with costs. It doesn't. Period. You charge what the customer is willing to pay and you reverse engineer your costs from that amount to see if it's possible to make business out of it. In some cases you will see that even with the highest amounts that you can charge you still can't make up the costs. Hence you should call it a game and move on: there's not business there.

What does this have to do with Finnair or aviation in general? Well, the trend has been changing ever since Southwest came along and made a value innovation and changed the rules of the game. To complement the traditional premium strategies, Southwest created a low-cost competitor: no frills, but the cheapest prices and you still get to go from point A to point B. And lo and behold, there was room in the marketplace for this type of maneuver. This is course leaves the mid-level companies, such as Finnair, in the unfortunate position in which it has to decide what kind of animal it wants to evolve into. The wealthy people will either fly their own planes, charter planes and do the Netjets thing or fly first class in luxury. I on the other hand will optimize the costs associated with the travel and get the cheapest possible ticket. Being in the middle is difficult: you may be able to target the business crowd, but let's face it, in these economic times companies are more than ever before looking at how to reduce travel and where it isn't possible try to get the absolute best rates. It's often cheaper to buy a couple of no frills flights from a low-cost carrier than to get a flexible ticket from the likes of Finnair.

So, the environment has changed and Finnair will need to reinvent itself and think about how to position the company into the marketplace. Based on this, the company will then need to think about its cost structure: if it chooses the low-cost route, the name of the game is scale and minimizing costs as much as possible. Look at Southwest or RyanAir or what have you: standardized fleets, quick turnaround times, optimized costs by flying to remote airports at unattractive time slots to avoid airport fees, and so on. Is Finnair fit to play a game like this? At the current cost structure the answer is definitely not. Can Finnair play the premium game? Well, the premium market in Finland is very limited, i.e. there aren't that many truly rich people (*cough* taxation and the whole shebang). So this may also be a rocky road. And as most people who have flown Finnair will know, the flight attendants never smile. So I'm definitely not going to pay premium prices for grumpy service.

Already the situation is looking quite grim for Finnair. The fact that the different employee groups are trying to suck an already declining company dry may actually be a good thing: my thinking is that the sooner Finnair declares bankruptcy and gets killed off, the sooner we can start from a clean slate and establish a brand new national carrier for Finland which is better positioned in the modern world. This would also take care of the path dependency issues as long as the culture is killed thoroughly enough in the transition. But will this happen? My forecast is no. The Finnish government still has a majority stake in the company and letting a flag carrier fail and at the same time have the staff laid off is something that no politician is willing to do. That is why I am guessing that if the situation gets worse, the government will step in to prop up the company. Mind you, Finnair's brand has already been diluted as a result of the frequent strikes and inability to reliably operate its flights.

So, it doesn't look too promising for Finnair or the tax payers of Finland. The net winners will most likely be the employees in the short-term as they will not need to adapt to the changing world as long as the government continues to bleed money and fight gravity. In the longer term we're all net losers, however, as we are only making a bigger space into the marketplace for foreign competitors to gobble up the space in Finnish aviation and establish routes to compete with the dinosaur that is Finnair. Oh well...

What are you passionate about?

What are the most interesting discussions you've ever had? Are there any common characteristics for them? And what are the opposites of these? I started thinking about why I can sit and have an endless cup of coffee (nicely emulated by refilling a finite cup over and over, mind you...) with some people and with others I just have an immediate reaction to move on. What is exactly going on here?

My working hypothesis is that it has something to do with passion. Some people are very passionate about something, and with these people the discussion is often interesting if you allow yourself to get immersed into the topic. Others will say that these are annoying people as the ramble on and on about something. But have you actually taken the time to think about all the fascinating aspects of what the other person feels so strongly about? Probably not. And the opposite case where a topic isn't discussed deeply and profoundly, chances are that time just won't fly by. Well, that's not entirely true, of course. There are also the conversations which just seem to fly despite the fact that there isn't any specific passionate topic at hand. Maybe the passion is then for witty remarks and rhetorics, which enables the conversation to flow onwards in an interesting way.

But are there people who aren't passionate about anything? Superficial empirical evidence would suggest so, but I'm not truly convinced. Another argument might be that everyone is passionate about at least one thing and some are passionate about more than one. Perhaps the problem is then about communication, which may either imply that some people are not able to clearly communicate their passion and for reasons unknown choose simply to not engage in a discussion. The other alternative would then be that they may have learned the hard way that others may not always be willing to listen to you or immerse themselves in your interests. I have to admit that I'm not always that keen on immersing myself e.g. on the latest Big Brother setup (which appears to have recently ended, judging by the tabloid papers). But that's something that I should work on changing in myself.

From this then emerges the question of when does the passionate discussion lose its passion and why do some discussions slowly die and become tedious? It might have something to do with relativity: perhaps the dynamic is the same as human satisfaction which appears to be defined as the delta, or the change in something. If you're not moving, you're not happy. Or so it would appear to be in the contemporary western world. Is the analogy then that if the discussion around a certain topic does not constantly attempt to push the boundaries forward and venture into the unknown that it then stagnates and dies out? Sort of like how sharks must keep on swimming lest they want to live.

Maybe this is again one of those topics that would need more thought. It's already clear in the 15 minutes spent to write this entry that the implications for this may be very wide.

Collisions

I wonder if much of the perceived problems in education and employment might have something to do with friction between planned systems (education) and emergent, free market systems (employment). Hayek might have something to say about this.

Data visualization

On the state of the church

Recently the discussion surrounding homosexuality and the church's views was jumpstarted again, thanks to a local talk show. What I can surmise is that some political figures and other extremists from within the Evangelical Lutheran church voiced some anti-homosexual views, which has now resulted in a mass-exodus of people from the church. My own position is that the state cannot under any circumstance discriminate against any group of people based on their gender, religion, sexual preference, or other such criteria. But if a closed group of people, such as a church, decides that they want to adhere to some set of rules but don't break laws or take away the individual's freedom, they're free to do whatever they please. But that's just my view.

The more interesting aspect is that apparently the logic behind the mass-exodus is that people want the church to change its policies. The problem here is that the main fuss was the result of what a politician who holds no position of authority within the church said, and thus it cannot really be interpreted as an official position of the church. I'm not entirely certain, not having seen the program, whether there were any official representatives present and if so whether or not they took any strong stances. But if we assume that the outflow of people consists of disgruntled church members who want to push through a point and get the church to change, then that is precisely the wrong course of action to take. Walking away from the situation does not improve it. Instead it merely takes you out of the situation and indicates that you have given up and don't really think you can make any difference. But still the people are quite vocally complaining about the stances of the church, despite the fact that they walked out...

Now, I'm not really a religious person nor do I really care very much about what the church thinks or what its policies are, as long as they don't severely impede and limit my freedom to act as an individual person. But if I cared and wanted to change the church, somehow I get the feeling that I should actually then try to change the group from within using the mechanisms afforded to me by the agreements made by the members. But if everyone who was disgusted by the comments of certain individuals merely walk out, then by logic wouldn't that leave only the extremists in the church and ultimately result in a tighter-knit group of people who then can freely foster their prejudices and avoid having to change their mindset?

Home ownership

I am growing fat. Not necessarily physically, but in other respects. In a sense I've been moving more towards a mode of stagnation, having climbed to what appears to be a local maximum, at least for the time being. I have become comfortable and somewhat lazy. And that is a horribly bad thing that must be changed. And change always involves risk, the jump to the unknown.

At this point I must also note that no, I have not purchased a home, unlike the title might suggest. I have, however, been thinking about home ownership. The current situation seems somewhat annoying: prices of homes in Finland have kept at record levels and the new home owner in the capital area will need to lay down closer to a quarter of a million euros in order to get a decent two room apartment at a reasonable location. That's quite steep.

Now, the question that is begging to be asked is whether or not one needs to own their homes. The current culture and the associated norms seem to suggest so: everyone should have a right to own their home. The trends in the western countries have been towards this direction for the past decades. In certain areas for much longer; for instance in the United Kingdom this trend seems to have started with the fall of the aristocracy, which traditionally was the only class being able own land and estates. With the fall of the aristocracy and the rise of the bourgeoisie the regular man could begin to fathom the possibility of owning property. The fact that property prices have seemed to historically grow rapidly has not really helped the situation: everyone knew up until recently that the price of properties would always go up. In Finland the trend for home ownership is further subsidized by the government, which gives tax rebates to the first home buyers. The signal is clear: the government wants you to own your home. But as the government tends to so often do, it has made a total hash of this as well, as the subsidy tends to go directly into the prices of houses and ultimately push up the already high price level. But the message is still clear.

The collapse of the housing market in the United States, however, tends to send a rather clear message: the direction was not sustainable. So not only does everyone not necessarily need to own their houses, but not everyone deserves to own their houses. In fact, to own your home, you must have income, jobs, and assets. The next question then is whether or not it is even beneficial to own your home. Certainly the world seems like a lot less risky place when you own your home. Especially more so if you've actually paid off your debts. But there as another side to this situation...

Consider the current working life. Job security has been seriously damaged, people are often working fixed term contracts, companies require employees to travel around and become expatriates, and so on. So is your home an asset or a liability? Well, from a flexibility perspective it's in fact quite clear: you are tied down much more if you have invested in owning your own home. Even more so if you have bought your home within the last two years, in which case you will not be able to get rid of your home without tax consequences in the event that you plan to turn a profit from it. So from this perspective you are selling off your flexibility to respond to potentially sudden opportunities. Also, by owning your own home, the emotional bond is that much stronger to the place you occupy. Having the sell your house, as some people who have been laid off have had to, is a bigger personal loss than merely deciding to terminate your contract and renting a new place.

It is very unlikely that we will return to an era of high job security. One of the competitive advantages for the future employees in the search for jobs is precisely the ability to adapt quickly to changing circumstances. And because this is the case, I am becoming increasingly certain that in the foreseeable future there is no point for me to tie my assets down in the form of housing property. That would be merely handicapping myself when I have already determined a very real need to slim myself down and regain my flexibility and begin to move more aggressively into uncharted territories.

Things that annoy me today

• People who wear shoes that go SLAPSLAPSLAPSLAP when they walk. Buy proper shoes and learn to walk.
• People who are either so lazy or so dumb that they cannot understand that if you need to classify P1, P2, ..., Pn into categories I1, I2, ..., In, E where it is trivial to check if Pn doesn't belong in In still place certain Ps into In despite the fact that anyone can see with their forehead that that is not the case.
• People who use read receipts (aka the "kyylätäppä") in emails.
• People who think that it's credible to state that it is possible to do 24 person months of work in 6 months.
• People who don't respect your calendar and still try to book meetings despite the fact that you have explicitly declared that you're busy.
• People who call wrong numbers.

And many other things, but those were the ones that came to mind after about 27 seconds of thinking. But on the other hand, the things that I like at this precise moment:

• The autumn and the way how the leaves in the trees are turning to different shades of red and brown. That's cool.

Courtesy & etiquette in regards to calls

Etiquette has historically dictated to a great extent the way people should behave in different situations. With the advent of casual Fridays and mobile phones, it seems that we have more or less rid ourselves of this type of guiding material. Which is a shame...

Most recently I overheard a person explain to another person whose phone was ringing that by pressing the button labeled as "Silence" the user of the phone could choose to not respond to the call, but not hang up the ringing. In effect the caller would then just wait for an arbitrary amount of time before either hanging up or leaving a message. Analogically the situation is same as if the recipient of the call had not noticed that someone was calling.

In my opinion that type of behavior is blatantly rude and arrogant. My personal policy is to answer calls if possible. If answering isn't possible, then I hang up the call with the red button, which gives a clear signal to the caller that their call was acknowledged by not taken, instead of leaving them wondering if the recipient didn't hear the phone or whether they are just ignoring the caller. I also attempt to immediately follow up with an SMS stating that I cannot answer at present but that the person can send me a message or if it is a matter of life and death, call again. If the person calls again, then I will answer the call.

The logic, from my perspective, is very simple and at least I feel that the above method is polite to all parties involved. I do not leave calls unanswered or unacknowledged just because I can, because it is not polite. But if I am otherwise engaged, e.g. having lunch with someone, I do not interrupt the engagement unless there is a heavy enough reason to do so, at which point you of course apologize for the fact that you absolutely must take the call.

That's just of course my take on the subject...

Less than two weeks to go...

On financing studies

The discussion around students and whether or not the subsidies they receive rages on again in Finland. One Finnish blog posting by a local student politician went on to complain about how "students are one group of people who are forced to fund their life with debt." Apparently this was a reply to some other comments, which supposedly suggested that students were taking too long to graduate and that "25 year olds are able to get subsidies while doing just about nothing."

Currently the situation is that Finnish students get a 298 euro subsidy from Kela for studies. Additionally Kela subsidizes living costs by 80% and up to 201.6 euros per month. Additionally the state ensures that each student is able to get an additional 300 euros of loans per month. So for an average student living in an apartment that costs over 252 euros a month in rent the state shells out 499.6 euros and an additional 300 euros in guaranteed loans. Students are also eligible for student housing, which is apparently roughly ~200-300 euros for shared apartments (students get their own rooms and share common facilities) or ~300-400 euros for studio apartments. Assuming that the student uses the exact 252 euros for housing, that means that from the 499.6 euros they will have 247.6 euros or 547.6 euros with the debt. With this type of setup the student is allowed to have incomes of up to 11850 euros per year, meaning that if the student studied full time and worked only during the three months of summer vacation, they would be allowed to earn a monthly salary of up to 3950 per month. Or if spread out evenly over the year, the student could earn 987.5 euros per month.

So, assuming that the student is able to employ themselves so that they earn the maximum of 11850 euros per year, it means that in total, including the debt, they are able to accrue 19046.4 euros per year, or an average of 1587.2 euros per month from which they still have to pay all costs of living, including housing.

Alternatively, if we assume that a student is able to tackle a job that pays 10 euros an hour and works 10 hours a week through the semester and 37.5 hours a week during summer, then the income would be 3600 euros during the semester and 4500 euros during summer for a total of 8100 euros of auxiliary income and an average of 1274.7 euros per month including subsidies and debt.

The student gets the above mentioned subsidies for 9 months every year, meaning that in 5 years time they will have used up 45 months of subsidies and accrued 13500 euros of debt (not including interests). At this point of time the student is eligible for tax deductions of 3300 euros as they were able to graduate on time. This essentially means that on graduation, the student now has 10200 euros of debt.

At this point I'm starting to wonder what all the complains are about. If you are willing to put in a bit of work, you are able to get a decent standard of living during your studies while accruing a relatively modest sum of debt. Sure, some may argue that the above scenarios are unrealistic. In my personal experience, for instance, I have entirely foregone state subsidies after my first ~year and a half of studies and financed my studies through working first part-time and then full-time and as of now it appears that I will be graduating in about 6.5 years. Out of those 6.5 years I've worked full time for about four years. During that time I have not accumulated any debt from studies. This may again be slightly unfair as I may be an outlier, but it just goes to illustrate that there are many different possibilities to finance one's studies.

Overall, however, even in the above scenarios, the student should be fairly well able to live off of the current system and further increase their level of living with a minimal amount of work. Even if the student takes the maximum amount of debt, the result is relatively small and the state continues to subsidize through tax discounts. Now, considering that studies are typically an investment in yourself which in turn offers a wider array of choices in regard to lines of work and also often increase your ability to earn money in the future, it still seems a relatively simple choice.

And regarding debt, there are again a few ways to look at it: if you don't want to finance your studies with debt, there are other alternatives as well. Then again, putting up some debt is a good statement in regards to commitment to your studies.

... makes the world go round

I recently popped by New York and one thing was blatantly obvious: the correlation between the size of cities and the affluence of the top tier is quite clear. New York's club scene is a case in point of how money talks and the rules of the game are clear: the clubs are there to maximize their profits. Which isn't really that big a surprise, I guess.

Another interesting aspect related to that was the dynamic with which clubs in the big world operate. To maximize money, you need to maximize the amount of affluent customers who are willing to shell out money. And that typically still means men. So as a man, you can essentially bring two things to the club: money or women. If you bring money, you better bring a hefty pile of it. If you bring women, they better be quite the lookers. The women are actually quite obvious, since naturally the wealthy men will like to be surrounded by beautiful women. And to get things going, men will have to show their colors by shelling out as much cash as possible to get the most expensive bottles. This then naturally attracts the women, who will tend to flock towards these tables either because they are gold diggers, or because they were already paid to do that.

Naturally this dynamic can be ruined if the average material in the club makes the club less desirable. So groups of men need not bother unless they are prepared to drop a thick wad of cash. Interestingly enough this dynamic isn't as present in Finland as it is in London, New York, and other big cities. The conclusion to draw from here is that Helsinki obviously isn't a big city or there aren't that many young and affluent people in Finland. Or both, which is very likely the case. This is, I guess, supported by a recent statistic that an average customer in the night will drop about 20 euros of cash per night, which is two or three orders of magnitude different than the wealthiest customers in the more exclusive clubs of the biggest cities in the world.

Another interesting thing is that despite the whole discourse on gender equality seems to have left the dynamics of the night very much untouched. Sure, some will argue that women on average have the upper hand when it comes to power, but in the more exclusive settings it is still the dollar that has the last say. Which is best illustrated by a question on Craigslist a fair while back in which a girl from NYC was asking about how he might go about bagging an affluent hedge fund manager. The response was that the setting should be looked at as a deal: the girl has nothing to give but her looks, which are melting away, while the guy has status, wealth, and power, which will keep on growing unless he fumbles. So ultimately the girl will want to bag the manager while the manager will want to only lease the girl for a certain while, until he can upgraded to next year's model. Which I guess is precisely how the world works in some circles.

Then, what is left at the end of the day in terms of lessons? Well, for me the very positive realization is that I'm in fact very happy with my life. I can enjoy myself by observing these types of dynamics at play while at the same time being satisfied by knowing that I don't need to partake in these games. And that's a really comforting thing to know.

Energy

Sampo Pankki...

I previously blogged about my experience with Sampo Pankki and how they actively sought me out to sell me stuff and to manage the customer relationship. What followed from that meeting was absolutely hilarious...

The only thing I was interested in was to change my former pankkikortti/credit card which cost something to a free debit/credit card that they were offering for young customers. Well, the contract stuff didn't go as planned as they forgot to have me actually sign the contracts that were needed... So they send them to me and I return them signed. Then I go on vacation and they call me to tell me that they received the contracts. I'm sailing for a week and return just in time to get another phone call from them telling me that I need to send my old card back because they already sent the new one. Which is nice, especially since I haven't really been at home. I promise to send back the old one.

I look at the new card, which the bank decided to give to me in a horrible black color with tiny sprinkles of glitter on it. Yay. They I tell them that the basic layout would've sufficed, especially as I hadn't requested any special theme for the card. And I get told that unfortunately all credit cards will now have some theme. But wait! I ordered a debit/credit card (my exact words were that they should create an "identical" card under the new contract with identical credit limits, debit features, etc.). Apparently they decided to only give me a credit card. And what more, they in fact also altered the terms of the credit by themselves to require repayment of 100% of the balance on the credit card each month (I always pay the credit cards back monthly, but for the sake of security, I like to keep the minimum bill at 10% if for some odd reason some month I just absolutely have to use up ~all of the credit).

At this point my patience runs out. Over the years I've put up with all sorts of shit from Sampo Pankki. Their online bank is broken more often than it isn't. Their card systems are broken so their cards routinely don't get accepted in restaurants. The fees that they charge are significantly higher than their competitors charge. But I've still stayed with them out of some twisted sense of loyalty. But this was it, my patience with Sampo wore out. Fortunately the one thing they did manage to actually get right was the termination of the relevant contracts.

Amusingly enough I did call their competitor with whom I'm also a customer and told the nice lady there what had happened and how it would be really cool if they'd set me up with a similar setup as I had in Sampo as I would like to move my daily bank activities to their bank. And that I'm in a bit of a hurry as I cut my Sampo cards in half and I'm leaving shortly to NYC for a trip and would like to actually have something to pay with on that trip. And lo and behold, this competitor actually delivered everything brilliantly within a couple of work days. Amazing.

So, to sum up the key lessons from this experience: if you're living in Finland and thinking about which bank to go to, stay the hell away from Sampo Pankki. They absolutely, positively suck at more or less everything they do.

Criteria

I again stumbled upon some Finnish blogs (yes, I know, I should refrain from reading these as they just result in me digging blood from my own nose...) and lo and behold the topic of the day was about the criteria that people, in this case women, have for selecting their partners. The topic is naturally as old as humanity and one of the more common discussions online. That said, I got around to thinking about it again and came up with the following angle.

My approach is that people typically have various dimensions to their lives. In the western hemisphere and especially in the regions plagued by the protestant work ethic one of the core dimensions is work. Another could be social life, friends, and the related stuff. A third could be continuous learning, sparring with ideas, and the pursuit of intellectual satisfaction. Then we could have physical well being and so on. I haven't spent very long with the taxonomy and I bet that someone could devise a more elaborate one and ensure that the categories are as orthogonal as possible to minimize overlapping. But for the sake of conversation, let's say that we have these categories to our lives. Finally, one of these categories is naturally that which contains your romantic life, your partner, etc.

The amount of time people spend thinking about this category seems to be disproportionately large compared to the fact that there are more things to life than selecting a partner. And people can be satisfied despite being single. For the sake of discussion again, let's say that for each category there's a certain threshold level that the person needs to achieve in order to be content with that aspect of their life. You can, to an extent, manually adjust the threshold level, but in some cases there are certain boundaries within which you must work. For instance, I couldn't say that currently I'd be satisfied in my professional life if I'd be cleaning streets; I'm currently way more competitive and want to move upwards and achieve things. So because of my character and nature, I can't really set the threshold level lower than a certain boundary.

But regardless, we now have categories and threshold levels. The name of the game is now to live a fulfilling life and pursue happiness. My hypothesis is that in order to achieve that, you should initially ensure that every category achieves the threshold level. I might be very successful at work, but if my social life is significantly below the threshold level, I would still be unhappy. Maximizing a single category is thus a very sub-optimal strategy and it's bound to fail in the long run.

Thus the amount of effort that people seem to allocate for their love life is very disproportionate. And defining hard criteria to define who you can and cannot date is not only a somewhat bad idea, but also eventually bound to backfire as you're going to undoubtedly set the threshold levels too high and cause yourself to be very unhappy. The dynamic here is that it's a multifold game: first you have to find the set of people who fill your criteria. Then you have to have individual games with each of the people to see if they're interested in you. And this is followed by the typical dating games and so on. If you have set your threshold levels high, then naturally this will cause the set of potentially interesting people to decrease drastically. This then also has the added fun factor involved in the fact that if you are very selective, then typically the other person can also be very selective. Are you special enough to pass their criteria lists? If not, then it's game over for you unless you split and re-evaluate your own criteria.

Then there's the aspect of the criteria lists in general. Apparently very often a certain group of women wants their potential partners to be good looking, well educated and smart, wealthy, successful, and so on. What's the point in that? Now that we're striving for gender equality, my understanding is that women should be able to finance their own lives and thus they wouldn't have to be dependent on men. These types of lists still sound to me as if certain women still see the world as a place where the name of the game is that they trade certain traits that they possess for an affluent and powerful spouse who will then support their lives. Hmm... Well educated? What does this matter? If your partner is incredibly well educated in a certain area, let's say in some specific area of string theory, chances of you actually understanding anything about it are very slim. So you most likely won't have interesting discussions about that aspect of their life with them. Unless of course you're also into that specific thing and rank in the top 10 researchers on the subject. This of course was a provocative example, but I guess the underlying point is that specialization of your spouse in a certain academic field is very much irrelevant in regards to your love life. Then there's of course the whole discussion regarding whether or not the level of education can be used as a proxy for intelligence.

So, my take on the criteria lists is that there is essentially one criteria for me regarding whether or not I want to spend my life with someone. And that criteria is essentially whether or not I love them. If I don't, then that's that. And if I do, that's simple enough again. The whole process of dating is merely to check out the compatibility, and there's no need to analyze it deeper with lists of criteria. If it clicks, it clicks. Having shallow lists of criteria merely makes your job harder as you might in fact potentially also miss interesting people who could've been the perfect match for you despite the fact that they might miss some mundane bit of criteria by being e.g. 169 centimeters tall instead of being over 170 centimeters.

And once you do find someone who you love and can share your life with, then I guess the natural thing to do is spend the leftover time to work on the other areas of your life which still need working. Because if you don't, then eventually you're anyway going to end up with an unhappy life. Or that's my take on the subject, anyway.

Food

These days organic foods and whatnots seem to be all the rage. And as usual, I can't really understand what the fuss is about. As a disclaimer, I have no firm understanding of the subject, but if I understood correctly, the core arguments from the proponents of organic food revolve around the notions that 1) organic food is healthier for humans and 2) organic food is more environmentally friendly. The first point seems to relate to the fact that with no pesticides, growth hormones, and other more or less interesting things the resulting food, be it vegetables or meat, is more natural and thus humans don't get exposed to all the unknown nasties in the non-organic stuff that are stuffed into plants and animals to get them to grow faster. The second point relates to the first in the sense that due to the limited use of fertilizers and other stuff, we don't pollute the ground as much.

I guess there may be some truth in both points. One question that springs to mind immediately concerns the efficient agriculture that we have going these days: can we organically produce enough food to ensure that everyone can eat and survive? Some argue that organic food is less efficient to grow and plowing down the rainforest is the only way to go organic on a global scale. To be honest, I can't judge whether this is true or not, but it does sound plausible. Secondly, the health aspect is something that I again find myself wondering about. My understanding is that due to the organic philosophy, farms that grow organic food have much stricter control mechanisms for ensuring quality. Which is good. But building on that, I would argue that non-organic food should perhaps be put through tighter quality requirements as well and mishandling of food should be punished more strictly. Perhaps this would drive the prices up, but then we would have higher quality food. As part of the stricter controls, perhaps even more emphasis should be placed on researching the stuff that goes into the foods.

Personally I'm not too concerned with the extra stuff that goes into foods as long as blatant mishandling and high quality are ensured in the production process. The thinking behind my view is essentially that if you look at the organic crowd, they're arguing for a return to the basics: no extra stuff in the food. But if you want to go back to basics, why stop there? I've recently been tuning in on some discussions about hunter-gatherers, and I guess the ultimate argument is that agriculture itself was the worst invention man has ever come up with (I believe someone attributed this comment to Jared Diamond). The idea is that since agriculture came along, we stopped acting in a way that was natural for humans, got lazy and fat and began focusing on things that seemed like good ideas, but ultimately had little to do with our health. So ultimately you should just run around gathering berries and hunting animals all day long. Not only would you then have a healthier diet but also focus on other important aspects of health, i.e. proper exercise and fitness. To be even more provocative, ever since we shifted into an agrarian lifestyle, the size of human brains has began to decrease, and the notions that IQs have risen are also meaningless since naturally people will adapt and become better at predefined tests.

I may not necessarily be that much of a hardliner in the above thinking, but it does sound reasonable. While I still may not necessarily change my eating habits too much, what I will do is think about the hunger-gatherer aspect in the context of exercise. That topic may actually warrant another entry after I think about it a bit more.

Jobs and ethics

I was recently approached by a bank who's customer I am as they wanted to have a meeting to talk about thing, mainly about selling me all types of products. The meeting itself was rather interesting, as they had supplied me with some barely 20-year-old girl to sell cards and mutual funds and whatnot. Naturally she may not have had too much clue about what she was in fact selling or how ("You appear to pay currently 40e per year for this card and 0.5e per month for this other, if you pay us 5.7e per month, you'll get both..."), but this raised some questions about the ethics of doing business...

In this specific case besides the blatant problem of attempting to overcharge (especially as a different bank has already given me everything she was offering for free...) there is a question whether or not the bank would've looked out for my interest. Naturally I'm not a big customer, so I don't get to talk to the more experienced people, but trying to sell me some obscure mutual fund which invests into other funds with a distribution of 25% to stock funds and 75% into bond funds at a time during which we have the whole Greek situation going on with an argument that the fund has made 13% since last summer is questionable (just for record, comparing with a year back, I guess the only possible way to have actually lost money would've been to invest in NOK...). When asked about this, the bank's representative didn't really appear to be too much on the map. Neither when I asked her if she actually understood about all the hidden costs associated with her product (the answer was: "But it's free, there's no fee!").

But, this still begs the question of ethics and looking out for the customer's interest. Lack of knowledge is something that I don't like at all and if you sell me something, you're in a really sticky spot if you insist on knowing something that you in fact don't. That's just dangerous and not looking out for my interest. There's of course the separate case where the seller might in fact know better but doesn't care about me. For these cases I suggest you to read about the behavior of bankers during the 1980s in Michael Lewis's Liar's Poker. Business is business, but still...

This got me also thinking a bit about myself. What do I in fact know about my line of work and is it beneficial for my employer, my customers, or the society at large? I guess the scary answer is that I don't know. I would like to think so, but I'm not entirely convinced. But I do think about it and try to understand the world a bit more and based on my studies, there are certainly many cases where standards are beneficial for the customers and society. Are they always beneficial for the company? It depends...

Oh, and a final note, the meeting with the bank did go decently well. I reduced all of my costs to zero while retaining essentially the same products. Which is nice.

Inches

Dreams

Overconsumption

“The wealthy are spending more now simply because they have more money. But their spending has led others to spend more as well, including middle-income families. If the real incomes of middle-class families have grown only slightly, how have they financed this additional consumption? In part by working longer hours, but mainly by saving less and borrowing more.”

That's borrowed from Krugman's slides, who in turn attributes that to Robert Frank. That may very well be true, judging by personal experience. I still maintain that it's ok to have variable costs with a more or less wide variance as long as you can control it, if need be, and also keep your fixed costs under tight control.

Zagat for Finland

I've recently fallen in love with one of the more useful "Web2.0" applications around here in Finland which is aptly called eat.fi. The concept is very simple and very old: rate restaurants. And as is all the rage, then there's the possibility to meta-rate. But all in all the whole setup is as simple as can be, and what more, it solves a practical problem and question for me: where should I eat today?

As a consumer I'm fairly in line with your typical Finn. I do get very annoyed very quickly if things don't go right in a restaurant, be it an improperly prepared dish or incompetent waiting staff. But I seldom take it out on the staff, preferring instead to send feedback directly to the upper echelons of the restaurant, if at all possible. In my view this cuts through the crap and takes the problem directly to the people who need to be aware of it: the upper levels of the company, perhaps even the owners. What is the point of giving feedback to a waitress who may not necessarily be too receptive towards criticism from a random customer when instead you can reflect a bit about what exactly happened and then try to offer a bit of analysis to the leadership of the company. I also don't typically attach my details to the feedback as I don't really want to appear like the type of guy who would be fishing for compensatory gifts from the company. It's enough that I've hopefully raised some points and in the future the restaurant is able to function better.

But with eat.fi, the whole eating experience has in fact gotten another dimension altogether: the social aspect. Not only do I finally have the possibility of publicly giving praise for places I like, but I can also find the people who appear to like similar places as I do and follow their ventures. And I must admit that the whole concept of meta-ratings makes sure that instead of deteriorating to a rant, I instead try to keep the feedback brief, simple, and as objective as possible. Oh, and I like points.

But yeah, long story short, I'm absolutely hooked on the system and my account is available here. If you're also a member at eat.fi, drop me a line.