Category Archives: Risk

Arghhh! Stuck in Train Doors

No apologies if your head gets stuck in train doors!

The Writer’s Digest recently announced a very short story contest called The Shortest Short Story Contest which requires a story to be told in 132 characters or less (in Twitter) or 140 characters or less in its website. In an impulsive moment, I thought “why don’t I write any little story that comes to my mind?”.

Here’s what I wrote in 132 characters:

The train doors crushed me. Stuck, struggling, I prepared to be dragged viscously to my death. Suddenly, the doors opened. Oh god!

Someone made a nice comment about this little story, so I thought I’d tell the full story here. Yes, it’s a true story – it actually happened to me!

I had landed in London, Heathrow in a snowy, very cold winter one January, after a good six weeks in the tropics. It was obviously a shock to the system, besides, I was very tired after the 14-hour flight. Taking the underground train (or tube as it’s called in London) to Central London, I was half asleep when I realised my destination had arrived. I rushed to pick my suitcase and bags up.

I was wearing leather gloves, and struggled to lift the suitcase handle which had a spring that flapped it firmly down when not being lifted. I took out my gloves but my fingers were numb in the freezing weather a weather that I really hadn’t gotten used to just then. I could hardly feel anything with my fingers. By the time a managed to lift up my suitcase and gather my other bags and speed out, it was too late. The train doors slammed hard with me stuck in between them clutching all my bags with my numb hands! I was absolutely terrified.

I had visions of being dragged by the train, crushed against the walls of the underground tunnel and being torn to pieces. Arghhh! Horror of horrors! Thankfully, oh, so thankfully, a few seconds later, the doors opened and I walked out, my blood circulating properly again at last. Only at that moment did it occur to me that these trains must have sensors and safety features built in that prevent them from moving if the train doors are not shut properly. Of course – it makes perfect sense! Silly me! Nevertheless, technology is not always reliable and there is always a chance of something going a little awry, so I have to admit, I would still be a little scared if it happened again, if not as terrified.

Well, that’s my little story! I wonder if someone could have imagined it from the shorted 132-character version!

Left Brain – Right Brain Confusion


I attended a 2-day training programme, about a year ago, by a company called Dramatic Resources, as part of a course I was attending. This 2-day segment was mainly on public speaking and leadership.

One set of exercises we had to do in the programme starkly showed how the interaction of the left brain and right brain can sometimes derail us if we are not careful. This has implications in the things we do in life so it is worth taking note.

Here’s how the exercises went. We paired ourselves up (to illustrate, let’s call the participants in a pair A and B) and did the following exercises:

Exercise 1

A and B say 1,2,3,1,2,3, in sequence alternating between A and B quickly (i.e. A:1; B:2; A:3; B:1; A:2; B3; A:1 etc)

This, apparently, is an activity in which the left brain predominantly, is used.

Exercise 2

A and B do the actions (clap, stamp your foot, flick your fingers) in sequence alternating between A and B quickly (i.e. A:clap; B:stamp; A:flick; B:clap; A:stamp; B:flick; A:clap etc)

This got us into a groove. We almost felt like we were dancing! In this mode, we managed quite well. This, apparently, is an activity in which the right brain, predominantly, is used.

Exercise 3

Combining the above, A and B had to insert the numbers in Exercise 1 after every 2 actions in Exercise 2 (clap, stamp, say 1, flick, clap, say 2, stamp, flick, say 3, clap, stamp, say 1 etc. ) in sequence alternating between A and B quickly (i.e. A:clap; B:stamp; A:1; B:flick; A:clap; B:2; A:stamp; B:flick; A:3, etc). As you can imagine, this drove us crazy!! It was really, really hard to do this quickly. This, apparently, is an activity using both the right and left brain and gets very confusing.

This really hit the point home for me and I found the exercise very insightful.

There are examples of this in real life. A child may get quite carried away in telling a story using her imagination (right brain activity). When an adult comes a long and chides the child, demanding an explanation as to why she is not doing her homework (left brain activity to answer this) she just freezes, going blank.

This could sometimes be what happens when we are talking to an audience, happily engrossed in the description of what we are saying and something triggers left brain activity (doubt for example – why is that person reading his blackberry instead of listening? Am I boring them?) This disrupts our right brain activity that was carrying on so nicely until interrupted.

I find it very useful to have this understanding of how our brains function. With this knowledge we can try to consciously tell the offending part of the brain to keep from interefering (for a while when we need this discipline) when another part of the brain is doing just fine.

Have you had such an experience you would like to share?

Real Life Drama – Stranger Than Fiction?

Is it just me or are stories of real events becoming more out-of-this-world than fiction iteslf?

First, there was the brilliant neuroscience doctoral student, James Holmes who turned murderer. Well OK, scientists and professionals do become terrorists, so after 9/11 you could argue such sagas are no longer “black swan” in nature.

Fresh off the press, we have the truly inspirational cancer survivor and biking superstar, Lance Armstrong whose story we are having to unwind, like a bad dream. In fact one bookstore has labelled a Lance Amstrong memoir as “fiction”, puchasable for a paltry one pound.

I have recently been tempted to ask the question, do real life experiences provide fodder for fiction or is it the other way round now – i.e. is fiction inspiring real life malice?

To get back to reality, we do make many assumptions in real life. Surely, it must have seemed plausible to some all along that Lance Armstrong could just be way ahead of the regulators in doping, and athletes being ahead of doping agencies in the doping game is not a new phenomenon. Similarly, what’s to proof that a scientist’s (or anyone else’s) moral compass is sound? The real life stories, it would seem, are built on somewhat wobbly foundations to start with.

When People Lived Till Only 40 or 50, When Did They Retire?

Life expectancy has increased tremendously over the last century and a half. In 1900, life expectancy in developed countries was only 40 to 50 (see table). Today it is close to or over 80 in developed economies.

I was curious about how the retirement age has changed over this time. To this end I found a few helpful documents and sites such as Gary Beene’s Retirement Information Centre. It would seem that in most of the 19th century, people worked pretty much all their lives, as long as they were physically able, death then following soon after. Many were self-employed at the time, working on their farms, for example. When the industrial revolution started in the late 19th century people became wealthier and social security during retirement started to become a viable idea. Among the first to get such privileges were war veterans. Retirement benefits were paid for just a few years (maybe 2-5 years) while people lived, as older people were deemed to be in an insufficiently healthy state to contribute to the workforce.

Going into the 20th century, not only have people survived to a much older age, they are also now much healthier during those older ages, as a result of vast advances in medical technology. Today, with retirement ages in the 60s and people living till the 80s, pension funding has gone haywire. Retirement ages have not kept up with increases in life expectancy. Retirement funding in a big way started during the last century, for generous pension benefits and proved unsustainable later because of both increasing life expectancy and lower interest rates.

A recent issue of Bloomberg Businessweek had an article that the Japanese are still working, at least part-time after formal retirement, not just for the money but because they are physically and mentally able and want to do something meaningful. We have seen a tremendous shift from the norms of the 19th century and the (different) norms of the early and late 20th century respectively. Surely, the way we look at work and retirement going forward will also have to undergo radical change.

Book Review: Tougher Boards for Tougher Times – by William A. Dimma

Tougher Boards for Tougher Times (Corporate Governance in the Post-Enron Era) – by William A Dimma

Everyone gets something different out of a book. The opinions here are mine only.

On the one hand, as it has been a while now since this book was published in 2006, and considerable discussion and developments on corporate governance have taken place over these years, I felt I did not benefit as much, reading this book only now, as I might have when it was newly published. On the other hand, coming from someone who is an authority on the subject,  who has held directorships for over 40 years, it emphasised and crystallised the most important issues for me.

The book is succinct, very well written and focuses on the crux of the issues, not just from a “best-practice” prescriptive viewpoint, but with real-world experience thrown in. There are 3 chapters written by 3 guest authors on board committees (audit, compensation and “governance and nominating”). It highlights the new demands and challenges of directorships, the far greater effort and time that should be required of independent directors (to acquire knowledge, as knowledge is power) and discusses stock options (their uses and abuses), dual-class share structures, comparisons of corporate and not-for-profit governance and ethics, among other things. It is certainly a useful read; however, I would look to read a more contemporary book on the subject.

National Geographic: Air Crash Investigations

National Geographic: Air Crash Investigations

Air Crash InvestigationsI have a great fascination for the aviation industry. I have no expertise in it, but for a layperson like me, it looks impressive from a risk management perspective. The commercial aviation industry is an immensely complex one, with a tremendous scope for a zillion things to go wrong – yet the number of mishaps today, given the scale of things, is relatively small. When an air disaster does occur, a thorough investigation is done and the findings used to improve regulations and safety from that point on. There are examples in this industry that can be emulated by other industries.

The Nat Geo Air Crash Investigation series on television is fascinating to watch. Some of the causes of air disasters in the shows I have watched have been attributed to the following:

  1. Pilot fatigue – after flying many hours in tight schedules, fatigue sets in resulting in irrational decision making
  2. A lack of clarity in communication between air traffic control and air crew and also among air crew
  3. A lack of ability of the co-pilot to influence his or her senior (the captain) when in fact the co-pilot was right
  4. A lack of basic flying skills when the auto-pilot was not working
  5. Confusion with regards to the units used for the numbers presented on the indicators (e.g. metric system or imperial system)
  6. Commercial pressure resulting in decisions to fly despite weather and other conditions not being favourable
  7. A maintenance worker forgetting to switch a control back to “manual” from “auto” after doing routine testing
  8. Less than ideal conditions at airports, e.g. no ground radar, poor lighting and unclear signals
  9. Fire caused by internal wiring problems spreading despite having materials tested to be fire-resistant
  10. Insects building nests in some aperture, when the aircraft happened to be parked for two weeks, causing malfunction

The last two in the list above are somewhat remote incidents, which would have been difficult to imagine before the investigations were documented. The rest are arguably avoidable through process improvements, training and detailed guidelines and this is what, no doubt, goes into the ongoing feedback loop for safety improvements.

The recent air crash in Nepal in which all 19 people on board were killed (mostly people excited to be going trekking in the Himalayas) is a tragedy. We are told that there have been quite a few crashes in this region. I would be hopeful that if some of the same rigour, discipline and effort that is applied to standard commercial aviation safety is applied to these flights, great strides in safety improvements may be made in the future.

LIBOR Overhaul

LIBOR Overhaul

Banks + Gangsters = Banksters

It has been announced that the LIBOR rate will undergo an overhaul. Some of the changes I picked up were:

  • It will be administered independently, not by the BBA (British Bankers Association)
  • The admistering body will fall under regulation of the FSA (Financial Services Authority); therefore, future rate fixing  could result in jail sentences for the offenders
  • The rates will be audited, so banks will have to justify the rates put forward, based on actual transactions
  • The number of banks submitting rates will be increased
  • The number of currencies and interest rates involved will be drastically reduced so as to concentrate on the rates most used by investors and borrowers

The way in which the rate is determined, which had been thought may be changed will remain the same. It will be based on daily estimates by panels of banks, of the interbank borrowing rate. Although this method had been criticised earlier as not being objective, I guess the issue that was highlighted earlier is that in thin markets (e.g. in depressed economic conditions) too few or no trades take place, making it necessary to have an estimate.

This seems like a step in the right direction. I wonder if more reforms are to come to the banking industry. Many other questions are still worrisome. Are some banks too big to be properly managed? Do appropriate cultures of good governance exist within these organisations? Will the compensation structure be changed sufficiently to disincentivise ruthless risk taking? These concerns linger.

Lehman Brothers revisited

Lehman Brothers revisitedSo much has been written about the collapse of Lehman Brothers and the incredible story behind it. Last year, I read “The Devil’s Casino” by Vicky Ward. It portrays how ridiculous an organisational culture can get and can survive this way for so long when misuses of power and money dictate. Other books have been written, including “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers” by Lawrence G. McDonald and Patrick Robinson. (I have not read this book, but in a beautifully written guest blog by McDonald, who is one of the authors, he tells of how the collapse was preventable, of the incredible talent at Lehman Brothers, of the rotting at the head and more).

I recently read a paper entitled “Lehman Brothers: Accounting Magic – Deleveraging, Manipulation & Moral Hazard” by Professor A.J Kreimer of Temple University. Yet more shocking details were unravelled here. Very creative accounting was used in which assets were sold just before year-end and repurchased just after year-end to give an appearance of a less leveraged balance sheet.

To most of us, all this is incredibly difficult to fathom. It would seem that regulations, boards, audits, all diminish in effectiveness when power and money come into play. I wonder how much more readily avoidable such a saga would be today?

The Protection Gap Puzzle

The Protection Gap puzzleMuch has been said about underinsurance in various populations. In recent years, this statement has been made about life insurance protection in Singapore (e.g. People of Singapore Found Underinsured) and another Protection Gap Study for Singapore was released. Conscious of the fact that Singapore has a relatively high savings rate, this puzzled me somewhat.

A bit of delving into the report pieced this puzzle together:

1) All the compulsory insurance under the DPS (Dependent Protection Scheme) amounting to roughly SGD100 billion in the CPF (Central Provident Fund) scheme is ignored in the assessment (section 6.3 of the study)

2) Many financial assets owned by the population (in particular cash, shares and property) are ignored in the assessment (section 5.5 of the study)

Let’s say, Mr X, aged 45, has cash in fixed deposits worth SGD200,000, which comprises all his savings over the last 20 years. (For simplicity let’s ignore the CPF scheme.) Let’s say also, his protection need has been calculated to be SGD200,000 now (which includes the oustanding mortgage on his residential property, future family expenses etc). The gap for Mr X, according to the methodology used in the study would be SGD200,000 because the SGD200,000 worth of assets in fixed deposits are simply ignored.

Many of us may reasonably regard the gap for Mr X as being closer to zero, as the ‘savings in fixed deposits’ asset may be used to meet Mr X’s protection needs. Similarly, if Mr X had invested his savings in shares or an investment property etc. instead of the fixed deposits, this could reasonably be used to meet his protection needs. (Of course, it may be debated whether a life insurance policy would have suited Mr X better than these financial assets, to meet his protection needs; however, that need not be a forgone conclusion.)

It is true that in any society there are segments of the population that are underinsured (and in this case, probably some individuals who are overinsured) and it is most useful to assess individual needs carefully. However, to regard a nation as grossly underinsured, while ignoring certain insurances people have and their financial assets seems a little odd. It helps to understand the situation better and put things into perspective.

Narrative Fallacies Galore

Narative Fallacies Galore“Narrative Fallacy” is a term I first came across in the book, “The Black Swan” by Nassim Nicholas Taleb.

The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship upon them. Explanations bind facts together. They make them all the more easily remembered; they help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.

“Storytelling” and “business narratives” are increasingly touted as the effective way to get the message across – politicians, business leaders and motivational speakers all have this indispensable tool in their armoury – the more wonderful the story, the more we are blown away and buy into it, so the more correct these successful storytellers must be, apparently. True, pure facts and figures bore most of us; we need a compelling story to bring the message to life. The problem though, is that people are often so enamoured by any good, well-articulated story that we fall into the “narrative fallacy” trap without asking the tough questions about whether it all really makes sense.

An example of story-telling gone horribly wrong was in the sub-prime mortgage crisis. The facts and details were too difficult, too tedious or too boring for most people to process; even experts fell into this trap. Conversly, the stories were exciting, compelling, marvellous. Most people bought the stories. It took someone like Michael Burry (as told in the book “The Big Short” by Michael Lewis), with Asperger’s Syndrome, to see the pattern of a mortgage bubble forming way ahead of others, even experts, and bet against this, making good returns for the investors in his fund, Scion Capital. (Those with Asperger’s Syndrome sometimes possess great talents in seeing patterns, but unfortunately, for various reasons, have difficulties with other abilities and with fitting into society.) Of course, a number of factors can be blamed for leading to the sub-prime crises; our vulnerability to get carried away by narratives just added fuel to it.

Narrative fallacies trap us everywhere – politics, commerce, belief in the paranormal etc. etc. It helps to be cognizant of how our brains unwittingly deceive us and not place undue faith in great narratives and good storytelling.