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Sunday, 6 April 2014

My comments re meaningful jobs, Financial KPIs/market challenges & what our kids and the world might need.. inspired by story of Marina Keegan, Her First, and Last, Book http://nyti.ms/1lHTIli A Posthumous Triumph - NYTimes.com



Must read! Marina Keegan, Her First, and Last, Book http://nyti.ms/1lHTIli



A Posthumous Triumph - NYTimes.com:



It is indeed a tragic and poignant story. Very brave and forgiving by (the no doubt distraught) loving mother, many lessons we can derive from this story (#please each take 5mins silence). our sincere condolences & our prayers are with Marina's family & friends.



I personally look forward to the Marina's book and will ensure that my children will read and share with their contemporaries.



It is indeed very worrying that not only is Finance (money) but short term fame (celebrity/notoriety) is now worshipped by Marina's and future generations.



Can we blame them though?  When western (& most eastern) culture/media/entertainment are all focusing on short term gain, and wanting to be billionaires/celebrities (but not mentioning the hard work and unlikelihood of success).



Question raised by Marina is absolutely correct, our future generations should challenge themselves to learn/engage/practice in many fields, rather than focus on money (& consume blindly).  By doing that, everyone has more likelihood of finding a passion/job that is meaningful & impactful, & hopefully bring some true fulfilment. (what I called a @Be_Champion life.)



Relating to sustainability of high pay in finance? No it will not last (in the long run, say, I hope in 50yrs) but only when a "viable alternative financial/capital market" arrives.. (such alternative ecosystem will need to focus on long term viability of companies rather than short term trading or extraction of cash for "shareholders" & turn them into zombies). Meanwhile the salary re-adjustment will only be done by pockets of great corporates, but many can still use perfectly legal ways (e.g. transfer pricing) to mitigate any likely regulatory changes that might affect them.



[ RT @GarethWong #MUSTRead/Watch @nxthompson Michael Lewis: Rigged stock market on @NYTimes http://t.co/09wpFws4Up & @charlierose http://t.co/IocaptKWlp ] & CBS 60Minutes: http://www.cbsnews.com/videos/is-the-us-stock-market-rigged/



Let me frame this properly: as highlighted by Michael Lewis and Brad Katsuyama highlighted regarding the public exchange market, it is highly complex, and that is ONLY 50% of the equity "traded" public market.. similar complexity runs through other part of financial & capital markets (from insurance to pension fund and even offshore trusts), therefore rapid change/fix would only happen if we had Brad & Michael-clones for each of those distinct verticals to arrive at the same time (likely?).



It is indeed very easy to point fingers at any particular section of the finance industry (in Brad's case, only HFT/High frequency trading).  Many also point fingers at government and/or even political parties.  Almost all think short term (2-3years are already long!).



However the challenge some might argue is that the finance/capital market is so complex that even top leaders are indeed NOT fully aware of the systemic issues spanning their industries (as mentioned by Michael's interview), let alone the systemic issues spanning other sectors!  (think about it, what type of assets do the multi-trillion dollar asset manager hold, how do they mitigate problems created with HFT (if the allegations is indeed correct)!? WHO keep their trillions? how about the billions from the pension funds, who keep that!? Most of these funds are richer than most government right?) 



Therefore, I would like to caution solely blaming Finance or Payscales/Bonuses, but would like to suggest that time/effort should be spent looking into what are the real issues (problems and maybe even solutions!). Leverage/Cash extraction and Carried interest are key challenges that are in the fore at present and do play key roles, however, sadly the present finance/capital market is entrenched to use credit/debts mainly, and as pointed out brilliantly by Prof Clay Christensen, it is a "Systemic Problem" of the finance/economic value chain/system that it is chasing the wrong KPIs (as he called it the church of new finance! and I shall explain my solution of "republic of common sense in future blogs), I cannot put it as eloquently as he has done:



 


[ MUST LISTEN: His brilliant speech with Q&A, with 1 question from me.. bit.ly/18ANQl2 ]



As Jack Bogle pointed out (ref book "Clash of Cultures") eloquently that equity market might be more for the rent seekers rather than value creators.. In addition, I would agree that the moral need/directions as proposed by Prof Colin Mayer (book "Firm Commitment") where firms might need to be punished if they veered away from the committed course (I am paraphrasing, hope I have understood correctly, if not it is my 'interpretation' that I am quoting!).



I am all for people using hard word to earn millions, but great money and power MUST comes with greater responsibilities (not only for spiderman!) AND punishment (if they have mis-used their position to extract too much cash for example).  Some might suggest all business leaders should sign some kind of moral code, whereby they will use their money for good/greater purpose...if there is such a code, how many of them would publicly do that? and how would they be held into account!?  Of course, first step is to fix the ecosystem/break the "church of new finance" as described by Prof Clayton.



All these are sadly too complex (I don't really understand it all!) and we have not even covered major macro issues that will affect our kids and their kids, namely the challenges the world really is facing: Food, water, to energy issues.. (Must see lecture link as explained by Dominic Barton, Global Managing Director, McKinsey & Company  Link to videos on @CIMA website: The city and capitalism for the long term bit.ly/11iTBBl




Using the Matrix analogy, maybe it is indeed time for everyone (especially the young) to take the Red pill and start trying to understand some of these issues AND figure out likely solutions first.. (before they go and join any of the movements that just shouts and demand AND affect changes.. sometimes too quick a change might be a much worst scenario as the outcome will not be as expected, Life is NOT a chess game with fixed rules but with people's money/real lives at stake. )



Be safe and hope we all find our direction/passion as suggested by the brilliant Mariana. Hope other youngsters would challenge themselves to achieve as much as Mariana has done. 



Have a great Sunday wherever you might be.  



BR

@GarethWong