Brian Keng

  • History

    “History doesn’t repeat itself, but it does rhyme.”
    – Mark Twain

    One of the great triumphs of man is when he first discovered the invention of writing. It’s probably one of the most underrated inventions that is taken for granted by the majority of people. Not only because it’s used on a daily basis by practically everyone in society but because it’s not used to its full potential. Some have figured out its power, possibly the most successful ones, but definitely not the majority. And the argument of why writing is so powerful is not very difficult to understand.

    Despite what some may have you believe, humans are just another kind of animal. Special perhaps but still just animals. One of the ways we learn is through experience. We do something, it’s beneficial, we keep doing it. We do something else, it’s detrimental, we stop doing it. Over our lifetime, we fill our brain with our cumulative experiences and it guides our actions. However, our life has to end sometime. We only have a finite lifespan so we can only accumulate a lifetime’s worth of experiences to guide our actions. So one would expect our knowledge to be limited to a lifetime’s worth of experiences. But it’s not. The invention of writing allows us to pick and choose from over 6000 years of human knowledge. We are not limited by the experiences of just one lifetime, but limited by the amount you can learn in one lifetime. There’s a big difference.

    Which brings me to my thoughts on the recent financial crisis. Many claim it was a fluke, a one in a hundred year event. It shouldn’t have happened. But it did. And it was predictable because something very similar happened before. Roger Lowenstein documented it clearly in his book “When Genius Failed: The Rise and Fall of Long-Term Capital Management”. In 1998, Long-Term Capital Management, with their mathematical models and leveraged portfolios, jeopardized the stability of the entire financial system. Take this quote:

    “If the Long-Term episode proved anything, it is that the system of disclosure that has worked so well with regard to traditional securities has not be able to do the job with respect to derivative contracts… As the use of derivatives grows, this deficiency will return to haunt us.”

    Sound familiar? This book was written in 2000. I sometimes think that it’s wishful thinking to think that things could have turned out differently. Take a bunch of smart young grads, throw them on a trading floor, and show them how to make lots of money. They’re not going to care what the derivative contract represents or whether liquidity will always be this good, they’re just going to keep making money. Unfortunately, the same thing is probably going to happen again and it’ll be another one of those once in a hundred year events, only 10 years after the last one.

    We’ve figured out how to learn from those before us, now only if we’d do it.

  • Models

    You quietly stash a few blunt items away. They’ll be back and in bigger numbers. Who knows why they don’t make their move? They just keep coming, day after day, atop their high walls, gawking. But you have a plan. These precious items will scare them off. You’ve made sure they haven’t seen you storing them. Every item, carefully hidden just out of their sight. You wait… and wait… and wait until the one day you’ve decided, it’s time. You pick up that big rock and hurl it at the closest target. Then another, and another. They run away screaming. You feel an overwhelming sense of self worth. You were right, you’re plan worked! Until you realize, you were wrong because, as it turns out, you’re just an angry chimp.

    Darwin tells us that we’ve come far since our ancestral chimpanzees cousins but I think we still have a long way to go. One of the distinguishing features we have over lesser animals is the ability to plan ahead and predict the future. Our brains have evolved to be able to simulate complex scenarios of possible futures to aid us in making decisions today. This probably worked well when we were competing with other Hominids for survival but it doesn’t work so well when trying to deal with complex systems with millions of variables. This is especially true when we talk about systems such as the economy.

    Our brains can’t handle all the input that’s available to us, so in the face of these complex systems, we’ve developed models to represent how things work. These are abstractions of the physical world that are easier to understand with the aim of being useful. However with the accumulation of human knowledge, these models have gotten so complicated that a PhD is sometimes a prerequisite for using these model. With all the carefully calculated equations, we come out with a result and proclaim that it must be true if only for the fact that it’s so complicated. Except that it isn’t.

    One of the most fundamental parts of using any model is understanding its assumptions and limitations. Despite this fundamental idea, “experts” (perhaps with PhDs) will try to convince you otherwise, saying that they’re models are right without stating the most important parts — the assumptions and limitations. This idea isn’t too complicated, a simple example of a model is saying that if it’s cloudy then it’s going to rain. Of course this isn’t always true, but why then do we believe experts when they say it’s going to rain?

    This brings us back to the economy. Everyone from the governor of the Bank of Canada, a famed economic historian and even the guy sitting next to me on the bus has an opinion on where this economy is heading. Each one is using some model of how they think the economy works — some more researched than others. No matter what model they use, no matter how many variables they take into account, they’re still missing a fundamental point that can’t be stressed enough: their model can’t predict the future of something so complicated.

    If we could predict the future with any reasonable sense of accuracy, we wouldn’t be in this mess in the first place. Be skeptical of someone who claims they can. If they could predict something even moderately useful with even the slightest sense of accuracy, they’d be rich. It’s no wonder the richest know enough to only use models within their limitations.

    Models aren’t useless. They help us simplify the world so that we can wrap our minds around it. We just have to understand their limitations and when they should be used, like the old saying goes “the map is not the territory”. I don’t think we’re as far off from chimpanzees as we’d like to believe but I’m glad we’ve moved beyond throwing rocks and not stepped backward to throwing something less pleasant.

  • Better not read

      If you believe everything you read, better not read.
      — Japanese Proverb

    The Japanese figured it out a long time ago but I think it’s a lesson forgotten by most. Millions of people around the world flock to news sources to find out about current events. Whether it be about a remote village in Africa, the financial turmoil of America or what Jennifer Aniston is currently eating, there’s an implicit trust. A trust that the information they are getting is fair and unbiased.

    Some people — unfortunately, not most — have figured out that some news sources are more trustworthy than others. It’s more than a simply dichotomy of news sites and gossip magazines. Some people have figured out that so called “news networks” aren’t really delivering news, they’re delivering entertainment.

    If we stop looking at what “news networks” are telling us and look at what they want from us, it’s very enlightening. Do the news sources want to give us fair and unbiased news, inform us about current events from around the world, and give a detailed analysis so we can understand the events within the context of our lives? Maybe. Do they want to make money? Definitely. And there’s the rub. They make money, not by the reliability of their news, but by how many people are viewing it. How can they get more people to watch it? Make it more interesting — even if it twists the truth to make it more entertaining.

    This irks me, especially when it presents a poor image about people whom I respect. The average reader will pick up the paper, read a story and believe it to be true. Why? Because of the implicit trust.

    They did it to Alan Greenspan last fall when he presented his testimony to congress and they’re doing it now with Warren Buffet (“Buffett admits mistakes in annual Berkshire letter”). I just read Berkshire Hathaway’s most recent shareholder letter and all the things they said in the article are true — except they’re not. The title is already misleading implying that the main subject of the share holder letter was Buffett’s mistakes, which is clearly wasn’t. The article also quotes parts of his shareholder letter to find fault in Buffett. Clearly, this wasn’t the most important point of his shareholder letter. The article can be summed up as Buffet made a couple of mistakes. However, this is taken out of context where his wildly successful investment decisions along with his very candid communication to shareholders do not come into play.

    I’ve come to abhor entertainment posing as news. There’s room for news as entertainment — just don’t pretend it’s anything else. I’ve come to learn that if I really want to learn about a subject, I’ll dive straight into the primary sources instead of looking through the second-hand rosy coloured glass that most modern news sources put on. I advise everyone to do the same, otherwise, better not read.

  • Passion

    I’m lucky. I’ve known what I’m passionate about for quite some time. It probably started back in grade seven when I first started playing Warcraft 2 on my 486. The mystery about how a curious little box could bring me so much joy — hours upon hours on end — playing a simple computer game was baffling. But it didn’t stop at computer games. I would poke around this little box tweaking, fiddling, trying to figure out what everything did. Pulling out hardware and putting it back. Even formatting the hard drive for no good reason (to my brother’s dismay).

    I’m also lucky for another reason: my mother. She saw this sudden interest in computers and wanted to cultivate it. So she hired an undergrad from York University to teach me about computers. Interestingly, my computer teacher didn’t really know what to teach me at first. He first asked about DOS, knew it. Then about HTML, knew it. Finally about hardware and how to install it. There I learned something new. There’s a strange sense of freedom when you figure out how to change your first hard drive. Being unbound from the shackles of the computer store technician whose motives all too often resembled that of an uncaring used car salesman is liberating. However, you can only teach someone about how to install a hard drive or a ISA card for so long. My newly hired computer teacher needed something more to teach me — lest he lose his newly needed source of income. Here began my first foray in programming.

    I must admit, I wasn’t a great programmer at first. I didn’t understand all the concepts. Functions, sorting, recursion was all a wonderful blur that I didn’t quite understand, although I was only in grade seven. I remember the first program I wrote in Pascal was a simple little hundred-liner that printed “*” across the screen in a triangle pattern. When I showed my mom, she wasn’t nearly as excited as I was — although I’m sure she, nor I, realized the magnitude of the event. I think that’s when I first developed a passion for computers.

    It’s hard for people who aren’t as lucky as me. Finding a passion for something is difficult. However, I recently came across a web page from my former professor Larry Smith who talks about “career development”. I feel obligated to advise anyone who still hasn’t found their passion to follow the wisdom of successful people before them. I list the first four principles here:

    1. You have passion for your work.
    2. In order to prepare for your work, you enjoy your studies.
    3. If you have not yet found your passion, you keep looking.
    4. Finding your passion and choosing your career takes great care and thought.

    I like to share my wisdom as most people do, including some very successful people. One thing I always stress is to be passionate about something. However, many that I talk to, have not found their passion yet. I usually don’t have a useful response, I’ve liked (and have been good at) computers for almost as long as I can remember. This usually doesn’t help them. However, reading what Larry has to say about it really clicked with me. Finding your passion isn’t easy. Nor should it be. Like most good thing in life, it takes hard work. Those who aren’t prepared to work for it, don’t deserve to reap the benefits. I’m lucky. I’ve found my passion. I work hard everyday, not because I must, but because I can.

  • The One

    University is supposed to be one of those life changing experiences. You come in a scared ignorant youth and walk out a confident worldly adult — at least that’s what we’d all like to believe. Change is inevitable and despite Hollywood movies where this process happens in the span of a fifteen minute montage, this change is usually more gradual, somewhere on the order of years. However, growing up with popular culture in my head, I’ve always felt that there was one thing missing from my education — the one. The one teacher who changes the way you look at the world. The one teacher who makes you consider possibilities that you’ve only imagined. The one teacher who changes you from an ignorant youth to a confident adult.

    I’m sad to say that I haven’t had that experience, although there’s always hope (PhD here I come). However, if there was any professor who came close, it was Larry Smith (link intended for the exclusive use of Larry Smith’s current and former students). Strangely enough (or maybe not at all), he wasn’t an engineering professor; he taught economics. His classes in micro- and macroeconomics (ECON 101/102) are infamous for his animated story telling, in your face lecturing style and surprisingly useful real-world applications of economics. If I had to give any UW student advice, it’s to take his course.

    His lectures have mass appeal because of the sheer entertainment value he gives running up and down the aisles, shouting in people’s faces, and stealing snacks from unsuspecting students. The numbers don’t lie — every semester he has the biggest lecture room in DC filled with students sitting up and down the aisles. Besides his obvious entertaining lecturing style, the main reason I like his lectures is that he goes into great length about two topics I find every interesting — success and money.

    There are a surprisingly large number of useful things that the education system doesn’t teach you — but Larry Smith does. I did go into university an ignorant youth, I didn’t come out a worldly adult — just a bit less ignorant. And a large part of that was because of his lectures. Maybe I don’t give him enough credit. I think the only thing I can do to show my gratitude is to become one of the “spies”. And if he really does have “spies” everywhere like he claims, it’s a real testament to his abilities as a teacher. Thanks Larry Smith!

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