Author Archives: Chok Leong

About Chok Leong

I am an Electrical and Electronics engineer.

Talking to fish

Talking to fish


Can you really explain to a fish what it’s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.

Warren Buffett, author of Berkshire Hathaway Letters to Shareholders

Talking about business is not the same thing as running a business.

Talking uses words which represent concepts of the real world. But it has limitations.

Try explaining to fish how walking on land feel like. The fish can’t understand how walking on land feel like no matter how hard we explain. The fish need to actually walk on land to understand it. Talking has its limitations. It does not change reality, it only changes our perception of reality.

We can fool the people. We can’t fool the nature.

In horse racing, gamblers bet on horses that they think will win the race. Each gambler has their own idea of which horse will likely to win and bet accordingly. No matter how confident the gambler is, he can still lose his life-saving if he bet on the wrong horse. His perception of reality does not change the reality. It is the actual outcome of the race that determines the winner.

In political debate, people bet on their favourite idea and try to convince others the merit of their idea. In a discussion, we are talking to other people. We are mutually changing each other perceptions of reality. The reality does not change. Just like in horse racing, the outcome in the reality could be a different story.

Debate is for addicted gamblers. Mostly, they are fooling other people and themselves. They bet without risking their own money.

As Warren Buffett observed, people are willing to spend thousands of dollars to go to Las Vegas to play games that are guaranteed to lose them money over long term. And they keep coming back. What we can learn from this observation is that this is a world of opportunities to make a lot money.

We are born gamblers.

On the other hands, doing experiment, testing, etc will tell us whether the solution work or does not work. The nature tells us the results. This requires real work.

We need actions to change the reality. That involves risk. Entrepreneurs test idea in the market, not in a meeting.

Wait, am I talking to fish?

Race between tortoise and hare

Value of work

The state of economy is in our mind. The way we think can change the world.

In physics, work is done when a force acts upon an object to cause a displacement.

In other words, work is moving an object over a distance. Everyone is capable of moving objects from one place to another. We can move and combines objects to produce new objects.

This “work” has value in economics.

Adam Smith, 18th-century economist and philosopher and author of The Wealth of Nations, had a radical insight that a nation’s wealth is really the stream of goods and services that it creates.

We can work to produce factory that in turn produces goods and services that lift the living standard of the people. Life becomes easier with the stuff that we produce to make our life easier.

When we work, we are productive. The more we produce, the wealthier we become (assuming we are producing stuff that people actually need and want, else they are waste). Productivity and wealth creation are twins.

People who own the means of production are the wealthiest persons in the world. For example, entrepreneurs like Jeff Bezos, Bill Gates, Steve Jobs created businesses that produce goods and services that people rely on daily to increase their productivity and quality of live.

Wealthy nations are highly productive. People get what they need and want almost all the times. For example, wealthy nations have abundance of food where people are more likely to die of over-eating than to die of starvation.

Zero-sum game

However, we are born with scarcity mindset. We learn since young as a kid that if someone takes away our toy, we no longer can play with the toy. Resources are scarce and limited. There is only so much land on earth.

Scarcity mindset leads us to play the zero-sum game where in order for one to gain, another has to lose. In order to grow our territory, we have to take it away from our neighbours.

In competitive environments, we can see zero-sum games being played everywhere. In a soccer game, no matter how hard each teams train themselves, there can only be one team as a winner in the end. In a status game, it is hierarchical and in order for number three to move to number two, number two has to move out of that slot. One person’s gain is another’s loss. It is not productive.

A compact organization lets all of us spend our time managing the business rather than managing each other.

Warren Buffett, extracted from Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012: A Fortune Magazine Book

In economics, the gross domestic product (GDP) of a country can grow even if we are playing the zero-sum game. We can hire one team of people to dig a hole and pay them. And hire another team of people to fill in the hole and pay them. We can repeat these activities indefinitely. Two parties working in opposite direction where the interest are mis-aligned. Nothing is getting produced even though there is work being done by hard working people. We can get stuck in this loop forever due to our scarcity mindset. It produces a tons of waste.

Zero-sum game is counter-productive. You have to work harder every time to keep standing still. We are back to square one each time the game ended. Life does not get better overtime.

People keep playing zero-sum game because, apart from scarcity mindset, it is actually good to watch as a show like the football game. There is always a hero in a zero-sum game, e.g. Lionel Messi, Roger Federer.

Even though any competitive sports games are zero-sum games, they can generate billion dollars worth of economics activities. Zero-sum game is good for entertainment.

Win-win

Value is subjective. As the saying goes: one man’s meat is another man’s poison. This is actually an opportunity for value creation. What I want to get rid of, might be what you are looking for. If I give the item to you, it is a win-win for both of us.

In economics, we have buyers and sellers. Buyers buy what the sellers sell. Buyers win as they buy the products and services that they want from sellers; sellers win as they also get the profit that they want by selling to buyers. These transactions create value for both parties. And there is no limit to the number of transactions allowed. This means that there is an infinite number of win-win waiting to be materialised.

International trades increase global wealth while at the same time reducing conflicts between trading partners which leads to more harmonious and prosperous environment.

The quality of our mind determine the outcome of our life. When somebody else’s win is also our win, we seek to maximise other people’s win.

When we listen and understand our customers’ need and want, we can satisfy them with the best we have to capture the most value out of it. This leads us to the positive-sum game where our work creates the most value.

Positive-sum game

Currently, there are around 8 billion people on earth and none of them know individually how to make a pencil. It actually takes millions of workers to produce a humble lead wooden pencil.

We need people to mine the mineral: a form of carbon called graphite, another group of people to chop down trees, and another to build factories to process the wood and and the graphite and assemble them, another group of people to ship the end product to shops for end users to buy. (And I miss out a lot of the detail.)

This whole process involves countless of strangers who work within their own specialty through division of labor guided by the market forces to produce goods that benefits the world. The output of one group is the input of another, each creates win-win throughout the chain.

The collaboration among these strangers is a million times more productive than individual workers who try to make the pencil all by themselves. This is the power of positive-sum game. We benefit from contributions of all participants in a positive-sum game. The whole is greater than the sum of its parts where the magic happens. Wealth is created out of thin air through human action: work that creates win-win.

None of the participants know how to make a pencil, but as a whole, they know. This is true for all other products like cell phone, computer, car, airplane and spaceship.

Example of positive-sum games in the real world:

  • China’s lifting of more than 800 million people out of extreme poverty since the late 1970s has been the largest global reduction in inequality in modern history.
  • Singapore went from Third World country to become First World country within one generation under the thoughtful policies from its disciplined leaders.
  • Stock markets is the breeding grounds for world changing companies that enrich the entrepreneurs, investors, customers and the society as a whole. It makes everyone richer.

Investors and entrepreneurs play the positive-sum game. Where people see problems, they see opportunities.

Everyone need to be an entrepreneur.

Positive-sum game grows the economic pie. The value is accumulated from all the work done. Life will get easier and easier the longer we play the positive-sum game.

Positive-sum game invents machine that extends muscle and computer that extends mind that lead to abundance.

Positive-sum game creates a perpetual bull market that leads to prosperity at grand scale.

Positive-sum game unleashes human full potential. Human best day lies ahead.

Final thought

Armed with better knowledge, we can judge how much value (or waste) we produce every day.

Zero-sum game has low horsepower with low output, positive-sum game gives maximum horsepower with maximum output.

Zero-sum game is hard and counter-productive. Positive-sum game is easier and productive.

Zero-sum game causes anxiety, positive-sum game is exciting.

Zero-sum game produces clear individual winner. Positive-sum game, however, does not have clear winner as everyone is a winner. Actually the whole group is a winner. Individual productivity measurement is misleading.

Individual is helpless, as a group we build spaceship.

Individual shows how smart he or she is. This is zero-sum. Supporting others is positive-sum and is the bigger game. Kindness has more value in a economics system that has billion of people.

It is harder to be kind than to be clever.

Jeff Bezos, as documented in The Everything Store: Jeff Bezos and the Age of Amazon

Make good deals for yourself and others. A group of givers make the world richer.

Positive-sum game is value creation game. Every effort counts. It is the infinite game and the ultimate win-win game.

Greater wealth is in the positive-sum game.

Do the right basic things can release a tons of value to the world.

Zero-sum game and positive-sum game are like the race between the hare and the tortoise. The hare is fast but loses to the tortoise that is slow and steady. It is pointless to go fast when the direction is wrong. We can get to our goal even if we are slow as long as we are making positive progress.

What we need is a switch. A switch to a better mindset. One mind switch for a better world.

It will take time to switch from zero-sum mindset to positive-sum mindset. Till then, there is a huge upside to the economy. Are you ready?

The ideal leader

How great leaders lead?

Apart from being good communicators, good leaders lead by providing clarity and pointing you to the right direction under uncertainty, especially during crisis.

If the leaders don’t know the direction, how can they lead?

They are also accountable for the decisions. If they lead us to the wrong direction with no consequences, where is the accountability?

These are important questions.

We can explore some of the attributes of an ideal leader from different aspects to find potential answers to the important questions.

Inverted pyramid

We usually think of leaders at the top of a pyramid who have all the control and power. However, leaders don’t necessary have all the answers.

The right way to think about leadership could be to flip the top-down model.

You should invert the pyramid and envision yourself as the guy at the bottom. You are there to enable all the work being done. That’s my mental image of what I’m here to do at Spotify.

Daniel Ek, founder of Spotify, as documented in Hidden Genius: The secret ways of thinking that power the world’s most successful people

Robert Greenleaf, who popularised the term servant leadership, believed that organisations are at their most effective when leaders encourage collaboration, trust, foresight, listening and empowerment.

Servant leadership inverts the pyramid. Leaders are here to serve the people. Customers and employees rank above the leaders.

From economic perspective, those with bigger pay check and bigger responsibility should produce more for the company by enabling the people who actually performing the work to be as productive as possible to generate the most value for the company. Productivity is accumulative and rewards should be proportional to the value created in order for the economics system to function well.

Strong supports the poor.

Great leaders are the strongest persons who stay low and humble to serve and support the people.

Good moral character

2500 years ago, Confucius suggested that if the emperor has moral perfection, his rule will be peaceful and benevolent. Natural disasters and conflict are the result of straying from the ancient teachings. He believed in the importance of education which leads to more virtuous behaviours, such as respect, altruism, and humility.

If the world isn’t following the Way, rewards go to precisely the wrong people. Cheaters prosper. The shameless get famous, instead of infamous. In a world gone awry, Confucius looks at any of us who have found wealth or made a name for ourselves and asks, This world is working for you? This one? If the world is out of joint and you find yourself living large, it’s probably because you, too, are out of joint. If the society you live in has lost the Way, you can choose only these options: leading your life well or trying to make it go well.

Extracted from Life Worth Living: A Guide to What Matters Most

The main idea of Confucianism is the importance of having a good moral character, which can then affect the world around that person through the idea of “cosmic harmony.”

History suggests that all prosocial institutions age and eventually collapse at the hands of self-interest… That is, although it may take long time, individuals and coalitions eventually figure out how to beat or manipulate the system to their own ends, and these techniques spread and slowly corrode any prosocial effects.

Joe Henrich, anthropologist, extracted from The Geek Way: The Radical Mindset that Drives Extraordinary Results

A nation is great not by its size alone. It is the will, the cohesion, the stamina, the discipline of its people and the quality of their leaders which ensure it an honourable place in history.

Extracted from The Wit and Wisdom of Lee Kuan Yew

Nations rise and fall. We are the problems. Great leaders lead by example and people follow great leaders with strong ethics. This can prevent disasters.

Skin in the game

If you are the owner of a business where you have your own capital at risk, your attitude towards running the business will be vastly different than those who merely work for you.

The outcome will be totally different than when you don’t put a cent in the business as you won’t allow your business to fail. You will do everything to make it a success. Failure is not an option. This is the importance of skin-in-the-game.

What is Skin in the Game? The phrase is often mistaken for one-sided incentives: the promise of a bonus will make someone work harder for you. For the central attribute is symmetry: the balancing of incentives and disincentives, people should also penalized if something for which they are responsible goes wrong and hurts others: he or she who wants a share of the benefits needs to also share some of the risks.

Nassim Nicholas Taleb, author of Skin in the Game: Hidden Asymmetries in Daily Life

In ancient times, the architect need to stand underneath the newly constructed bridge to show confident that it is safe for others to use. If the bridge is poorly built, the architect’s life will be first in danger.

Here is a recent example of skin-in-the-game where Temasek cuts its senior management compensation after failed FTX investment.

Great leaders have something to lose if their decisions are wrong to hold them accountable to ensure skin-in-the-game. This eliminates irresponsible behaviour that creates risk for others.

Leaders with skin-in-the-game are leaders we can trust.

Bad news first

Warren Buffett, the greatest capital allocator in the world, prioritises the bad news. He wants the CEOs of the companies owned by Berkshire Hathaway to report any bad news to him immediately. He can get to the good news later.

Lose money for the firm and I will be understanding. Lose one shred of reputation for the firm and I will be ruthless.

Warren Buffett, as documented in University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting

A small crack can lead to a bigger problem that can sink the ship. Problems when left unattended tend to compound. Buffett understands this, in this case, negative compounding effect, more than anyone else in the world. In order to become the greatest investor in the world, he can’t afford to be deluded and live in denial.

Actions have to be taken right away to correct the bad situations. This reduces risk in the system.

When we see the reality as it is, it is easier to make the right decisions.

Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add overhead, while the manager of a tightly run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors.

Extracted from Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2013

This is easier said than done. Normal people would like to show off good news in order to claim credit for bigger bonus. The downside of reporting only good news is that human is creative and can always present any situation in the best possible light by covering up the bad side. In financial world, most statements are fiction. This can fool those inexperienced amateurs but not seasoned investors like Buffett.

It is more comfortable to live in denial than to deal with reality. It is painful to deal with loss as documented in Thinking, Fast and Slow by Daniel Kahneman, world-famous psychologist whose prospect theory deemed to be so influential to economics and government policy making that he won the Nobel Prize in Economics.

Great leaders with strong mind deal with reality all the times. Running a successful business is not for those with weak mind. We can’t take loss personally because the market does not discriminate.

What the wise man does in the beginning, the fool does in the end.

Howard Marks, author of Mastering The Market Cycle: Getting the Odds on Your Side

Final thought

We need to check against ourselves and our leaders if they hold up to the above qualities. If not, we have work to do.

It’s not about working harder. It’s about working the system.

Evan Spiegel, founder of Snap, extracted from The Unfair Advantage: How You Already Have What It Takes to Succeed

We all have tendency of misbehaving by natural instinct.

In a nutshell, ideal leaders are the leaders who can actually lead. They are strong persons with strong mind who stay grounded and care about others.

Hard times create strong men. Strong men create good times. Good times create weak men. And, weak men create hard times.

G. Michael Hopf, author of Those Who Remain

We need more ideal leaders, the destiny of humanity depends on them. You could be one of them if you want to.

Be the change you want to see in the world.

Mahatma Gandhi