A large number of finance research seem to start with data or the questions that journal editors may find interesting. Taking advantage of the explosion of new data, some scholars tend to tackle simple and high-level questions. In so doing, they enjoy the first-mover advantage and win citations. Other scholars network and try to be faster in grasping tastes of journal editors. There is nothing wrong with these efforts. But if such data- and relation-driven research are dominant, the social value and the real impact of knowledge finance research create can be at best limited. Also, data- and relation-driven research are more likely to encounter competing work and be written in a hurry and thus of insufficient quality.
Ph.D. students and junior faculty are discouraged to enter the mature literature. It is a crowded area where incumbents easily kill early-stage ideas. The probability of top journal publications is lower and so is that of getting tenure. They are instead advised to enter the young and growing literature where research demand is high and its supply is low. While the advice is entirely sensible, if one is confident enough to deliver new insights based on his or her unique experience and superior knowledge, why not jump into the mature literature? The literature is mature at least in part because it addresses import questions and also demands fresh brains to improve old, or outdated, thoughts.
Social scientists tend to pay little attention to the society often for the reason they are busy doing science. It is contradictory in that the society is where problems are and they do science to solve them. This is probably of reasons why progress in science does not translate at the same rate into progress of the society. I see the majority of social scientists are either i) from financially-unconstrained families or ii) from financially-constrained families but with high enough marks to win scholarships. During the formation period (i.e. in their youth), either group barely interact with middle and bottom classes. Such a tendency is stronger in areas of social science, for which demand for human capital is lower and so is supply from constrained families. It is therefore necessary to change policies as to education and human capital management to i) better incentivize licensed researchers to improve their understanding of the society and ii) facilitate those who have lower qualification but have richer understanding of the society to do social science research.
Economics rooted in western values is destructive, the impression I have formed for the past two years learning economics in the US. Its added value comes mainly out of progress of civilization. It views the nature as a subject to which they make changes rather than a subject from which they learn. It parallels a common mistake one makes in his/her relationship with family members and friends. An individual tends to put greater effort into changing others to the shape it considers ideal rather than accepting them at their own currencies and honoring them for what they are. Economics stems from a similarly erroneous presumption that mankind is superior to other species on earth both contemporaneously and historically and can make a more efficient use of resources.
Consequently, economics has contributed to spawning unsustainable systems destroying a sustainable one, the nature. A fact that is overlooked in the course is that the nature has sustained for billions of years, whereas the socio-economic systems the mankind created and tested had sustained only for up to thousands of years. Worse, the latest systems including the one for which capitalists play pivotal roles are expected to die out in hundreds of years upon the depletion of resource, unless necessary, smart corrections are made. The inefficient use of resources is, however, not the most imminent problem facing capitalist economies. Capitalism, which engendered the economies that proved to be more sustainable than communist economies in the sense that they preserve incentives of people to work hard, is also proving that it is fundamentally flawed and nearing the end of its life, or at least a major departure from its original shape.
Capitalist economies, with little check and balance involved especially during the aftermath of the Cold War, has suffered an ever-increasing inequality in wealth and is rapidly converging to an economic state in which individuals are left with little incentives to work hard. It is the state communist economies reached and found themselves unsustainable. Nevertheless, economists are still disproportionately exploring civilizational alternatives to cope with civilizational problems uncovered. I believe that such a bias or ignorance about non-civilizational alternatives is a reason they keep failing to find a way out. And that they really need to pay attention to eastern wisdoms which take into account both civilizational and non-civilizational solutions. I frequently find possible solutions to many unanswered (or poorly answered) fundamental economic questions out of eastern values that are planted deeply in Asian histories and philosophies. I may discuss them in more detail later.
Assume that the value of a person is measured by his or her marginal contribution to the society (MCS), which can be estimated by the difference between the value of the society with and without the person. It is speculated that a person who is more educated and experienced is likely to have a greater MCS. But a dimension that is often overlooked is its direction. The sign – either positive or negative – of the MCS is not necessarily a function of education and experience whereas its magnitude arguably is. As such, unless the distribution of the MCS for the highly educated and experienced is proven to be “substantially” negatively skewed in most states of the world, it is not only imprecise but also risky to assess the value (or expected contribution to an organization or the society) of a person primarily based on his or her education and experience and appoint them for high positions, especially for the positions that are systematically little monitored. They would be the subject of a higher variation, yet not necessarily a higher mean, of the MCS.
PhD students often choose research areas and methodologies in their first or second years. It helps them develop early in their academic careers competence in selected subareas and research methods and distinguish themselves from fellow researchers. But, this seemly rational approach may later turn out to be irrational for a couple of reasons. It is particularly the case when the early decision serves to justify students’ not making much of an effort to learn about other subareas and analytical tools not actively used in their chosen subareas.
Firstly, researchers never know for sure – even if they feel confident at the time of decision – what questions they end up answering in the future. Confining themselves to particular research areas and methodologies in an early stage of their academic careers is like a golfer choosing an iron before seeing where to fly a ball, or an engineer selecting tools before knowing what to make. Secondly, research amounts to connecting dots (a metaphor for innovation used by Steve Jobs in his popular Stanford commencement speech in 2005), and the easiest way of increasing the scope of dots to which one is exposed is to explore subareas within the area they major. If widening the spectrum of dots helps one connect and rearrange them to innovate and, say, an economics PhD student choose to be specialized in industrial organization, it is the most efficient for her to explore other subareas of economics such as macroeconomics, econometrics, and financial economics before turning her eyes to relatively distant areas such as anthropology and chemistry.
The unresolved debate over the nature of human beings dates back to more than two thousand years ago in Asia. In around 300 B.C., Mencius developed a theory which brings to a conclusion that human nature is fundamentally good. Xun Zi opposed it with a theory which concludes that human nature is fundamentally bad. A stream of other schools of thought followed either of the two theories. In the warring states period, states had an incentive to develop more competitive ruling systems than those of others and, to do so, needed to appreciate whether people are born to be good or bad. It was because a good understanding of human nature would facilitate determining, for example, the size of costly judicial and security systems, which is a function of the amount of good and evil realized in the society. Philosophers (ruling system designers) viewed human nature as a proxy of the amount of good and evil observed in the society.
Their views, however I believe, were incomplete at best. The amount of realized good and evil is rather a function of how national systems (ruling systems then under the monarchy) are established and operated, not a function of how people are born to be. It has been well documented by several research that crime rates and suicide rates historically rose in years of a Republican in the White House and dropped in years of a Democrat. The former’s policies which involved corporate tax cuts and easier layoffs raised unemployment rate, and nation-wide depression caused by high unemployment resulted in a hike in crime rates and suicide rates. This is an example of how poorly-managed national systems increase the amount of good and evils observed in the society, among others. Nevertheless, we often see some politicians attribute realized bad social outcomes to national character or traits – which belong to a battery of human nature – while they are outcomes of the national systems the politicians design and run.
Arguably putting an end to the long-lived debate, democracy forms a surprising innovation. It enables people to determine and control the relative proportions of observed good and evil in the society. Precisely, in modern societies where democratic systems are installed (which are assumed to function as designed in this writing), the wedge between good and evil converts from the matter of human nature to the matter of choice. That is, the choice between a pair of certain short-term benefits and uncertain long-term losses expected from the practice of evil and a pair of uncertain long-term benefits and certain short-term losses expected from the practice of good. Or, in even simpler words, the problem of incentives.
Given the representative political system, it is now possible to pull up the proportion of observed good by delegating the right to operate and amend democratic – administration, legislation, and judicature – systems to those who are willing and able to do so in the following directions. The ways that reduce costs (and uncertainty) as to implementation of good and merits (and certainty) as to implementation of evil and that raise merits (and certainty) as to implementation of good and cost (and uncertainty) as to implementation of evil. That is, the extent to which democratic systems incentivize, as described above, each member of the society drives the relative proportions of observed good and evil.
Those who have less are often the ones who give more, not necessarily because they are nicer ones but because they tend to suffer hardship of similar types. To them, economic difficulties are what they also deal with as part of their day-to-day lives, rather than knowledge learned indirectly by reading books or media, which is often the case for the haves. This is why constituents must be extremely careful in giving their votes to those from the upper class. They might be nice enough persons personally but are likely to share few grounds from which they could truly understand how lives go at the bottom or in the middle.
Income, or wealth, inequality harms both the rich and the poor by limiting the spectrum of lives to which they are exposed to each extreme. Assume a society that involves persons R and P who are equally talented and passionate but from, respectively, rich (top 20%) and poor (bottom 20%) families; and that every single person in the society desires only to climb up, never down, social as well as economic ladders. Then, the life spectrum one ever experiences is limited to 20% for R and 80% for P if they never interact and 80% for both if they fully interact as R learns from P indirectly lives of the middle 60%. The merits of exposure to a wider spectrum of lives is obvious. For R to sell products as a businessman or win votes as a politician, for example, she must understand what the bottom 80% care or concern about and suffer from. Hence, the more the interaction between R and P, the wider the spectrum to which R and P are exposed, the more the value created by R and P, the richer the society. As the income or wealth equality narrows the distance between R and P, and the wealth of the society is a function of the interaction between R and P, which in turn is a function of the income or wealth equality, it is straightforward to conclude that the less inequal the income or wealth is, the richer the people are in this stylized society.
Takeaways from this society setup include 1) the importance of lessened inequality, which generates more within-society interaction between the rich and the poor, for economic growth; 2) the importance of indirect learning of lives from different economic classes through reading classics and extracurricular activities at school; 3) the risk of firms hiring talents from rich families having a record of little contact with the bottom 80%.
One of the habits I got into since my late 20s is to begin a day early. It might be rather called an obsession over the earliest opening time of a coffee shop or so. Here at Chapel Hill (2014-), I wake up at 5am and take the first seat at Starbucks at 5:30am to start a day, unless I otherwise choose to work from home, my office, or the library. Back in Singapore (2011-2014), I used to wake up at 5am, read on my way to work, lift weights starting 6am at a fitness club one floor below, and work on personal projects at Coffee Bean near my office from 7:30am to 9am. Apparently, doing so hasn’t always led to efficiency or productivity of a desired level, yet has been of much help especially when I was off the rail without curriculum or timelines to play on.
In my early 20s, I was a night owl. The difference between a day-opener and a day-closer even between the same hard-working persons was clear to me, and I was eager to become the former, who lives on a self-constructed timeline and thus maintains evenly high productivity throughout a day, rather than the latter, who follows a given timelines and hence produces most near the end of a day or deadlines. To become the day-opener was just not as easy as I initially imagined. Whenever I tried to do so, I immediately experienced productivity loss and had to return to a life cycle of the latter as deadlines to meet approached. The result was that I continued to be a hard worker but of a latter type, being awake until around 5am most days, when I was at State College (2007-2008), Stony Brook (2007), and Suwon (2005-2006).
It was only when I got fully off the rail going neither school nor work that I was able to turn to the former, the early bird. In 2011 I failed to enter into academia and was seeking for an industry position to take on for a couple of years before reapplying to PhD programs. On top of the uncertainty coming out of my homeless status for several years, I had to deal with additional dimensions of uncertainty. Only by putting more and more structure on my days – including the early-bird habit – was I able to overcome growing anxiety during the period. As a result, my days turned tightly planned, organized, and regular more than ever before.
My reply to my mother’s then saying may well describe circumstances having faced me and my general attitudes against them. She once said that I should visit her place more often – while I was jobless as well as homeless – and listed other expectations she had on me; I seemed, not only to my mother, out of touch with society and was supposed to have no urgent things to do. There were clearly more than what was literally meant in her words. She worried about me possibly being in distress and wanted me to take a rest in her arms. I yet responded that I was managing to have my days more regular than anybody else, beginning my days earlier and ending later than the employed, and asked back how an unemployed one could ever be employed living days less organized and making lesser efforts than the employed.
Thanks to repeated exposures to high uncertainty including the one described above, I was able to turn to the former as I had long hoped, be hired to work from Singapore, and be admitted to a dreamed doctoral program in finance.