Hi, Philip here with a few thoughts for the new year for young investors and old ones. I have started a small interview and discussion with groups of private and not so private investors to find out and sort out between those who are really successful as investors and those say they are successful. I have also been a big fan recently of ming jie gan and john huo of the firl group who have taken a lot of effort to interview institutional and private investors to see their active mental models and their thought patterns, which have really strengthened and clarified my own thinking recently. Some videos to keep track of and watch:

https://youtu.be/mvORFu9yrw0 - FIRL interview with tan teng boo of capital dynamics

https://youtu.be/E5z_mG5De2M - FIRL interview with nixon of tradeview

https://youtu.be/KNDlgoj9KPs - FIRL interview with Rondy

https://youtu.be/2XaH54_HoG4 - FIRL interview with KC Lau

https://youtu.be/eB7x7qUE7J4 - FIRL interview with KC Chong

https://youtu.be/6pluZabMdHs - FIRL interview with Aaron Leow

https://youtu.be/awHKPyXrYAI - YInson CY Lim talk

https://youtu.be/9PC6oZYRKss - BFM guy with guan chong talk

https://youtu.be/XE5KEHBr260 - FIRL interview with mynews/CU

https://youtu.be/ZfE8WltbVGI - interview with Chicken genius singapore

https://youtu.be/G2TGEhSiJKY - karen foo

https://youtu.be/RFxXl9eAWV4 - interview with charlie munger

https://youtu.be/Lnh0TmyVG9A - interview with bill ackman

https://youtu.be/wkJXQ46ma8I - interview with howard marks

https://youtu.be/S8yjzUqK1zQ - interview with mark cuban

FYI, these videos that I have shared are about all the local investors and business people. The purpose is simply to look at how business people invest in businesses, how investors and traders think and I feel very useful for doing comparative analysis on the most important reason that diffrentiates successful investors versus the ones who only talk. One trick I always do is to listen to these interviews and do the comparative analysis by looking at their results, portfolio, assets under management and net worth. Very interesting reading (or watching) indeed. Anyhow, after watching all the interviews, lets move on.

 One of the most important things that define your longevity of investing (which is still the best way to compound money long term) is to ask the question,

WHY DO YOU INVEST/TRADE/SPECULATE ?

The biggest issue I find in young investors is that they want to make the biggest bang for buck they can. In business, we are looking towards a net profit margin on average for companies in general of 10%~20% per annum, depending on how scalable and how much competition you find in the red/blue ocean of the business. This is normal. However, what young investors find early is in absolute numbers, not percentages. if you tell them putting your money to work in the market gets you only 10% per year they cringe. For a 50,000 investment per year I only get 5k? Horrors, that is not even enough to eat on. You get more by working on the day job, with a active salary of 3k-5k a month! Problem is in basing the active salary with investment returns, and assuming that you since you are spending similar time into your trading/investing/speculating that you should also be getting 3k-5k returns every month on your capital of 50k. That is sounds good until you think about risk free rate.

When you are a young buck investing and working, risk is a very far away concept as you can always earn back what you have lost. However understanding how to handle risk, and what are risky investments should be the core analysis for any investment.

When you "invest" in say TriumphFX or OctaFX etc etc or some Trust Will Fund etc, do you look at the profit returns first? Or do you look at how much risk you are taking in the investment? If you are of the former (and probably invested in TriumphFX for the 21% returns every month), then you have no idea how to analyze risk, but you are only looking at how much you stand to make. 

Very dangerous to lean on only one side of the pendulum.

One big mental model to learn, repeat after me 3 times: In any form of trade involving your hard earned money: the most important skill to learn is how to understand RISK. Analyzing risk is EVERYTHING.

Take my portfolio for example: 

https://klse.i3investor.com/web/portfolio/mypf/120720

If you look at every transaction I have ever made and every stock bet (and make no mistake buying stocks is a gamble where you stack odds in your favour), you will find that my largest long term investments have very little churn, are owned by institutions and are consistently profitable. Why so? Risk.

And the stocks that I lost money on are usually the smaller debt ridden or speculative companies with story and theme, but over the long term it doesn't do well for me. Again, RISK. Luckily however, my investment dollars on buying the best companies at fair prices have brought me better returns over the long term than buying risky bets  which on average are just par on course (I made tons of money on kpower and scib for example, and gave it all away to serba dinamik fiasco).

But leaning on the other side of pendulum is also just as bad. Not taking any risk at all is just as bad. Not thinking about risk at all and just closing ones eyes from using risk as an element of leverage would just pit you against time as an enemy. I remember how a friend of mine who was a teacher at the local la salle school was an avid despondent of using risk and leverage bought everything with cash. She put all her savings in fixed deposit, bought her house with cash, never bought a car (we loved to drive her everywhere, amazing teacher) and stayed away from debt. But in the end, she fell to the twin enemies of time & inflation. She ended up not having enough money to last for her retirement, her savings amounted to 200k when she retired in 2000, which was wiped out by medical bills and healthcare later on in as she had to finally borrow money to pay bills that just came up.

Relying purely on AAA bonds and government EPF/ASB etc is not a long term plan, as we do need to account for the increase in costs and value of our investments that are affected due to inflation over the years. 

This is something that I would also like to highlight especially to seniors in my telegram group, Analyzing risk is EVERYTHING. But more importantly, we need to understand risk free rates and how to take risk before risk decides to take you.

>>>>>>>>>>

Christmas stories

Basic mental models indeed. In any case, I was regaling an old friend about his dad during a dinner in singapore one day, and he told me I should share some of the funny stories and experiences that his father and I had so I could share it with for posterity sake. And so, here it goes, the life lessons that were shared during the days when I used to work with robert kuok:

Mental model 1 - How to build a network

 At the beginning of my career, when I was invited for lunch by mr Kuok personally, we were happily having our meal and I was thinking that I was a brilliant up and coming corporate guy (working for a japanese company at the time in Singapore), I was thinking that I was very witty and funny and intelligent that kuok wanted to eat lunch with me instead of my boss. He left me humbled and a wonderful lesson on life with this tidbit: " Hey Philip, do you know why I have lunch with you and keep in touch every month? The reason is simple, it is always cheaper and better to take care number 2 to number 6 man in any organization, instead of taking care of number 1. Too expensive! I hope you remember me one day when you move up, and don't forget to help support your community.

I laughed at the brilliance of the man, and how I was humbled by his words. And yes I practice it everyday. Always know who the number 2 ~ number 6 man in any organization, as they are the moving cogs in the politics/company/community and they are the ones who can help convince the boss if needed. And yes, it is always cheaper to take care of them than to "take care" of the big boss. and who knows, one day number 6 man will go up in life too, so play the long game.

Brilliance.

Mental model 2 - How to get married

When I got married, me and my wife had a very entertaining time. Mr Kuok arranged for our wedding ( somehow my boss told him, and he offered, so I accepted). For some reason it took 3 months to prepare, while we had a very simple wedding ( back when singapore was not as expensive, and people's park was where the hot place to go dating was). Even at that time he was already a wealthy man, so we were thinking that the wedding arrangements would be very grand. Funnily enough, it ended up at a very simple banquet place in a hotel which was where families and friends would regularly eat, not to be seen. I attend there often food is always wonderful, but not necessarily a place one gets married in, you know?

You see, back in the day, we did not have fancy weddings with pre wedding photography or video shoots or huge 50 table wedding dinners. what we did have was a small 15 table dinner with friends and family (most did not journey down) and colleagues. But we would then spend time on finding a good hotel as that would be the extent of any wedding festivities (other than ROM). 

But how does one remember a wedding 40+ years on? Mr Kuok decided to spend as little on the location and the wedding planner as possible, but maximize on the glorious feast. First he found a banquet hall that knew how to cook the dishes (bird nest desserts and rare chinese delicacies you couldn't find anywhere in singapore normally, remember this was the 80's). Once he found the chef that knew how to prepare, he did his specialty in the industry that he was famous for - sourcing. He apparently went and personally pulled favours over 3 months to get all the specialty food from malaysia, china and even japan together to pull of the dinner. 

It was simply the best meal I have ever had in my entire life.

Oh, did I mention also that there was 2 other people getting married at the same banquet hall that Mr Kuok prepared and paid the expenses for? Amazing and funny as well. We didn't mind at all as by the nature of working in singapore we were a small group with no families travelling that far down to attend our wedding. So as funny as it sounds, having 3 people having the same wedding dinner at the same time we ended up becoming close friends over the decades. 

Mental model 3  - How to run your business

When I left the company and decided to work in Sabah, I had the good fortune of knowing shangrila development team and managed to get my boss company invited to do some renovation work on his Shangrila hotel at the time in Kota Kinabalu. He had just bought 40% ownership from a failed Sabah GLC run by a bruneian who had ideas about making a hotel in the area using Yayasan Sabah money, but had no vision and had no reliability. Huge failure.

When Mr Kuok came in, I was working with one of the sub contractors doing the job who were out to impress and lobby for work. Here I was sitting in the corner during the meeting, when mr Kuok comes in listen to all the big bosses and contractors and their ideas on the renovation etc, when he turns to me and asks my opinion on who is reliable and who can do the work. Remember that at this time, I had run into a huge debt wall and moved to sabah to get any job I could to pay my way. I was an engineer working for my new company and had just been there a year or so and no one knew who I was. When everyone turned around and looked at me, I was so embarrassed (and secretly pleased that Kuok actually remembered a small fry like me). I was less than number 6 now. I gave a few viewpoints, which he then said, ok later we have lunch and discuss further. Boss was not invited, which was really problematic for me later on.

It was during lunch when I learned my next big mental model, I remember it very very clearly.

"Philip, the most important thing to learn in business is to know who you can trust. If you cannot trust the person, even if you can make hundreds of millions, it is not worth the trouble. And if you know you can trust them, even if they are more expensive, the benefit will make it worth doing." 

So this is why for those who have done jobs and projects for Robert Kuok, you will know that they do not pick those who have the lowest prices but the ones who have good reputation in the market and have long history of doing good work. (and if you do their job the second time, then they squeeze you based on last project price to go down 5-10%) 

And that is why Robert Kuok is a billionaire. Efficiency, brilliance, and huge generosity over his community.

Happy Christmas and a happy new year!

Hope you learnt something new

Philip