Why trade happens

Recall that a few weeks ago, I learned that the $5 Trader Joe’s bags are being sold for $25 in Japan, and that really fascinated me. We’ll be revisiting this topic from time to time.

Today, I want to focus on one aspect of this phenomenon: “Why Trade Happens”.

By the way, it is a very hot day in Southern California, and I am writing this from the comfort of an air-conditioned coffee shop. I paid $3 for my decaf ice-americano and a seat at the cafe. Why should you care? Because fundamentally, trading my money for coffee is not any different from all trades that happen globally at massive scales every single day, which leads me to today’s key point: Trade happens because it benefits both parties. Once you understand this, you start to see the world a little differently.

In my case, I gladly traded my $3 for a table in this cafe, because to me, this comfortable spot where I can work on this hot day was way more valuable than the three dollar bills in my wallet. However, for the coffee shop, the opposite is true. To them, the $3 was more valuable than the coffee, so they gladly gave up their cup of coffee away in exchange for my $3. The trade made both of us better off, and we can rest happy that both parties contributed to the betterment of the other. Isn’t that beautiful? And just imagine, trades like this happen everywhere, every day, at unimaginable scale that makes the entire world’s economy function.

Access to the world’s market has been so important that it has lifted more people out of poverty than all of the well-intentioned non-profit volunteer organizations put together. There are tremendous advantages that come to allowing trade to happen freely; it brings costs of goods down, it makes us more efficient, and lives are improved everywhere. It is no accident that when governments try to intervene or restrict trade (or even worse, regulate how much of what should be produced and how much they should be sold for), the economy tanks. No economist is surprised that the Soviet Union has collapsed, and North Koreans are going hungry. I am amazed to see how there are so many well-intentioned but ignorant people today who have forgotten the brutal history of socialism’s collapse, and think that somehow the world will be better if it returns.

But there is a caveat to all of this. Our challenge is to carefully consider policies so that the market can continue to function effectively, while intervening in areas in which the market fails, such as when we act in ways that seem to grow the economy but actually doesn’t (like our increasing dependence on fossil fuel), or when we undermine important aspects of society that have tremendous long-term benefits but the free market will fail to provide because it benefits the entire society as a whole, and not one company (like providing high-quality education for everyone , or mandating a universal health care). Even though it may seem like drilling for oil and cutting back on education is a cheap and easy way to pay back some of our federal deficits and grow the economy, the growth that occurs in the short-term must be balanced with the long-term harm. Most people I know, even Trump supporters, at least agree with me on the point that it’s pretty difficult to grow our planet’s economy if we destroy the planet.

As you can imagine, the trading of Trader Joe’s bags are not too different from my trading my money for a cup of coffee. The bags are sold in Japan for $25 because those trades make both the buyers and the sellers better off, at least in their eyes. Who are these buyers and sellers and why do they act the way they do? We can discuss that in a future post, but today, I want to finish off by pointing out that there exists a common misunderstanding in which people assume that certain things are expensive because the sellers of such goods are evil. You know what I’m talking about if you’ve been surprised to see those $4 bottled-water or $18 sandwiches at airports. But before we make such judgements of merchants who sell these goods and services at outrageous prices, we need to remember today’s key point: trade happens because it benefits both parties.

Some people feel annoyed when they see water being sold for $4 at the airport and blame the merchants for such evil doing. Their anger is understandable because after all, not everybody pays attention in an economics class, but misplaced. Don’t think that the airport stores are charging that price because the store-owners have bad intentions of stealing your hard-earned money. Think again. Even if you refuse to buy that water, there are plenty of other people who are perfectly willing to buy them. I know that there are such people, because if there weren’t, the stores would have lowered the price a long time ago (or have really old water that they can never sell). So is the store to blame for this? Or are they simply charging a price that the buyers are willing to pay?

Another example that is a little more significant and relevant in recent political and economical discourse is the rising price of housing in certain places, namely New York City, coastal California, and Washington state where this is becoming a serious problem. Sometimes, landlords and developers are blamed for such high prices, but that comes from the same misconception. If you have understood today’s point, you should know that rent is simlar to other goods in that it becomes high when there are many people willing to pay it. You cannot blame the landlord, then, for charging that market rate. Why would they charge $500 when there are people willing to pay $1000? If any of us were in their shoes, we would do the same, so it is not right to criticize them. So who is to blame for the high cost of living?

The good news is, economists have studied this topic pretty extensively, and they actually know of data-driven solutions to make housing more affordable to people of varying levels of income, which is a topic for my next post. The bad news is, emotionally-charged political debates that disregard everything that econmists have figured out, and politicians who play to people’s ignorance and emotions to get more votes, get in the way of implementing such solutions.

One big motivator for me to keep writing posts like this is to educate more people about economics, because we are all voting citizens. Let us not forget that stupid politicians are in office only because we put them there.

Celebrating Humanity

I am not one to pay too close attention to the news. Some of my academically-inclined friends accuse me of not trying hard enough to stay informed about the world, and while they certainly have a point, I also think that for an average guy like me, paying too much attention to the news gives me a very false view of the world because of the biases that exist in the news industry.

But I have been noticing an interesting trend about the recent Ebola outbreak in Congo which was declared over this week.

In a nutshell, the trend is this:

  1. Humans have dealt with this recent outbreak so-freaking-amazingly well compared to the previous Ebola outbreak (2014-2016) in West Africa.
  2. News coverage of the topic was way down compared to the 2014 outbreak.

That’s not surprising given that news tend to have a negative bias, but can we all take a moment to celebrate the human progress?

The death toll of the previous outbreak was over 11,000 people. This time it was less than 30. Stuff like that don’t happen by chance or luck. Our progress is a result of collaboration between societies and organizations. We have dealt with ebola because we have the knowledge and technology to do so, and we have made it a priority to do so, from governments funding and expediting the ebola vaccine research and clinical trials, to reacting quickly to visit even the most remote of villages to administer the virus on first sign of an outbreak.

Of course, fighting the ebola virus isn’t the only area in which we have made a significant improvement.

Extreme poverty in the world (measured by income adjusted for inflation) has diminished to a half of what it was 20 years ago. It’s hard to notice this for those of us who live in the United States, because $2/day and $4/day both seem like extreme poverty to us, but this is a significant improvement in the quality of lives of people all over the world.

Casualties from war and battles have declined dramatically. During the World War II, the death toll was over 200 per every 100,000 people. That number is just 1 today, a whopping 99.5% decline.

Less children are working. Crime is decreasing. More girls are getting educated. Less people are enslaved. Nuclear weapons are getting disarmed. Deaths from natural disaster is declining. Planes are crashing less. We are harvesting more food per area of farmland. Share of people living in an elected democracy is increasing. More kids are getting immunized. Literacy rate is as high as it ever was.

Does that mean that we’ve solved every problem? No. But are we on the right track? Absolutely. I cringe when my pastor would make a commentary on something he saw on the news and say something like “in times like these, we need the love of Jesus more than ever.”

Precisely what does he mean when he says “in times like these?” The data is overwhelming. Now is the best time we have ever lived in, and it will be even better tomorrow. Humans collectively have realized the power to solve problems that were impossible to solve in the past. With that same power also comes the power to destruct just the same, but that is not the direction we have decided to move in. Data does not lie. Together, we’ve chosen to improve the world. That gives me hope.

On monopolies and antitrust laws

“Amazon is getting too big, it’s like a monopoly. I’m scared that they are going to take over the world. Other sellers cannot compete with them, and that’s not good.”

That was a concern my friend expressed recently. I was reminded of it again today, because the authorities of the European Union apparently have the same misunderstanding of what constitutes a monopoly. Today, the E.U. announced a fine on Google worth over $5 billion, claiming that Google’s partnerships with hardware makers such as Samsung, Huawei, and HTC to make Google’s applications the default services on the devices are in violation of antitrust laws.

Simply put, this ruling is not warranted. (Disclaimer: any views I express here are my own, and they are not of my employer, Google. For that, refer to their official blog.)

Antitrust laws exist for a simple reason: to prevent a monopoly from taking advantage of its status to remove competition from the market. Here’s a couple of examples of what might constitute a violation of antitrust laws:

  1. If my local cable company works out a deal with the politicians to make it illegal for other competitors to enter the market, then promptly jacks up the price of its services.
  2. If Google and Apple were to secretly agree that instead of competing to offer good products at good prices to the consumers, they would both jack up their respective phone prices (iPhone and Pixel) to some ridiculous amount.

Honestly, either of the above wouldn’t bother me at all because we’ll all be just fine without cable TV or smart phones, but still, I can see that such actions could be considered a violation of antitrust laws.

Now, let’s be clear about one thing. There is a big difference between a company who gets big because it has removed competition through corruption and has broken antitrust laws, and a company who gets big because the services and the products that they provide are so valuable to the consumers that so many of them choose to use it. So which is the case for Amazon and Google?

The reason Amazon is big is NOT because they are evil and they are taking advantage of all of us. Amazon is big because everybody chooses to use Amazon, which in turn makes them profitable. Why do we all choose to use it? Is Amazon our only choice? No, of course not. We can all stop using it any day, if we wanted to. But we don’t want to. We use Amazon because they offer better prices on many goods compared to their competitors, and that is a good thing for the consumers. That is far from a monopoly taking advantage of its status to jack up prices that it puzzles me why people confuse the difference. It might suck for a store owner about to go out of business due to increased competition, but the whole point of antitrust laws is to encourage this kind of competition, not to stop it. If that store owner were to argue he is going out of business and therefore Amazon must be harming the economy, he would be wrong. It is actually good for the economy for a company who does the job more efficiently to get more of the business, incentivizing businesses who don’t do it as well to step up their game and do it better. If they fail at that, they’ll go out of business as they should in a healthy economy, and hopefully they’ll go on to do something else with their time and resources to benefit the society in another way. Fallacies in economic thinking often comes from only thinking about a negative aspect of a small part of the economy (in this case, the store owners), so let’s make sure that we don’t forget about the positive aspects on the rest of the economy, which in this case obviously includes the consumers, but also the manufacturers whose customer-base has suddenly expanded to the entire world thanks to Amazon.

When it comes to Google and the Android platform, again, it would be wrong to say that they have taken advantage of their position to the detriment of the consumers. First of all, they have not at all removed the competition, and they aren’t trying to. Android is an open platform precisely because Google’s mission is to make the world’s data accessible to anyone and everyone. There are so many choices when it comes to Android devices, from over a thousand manufacturers. The competition in this market is alive and well, and there are many affordable options for the consumers because of it. Some of the manufacturers may have agreed to a contract with Google to pre-install Google’s apps, but it’s not as if they were forced to do so. If they thought that Google’s apps were bad and it would’ve been better to install other apps instead in order to sell more of their devices, they would have. Why didn’t they? Their choice. Customers also don’t have to use these manufacturers’ devices. So why do they? Again, their choice. And I didn’t even mention the competition from non-Android (which basically means iOS) devices, which is also a very healthy competition, so really nobody needs to use an Android device if they all choose to use iOS. Why don’t they all switch to iOS? Again, their choice. (Starting to see a pattern here?) All this competition is good for the consumer, and plenty of choices exist as we speak. There’s nothing confusing here, and I can’t put it any simpler. Despite the competition, customers are still choosing to use Google’s applications because of their high quality. These apps provide them with something valuable. When’s the last time Google Maps helped you navigate and avoid a traffic jam? It happens all the time for me. And recently at a sushi restaurant in Tokyo, I saw a Korean girl use Google Translate to figure out how to say her favorite fish, then proceeded to put in her order in Japanese.

My coworker told me about a time he witnessed a family at an airport attending a sick child, and a nurse happened to be nearby to help. They didn’t speak the same language, so they used Google Translate to communicate. Were they forced to use it? No, they chose to because it was useful and it provided them with something they needed.

Me llamo Shin. Soy músico.

During a recent conversational class, I learned to introduce myself in Spanish.

“Me llamo Shin. Soy músico.” (My name is Shin. I am a musician.)

This got me curious, because any English speaker would be tempted to say “Soy un músico” instead, but apparently, it’s not quite correct to add the article when speaking about my profession.

So during a 15-minute break with my band in between our shows, I asked my Spanish-speaking bandmate why he thinks this is so. His answer was so beautiful that I have to share with you:

“When you say ‘I am a musician’, you are just that, one musician. But you see, you are not just a musician. So you say ‘Soy músico. I am musician.‘ When I tell you ‘I am musician’, I’m heroically professing that I embody music. All musicians are within me, and I am within all musicians.”

I’m pretty sure he just made that explanation up, but nonetheless, I was inspired by how romantically he thinks about his language.

The economics behind Trader Joe’s bags: An Introduction

I went grocery shopping today at a nearby Trader Joe’s store. As Joel (my cashier today) was ringing up the items I had picked, he asked me in typical Trader Joe’s fashion, “any exciting stuff happen today?” By the way for anyone who hasn’t been to a Trader Joe’s before, their cashiers tend to strike up conversations with you.

I mentioned to him that I learned some Spanish phrases on Duolingo this morning, and asked if he had tried the app too. It turns out that he uses it for learning Japanese, and he started talking to me in pretty good Japanese: “watashi wa nihongo wo hanashimasu. Trader Joe’s no baggu wa nihon de ninki desu.” (I speak Japanese. Trader Joe’s bags are popular in Japan.)

Clearly that second phrase is not something he learned directly from Duolingo, so he must have taken his learning a bit further, and I was very proud of him for that.

Then he proceeded to tell me about an interesting phenomenon: the $5 Trader Joe’s reusable bags are being sold in Japan for $25. “There is a black market for Trader Joe’s bags in Japan,” he claims.

Of course the “black market” part is a joke because there’s nothing illegal about me buying a few of these bags and selling them in my home country, but I got curious so I searched on some Japanese peer-to-peer shopping sites, and sure enough, these bags are indeed being sold in Japan for around $25.

This fascinated me, because as an educator at heart, I could not stop thinking about what a great lesson in economics this makes. Any curious student of mine, when told about this phenomenmon, would have asked me: “Well why does a $5 Trader Joe’s bag sell for $25 in Japan? Can I get rich by starting a Trader Joe bag business in Tokyo?”

It turns out that answering this seemingly simple question requires a solid understanding of some of the most important economic concepts, such as “supply and demand”, “scarcity”, “free market”, “division of labor”, “tradeable vs non-tradeable goods”, “exchange rate”, “purchasing power parity” and many more.

So let’s delve into those topics in future posts. But first, why should you care? For starters, economics is really interesting, but more importantly, I believe that a firm grasp of economics is essential for any citizen of a modern society. Not only are we affected profoundly by the economic decisions we make in our lives, we are also voting citizens, and as such, we ought to understand the philosophies behind each of the fiscal and monetary policies we support. The field of economics, contrary to popular belief, is not just about money. At its core, economics is about making the best use of limited resources to improve society.

choose the difficult road

During a recent music gig, a girl who looked to be a teenager came up to me and asked, “is it hard to become a musician?”

At that moment, I could have simply answered the question and tell her that yes, it is probably difficult and requires much more work to be a musician than most other jobs, but I wondered about why she was asking the question in the first place, so I asked her, “what would you do if I told you that it was difficult?”

After a short conversation, I found out that she loves to play the guitar, and her parents think that making a living as a musician is difficult, so she should pursue other things instead.

I see two main beliefs that drive this kind of thinking.

  1. You should not pursue something if it is difficult.
  2. Pursuing one career takes away an opportunity to pick up another down the road.

The only problem I see here is that both points above are completely wrong.

Often, it is very tempting to take the easy road. In fact, a lot of what we do on a daily basis is driven by how much short-term reward we can get for doing as little work as possible. For example, many people (including me) like to get drunk for the good feelings we get in return, however temporary they may be. We also like to satisfy our hunger by consuming junk food. And we attempt to garner “likes” on social media by posting an over-dramatic representation of some status update based at least in part on our lives showing off how great our lives are, or taking pictures of food that we didn’t even make ourselves, as if we somehow deserve the credit for the culinary art.

All these things give us instant gratification, but they make us worse off in the long run. They make us feel good just in that moment, but that feeling does not persist, and we even pay a price afterward. In the case of alcohol and junk food, the price is obviously our degrading health. In the case of posting things on social media, our price is the empty feeling we feel on the inside from desiring so badly for social approval while doing nothing of value to others.

It turns out that the things that are truly worth doing, like the things that change the world for the better and the things give us a sense of purpose, are all difficult things. So even though we all succumb at times to the desire to pursue the easy road, we must not give up completely by making that our default action. Whenever we come across a juncture (which is pretty much every single day), we must intentionally choose the difficult path that takes more work but also leads to more growth.

And as for the second point, no, we do not necessarily diminish our chance at one career by pursuing another, and sometimes, we even gain more, as our philosophy slowly builds to help compound our overall growth which opens up more opportunities. Besides, with the current pace of societal changes, there isn’t a single job that exist today that is guaranteed to exist twenty years from now anyway, so we might as well embrace the changes and take joy in all the learning that we must do continually. It is even becoming the norm for people to pursue multiple careers throughout their lifetime. Personally, I know that I have lost nothing by pursuing music. In fact, music taught me some of the most important lessons that allowed me the chance to develop my skills in other areas. Music helped me internalize that the only way to get better is to work to get better. It turns out that this applies in any other field. So just by knowing that and letting that conviction be the guide for daily action, you will have a leg up on anyone who believes that there is some magical shortcut in life to achieve more with less effort. There isn’t.

Just show up

I happen to live and work by the gym where Kobe Bryant works out. He works out quite early, and today he showed up at 5:45AM for his morning workout. My coworkers tell me that this is nothing unusual for Kobe, and he’s been doing it since his high school days. Mind you, he is a retired player, but hey, Kobe is still Kobe, and I think the fact that he still shows up in the morning to this day says a lot about his attitude and philosophy toward life in general, not just basketball. Now I feel like a coward lecturing to my students about the importance of work ethic, when my daily practice sessions don’t start until much later in the morning (if it starts at all). Apparently, I still have a whole lot I must learn from truly dedicated people like Kobe. He makes me look like the laziest person on the planet, and that’s probably why he makes millions and I don’t.

By the way, here’s a little nugget of insight I’ve discovered over time, for anyone who thinks that practicing is too hard and unpleasant; practicing is actually not hard at all. What’s really difficult is to do the Step Zero, which is to show up for practice. Or in my case, to sit myself down in front of the piano. Once I can overcome that initial step, the actual process of going through the practice is not as difficult.

New York City

When I stepped foot in New York City, I felt a strange sense of familiarity. Here I was, in a city that I had never been in, yet it seemed as if the scenery in front of me was something I had seen before. I even felt like I had come home.

It could be because New York City is similar to my hometown in many ways. Just like Tokyo, you encounter thousands of pedestrians on a daily basis. Many of them seem to be in a rush to get somewhere. They are “strangers” to you, as in they are people whose only connection to your life is that they once walked by you in a busy city street. If your life were a movie, they are part of the “extra”. But let us remind ourselves that in their lives, we are the extra. Just strangers walking by. Most will stay strangers, yet, should you get to know some of them through a stroke of life’s luck that bring you together, you quickly find out that you were not strangers at all. After all, we are all human, and as such, we share much in common. We all seek meaningful relationships, we strive to do the best given our life’s circumstances, we worry about our future, and we ponder about things like the meaning of life and our place in society.

I wrote this piece, “New York City” for my album “Portraits”. The album is called that because these are pieces that portray some aspects of my life that have meant a lot to me.

You can listen to the rest of the album on Spotify and iTunes.

the fear of investing

Many people tell me that when it comes to investing aggressively, fear often gets in the way. But when I talk to them, I quickly find out that their fear is based on their emotions, and just by having more information, they can get over their fears and start investing wisely. Too often, our fears are unwarranted and we don’t even know it.

For example, here are some comments I’ve heard from my friends just in the recent months:

“Other than my real estate properties, I hold a lot of my assets in cash. I just can’t go into the stock market, I’m scared that it is way too overpriced.”

“I just sold all of my stocks recently. I’m glad I did it because the stock market hasn’t gone up at all this year.”

“It took 25 years after the Great Depression for the market to recover. I can’t risk an event like that happening again. I can’t afford to wait 25 years to get my money back.” (This is not true by the way, it doesn’t take 25 years to recover, as I’ll argue in this post.)

All of these fears are understandable. Just the potential of losing money is scary, and I actually used to have the same fear before I studied about this topic more and have come to the understanding that my fear was purely based on the lack of my knowledge.

Having said that, there are a few things that you must understand when investing for the long-term.

You will lose money in some years.
The stock market does not always go up. So if you’re invested in the stock market, you will lose money in some years. I lost close to 40% of my assets in 2008. And guess what? That’s totally okay! You’re actually in good company when you lose money, because even Warren Buffett, the world’s best investor, loses money in those years too. Which leads me to my next point:

You will gain money in most years.
And these years are quite profitable. Way more than enough to make up for the lost years in my first point.

You cannot predict which year will be which.
This is really important. You cannot predict the market. That doesn’t mean the market is completely random. There actually are ways to evaluate whether the market maybe over or under-priced, and one good way is to calculate the price-to-earning (P/E) ratio of a broad stock market index and compare it to the historical average. But even with that information, you still can’t predict what the market will do that year. Take 2017 as an example. It seemed that the market was overpriced at the start of the year. Seeing that the market is overpriced, an investor could have sold all his stocks predicting that it will go down (sadly, some people actually did). Well guess what? By the end of the year, the market gained a whopping 21.7%!

It’s costly to be NOT invested in the market.
It is tempting to sell your stocks when the market seems overpriced. But when you sell your stocks, you miss out on the potential growth, and history has shown that the market tends to have just a few days every year when the most significant growth occurs (we’re talking multiple percentage points in a single day). The only problem is, nobody can predict when those days will come. So how costly is it when you miss out on the few good days? Consider this fun thought-experiment:

Suppose you had $100,000 on January 1st of 1994, and decided to invest all that money for two decades, ending on December 31st of 2013. That’s a total of 5037 trading days. If you kept all of the asset in an S&P 500 index fund for all of those trading days, you will have a hefty $583,520 sitting in your account at the end of the experiment. Cool! You survived the dot-com crash of 2001 and the housing-crash and financial melt down of 2008 just fine, and you can now retire comfortably on your money. Readers in Los Angeles or New York might disagree and argue that they need a few million dollars to retire, but remember, the reason why people seek to live in these expensive cities in the first place is because of the wealth of economic opportunities close to a center of commerce. But if you are financially free, the prospect of a well-paying job doesn’t factor into your decision anymore. You can pretty much live anywhere in the world at that point.

Now, to continue with the thought experiment, consider this alternative: Suppose that instead of investing your money for the entirety of the 20-year duration, you took your money in and out of the market due to fear, and you happen to miss out on forty of the best trading days during the 5037 trading days span (that’s less than just 1% of the duration). Guess how much you’d have at the end. A mere $81,490. Remember, you started with $100k. You actually LOST money over those twenty years, simply by missing out on those forty days of trading. It turns out that fear could be very costly.

When it comes to making a financial decision, you are much better off going with what the research says, not what your emotion tells you to do. And the research says that the people who stay invested see much better returns than people who try to time the market. So stay invested at all times.

Count your wealth by how much of the economy you own, not dollars.
Money is just a piece of paper. Although it is a pretty useful piece of paper for trading goods, there is no inherent value in it. But so many people think that there is. I even know of an extreme case of a family who holds most of their assets in cash hidden in various places of their house. They do things like that because they think that money is valuable. It is not. When you hold onto cash, you are actually constantly losing wealth over time, because the purchasing power of a dollar diminishes over time. Economists call this “inflation”. Just think about it. A person could buy a hamburger for 12 cents in 1950. Well, that’s not true anymore, in fact you can’t buy much of anything for 12 cents nowadays. So by keeping 12 cents under your bed thinking that you could treat yourself to a nice juicy burger in some future date, you lost all your purchasing power. That’s essentially what happens when you just keep cash. Money loses value over time.

But it is so tempting to compare prices simply in terms of dollars. I’ve met some old people who talk about the “good old days” when everything used to cost cents. Well they forgot one important factor: their wages were much lower then too, and their purchasing power was actually lower in those “good old days”. Most of them couldn’t afford a color TV, for example.

It’s also the same misunderstanding that causes people to think that they got a raise when their salary goes up, because they simply look at their wealth in terms of dollars. If your salary goes up by 1% every year, you are not getting a raise. In fact, your income went down, because inflation raises the consumer price index by more than 1% per year.

When you think that your wealth is measured in dollars, it makes sense that you would have an aversion to loss by investing in the stock market. After all, your $100 today could suddenly drop to $60 tomorrow, and it appears that you “lost” your wealth. But that’s not how I think of it. I count my wealth in terms of the proportion of the world’s economy that I own, because essentially, that’s what I am buying when I invest in index funds. Suddenly, the ups and downs of the market don’t affect my emotions anymore, because even if the market crashes tomorrow, I still hold the exact same percentage of the economy. So my wealth hasn’t really decreased, first, because prices of goods also drop with the market keeping my purchasing power relatively stable, and second, now those shares are at a steep discount! If the market crashes and loses half its value, I can afford to buy double the shares for the same amount of dollars all of a sudden! So the market crash is not bad at all. In fact, it’s a great opportunity for me to keep investing.

When you invest consistently, you naturally end up buying more shares when they are discounted due to downturns, and that leads to a significant wealth over time. Market downturns are actually to your advantage.

It won’t take 25 years to recover from a crash.
This is partially related to my last point. If you simply look at it in terms of dollars, it does appear that the recovery from Great Depression took 25 years. But you know by now that your wealth is not to be counted in dollars. Remember, this was a deflationary period when the prices also went down, so if you just look at purchasing power alone, it turns out that the recovery only took 4.5 years, not 25. Plus, this person was assuming that he invested ALL of his assets right before the market crashed, and didn’t invest a single dollar after it crashed. But that’s not what you’d be doing if you’ve been reading my posts. You will likely start investing way before the market crashes and see significant growth in your funds that makes the loss of a crash not hurt as much. And even if you do get unlucky and invest a significant amount of money right before a crash, as long as you keep investing after the crash, you will still be in golden shape.

So there you have it. Hopefully now you have a better understanding of the market, and are not that afraid to invest. There’s no telling when the next crash is. It might happen tomorrow. It might happen in 20 years. It doesn’t matter. Just keep investing.

Simplicity is fun.

Yesterday, I wrote about getting stuck in traffic and how fun that was because of how rare that is in my life. There is actually a broader point I wanted to make, which is that events in your life that are rare are more enjoyable than those that happen frequently, and understanding that part of your psychology can help you hack your life in a certain way to make it much more enjoyable.

There are many examples of this.

For one, I don’t subscribe to anything. No cable, no Netflix, no Spotify, no Amazon Prime, and I actually don’t even own a TV nor a computer. While these services may appear like a good deal because you get to consume as much entertainment as you want for a very low price, having constant access to entertainment actually diminishes the positive life-energy that you can gain from them. Plus, seeking for “good deals” is not the best way to go about life. We will fare much better by optimizing our surrounding to improve our quality of life rather than stuffing our minds and bodies with unnecessary stuff, however cheap they may be.

I actually still do watch TV once in a while, at Best Buy. I walk into their state-of-the-art surround-sound and TV display room, and enjoy a good showing of Planet Earth 2 (or whatever they happen to have on display), and let me tell you, it is a pretty amazing experience! It’s been so cool to see the improvements in TV technology over time, because when I walk into a Best Buy store after not having visited one in a few years, I am shocked to see that what used to be an amazing feat of technology that costed $2000 are now being sold for like $200, and there is an even more amazing piece of technology out today that has claimed its place in the $2000 range (apparently called “4k” now. Did you say 1080p? That’s so yesterday). But do I come home with the TV after this really cool TV-watching experience? No. Because I understand that as soon as I bring one home, I will just get used to it, and it won’t feel as amazing anymore.

Last week was TYCTWD (Take Your Child to Work Day) at Google. I signed up to teach one of the computer science classes, and the kids had a blast skipping a day of school to learn about Google and our work in machine learning, and also about computers and society at large. But what was particularly interesting to me was to see the kids’ joyous reactions to the free gourmet meal at one of Google’s cafes. They think it is the best thing ever, and it reminded me of my first days at Google. The meals are amazing! Or so I thought at first. Then I just got used to it. Now, it’s just food. I even catch myself complaining sometimes, “that dish was a bit strong on the spices”, “Taco Tuesday again? We just had one two weeks ago!” “Why not serve lamb chops or scallops more often?” Wow, what a snob I am. But you see the point? Even something as amazing as free gourmet meals at work, a very special perk that pretty much nobody else in the world gets, will quickly start to feel ordinary if you get it every single day.

I have a friend who lives atop a hill overlooking the city of Orange. About once a year, I would attend a dinner party at her house where she brings together scientists and engineers in the area. The view is quite spectacular, and I enjoy every minute of it, sipping a good wine and having an intellectually stimulating conversation learning about various things happening at the forefront of science and technology. I realize then just how much I appreciate a nice home with a view. But would I buy that house? Never! Not because I can’t afford it, but because I understand my own psychology. The view is enjoyable because I go there once a year. If I owned that backyard, it’ll just become the norm, and I would no longer appreciate it. Same exact reason why I don’t own a luxury car. I love it when I get to catch a ride with some of my friends who own luxury cars, precisely because I don’t own one and I rarely get the opportunity to ride in one. Recently I got to ride in my friend’s Tesla and he demonstrated to me its acceleration capability. It was like a thrill ride at an amusement park!

We can improve our lives by simplifying our surrounding environment. The less we have, the more we enjoy everything in life.