The resurgence of the Indo-China education paradigm

A really important shift has just taken place in the world of international Indian students going abroad. For the first time ever, there are now more Indian students studying in China than in the UK! According to the Times of India (and other sources), there are now 18,171 Indian students in China against 18,015 in the UK, the numbers for 2016 reveal.

UK has always had a strong allure for Indian students (indeed the first Prime Minister of India, Jawaharlal Nehru attained his education in the UK). The strong historical, cultural and social links meant that UK was a favoured destination for Indian students pursuing their studies.

This has now changed. A combination of factors, from Britain’s immigration policies, Brexit, China’s emergence, and greater availability of information has meant Indian students are now taking a much more diverse approach as to where they obtain their education.

Indeed, Indian students are the fifth largest group of international students in China (after S. Korea, USA, Thailand and Pakistan). This number is expected to grow in the coming years.

India and China have both shared a close historic education link dating back to at least 1,000 BC from ancient Taxila (where Chinese scholars to discuss and learn logic, mathematics, astronomy and science) to Nalanda (from around 5 CE).

Over time, it is through education and dialogue that both these historic neighbours will forge even greater collaboration and partnership. There is scope for greater learning of best practices to create a harmonious and progressive approach to education.

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The Emperor’s New Coins – Don’t Let BaitCoins Lure You Down A Rabbit Hole

As the public discourse around Bitcoin reaches a crescendo, a number of learned commentators are comparing the current Bitcoin mania to the Tulip mania of the 17th century or even to the South Sea Bubble, where a great number of British people lost huge amounts of wealth in the 18th century as a result of purchasing the stock of companies that didn’t actually generate any value.

However, I beg to disagree. In the case of those who physically bought tulips (rather than the futures contracts attached to tulips), when the crash came, they at least owned a bunch of beautiful flowers. In the case of Bitcoins, people will be left with a string of 0s and 1s which will never be seen, admired, enjoyed or felt.

The Bitcoin high priests (because there is a certain level of almost theological fundamentalism one senses when one speaks with Bitcoin proponents) will argue and explain that Bitcoin is a fairer way of redistributing wealth and how it will be the currency of the world because it is free of central bank influence.

Except when you ask them to explain how:

  • There will only ever be 21 million Bitcoins – because that is the theoretical maximum limit
  • It can ever be a transparent when 1 million of those coins are owned by possibly one person or a small group of people (Satoshi Nakamoto) – who is unknown and whose origins are shrouded in mystery
  • It can be considered equitable when 40% of all Bitcoins are owned by 1,000 peoplein the world who are all linked to each other and can collude to move the Bitcoin markets at once.

There are some real fundamental problems with Bitcoins which I’m highlighting below and which I hope gives food for thought.

The real issues with Bitcoin and the arguments made by Bitcoin proponents

What is the intrinsic value of Bitcoin?

 The single biggest issue about Bitcoin is around what the intrinsic value of Bitcoin is. There will be any number of convoluted answers about what people think the inherent value of Bitcoin is, but it gained the greatest usage by merchants and purveyors of illegal merchandise on the dark web through sites like the Silk Road where you could buy anything from crack cocaine to knuckle dusters.

I was reflecting on the factors driving the valuation of Bitcoin valuation, 4 years ago in 2013 (when Silk Road was at its peak) and now and reflecting on the drivers leading to Bitcoins valuation. The figure below is my view of some of the factors driving Bitcoin valuation.

Figure 1 – Factors driving Bitcoin valuation

In the very early days, when you required a few Bitcoins to pay for pizza, the usage of Bitcoin was limited to a very small group of individuals who wanted an anonymous mode of exchange. The bearer nature of Bitcoin meant that it provided the level of anonymity that one requires in order to transact bravely in all forms of drugs (except it didn’t and a whole bunch of people were caught when Silk Road was shut down – and also because the founder of Silk Road, Ross Ulbricht aka ‘Dread Pirate Roberts’, chose to use his actual name to set up his anonymous site….and boasted about it in his LinkedIn profile!). Crime generates US$2.1 trillion worth of economic activity, or 3.6% of the world’s GDP. This suggests a sizeable market for anyone who wants to move on from transferring large amounts of US dollars physically or electronically towards a virtual, anonymous currency which can be transferred across borders through anonymous digital wallets.

There were also small groups of Libertarian vendors who were accepting Bitcoin as a means of exchange but Bitcoin’s perception, be it as a commodity or currency, was fairly limited. However, through the hype generated through the valid use cases of the underlying technology driving Bitcoin, Blockchain, Bitcoin hit the public domain in a much bigger way and a small group of individuals started creating the hype around it, which increased people’s perception of what the value of each Bitcoin should be.

That is what figure 1 above suggests – the value of Bitcoin has been driven by the irrational and exuberant perception of some of the market around what the value of Bitcoin ought to be, rather than on any sound fundamentals or basis.

This then leads to my original question: What is then the inherent value of Bitcoin?

Why should anyone consider it as a store of value and the most fundamental question of them all is, when all is said and done, what is a Bitcoin backed by?

Paul Krugman said it best when he explained that, “To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why Bitcoin should be a stable store of value.”Krugman’s interview with BusinessInsider is also hugely instructive for those interested in learning more about his thoughts on Bitcoin.

‘Ah,’ the Bitcoin high priests will exclaim, ‘what then is any currency in the world backed by?’ and use that as an argument to argue the value of Bitcoin.

Let’s be clear, a Bitcoin has no underlying value. It generates no value, except in its own exchange, and there is nothing to back the price of a Bitcoin, except only the trust of the purveyors of Bitcoins, which in turn is backed by nothing but hope and the promise that there will be another sucker who will come along to buy the coin at a price higher than they were duped into buying.

Other fiat currencies, say the US dollar, the Chinese renminbi, or any other national currency are essentially backed by the underlying economic output of the country. Governments are able to defend and protect a currency on the back of the strength of its reserves or economy. These currencies are accepted as a means of exchange and faith in the economic system is implicit.

If Bitcoin goes into a free fall, what authority or government is going to step in to prop it up and ensure the confidence within the underlying asset? What economic output does Bitcoin generate that underpins its value?

No underlying value – not like a fiat currency backed by the underlying economic output and governments are able to defend and protect a currency on the back of the strength of its reserves and the currency is accepted as a means of exchange and faith in the economic system is implicit.

The naiveté of Bitcoin high priests

Bitcoin enthusiasts proclaim how Bitcoin will become the de facto currency of the world.

Let’s be clear. The moment anyone or anything comes close to threatening the national sovereignty of a country, they will be shut down and shut out.

Over time, I foresee national economies and regulators killing Bitcoin outright (the way China banned it outright) or killing it through a thousand cuts (or regulatory burdens such as considering Bitcoins to be commodities rather than currencies and taxing holders of Bitcoins for capital gains – as the IRS are seeking to do in the US). The IRS in the US is also hunting down Bitcoin users and breaking their shield of anonymity so as to find them and tax them.

The British government, through the UK Treasury, is also looking at greater regulation of Bitcoin in an effort to bolster anti money laundering or the countering of the financing of terrorism (AML/CFT). Australia is following suit in a similar vein, and it’s a matter of time this becomes a wider campaign, driven by concerted regulatory authorities.

The moment governments introduce sufficiently high capital gains taxes – and they will because they will be able to justify it as a tax on something that has been made purely through speculative channels and with no underlying economic activity – and over time, this will destroy Bitcoin’s value?

The reason why governments will, over time, not allow for Bitcoin’s operations is because it threatens the sovereignty and integrity of their national borders. Governments will never cede their ability to use monetary policy to control and influence economic activity. This is precisely what Bitcoins do as they fall beyond the reaches of central banks and regulators and how can a country aim to control inflation, employment, underlying economic activity, if a currency that they cannot control is influencing their economy? This is the challenge economies like Vietnam or Indonesia face because of the pervasive influence of the US dollar on their economy and they are unable to exercise monetary policy tools.

The race to regulate Bitcoin has begun, and ultimately, this is what will lead to the moderation or possibly the demise of a currency that is not backed by underlying value, economic activity or output.

It’s all about finding the next sucker

The way the Bitcoin market is moving now, nobody is actually using Bitcoin as a medium of exchange or as a currency. It is a commodity or an asset that people are holding on to, and hopefully selling it off to somebody else before the whole thing implodes.

Since the start of the year, Bitcoin’s price has jumped more than 1,000 percent since the start of the year, and Bitcoin futures just began trading at the Chicago Board Options Exchange (what happens when you bring together a fake currency and a financial weapon of mass destruction??)

The shadowy nature of Bitcoin’s true controllers

The other real issue with Bitcoin is the completely opaque structure of Bitcoin’s ownership structure. Satoshi Nakamoto, the founder of Bitcoin, allegedly owns up to 1 million Bitcoins, or roughly 5% of the theoretical maximum number of Bitcoins (21 million). If and when Nakamoto chooses to cash out, it will lead to a collapse of the currency as we have it.

Another estimated 1,000 people own up to 40% of the total Bitcoins in circulation – most of them who are connected to each other. There is a persistent, and reasonable concern, that if these Bitcoin owners choose to ‘pump and dump’ the Bitcoins (given the lack of any real governance or regulation around Bitcoin trading at present), then those shouldering the fallout will be the investors who came in without understanding what it is and without an ability to influence the market or hope for some form of regulatory/governance mechanism to support them.

Collusion, which is generally illegal for almost any other asset class, can take place with impunity amongst the Bitcoin community (the majority of coins which are controlled by a very small group of individuals). The Bitcoin whales (or those who control significant portions of the Bitcoin world) are under (currently) no regulation, there is little anonymity, and there is no oversight – so how will this lead to the type of transparency that one requires in order to be the de facto currency of the world?

Bitcoin’s widespread acceptability isn’t all that it is cracked out to be

Bitcoin enthusiasts will claim that Bitcoin is going to be the new digital gold that will overhaul the existing global monetary system – overhaul to what exactly is not something they are able to answer. They will cite it’s widening acceptability as a medium of exchange – but it ain’t.

Bitcoin’s acceptance as a mode of exchange is still hugely limited. Last year, 1% (or 5) of the top 500 online businesses accepted Bitcoin as a medium of exchange. Given the fanfare Bitcoin has had, you would expect there to be an increase in its acceptability. But actually, only 3 of the top 500 (or less than a percent) online retailers are now accepting Bitcoin – so the number has fallen.

The single biggest traded commodity each given day, is oil. It is oil that drives the strength and value of the US dollar. There is almost never going to be a time where anyone will sell oil in Bitcoin. Nobody (sane) will seek to sell their home or property in Bitcoins. Everyday life will rarely include Bitcoin in its path – and it is not going to become the ‘de facto currency of the world’ which is part of the excuse individuals use to explain the current price levels.

Furthermore, it is also important to note that, even in the world of cryptocurrencies, Bitcoin isn’t the only non-value generating currency or show in town. There are numerous other cryptocurrencies (including DarkCoin – which has increased in value exponentially over the last few months, Litecoin, Ethereum, etc), all with the same level of vulnerabilities and issues. Why should any of the currencies be THE cryptocurrency of choice?

This is remarkably similar to the conditions that led to the South Sea Bubble, a period of history where even Sir Isaac Newton lost a fortune which led to his famous quote, “I can calculate the movement of the stars, but not the madness of men.”

Incidentally, Venezuela just launched Petro, their own national cryptocurrency – and to be fair, at least Petro is backed (allegedly) by the national oil reserves of Venezuela, which is more than can be said for Bitcoin.

It’s a secure trading currency

 The Bitcoin enthusiasts argue about the security Bitcoin offers. It doesn’t.

South Korean Bitcoin exchange was hacked and has gone bust in recent days – with North Korean hackers being blamed. There is a continuous stream of reports of digital wallets and coins being stolen and with little recourse for individuals who have lost their earnings. This is what happens in a world without regulation.

These are not isolated incidents either. In a report delivered in 2016, Reuters argued that a third of all cryptocurrency exchanges have been hacked.

The fact that authorities are routinely seizing Bitcoins (see examples of SwedenBulgariaUS) suggests that a concerted drive by determined individuals can also take control of the Bitcoins you think you own.

Beware and be careful

From the time I started on this article 3 days ago, to the current time, I note that the Bitcoin valuation has gone from close to US$20,000 to just over US$13,000, with no real change in underlying world economic conditions in those 3 days.

It just goes to prove my point that a currency based on nothing, will move due to anything.

Ultimately, one should never buy what one doesn’t understand. Of course, the likes of the Winklevoss brothers will argue that Bitcoin will grow by twenty times – but that’s of course only because they own a huge chunk of Bitcoins and will only benefit from a price increase.

I worry greatly when I see young people take out credit card debt to buy these coins or in some insane cases, take out second mortgages!As I’ve said earlier, nobody’s going to sell their homes for Bitcoins, so why bet your savings on it?

People are going to be at the mercy of forces they can never hope to control or understand, and should not be investing in what essentially a fad based on no real underlying value or economics. Aswath Damodaran’s (Professor at NYU Stern School of Business) warning about it being a potentially lucrative but dangerous pricing game with no good ending is one that people should do well to heed.

People also often make a mistake in assuming a paper profit translates to actual cash surplus. We already are reading about the lack of liquidity in the market place alongside cases of individuals who are unable to liquidate their Bitcoins for cash, especially during a downturn.

Nobel Prize winner Joe Stiglitz argues that Bitcoin should be outlawed because it doesn’t serve any real useful function but ultimately it may not require any legislative forms of control because it will disappear into the margins of society where it began once people realise the lack of substance or value that one can attach to it and after people realise in the end, it comes down to a bunch of digital bits they can never see or touch and which is not backed by anything real.

Reflections on the Singapore National Day Rally 2017

The Singapore National Day Rally 2017 took place on the 20th of August 2017. The full video of the rally can be viewed here. However, the salient points of the rally are depicted in the image (copyright: Reza Ali) below. (For a PDF version of the image, please download it here: NDR2017)

My personal reflections on the rally can be found below the image.

NDR2017

Reflections

The emphasis on childhood education and development is an important one. As the Prime Minister noted, this helps ensure greater social mobility over time.

In my earlier article on income inequality, I wrote the following:

Governments and policy makers should also consider more directed interventions to enhance the social conditions of lower income families. For instance, in the UK, the Child Benefit offers a weekly allowance to parents for every child they raise. The transfer could be better targeted by making the income taxable as personal income, which will reduce the size of the benefit for those in higher tax brackets or who do not have face any other mitigating circumstances. In the UK, child poverty has dropped sharply whilst in the USA; it has risen by a third between 1969 and 2013. A child-benefit programme will help make a major dent in child poverty and also represent a powerful investment in the future. Introducing a child-benefit program in the US will make a major dent in child poverty and represent a powerful investment into the future.

The focus towards building greater support and increased investment towards the KidStart programme  – which ensures lower income families are supported in their children’s education and development – will have a huge impact on the recipient families. It will support greater social mobility and enhanced potential for economic empowerment.

The support being provided to expectant mothers even before the children are born is also similar to the Finnish system – and one which I admire deeply. Parents of new-born babies are given books to read to their children so as to inculcate greater reading, social and cognitive development amongst their newborns.

The second pillar of the National Day Rally was on healthcare, and particularly diabetes, is an interesting one. The Prime Minister’s emphasis on a good quality of life, rather than a long life is an important one. Whilst potential solutions, including the imposition of a sugar tax or better consumer awareness of high-sugar food are being reviewed for efficacy, the government needs to provide a clearer framework as to how the war on sugar and diabetes will be fought.

The final area of consideration at the Rally was that of a ‘Smart Nation,’ or the development of an integrated approach to information technology, employability and productivity in light of massive developments in the areas of big data, the Internet of Things (IoT) and blockchain technology.

The Prime Minister spoke of a need to further enhance areas such as mobile payment – but beyond merely the technological enablers, there needs to be a greater consideration in terms of educating and socialising to people the benefits of such solutions and also help convince them that this is indeed the way to go by also clearing up some of the pain-points and fears around online security and their own protection.

The Prime Minister spoke of how technological innovations are driving areas of retail, logistics and security. However, the examples he chose also demonstrated how employability is going to be impacted – with less people able to do more. The Prime Minister spoke of how new areas of employability such as big data analytics will be created but urgent measures are still required to support the employment dislocation that is inevitable as companies use greater technology with less manpower. Whilst programmes such as SkillsFuture will go some way towards alleviating the challenges, there needs to be further measures to support individuals who are further down the education spectrum who need more help and assistance.

The close of the Rally with a fantastic story of three generations of the same family achieving social mobility through education was inspiring and inspired! It carefully encapsulated the central theme of the rally around how education allowed for the son of a gardener to become a rail engineer and how his son, through the investments being made in the areas of technology, has all the opportunities to succeed.

Ultimately, the National Day Rally was one in which the government’s duty to its people and building of the nation’s future was clearly demonstrated. The challenges are many, but not insurmountable.

Why The Finnish Education System Works.

I’ve previously written about my admiration for the Finnish education system.

I just finished reading Cleverlands, a book by a London teacher, Lucy Crehan. Lucy decided to visit five countries with top-notch education systems: Finland, Japan, Singapore, China and Canada – spent time there with teachers and tried to understand what it was about the culture, the education system, the philosophy and the approach that have allowed for these nations to be amongst the top for quality of education.

Upon reading this very informative and thought-provoking book, I revisited the topic of Finland’s education policy and thought it’d be useful to share some pertinent details.

Start of formal education

Formal education in Finland only starts at the age of seven, significantly later than in most other countries.

The late start of formal education has had no impact on the competency attainment in literacy, maths or science by the time Finnish children turn 15. Finland still ranks amongst the top nations in the PISA rankings.

Before the children turn seven in Finland, quality time is spent on creating the right conditions that support the children’s holistic growth and development. There is a predominant focus on the development of social skills, positive self-affirmation, reflection on right and wrong and creating the basis for much more positive interaction with their peers.

This emphasis on holistic development before they start school has allowed for Finnish students to rank amongst the top of their peers globally despite starting formal school later than in most countries. This is further supported by a generally high staff to student ratio and where the teaching and support staff are all highly trained and qualified professionals.

Free compulsory and comprehensive education

Finland also runs a free comprehensive education system for all children for the first nine years of their formal education (from seven to sixteen).

All of the children are trained to the same curriculum during their time at comprehensive schools.

In their first few years in their comprehensive schools, children with additional or special needs are identified early by their teachers. These students are then given greater support and guidance with teachers who are equipped with the right training and skill sets. These children may then be placed in smaller classes where they are given greater bespoke support and guidance by teachers. Beyond this though, there is no further ‘streaming’ or classification of students into different ability groupings and the children remain in class together till the age of fifteen/sixteen.

Despite the relatively late start of formal education (from the age of seven), Finland not only has one of the highest ratings of their children’s performance in international education rankings, it also achieves one of the top scores in terms of equality across students – where the gap between the best and worst performing students is narrow.

Another important aspect of Finnish education at the comprehensive school level is that schools have a multi-disciplinary approach to children’s development. All schools or clusters of schools in each area have a support team including a nurse, dentist, speech therapist, psychologist and counsellor. This child welfare support team form the base support for all schools where each child’s progression is considered.

This approach to education has a significant investment outlay. However, the Finnish attitude to this is that it is much most costly (and wasteful) when any Finn is excluded from active society due to a poor start during their schooling years.

As Ilpo Salonen, Executive Superintendent of Basic Education in Finland (in an interview to Crehan) says, “When we are five million (population-wise), we cannot afford to drop anyone.”

Empowering the teachers who are educating the youth of the nation

“If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to year for the vast and endless sea.”

Anotine de Saint-Exupéry

The Finnish approach to the development of their teachers is a fundamental underpinning of the Finnish education system

There is a significant emphasis on teacher training. All aspiring teachers need to first go through a rigorous and robust training programme, to Masters level, at one of eight prestigious Finnish universities.

Here, the teachers are all deeply immersed in understanding the pedagogy and educational approach towards a nationally coordinated curriculum.

Following this rigorous training programme, in their initial years, they observe senior teachers and have a programme of mentoring that help them further develop and refine their skills.

They are subsequently given greater autonomy when they are in schools (there are no lesson observations, no school inspections for example), and have the freedom to grade students to the age of fifteen (when they are in comprehensive schools) and even have the freedom to choose their own books for children!

This autonomy and trust provided to the teachers provides them with greater motivation and passion. In return for the trust shown to them, the teachers have a very disciplined approach to continuous professional development, where they spend time each year to learn new concepts and best-practices in teaching.

This Finnish approach of providing all teachers with the mastery in the art and science of education and teaching, creating a peer community of teachers, continuous training and respecting them by providing them with greater autonomy has reaped significant benefits for the education of children in Finland.

The power of culture

One cannot underplay the role culture plays in ensuring the overall approach to a high-performing education system.

In the case of Finland, the educational framework has a thoroughly egalitarian approach – where both vocational and academic pathways, post the basic comprehensive education phase, are deemed to be equal.

Children are also reinforced with positive affirmation and motivation rather than be shepherded early only in their childhood towards educational pathways which they may not necessarily understand.

The Finnish traditions also consider teaching to be a highly respected profession (despite the average pay) and hence the teachers who join the profession are intrinsically motivated and are committed to delivering public value through their custodial responsibilities of their nation’s youth.

For long stretches of their history, Finland and her people have been ruled by various colonial powers and were subjugated as second-class citizens. From the onset of independence, the Finnish people were determined to ensure they would never again be second-class and education was seen as an important lever to enhance themselves and their sense of self.

Finland remains a model of education for educators and regulators everywhere and has much for us all to learn from.

Inspirational Quotes for Education and Learning

I originally read this in a blog by Dr Maryellen Weimer and found it very inspiring and instructive. I’ve made some minor amendments to the original post in the link above and hope this inspires anyone who’s an educator or a student (which should really be each and every one of us!).

“Education breeds confidence. Confidence breeds hope. Hope breeds peace.”

– Confucius, 500 BC

Tell me and I forget. Teach me and I remember. Involve me and I learn.

Xun Kuang, Xunzi – Ruixiao: The Teachings of The Ru, Book 8, Chapter 11,250BC

“All discussion of reform must begin with the ordinary student, not the genius, not the prospective scientist or professor of abnormal psychology but the citizen of the republic who must earn a living in addition to living a humane life.”

– Paige Smith, Killing the Spirit: Higher Education in America, 1990, p. 200

“Good students are those who learn. Whatever their preconceptions, barriers or deficits—whatever their story—they take new information and new experiences, and to the best of their ability, make them tools for transforming themselves and their world. And at last I’ve learned that a good teacher is someone who can recognize and connect with good students—in all their forms.”

– Mark Cohan, “Bad Apple: The Social Production and Subsequent Reeducation of a Bad Teacher,” Change, November/December, 2009, p. 36

“Our students live in cacophony. Clamour, chatter and din fill their ears, and may even injure them. To many, a moment of silence in unendurable. I cannot ask them to put their heads down on their desk and be quiet, as Mrs. Morgan commanded me to do in Grade 2. But we can educate ourselves to be models of intellectuals who trust and value silence, who practice what we have always known; when no one is speaking, someone is learning. We can create oases of silence where cool springs of insight trickle and flow.”

– Ron Marken, in Silences, 2008, p. 115

“Most teachers resist showing students the dirty part of real learning and by the dirty part I don’t mean the hard work…. I mean the part where we fail nine times in a row before we find a good approach. I mean the parts where we are confused about our project, defensive in the face of criticism, doubtful of our abilities…. Whatever the venue … teachers like modeling their knowledge, not their ignorance, and they avoid referring to the muddy paths, fear-filled moments, and just plain failure that are the unavoidable parts of getting the knowledge we possess.”

– Marshall Gregory, “From Shakespeare on the Page to Shakespeare on the Stage,” Pedagogy, 2006, p. 324

“Skills as complex as questioning, listening and response are learned step-by-step; mastery is a climb up a ladder, not a pole vault.”

– C. Roland Christensen, Education for Judgment: The Artistry of Discussion Leadership, 1991, p. 156

“If members of another profession—say surgeons—were like college teachers, they would perform in isolation without apprenticeships, learning to cut and sew by trial and error. They would know anatomy but be ignorant of biology. They would hold colloquia discussing incision tips and suture innovations. To demonstrate the quality of their work, they would ask surviving patients to fill out bubble-sheet questionnaires with items like: ‘Does the surgeon demonstrate a commanding knowledge of his field? Is the surgeon well organized? Did she show respect for patients?’ No one would look at survival rates.”

– Larry D. Spence, “The Case Against Teaching,” Change, November/December, 2001, p. 14

“The teaching life is the life of the explorer, the creator, constructing the classroom for free exploration. It is about engagement. It takes courage. It is about ruthlessly excising what is flawed, what no longer fits, no matter how difficult it was to achieve. It is about recognizing teaching as a medium that can do some things exquisitely but cannot do everything.”

– Christa L. Walck, “A Teaching Life,” Journal of Management Education,November, 1997, p. 481

“Learning is my daily bread. It is wholly selfish, I fear, but I feel more alive in a community of learners than anywhere else. I am a voyeur, a peeping tom. I like to watch other people doing it almost as much as doing it myself. But unexpected (yet dependable) flashes of intuition or dogged discoveries or familiar ideas enlighten and warm me and make my joy complete. Every day.”

– Peter G. Beidler in Distinguished Teachers on Effective Teaching, New Directions for Teaching and Learning, No. 28, 1986

“The highest education is that which does not merely give us information but makes our life in harmony with all existence.”

– Rabindranath Tagore, Siksa Herfer, 1917

10 Things To Learn From Warren Buffett’s 2017 Letter to Berkshire Hathaway Shareholders

The Oracle of Omaha’s latest letter to his Berkshire Hathaway (BH) shareholders is filled with Buffett’s typical humour, humility and cutting insight.

Below are some early reflections from his 2017 letter which was issued on the 25th of February.

1.   Always Look For The Opportunities

Buffett (and Charlie Munger, BH’s Vice Chairman) will always be “prepared mentally and financially to act fact when opportunities present themselves.”

He then goes on to add, in classic Buffett-style,

“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.”

2.   It’s Okay To Make Mistakes (Just Make Sure You Learn From Them)

Buffett shares his anecdotes about how he’s “made some dumb purchases, paying far too much..” and gives some examples of when he overpaid for companies such as Dexter Shoes which lost all value and for which he paid for in Berkshire shares (shares now worth $6 billion – arguably the most expensive shoe company in the world!). He then made a similar mistake buying General Reinsurance, again with shares. From that point, he explained how he has ensured that most of BH’s deals came from internally-generated cash rather than through BH shares.

“Today, I would rather prep for a colonoscopy than issue Berkshire shares,” declares Buffett. The lesson here is how it is okay for mistakes to be made, but what won’t be okay is not learning from them!

3.   The American Dream – Built By Immigrants

Buffett remains the eternal optimist. He remarks on the ‘miraculous’ achievement of the United States of America over the last 240 years through the efforts of a ‘tide of talented and ambitious immigrants’, the rule of law and human ingenuity. He explains how, since 1776, Americans have managed to amass wealth totalling $90 trillion.

He does acknowledge that the majority of the homes, cars and other assets are often borrowed but goes on to add how even if the owner defaults on the asset, it remains within American hands.

The one point he does touch on very cursorily is about how the wealth is divided but argues that it is okay as long as it belongs exclusively to Americans. The real challenge here is how less than 1% of Americans actually own the bulk of the wealth – and this inequality is arguably the biggest challenge America faces in the coming years and decades.

4.   Remaining Bullish

“Babies born in America today are the luckiest crop in history,” claims Buffett very boldly. He goes on to explain how American businesses are going to be without doubt ‘winning’ as President Trump may claim.

He then reminds investors that ‘widespread fear is your friend as an investor, because it serves up bargain purchases,’ and that ‘personal fear is your enemy.’

5.   Succession Planning and Managing Talent

Buffett speaks of Ajit Jain who manages Berkshire Hathaway Reinsurance Group and extols his virtues including how Ajit’s operation ‘combines capacity, speed, decisiveness, and most important, brains in a manner unique in the insurance business.’

Buffett talks about how when Ajit Jain first came to BH, he had no experience in insurance and went on to build one of the most successful insurance businesses. Buffett goes on to say, “I there was ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!” providing further hints that Ajit Jain could become the next chief of BH.

Ajit Jain is also another immigrant from India who has established his roots in the US and it will be interesting to have the views of Steve Bannon who was dismayed by the fact that there were too many CEOs from South Asia.

6.   The Power of Marketing

Buffett demonstrates how you should always be unashamedly promoting the brand you represent and goes on to tell all readers of the letter to go on to GEICO (an automobile insurance firm) by providing their contact details to save money on their auto insurance! He extols the virtues of GEICO’s superior advantages driven by low costs and how they’ve grown (from making US$8 million annually in 1951 to making that same amount now every 3 hours!).

7.   The Importance Of Having Trusted Advisors Beside You

Buffett explains how he has made errors and ‘stumbled’ either in assessing the fidelity or ability of managers and also talks about how one could count on him certainly making more errors. He then touches on how he is fortunate that Charlie Munger is always around to say ‘no’ to his worst ideas! Anyone who thinks they have no need for guides or advisors is going to be sadly mistaken.

8.   Targets Drive Behaviour And Culture – The Challenge of CEOs Who “Always Make The Numbers.”

Buffett fires a shot across the bow for CEOs who tend to omit certain items or expenses in order to ‘make the numbers’ and meet analysts’ expectations. Buffett warns how CEOs who ‘overtly look for ways to report high numbers tend to foster a culture in which subordinates strive to be “helpful” as well.”

As Buffett explains, business is too unpredictable for numbers to be always met and when a CEO’s focus is driven solely by Wall Street’s expectations, he or she will be ‘tempted to make up the numbers.’

9.   What Value (Or Fees) Do Those Hedge Fund Managers Add?

Buffett has hedge fund managers plainly in his sight. He bemoans the prevailing hedge fund standard of “2 and 20” which means a 2% annual fixed fees and 20% of profits – which means hedge fund managers end up making money (simply by piling on the assets) even if the underlying fund performs badly.

Buffett argues how merely investing in an unmanaged low-cost index would do far better than through some very expensive fund managers and highlights how only one individual, a Ted Seides, from thousands of professional investment managers offered to take him up on a $500,000 bet that a low-cost S&P fund would beat (over a 10-year period) five expensive hedge funds. He goes on to explain that 1,000 monkeys are as likely to make similar market predictions as 1,000 fund managers…

Buffett’s guidance is that all large and small investors should stick with low-cost funds as it is always going to be the hedge fund managers rather than clients who reap the benefits.

He adds how he has always recommended a low-cost S&P 500 index to his friends but how wealthier investors have always only politely thanked him for the guidance and went away to listen to the ‘siren song of a high-fee manager.’ Buffett estimates that more than US$100 billion has been wasted in the past ten decades as a result of “elite superior investment guidance,” and how most of the financial damage impacted pension funds for public employees.

10. Mind the GAAP – the Woes of Warren

One final point to note about Warren’s on-going challenges with accounting standards, or Generally Accepted Accounting Principles (GAAP). He explains that amortisation is not truly an economic cost and therefore should not be reflected in the way US GAAP requires them to. He also feels that GAAP-prescribes depreciation methods also understate true economic costs which mean earnings are overstated.

Buffett highlights how the changes in BH acquisition strategy – from merely owning a portfolio of stocks to outright ownership of businesses. This meant that rather than having a balance sheet that was ‘marked to market’ (or having a balance sheet that reflected prevailing share prices for the stocks they own) they had now companies they owned or controlled and therefore had to be reflected as per current GAAP or accounting standards. This meant that they have had to write down for companies that lost value (referred to Buffett as the “losers”) but could not revalue the goodwill for the companies that performed well (or the “winners”). This is why their market-value gain was 23.4% in 2016 vs a book value gain of 10.7%.

A Sino-Scottish Football Proposal

Readers of this blog will know of my interests (and soft spot) for all things Scotland. I previously wrote a brief ten-point approach to revitalising Scottish Football.

In the time that has elapsed since that article was written, we’ve seen a robust approach to football development in China. Now, football has always been popular in China but the attempts towards establishing China as a footballing powerhouse have been sporadic at best. However when President Xi Jinping became the President of the People’s Republic of China, it all changed.

president-xiIt has to be noted that President Xi is a huge football fan and he has publicly outlined his vision for China to one day host the World Cup and to then win it! In 2015, a 50-point plan was announced by the Central Planning Committee (of the Chinese Communist Party) to overhaul Chinese football and it was overseen by President Xi.

This desire for China to be a football giant isn’t a new one. The other Chinese leader in the past who had huge dreams for Chinese football was Deng Xiaoping, the architect for China’s economic liberalisation but his priorities had to be primarily on economic and social development.

Chinese football fans are a hugely passionate lot – I recall watching the Singapore Armed Forces FC (SAFFC) playing the Chinese Army Ba Yi team in 1998 at the old Kallang Stadium in Singapore and it was sellout turnout that was half Singaporean and half Chinese (despite the fact it was held in Singapore!) and the passion and energy was fantastic.

In fact, when Stockport County (from the Second Division) did a tour in China, their matches were attended by over 20,000 fans per game (more than five times their home average home attendance!).

The Chinese Football Association Strategy

The Chinese Football Association have clearly spelt out their desire and strategy to be a ‘world football superpower by the middle of the century.’

In an effort to match the strategy, they have embarked on a five-pronged approach towards delivering their vision.

1. Grassroots training, academies’ development and training

The Chinese investment into building the game at grassroots level is absolutely staggering. According to a memo sent out by the Ministry of Education in China on July 2015, they have identified 4,755 schools as specialist footballing academies.

Last year, the world’s largest (and arguably the most expensive) football academy – the Evergrande Football School – opened in Guangzhou, a Southern Chinese province. The school built in 10 months cost over $185 million. The school also has partnered with Real Madrid to provide the trainers and coaches to help develop about 3,000 young Chinese footballers.

Other football clubs, including Manchester City, and ex-players such as Luis Figo and Michael Owen have also established their football academies across China.

The Chinese government have also expressed a clear commitment to include football as part of the overall school curriculum.

This is part of the overall goal to ensure over 50 million children and adults play football regularly by 2020 and to develop the critical mass of high-quality players required to develop a world-class team.

2. Providing Chinese players with international experience and exposure

There have not been as many high-profile Chinese players in European leagues. The two most recognisable players were Sun Jihai and Li Tie who played for Manchester City and Everton respectively. Unlike South Korean and Japanese superstars (such as Park Ji Sung for Manchester United, Hideotoshi Nakata, Shunsuke Nakamura for Celtic, et et), Chinese players have not been able to shine at the top European leagues.

There is now concerted effort to get Chinese players playing in the top European leagues to get the international exposure. There is a reasonable expectation that this will not only allow for top players to develop their craft further but also help China in their international competitions.

It is to be noted though that Chinese players turning out for British teams saw over 350 million Chinese viewers becoming more interested in British football!

3. Ownership and partnerships with globally-renowned football clubs

The top Chinese companies are now investing, partnering or buying outright top teams across Europe. From Atletico Madrid to Inter Milan to Wolverhampton Wanderers, we see Chinese ownership. Chinese consortiums are also partners in other clubs such as Manchester City. This is part of a wider effort not only to drive economic benefits that come from effective management of football teams but to also learn and adopt best club management practices. These best practices will ultimately support better footballing management and establishment of world-class processes and procedures required to develop a football network back in China.

4. Bringing world-class managers and trainers to China

The top teams in the Chinese leagues are now bringing in expert football managers and coaches with very impressive pedigrees. The likes of Luis Felipe Scolari, Sven-Goran Erikkson and Dan Petrescu have come to Chinese leagues and have helped raise the level of the game in China.

5. Signing high-quality talent and superstars from overseas to play in Chinese leagues 

In the recent year we’ve seen the financial muscle of Chinese football clubs (supported by the richest Chinese companies and their billionaire owners, including Jack Ma of Alibaba fame and Wang Jianlin, owner of Dalian Wanda and China’s richest man) outbid top European clubs for the services of world-class footballers. From Ramires (£23 million), to Alex Teixera, to Hulk (for £47 million), to Carlos Tevez (being paid an estimated £20m per annum), we’re seeing a very deliberate policy of bringing the best players to China in an effort to drive up the overall quality of Chinese players in the Chinese League through better exposure to top talent.

What all of the above demonstrates is a clear laser-like focus on the Chinese government ambitions of winning the World Cup in the coming decades. We see the ambition being matched with money, political support and commitment from across all sectors (education, business and policy) – and this is just the start. 

One Area For Further Development

There is, however, one area which is still missing. Chinese players need to be playing against quality opposition week-in, week-out. Whilst the youth and grassroots development is a step in the right direction, it is going to take a decade or more before there is a crop of players who will provide the quality opposition. Having a few superstar players (limited to three foreign players per team in any event) again is not enough. Similarly, having a couple of world-class coaches is not going to be enough.

The Chinese league needs to have complete teams with quality players who can provide the Chinese players with the type of competition and exposure that will allow them to make step changes in their development and progress.

This is where Scottish football comes in!

What Could This Mean For Scottish Football?

The Scottish FA have provided for development loans to help build the youth football framework across Scottish football clubs. The Scottish FA have also provided financial incentives to Scottish football team for performance-based outcomes which include number of under-21 players in the first team.

Alistair Gray, in a BBC interview, also highlighted the quality of youth players from Scotland and the need for the players to have more competitive game time to further develop their capabilities.

The Proposal

My proposal is that the Chinese Football Association allow for the Celtic U23 and Rangers U23 participate in the Chinese Super League and increase the size of the league from 16 to 18 teams.

What would this mean for Chinese football and the players in the league?

  • It means that you will have the top Chinese teams playing against the cream of the crop from Scottish Football , against young players who are technically very competent.
  • It will also allow for Chinese teams to get used to the pace of football Scottish teams can provide and help build the overall footballing game intelligence for Chinese league players.
  • This will allow for a much more holistic development of Chinese players and get them acclimatised to playing against different styles and against much higher overall quality players.
  • It could also lead to a more formal exchange programme between Chinese league players and Scottish football clubs and also promote greater youth development through these exchange programmes.

There are significant benefits for Scottish football as a result of this proposal:

  • It will mean the top youth players from Scotland will have the opportunity to play against an up-and-coming group of Chinese players and further hone their skills.
  • It will also create greater interest in Scottish football by Chinese fans and will spur a greater following. It will help expose Chinese football fans to the intrigues and entertainment of Scottish football. The history of Scottish football, its lore and fables – from the Lions of Lisbon, to the history of the Old Firm derbies,   Archie Gemmill’s wonder goal against the Dutch in the 1978 World Cup. This will allow for the Scottish Professional Football League to negotiate better rates for the TV deal in China in the future. Imagine a world with a billion more interested Scottish football fans!
  • An Old Firm derby in Shanghai – the opportunity to recreate one of the world’s most historic football rivalries, creating an interest in the history and ethos of both Celtic and Rangers for an entirely new audience remains a very tantalising prospect.
  • It also provides a fabulous opportunity for Scottish youth to experience a year out in China, learning more about the culture and experiencing life from a different lens and perspective. This can only further build the bridges between cultures.

Ultimately this initiative will lead to greater awareness and relationships between both China and Scotland. It also becomes a fantastic opportunity for Scotland to showcase her natural beauty, the culture and traditions of Scotland and help increase the overall tourism and investment by Chinese.

It will also help the Chinese sports authorities get one step closer to meeting the Chinese leadership’s ambitions of one day winning the World Cup. Now, that’s an offer that will be hard to refuse.