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Taking my first paid corsera course. Machine Learning.

~ Hermann P
After a few failed attempts at taking online classes, I’m going to commit to taking the Machine Learning course offered on Coursera.

You can check it out here: https://www.coursera.org/learn/machine-learning

I actually PAID for it, not because I’m interested in showing off the certificate, but because I’m interested in actually learning the material. I think that if I pay money I’ll take it more seriously.

To accentuate that, I’ll post updates here on what I’m learning, trying and failing at.

Join me if you want!

Family Vacation in Northern Bali

~ Hermann P
Hi Guys.

As some of you may or may not know… my family and I are spending a month in Bali. We chose Bali for a number of reasons I won’t detail here, but we chose North Bali in particular for a few reasons:

1) It was supposedly not as touristy. We aren’t huge fans of large integrated resorts, drunken tourists and being accosted by people selling junk every 5 minutes.

2) Cheaper. As luck would have it (1) means that you will spend less money.

3) More “real.” My personal opinion is that if you are visiting a foreign country and then go out of your way to make sure it resembles your home country as much as possible… you’re doing it wrong :). Again. Personal opinion. You can take your vacation however you like.

GETTING HERE

Getting here was both easy and hard. For one thing, we are combining vacation with moving, which means that we have 10 boxes and suitcase with us. So we have to consider that with travel arrangements.

The flight from Hong Kong to Denpasar, Bali was uneventful and reasonably short (5 hours). Ok… short for people who are used to 14 hour trans-pacific flights.

Once we got here, we got our bags, met our drivers (one for us, one for our bags) and began the 3.5 hour commute to the house we rented. I want to point out that it’s a 3.5 hour drive and it’s 70 km so that gives you a sense of the kind of road quality and traffic you encounter driving around here :).

Both kids threw up a couple of times and there were points in the drive where we were thinking “what the hell did we do here?”

Once we got to the town we are staying in, the roads got better but it turned out the driver didn’t know EXACTLY where the house was. I had it on GPS (coverage here is amazingly good) and so we were able to find it. Here’s a couple of pictures to give you an idea of what the road looks like.




The second image is the narrow dirt road that leads to the parking for the house. When it’s 10PM it’s quite a bit more rickety and gives you that “there’s no way in hell this is the right place” feeling.
Well, it was the right place.
We got in, got settled, cleaned up some puke and went to bed.




EXPERIENCE SO FAR
Ok. So the drive was a bit rough, but other than that things have been great.
Here’s a panoramic shot from the back yard.
It’s pretty breathtaking.
There are a few negative points.
1. Humans think the world is their personal garbage can.
Because of the increase in population/tourism and the challenges of investing in infrastructure, the beaches have tons of garbage on them. Of course fancy houses for tourists have people who clean the beaches for you, but you can look 100 feet down the beach and see what the average Balinese person sees. The contrast is striking, and unsettling. Diapers, plastic bottles, potato chip bags… people are huge trash generators.

2. There is no “quick trip” to … fill in the blank.
Leaving the area is at least a 20 minute drive. Period. Walking is pretty much out of the question because it’s at least a 1 mile walk just to get to the main road, it’s really hot and the you’re walking through slightly tamed jungle. That means any trip requires calling a driver in advance and taking at least an hour. Needless to say, we haven’t done many :). It’s not uncommon to see a family of 4 with groceries on a moped… and usually the kids don’t have helmets. You do what you gotta do.
3. People are poor.
Not really a negative per se… but unlike fancy integrated resorts with giant walls that keep the “riff raff locals” out, we are right next to the locals and so it’s very obvious how different the standard of living is.


BALI FOR THE KIDS

For the kids, of course, none of this matters at all. We have a really nice woman named Ayu who takes care of cooking and cleaning. I enjoy doing dishes and cleaning up so I think her work load is pretty light. I get the feeling that seeing me wash dishes is a bit odd for her… but that’s ok.
She has 3 girls: 2, 5 and 7 and they have now come over almost every day to play with Lily. Despite Lily not speaking Bahasa (or any native language) and her kids not really speaking English… they somehow have no problem playing together for hours and have become close friends very quickly. Lily is very sad when they go and asks every morning when they will come back.
They build sand structures for hours, play with toys, run around the yard, look at the bugs and so on. I think we can learn a lot by watching children interact. Lily just immersed herself immediately and wasn’t troubled by any of the differences…except maybe food, but that’s kind of typical for young kids anyway.
For Alex it’s a bit different because he’s still so young (under 2). Mostly he runs around naked and goes in the pool. He DID jump into the pool on the first night which gave us a fright and him a healthy respect for deeper water. Since then he hasn’t fallen in or tried to jump… so I guess that worked :). From what I can tell he’s having a blast.
LOCAL SHOPPING

We have gone grocery shopping twice. The first time to get basics and to get a sense of things and the second to stock up more deeply. The interesting experience was the local market. Here’s a few pictures:





















































Now I have to say… this was a REAL local market. By that I mean it was a “why on earth is the white guy shopping here” kind of place. Some of the smells were powerful, but there was a huge selection of fruit, veggies, fish, etc. and we were able to load up on stuff for a reasonable price. I have no idea if we were getting “ripped off” but if we were, it was only in relative terms and I have no problem contributing to the local economy.
I was very thankful that Ayu came with us and could show us where to go and what to look for. My wife is also incredibly good at picking out fish, fruits and vegetables and has no problem getting her hands dirty. It was an awesome experience and I think it would have been harder to get if we had stayed in a more touristy area.


UNEXPECTED OBSERVATIONS

On the 3rd point above. EVERYONE we’ve run into is super friendly and doesn’t really seem to care about the obvious wealth disparity… at least not yet. I’m sure there are people who are annoyed that their once pristine and open beaches are now dotted with big houses rented to foreigners, but I haven’t felt any of this. Also, there are almost NO people trying to sell you stuff here… and when they do, it might actually be worth buying. No $5 made in China Buddha statues, etc. We did buy some peanuts and there’s an old woman selling hand made wrist bands every morning.
It’s mostly fisherman and their families trying to scape together a living.
I did talk to a guy who has lived here for many years and he related that while some things are better (health care, roads, utilities) the cost for the average person here has gone up much faster than the wages (sound familiar) and he’s really worried that the increased cost of living will be a big problem for his children.

My gut is that over the next decade or so the area along the coast will become more “rich expat rental homes” and then eventually “large integrated resorts” and the people that live in shacks along the beach making a living as fishermen will be relocated elsewhere. That’s really sad to me. I wish that the local population could benefit more directly from those kinds of developments, but it doesn’t seem to happen this way.
So I’m glad that we were able to see this area before it gets to that point. And even though I feel some guilt in living in such comparative opulence, I prefer being able to spend at least much of my vacation money directly on the local economy rather than giving it to a resort.
It’s also a lot cheaper when you are inconvenienced. Since I can’t just pop down to a fancy restaurant we tend to cook and eat at home… and we tend to eat what we have. We also tend to relax a lot. Since there isn’t 24/7 catered entertainment, we play hide and seek, make friends and talk to locals, lounge in the pool, etc.
It’s been great so far.

Two of the most powerful productivity tools.

~ Hermann P ~ 1 Comment
I’m going to let you in on a secret. I’m a terrible procrastinator and I am riddled with guilt about it.
I have lots of ideas and never realize them.

I have lots of goals and never achieve them.

I am incredibly envious of people I know that are super focused, highly productive and just seem to do it all the right way while I flail around like a fish in a rowboat gasping for air.

I’ve tried to get better and continue to, but it’s rough and slow going.

So dark side out of the way, I want to introduce you to two of the most powerful tools I use every day and they’ve helped quite a bit.


1) The  Text Notepad

I use “notepad.exe” on my laptop, but you can use whatever you want.

I tried them all, evernote, virtual sickies, tasks in google calendar, etc etc. None of that worked nearly as well as my notepad.exe blank text file.

What’s the structure?

Simple, I type the date at the top and then I have a list of stuff to do.

Every morning before I do ANYTHING, I crack that baby open and spend at least 10-15 minutes planning out what I want to do.

I order it first by “thing I want to do least.”

That’s different than the most important thing method or the easiest thing first method or many other methods. The reason I order it this way is because stuff I HATE doing tends to occupy huge amounts of brain power while it ISN’T being done. This is usually mundane and unpleasant work. You KNOW you have to collect that tax information. You KNOW you have to send that rejection email. You KNOW you have to have that unpleasant conversation with that person.

We delay those things for a long time and while we delay them they act as a tax on EVERYTHING else. So I try to kill those first.

Next on the list is stuff that is time critical/easily actionable. There is sometimes overlap between stuff I dislike and easy/critical/annoying things (say, buying airline tickets or sending meeting notes). I also like to “chunk” those things together so that I spend 30 minutes on things like responding to meeting invites (or cancelling them), planning a trip, typing up interview feedback, and so on.

Then I try to pick one (or maybe two) things that require more focused energy and should be the major contributors of value for the day. This is something like finishing a presentation. If you’re an engineer/artist/etc and not a “manager” it’s stuff like finishing a feature or completing a piece of art. It’s important that the end result is “finished” in some way. I’ve also found that limiting how many I allow myself to do reduces distraction, switching cost, anxiety and many other things that dramatically reduce my effectiveness. I allow myself the freedom to NOT do most things on most days.

And finally is the “fluffy” stuff. Things like “test out that new game engine” or “try to visualize that data in an interesting way” or “read those cool HBR articles people have been sending around.” I tend to find those things to be the most fun to work on and they can act as “rewards” instead of “distractions” if I leave them till the end.

OK. On to tool #2


2) The 30 Minute Timer

Again, I’ve tried lots of high tech solutions here.

My favorite. Go to Google.com and type in “30 minute timer.”

That’s it. Away you go.

I try to put tasks into chunks and spend 30 minutes on them. I try to do NOTHING else. I try to forbid myself from reading news, email, text messages, etc. I try to shut it all down except the window that I need for the thing I’m doing and the timer window.

I commit to making EVERY task be 30 minutes long. This is weird, but the reason I do it is because I found myself wasting a lot of time trying to “guess” how long things would take. Worse, my guesses were both totally wrong and usually irrelevant. By taking out the time and energy required to estimate things I actually make much more progress and am much less likely to procrastinate doing the task to begin with. Even writing this blog post was done in 30 minute increments… although it took about 5 of them.

If I finish early, I either take the next chunk of tasks or I take a break.

If it takes longer I quickly decide if I want to commit another 30 minutes or not.

It is AMAZING what can be done in 30 minutes if I remove all distractions and just focus.

It’s also amazing how much better the day is when I start by getting those horrible things I hate doing out of the way. It’s sort of like being in a room that is clean and organized vs being in a room that you are dreading to clean and organize. Same room, different feeling. So my approach is to clean the room, THEN do the work.

So that’s it!

I’m happy to write about things like how to write tasks in a way that makes them actionable, how to segment things into time chunks, how to fight distractions, etc. if there’s interest.

Please let me know what you’ve tried to increase your focus and productivity.

Simple, cost effective long term retirement plan for your kids.

~ Hermann P ~ 2 Comments
NOT A GENERAL POST ON INVESTMENT ADVICE
I haven’t posted much about investment. I think about it a lot and I research it a lot, but it’s such a tricky subject and so open to interpretation. Also, there is TONS of good (and tons ^ 1000 of bad) investment advice around.

That said, this is one piece I feel really strongly about.


SHORT AND SWEET

I’m not going to spend a lot of time on investment theory, tax optimizations, transaction fees, inflation, value of advisors and the thousands of other topics broadly discussed.
I am going to make one, simple, specific recommendation that I’m doing myself.
Here’s a step by step list:
1) When you have a newborn (or if you currently have a child). Open a simple trading account for them. ETrade, Ameritrade, Interactive Brokers, Vanguard, Schwab, whatever.
2) Put $5000 into it. (or whatever you can somewhat comfortably afford… but 5k is a really good number)
5) When your kids turn 18, convert it into an IRA (or some other tax deferred vehicle, if its possible).
6) Try to figure out how to not have them or anyone else touch it until they are 65 (or whatever normal retirement age is).
7) When they have kids, have them (or yourself) the same thing.
That’s it. Set it and forget it.
I wouldn’t rebalance. I wouldn’t dollar cost average. I wouldn’t track it. I wouldn’t tell my kids about it (until I have to). I wouldn’t include it in any budgeting, etc.
Why?
Because activity and information lead to decisions that work against the long term potential here.
If you’re satisfied or totally dismissive, read no further, if you’re not, read on.

RATIONALE

INVESTMENT PERFORMANCE
Over the very long term, small cap beats all other types of investments. The ride is rocky. Timing is impossible and you can’t possibly do this for money that you will need even over the next couple decades. But over 6 decades it’s likely to produce fantastic returns… as long as you don’t mess with it!
Google all you want. Read all you want. Study all you want. Historically over very long time periods… small cap value just crushes face. That won’t help you if you’re 40 years old and need to retire in 25 years and need a 15% compound return. But if you are 2 and have a 63 year window, and a modest amount of risk capital; It’s as close to risk free as it gets. Since my 2 year old can’t make investment decisions about their retirement 63+ years from now, I’m making one for him.
THE ENEMIES ARE INFORMATION AND ACTIVITY
We love knowing how our investments are doing. Day to day, Hour to hour. Minute to minute. We want to research, we want to tinker, we want to beat the S&P. We think we are smart.
This is not the point here. If I could erase the knowledge of these accounts from my mind (and my child’s mind) and then when they hit the age of 65 (or whatever) they wake up with recall… that’s what I would do. Knowing how these accounts are doing and ANY activity puts the strategy at risk I am not even going to rebalance. The ONLY thing that would make me conduct any activity is if something like Vanguard went bankrupt or got bought or something and I was forced to take some kind of action. Then I’d try really hard to find similar low cost, small cap diversified investment vehicles and reinvest with whatever the asset allocation happened to be at the time.
I can FEEL people talking about how this isn’t optimal for risk management, etc. That’s not the point. I’m optimizing for psychological behavior of myself and my kids. We are short term rationalizing beasts. This strategy is in response to that.
THE SIMPLE MATH
OK. Here’s the exceedingly simple math.
Let’s say you have a baby and you do the above. Historically (since 1930) the small cap value return is 15.4%. If you compound that over 65 years, the result is?
$55,251,945.86
That’s right. doing absolutely nothing else at all, your 65 year old child retiree will have 55 million dollars. Granted. Inflation will chew at the value of that it will double and half many times. It will go through world wars, terrorist attacks, presidential assassinations, and technological changes you can’t imagine. It might not even survive if the whole country collapses. But then, what investment will :).
Now let’s be more pessimistic. At 8% it’s only $743,899. That’s a LOT less, but better than a hole in the head. At 11% it’s a still respectable $4,415,334 .
By leveraging both global and US specific companies in this area I believe my kids will be well served by this trend as the world globalizes or (galacticalizes?).
Basically I give them partial ownership in the global collective of small, innovative, relatively “cheap” businesses around the world over the next 6 decades. I choose Vanguard because I believe as an investment company they are likely to be around a very long time and they don’t charge huge fees or try to be too smart.


IMAGINE YOUR OWN FUTURE OR PRESENT
There are lots of headlines today about seniors who are scared of retiring. The reasons are very real. Failing or inadequately funded pensions… and in many cases no pensions at all. Potential threats to social security. Inadequate savings. Bad investment performance. Fees taking too much away. Etc etc.

I don’t want my kids to face this. Nothing can guarantee that, of course, and ultimately I hope they are helpful, engaged and productive members of society. But I think many helpful, engaged and productive members of society face this terrible future as they age. Sometimes of their own making, sometimes not.

GREAT ARTISTS STEAL?
This is a blatant copy from an idea by a senator named Bob Kerrey in the 1990s called KidSave. I really liked the idea when I heard about it. It was simple. Each newborn child gets $1000 from the federal government put into a savings account managed in the same way the “Thrift Savings Plans” are managed (to avoid “professionals” taking their cut as much as possible). Then for the first 5 years of the child’s life, the $500 (or whatever) child tax credit would go into that account. It’s impossible to withdraw those funds until the age of 65 and they are tax deferred. At 8.5% it was projected that each child would retire with over a million dollars. At four million births per year, that is a four billion dollar government program that essentially wipes out retirement problems forever.

I don’t think it would have worked as planned because the size of that pool of money would have created all kinds of nefarious and unethical practices by public and private sector institutions. And, of course, it requires that the country continue to grow and be successful… but so do all other alternatives. But that doesn’t matter. We can recreate the basic concept.

CONCLUSION
It’s simple, when it comes to compounding interest time matters MUCH more than amount. As a really crazy example, let’s say you go back to the year 0 and invest 1 penny at 3% interest. 2,000 years later you have $472,551,787,558,269,000,000,000.00. Of course, that’s impossible to actually have but it illustrates the point. Small sums over huge periods of time result in big numbers.

Also, please don’t forget to make sure your kids pass that on. The goal isn’t to create vast, indefensible dynastic fortunes. The goal is to promote a simple system that relieves a very basic and fundamental human problem.

Let me know what you think!

How to improve critical thinking: Inversion.

~ Hermann P ~ 1 Comment
INVERTED THINKING

The idea of inversion was introduced to me by a guy named Carl Jacobi. I heard the quote “invert, always invert” and thought it was a great concept so I dug around to find out who said it.

For a great article on using inversion to solve real problems, you can read this post. If you don’t want to bother the summary is that the problem of trying to keep B17s from being shot down during WWII was looking at bullet patters on the planes that returned and then extrapolating that where there were NO bullet holes must be where the planes are weak (because the weak planes didn’t return).

This is classic inverted thinking. You look at information from the opposite point of view. The absence of data can be more meaningful than the presence of data.

Why is this hard?

Many things work against this kind of thinking. The most obvious one is that we have WAY too much information around us… so it’s unlikely that we will get through this information and find our way to the non-information.

Another reason is that it’s much more difficult mentally. If I show you a pretty graph with nice pictures and well stated text your natural thinking process attempts to understand what is being said. Only afterwards and with much deliberation will you consider what is NOT being said. What we can see overwhelms our mental processes making it very difficult to contemplate what can not be seen.

Why is inversion valuable?

I am a firm believer that value and difficulty tend to be related. Inverted thinking is valuable because it is hard. Because it is hard, less people do it less frequently and thus the insights it can provide are discovered with less frequency. Therefore it pays to practice it on things that aren’t that important, just to get the knack.

I also think it’s valuable because it forces you to look at things in a much clearer way. It tends to be “unnatural” and a bit ridiculous to invert some things… sort of like a child constantly asking why. And yet. It can be really enlightening.

OK. How can I practice?

Well… it’s actually not that hard to do. I’ll take a few contemporary examples.

1) It believe Donald Trump is a self-serving bigot who should never be president.

OK. That’s a sentiment I hear a lot these days. Let’s invert it… and see what happens.

Step 1: Inversion: Assume I believe that Donald Trump is a giving uniter who wants what’s best for people and would be a great president.

Step 2: What would have to be true for that statement to hold? What would I have to believe that I don’t? What would  I have to assume is true that I believe is false?

This forces me to take a position I don’t hold and then imagine myself believing something completely different. That’s the first step to understanding an opposing point of view which is one of the benefits of inverted thinking!

Inversion can be used in goals as well!

2) I want to lose weight and get in shape.

This is a pretty popular and valuable goal that few people attain. Let’s invert

Step 1: I want to get really fat and out of shape.
Step 2: What do I need to do to accomplish that goal? Eat all the unhealthy food I want. Lead a sedentary lifestyle. Avoid the discomforts of physical activity.

That gives me a nice list of things that I would do if I wanted to get fat. That may seem obvious, but I think that when I make that list I find that a lot of it is about delayed gratification and discomfort. Thus, I could conclude that if I want to lose weight and get in shape, I must embrace discomfort and instant gratification.

That’s quite different than buying exercise programs, a gym membership and fancy workout clothes.

Conclusion
So next time you find yourself thinking something that is obvious or seeing something that you are trying to understand, practice inverting it. Why is there rush hour traffic? Why do we pay $5 for coffee? What causes cancer (Mole rats never get cancer)?

Those are all questions that you can practice inversion on.