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How the handicapper became a jockey

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This is reposted from my original robincmba.blogspot.com post dated Thursday, April 7, 2005…  I wanted to consolidate blogs.

The other night, I had a rather intense dream. Intense emotions. Intense realism.

Intense fiction.

When one of my roommates first moved in to my current house and home last spring, he introduced me to the discipline of handicapping thoroughbred horse-races using the structured and tried and true methodology of the Controlling Factors: Speed, Class, Record, Weight, Interval between races, time, and odds. While he has returned to work two days per week, he spends every of the intervening days, for most of each day, betting the horses. Personally, I think it is a bit excessive, but it’s not my business, as long as he makes rent each month.

Since then, I’ve expanded my handicapping knowledge base, including formal studies of various methodologies–but still, I don’t have the money to play the races regularly–nor the desire to–but rather continued more formal studies because of my extensive background in forecasting, modeling, and statistical analyses.

But this is just background information for this odd, intense dream I had the other day.

The beginning of the dream started with my estranged wife spending pleasurable quality time together with me, just like we used to do. It was a refreshing change from the cold rudeness she affords me whenever I travel to her parents’ house, where she lives with my daughter.

They say time heals all. But surely this is a sign that the intervening year and a half since our separation has had barely any effect at all–that I still wish that a snap of the finger could bring us back to our happy days–that we could once again be a happy family. In my dream we spent happy times, as we did for so much of the almost five years we were together, exploring the natural world together–thinking about the science behind what we take for granted–thinking about such things as why ice floats, for example. We take for granted that ice floats. But because we take it for granted, we don’t think about it. And because we don’t think about it, we really don’t understand what is going on that makes ice float. In fact, ice won’t always float. We take it for granted that ice floats in liquid water, but never stop to think that the very physics that makes ice float in water could make ice sink in some other liquids, or that in the microgravity of freefall, such as a spaceship in orbit–that’s right, there is a strong gravitational pull on spaceships; the only reason astronauts seem to be weightless (not massless, which would mean they didn’t exist) is because, they–and their spacecraft–are in fact very strongly being affected by the earth’s gravity. They are weightless because they are in a very controlled freefall in a special condition where they fall towards the earth (quite fast, too–the speed at which they orbit) and they fall at just the right angle that their freefall is just at a rate that matches the curvature of the earth. That’s right–spaceships and astronauts are actually in freefall, because of the earth’s gravity (and their very fast orbital speed is evidence of how strong this gravity is), but in a special freefall where they fall towards the earth, and just match the curvature of the earth, so the freefall can continue ad nauseam. If the spaceship moved faster than the pull of gravity made them fall, the spaceship would leave orbit–and not be weightless. If the spaceship moved slower than the pull of gravity, it would not keep up with the curvature of the earth and would fall towards the earth until it crashed–and experience negative gee’s. The whole reason I expounded on the explanation of spaceships and the illusion that there is no gravity in space is to explain further that ice does not float in space, but not because there is no gravity–rather because the spaceship is in freefall matching the pull of gravity, thus making it seem like there is no gravity, when in fact, there is a lot of gravity in space. Because it the pull of gravity is matched by the spaceship’s freefall, ice in water would not float–the pull of gravity on the water and the ice is matched and made to seem absent because the ship that the glass of icewater is in is in freefall.

So why does ice float on earth, when we obviously know that gravity is present?

It is because water behaves strangely around its freezing point. Due to hydrogen bonding and the fact that a water molecule is polar (that is, because of an unpaired set of electrons on the oxygen-rich side of the molecule, and the relative lack of any charge on the hydrogen side, the water molecule is overall neutral electrically, but exerts a slight negative charge effect on the oxygen side and a slight positive charge effect on the hydrogen side). Because water is polar, it experiences hydrogen bonding–that is, an attraction between the unbalanced concentration of negative charge on the oxygen side and the unbalanced lack of negative charge (relative positivity) on the hydrogen side. This attraction occurs between water molecules and is, in fact, what causes water to be liquid at room temperature and pressure instead of a gas; without the cohesion caused by this polarity keeping molecules attracted to each other, at room temperature, water would not have any attraction between molecules, and a substance as light as water would cease to have any cohesive forces within it, freeing the molecules to act as a gas.

So, what does this have to do with ice floating? (Or, more circumlocutionally, what does this have to do with my intense dream?) It is this polarity that causes something strange to happen to the intermolecular interactions of water around its freezing point (perhaps another day, I’ll explain that the Celsius temperature scale does not mean that the freezing point of water is “cold” or “hot”–or that 0°C lacks any temperature and, say, -40°C (which coincides with -40°F, incidentally). The Celsius scale was simply defined as 0°C being the temperature at which water turned from liquid to sold (or vice versa) at standard pressure, and 100°C was the point at which water turned from liquid to gas (or vice versa). But as I said, I’ll write more at length on this in a future post….

As I just mentioned, the polarity causes something “strange” to happen around freezing temperature. First, I must make something else we take for granted–and therefore don’t really understand–perfectly clear; I must define what, precisely, a “liquid” and a “solid” are. A liquid, as I alluded earlier, is a state of matter characterised by intermolecular attraction strong enough to cause the molecules of a substance to maintain contact with each other (without molecules having a strong enough attraction to maintain contact with each other, the substance ceases to “stay together” and becomes a gas). But this intermolecular attraction is not strong enough to form a structure (i.e. the intermolecular forces are not strong enough to maintain each molecule of the substance a fixed position relative to each other–a solid). What is the force opposing intermolecular forces, determining what state a substance will be? It is temperature, something else we take for granted. Temperature, technically defined by the Kinetic Molecular Theory, is simply defined as the amount of kinetic energy (energy of motion) the substance’s molecules have. The faster the molecules move, the hotter a substance is. The slower a substance’s molecules move, the colder the temperature. Therefore, although it is “temperature” that determines what state a substance will be–solid, liquid, or gas–a more meaningful explanation is that whether a substance will be a solid, liquid, or gas, is determined by the balance between the intermolecular attraction and the motion of the molecules (temperature) which acts opposing the intermolecular attraction. A solid is thus the point at which intermolecular attractive forces are stronger than the motion of the molecules. And since we do not change the intermolecular forces of a substance, the only variable is the temperature–or the motion of the molecules. A liquid is a substance within the range of temperature/molecular motion where intermolecular attraction is able to maintain a cohesion between the substance’s molecules (i.e. intermolecular attraction is strong enough to prevent the substance from being a gas, but not strong enough to maintain fixed relative positions of the molecules–a solid), but not strong enough to make it a solid. When the molecular motion is high enough to overcome the intermolecular attraction, the substance ceases to maintain cohesion between molecules and the molecules have enough energy to roam freely–be a gas.

So what happens that is “strange” with water around it’s freezing temperature? What is “strange” is that liquid water–water with enough intermolecular attraction to maintain cohesiveness of the substance to itself but enough molecular motion/temperature to prevent its molecules from settling into fixed relative positions/structure–has a certain average distance between its molecules. I don’t know what it is numerically, but it naturally has a certain average distance between the molecules. Because of its polarity, when the temperature is low enough/molecular motion is slow enough/defined in the Celsius scale as 0°C, the water molecules are moving slowly enough that they do not have enough energy to move out of a fixed orientation/structure. But just before water “freezes” or “settles into a fixed position of molecules relative to each other,” the polarity of the water molecules cause them to orient themselves in a hexagonal 3-dimensional structure. At temperatures/motions around freezing temperature, there is enough molecular motion energy to keep the hexagonal structure having an average distance between molecules that is farther apart than the average distance between liquid water molecules.

Why does this make solid water (ice) float in liquid water? It is because of this differential in distance between water molecules as a solid and as a liquid. (It should be noted that at slower molecular motions than around the freezing point, the molecules do not have enough molecular motion energy to keep the perfect hexagonal structure and the intermolecular forces win over the motion of temperature, causing the intermolecular attractive forces to draw water molecules closer together. This causes solid water to become more dense. At some theoretical point, the intermolecular attraction is strong enough to pull the water molecules closer together than liquid water’s molecules, making ice sink.

But around the freezing point of water, when the hexagonal solid structure maintains a distance between molecules farther apart than liquid molecules, the concentration of mass is less in the solid structure than the concentration of mass of the liquid.

This is where I must point out that you should realize that it is not really ice that floats. It’s really the more concentrated mass of the liquid water that is trying to fall as close to the earth as possible. Because it has more concentrated mass than the solid water (ice), it pushes the solid water out of the way. It could be sideways, upwards, diagonal–it doesn’t care; the liquid water only cares about being as low as possible. So if it pushed the ice sideways, it would not gain any advantage in being lower. The only way to make as much liquid water sink as far down as possible is to push everything less dense than it upwards. This means, of course, that if you had a balloon filled with carbon dioxide and a balloon filled with helium as well as ice chunks in a swimming pool, the water would push the helium balloon and the ice upwards. But the carbon dioxide-filled balloon has more concentrated mass than liquid water (i.e. is more dense), so it pushes everything out of the way to get to the lowest position. This means pushing water, helium balloon, and ice out of the way to be lowest.

Now, I think you will never look at a glass of icewater the same way again.

And now, I can get back to my dream.

It was the enjoyment of exploring such simple physical properties for the sake of understanding that my wife and I shared. And in my dream, we blissfully discussed such properties.

After my dream took a sharp change in story, it went from the blissful to the exotic.

Enter my father, my sister, one of my friends, Brad, his dream-generated brother, my father, my father’s girlfriend, and my other roommate, Alex. Somehow now there was an understanding that we would all participate in a thoroughbred race–not bet on it–we would be jockeys. What began to drive me crazy was that each person, in turn, caused a delay for some reason or other, to the point that Brad decided that he no longer had time to race his horse. Then his brother dropped out. Then my father’s girlfriend, and then him. My sister stuck with me the longest (but strangely caused the first delay for taking a bath). Then I blew up at my father. Probably repressed emotions from waking hours, I lashed out at him for not understanding my situation. I lashed out at him for never even trying to understand my difficult emotional, financial, and life situation. He was lying down on a couch at the time, and completely out of character when he drew the blanket up to cover his crying face. Of course, in real life, I know his obstinance would result in the confrontation ending with his storming away, even more righteous than before, even less understanding than before.

At this point, the craziness of the idea that we would jockey horses yielded to the insanity of my intensely resentful, painful emotions. The fact that because the numbers worked out such that I and my friend would be jockeying two horses–just as insane as the idea that we would race a horse in the first place–was even overpowered by my anger of being delayed by everyone close to me, one by one; was even overpowered by my resentful feelings of being betrayed by everyone close to me when they decided not to race, after causing all the delay; was even overpowered by my disappointment that my parents had become increasingly less supportive and understanding as time has gone on–was even overpowered by my losing my wife and daughter a second time.

When I first set out to write this exposition, I thought it would help to verbalize all this pain.

But now, over an hour after I wrote the first words, the emotional pain has become so intense–the tears accurately prophesied in my dream now a reality–I realize that time has done nothing to heal anything.

Rather, time has caused my emotional wounds to fester and ripen–and rot.

If not time, what–if anything–will save me?

Improving Scholarly Writing

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Some writing aims to convince readers of a particular point of view or incite the reader to action (Zuckerman, 2008), such as advertisements and documentaries. Scholarly writing, however, aims to be as informative and unbiased as possible, conveying accuracy with precision rather than achieving a desired effect.

Scholarly writing should be maximally efficient, using the appropriate words in an appropriate arrangement to convey accurate information as precisely as possible while striving to be as concise and succinct as possible. It should not itself guide the reader to a position on the topic but rather provide enough information that the reader can make an informed decision about the topic.

While I have long considered myself adept at conveying impact and emotion in my writing, I continue to strive for increased efficiency. Two goals I continue to pursue in my scholarly writing are better planning and structuring to convey information in an organized format as well as precision.

I believe this can be achieved largely by practising two basic behaviours fastidiously as I write in the future: pre-planning my works with the major points and supporting arguments predetermined, and having a second reader review my work before submission. I have long been a proponent of keeping essays simple and balanced through constricting a typical essay to three major points, each point supported by three arguments, each argument rationally argued with three pieces of evidence. This aims to keep the paper simple by discussing a restricted number of issues, providing an equal amount of support for each issue, and choosing the most compelling arguments both for and against each point. The end result is a paper that is strong, balanced, organized, and compelling.

In the process of writing a paper, the author spends a great deal of time researching, thinking about, and writing about the topic. Naturally, the author has a clear mental picture of the arguments and paper that does not exist in the minds of readers. Many inconsistencies or tenuous arguments can be identified only by a reader who has not yet been introduced to the topic and expended as much thought and analysis of the topic as the author; thus, I aim to improve the effectiveness and clarity of my scholarly writing by enlisting the aid of an individual who has not spent a great deal of time recently analyzing and writing about the topic.

Together, these two practices should greatly improve the efficienc,y efficacy, and impact in my scholarly writing.

Zuckerman, J. (2008). Introduction to Scholarly Writing: Finding a Scholarly Voice [Motion picture). Walden University, Baltimore, MD

Which is the number one cookie company? Critical thinking and performance metrics

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“Now with 50% less fat.”

This ubiquitous claim at first glance seems quite straightforward.  But anyone with biology or nutrition background will quickly realize that it is anything but. Marketers often exploit our ignorance of a discipline to make claims that may be true but less than compelling to a critical thinker.

But marketers are not the only ones who manipulate perceptions using data.  While providing hard factual data–especially quantitative data–seems to lend automatic credibility to a claim, it can in fact obfuscate issues much more than clarify.

Accountants and finance professionals do it just as much–perhaps even more often on a day-to-day basis.  Four different bakeries in the same market might, for example, make a claim to its shareholders that it is the leading producer of chocolate chip cookies in its market.  And they could all be telling the truth.

One bakery might, for example, support its claim by comparing number of cookies sold.  Another might measure its position in the market by the weight of cookies sold since 1,000 small cookies could actually be less cookie than 100 jumbo cookies.

Still another bakery might measure its success as total sales revenue for chocolate chip cookies.  And the fourth might claim market leadership as the most profitable seller of chocolate chip cookies after expenses are deducted.

So is the first, second, third, or fourth bakery the market leader in the chocolate chip cookie segment?  Yes.

It all depends on what you plan to use the information for.  If you are an investor interested in maximizing your returns either by growth or dividends paid, then you are probably interested in the most profitable bakery.

If you are a stakeholder in the chocolate chip cookie value chain–a flour producer, for example–and would like to form a strategic alliance with your largest customer, you might be interested in which bakery consumes the most flour or produces the greatest mass of cookies.

A packaging company interested in identifying its most lucrative potential leads might be most interested in the bakery that sells the greatest number of cookies.

The bakery looking to secure more funds through debt might, for example, try to look as good a credit risk as possible by reporting highest revenues in the chocolate chip cookie market.

The combination of accounting and finance knowledge foundations and critical thinking will guide the analyst in evaluating performance measurements and critically assessing which metrics would be most appropriate for a given application.

Happy 142nd, Canada!

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Last night I taught my daughter how Canada turns 142 years old today.

Canada is a country of immigrants.  Saving the debate about the aboriginals and whichever standoff they are contemplating next, one out of six Canadians wasn’t born here.  Yet we should consider ourselves lucky to live here.

My Mrs. Hudson’s companion, who immigrated here nearly sixty years ago, repeatedly reminds us all how Canada means nothing to him; all he wants from Canada is his pension (which of course will be depleted by the time I need one), and the health care paid by taxes.

Without getting into a debate about the actual innocence or guilt of Canadians like Omar Khadr and Maher Arar, what kind of country would we be if we cared nothing about our fellow citizens and only about what we got from the country for ourselves?  These two cases are topical examples of how we, as Canadians, care about our fellow citizens and take action to bring them home.

Without the constant vigilance and patriots willing to risk their lives to defend our ideals, we wouldn’t have a pension or health care system at all.  Even if you don’t get out to your local Canada Day celebrations to show your support and appreciation for what we have, at least take that moment to appreciate it sometime, somewhere, today.

Why you should even do a B.Comm/BBA and/or MBA in the first place

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A couple of weeks ago I wrote an exposition regarding the value added by an MBA degree even with previous undergraduate business training.

In my non-conformist countercultural other life as a raver, I encounter many bright cynical people who state, “Book learning is of little utility in the real world,” or “A degree is just a piece of paper.”  Well, that may be true.  But like the many other pieces of paper with which you will part to get that degree, there is still value in that piece of paper.

For many of these people, the fact is they may be intelligent and may know a lot about a particular field.  But my experience has shown me that being self-taught (I have similar feelings about problem-based learning, by the way–a didactic tool developed at one of my alma maters: McMaster) has several disadvantages: without guidance and a formal course syllabus, you tend to learn what you’re interested in very well–and what you’re not interested in, little or not at all.

Now although I live part of my life as a vehement non-conformist, I still have completed an honours Bachelor of Science in biology and biotechnology and an MBA and spent part of my life as a financial analyst at a Bix Six Canadian bank headquarters.  And herein lies the second reason I believe that those cynics should put their money where their mouth is and get a degree too even if it is just “a piece of paper”:

It shows you have commitment, perserverance, and an ability to work within convention when required.  In most accredited programs, getting a degree isn’t as simple as just showing up to class for four years.  There are all-nighters, there is learning about prioritization and learning how to learn in a mature learning environment.  There is the ability to learn both what you like as well as what you don’t like and consider ideas that you do not agree with, critically.  There is the discipline in being able to live your ideals as well as within someone else’s framework.

So if you think a degree is “just a piece of paper,” then consider that it says more about you to have your own beliefs but be able to comply with others and compare them first-hand.

Wal-Mart to Charge $0.05 per shopping bag as of June 1, 2009

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In a largely me-too move by Toronto area Wal-Mart retailers, Wal-Mart Canada has announced as of June 1, 2009, it will begin to charge $0.05 per shopping bag required at the cash register–joining NoFrills, FoodBasics, and a handful of other, smaller, food retailers in the practise of charging for shopping bags to encourage “Green” alternatives.

I submit, therefore, that since Wal-Mart is now profiting from selling these bags, it should also face increased liability to pay damages for deaths caused to children (and adults) by suffocation with these bags, whether my proper or improper use.

Buy low, sell high

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Everyone knows the way to make money on the stock market is, “Buy low, sell high.” 

It seems patronizingly obvious.  Yet people repeatedly buy high, sell low as if they just stepped off the boat from bizarro world.

It’s not usually the case that people forget that in order to end up with more money than they started with they must sell the security at a higher price than that at which they bought it–it’s that circumstances their perspectives to make it seem like the most favourable course of action. 

Most often the reason for this is because they see a stock that is rising rapidly and it looks like a good company to invest in–after all, it is exceeding earnings estimates, it is financially healthy–and their friends already made a killing from it.  It makes sense to invest in a healthy company that is

I believe the foundation of a stock’s price should be the valuation that any competent financial analyst should be able to calculate given a firm’s intended and emergent strategies, competitive and market environments, and its financial statements.   These factors must be considered together and not in isolation.  One common investing pitfall is completing an introductory financial accounting course and thinking just because you can calculate a bunch of impressive ratios that are designed encapsulate various measures of profitability and financial healthy.  I say designed because if you do not consider the other factors, you will be using the right calculations on the wrong numbers.

Also

Introductory Integrative Business Courses

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I’ve pretty solidly established my strong feeling that business education must be more holistic from the get-go in my previous posts and I try to make it central to all my work (cf. http://robincheung.info/samples/bbc.pdf) 

I was first introduced to the business academic world in about 1998 when I was already nearly finished my Bachelor of Science in Biology and Biotechnology.  I had run my own small businesses prior to that, but when I think back about it, it was reckless without at least a basic understanding of business.  I have long believed in having a wide knowledge base upon which to draw regardless of your position or field, and I had taken electives such as classical civlizations, psychology, children’s literature, and even american sign language by then.  My sister, who was attending McGill University in a BA, Political Science and East Asian Studies program decided to take a course together while she was home one summer.  She got a letter of permission to take a course at my school (Carleton University) and we chose Introductory Financial Accounting for some reason. 

By the time I finished Introductory Financial Accounting, I had convinced myself of a few inaccuracies:

  1. Business was all about Accounting
  2. I could read–and more importantly, analyze and interpret–any financial statement for any company.
  3. I knew how to run a business
  4. I knew how to make investment decisions

While I was taking that introductory financial accounting course, a friend of mine–whom I had known since grade five and I considered my best friend–found a better job than the one he had preparing corporate profiles for a senior executive in Investment Partnerships Canada, a department within Industry Canada.  He knew I was strong analytically and had developed a certain scientific rigour from my program and that I was taking my first financial accounting course.  (Incidentally, he never chose to do an MBA after his B.Comm.  He is now a seasoned project manager at IBM and not only feels he hasn’t missed out by not doing an MBA, but shares a belief common amongst B.Comm grads that MBAs are overpaid and not trained thoroughly–more on this later).

I was hired at that point as a Research Analyst, primarily to identify strategic foreign direct investment opportunities for IPC in Germany and Austria.  Since I had a rather erratic first few years in undergrad, I would work there and finish my BSc part-time.  I will admit that the analytical and reasoning skills developed in undergrad are severely insufficient to take the knowledge from an intro financial accounting course and tailor it to a specific application.  If I were told, “calculate the accounting ratios,” I could do that.  If I were told, “look at the financial statements and identify potential candidates with specific trends in their financials, I could do that.  But in no way could I propose a set of metrics that would identify ideal candidates, let alone competently make adjustments to the financials to correct for non-recurring items, and then come up with a ranking for the candidates.

But I digress.  The point was even a first-year business course desgined for people who have had no business training left me believing it was the only thing I needed to learn–or at the very least, the most important.

I’m pretty sure all the introductory business courses are designed similarly–even when I began my MBA along with students from a wide assortment of undergrad backgrounds, many of whom have also had no formal business training, I found marketing courses were developed as if accounting did not exist.  And finance courses that were ignorant that operations management exists.

I was pleasantly surprised then, when a friend of mine in computer science at University of Waterloo who was interested in investing in the stock markets told me he would take a first-year business course called “Functional Areas of an Oragnization.”  Someone had finally seen the importance of a solid foundation in all functional areas at the early stages of a business education.  I thought it sounded ideal for business majors in that it would help them select an area of interest without being influenced by the primacy effect, and it was great for non-business majors if it were the only business course they would take. 

One feeling I left the sciences with was that scientists were generally quite idealistic.  They often believed that research would be funded based on its merit.  The reality, of course, is that nothing gets funded without a business need, and more importantly, a business plan that will lead to profitable returns.

(The corollary, incidentally, is that businesspeople are often quite myopic and should be more aware of their place in the universe.  They could also benefit a great deal from the rigour and critical analysis so characteristic of science.)

Upon skimming the course outline, however, I found that the course is still quite accounting-heavy and the majority of the 12 lectures are based on it.  I prefer a top-down approach beginning with the big picture and how the various functional areas work together.  Before teaching the details of each functional area, I would begin with basic strategy, such as SWOT, the value chain, and Porter’s five forces.  Strategy should be used to make business decisions, employing the five functional areas as required, taking advantage of any possible synergies. 

The way business school segregates disciplines into courses designed largely ignorant of the other functional areas and do not require including them in their own case assignments is a backward bottom-up approach, classifying the business issue as an accounting one or a marketing one, then using that to see what solutions are possible and selecting from those.