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Singapore American • September 2014
CRCE & BUSINESS
Who is the Monkey Now? By Andrea Kennedy
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ehavioral economists or “neuro-economists” are all the rage thanks to books like Freakonomics, Nudge, Think Slow, Think Fast and so forth. I enjoy these books as much as anyone, but a frequently-repeated refrain among these economists is that you are just as well off asking a monkey to choose your investments as you are choosing them yourself. Their reasoning is that we humans are at the mercy of our mammalian brains, too driven by greed and fear and too prone to following the herd, rendering us incapable of making rational economic choices. With this in mind, I'd like to introduce my two children, Stefan and Elena. They put a dividend- and dividend-growth portfolio together themselves three years ago (at ages 10 and 12), to earn and save money for college. The rules were: buy, hold and reinvest the dividends. If an investment appreciates more
than 50%, sell some of it. If the investment has a precipitous fall (over 15%), then as long as it can reliably keep paying its dividend, just let the dividends reinvest (earning more shares at a much lower price). Their three-year annualized real return is 24.6% per year; their cumulative real return is 86% including dividends. They have outperformed approximately 90% of all hedge funds in Barron’s Hedge Funds list - and they weren’t even making the 2% bonus and 20% fee hedge fund managers get as an incentive! Now, the real lesson here is why my two children outperformed most professional investors:
investing table with the many hang-ups, neuroses and biases that adults do. So they are more flexible economic animals than adults, whose hardened biases often lead to extreme and
1. There’s no “currency” or kudos in having a great portfolio in junior high school. At that age, investing is just something one does to earn a return and stave off the effects of inflation; it’s not a competition. 2. They have better things to do than watch their portfolio performance. They are far more concerned with working out at the gym, socializing, music and other such fun compared to us tedious adults. So by default, they are patient. 3. They know they are not investing geniuses. So they keep it simple and choose simple investment strategies, occasionally relying on outside help with one or two trusted sources. 4. They had paper losses of 20-25% two months after they invested on the back of the Euro crisis. They learned they can only control how they react to the market; they cannot control the market itself. So, they are practicing Zen-like emotional control, while appreciating the dividend reinvesting on downturns. 5. The Holy Grail: Children do not come to the
disastrous investing positions. The real test of the methodology (and of our mettle) will be long- term returns in 20 or 30 years. My teenagers’ outsized returns have to make you wonder exactly which investors these economists are referring to when they speak of monkeys outperforming investors. Maybe they are talking about all those hedge fund guys; monkeys certainly could be capable of outperforming them. Photos by Andrea Kennedy Andrea Kennedy is an American certified financial planner (CFP), now based in Singapore. She maintains a personal finance blog, Wealth Rain Dance.
The School that Cashews Built This is the second in a series of two articles By David A. Bede
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ducational and employment opportunities for women are perhaps the single greatest weapon in the war on rural poverty. They go together in more ways than one, as Americans Aaron Fishman and Lindsay White discovered when they founded East Bali Cashews (EBC) in 2012. EBC provided the impoverished northeastern Bali village of Desa Ban with what it needed most: jobs, particularly for women. That in turn afforded a new opportunity: providing first-time early childhood education for the
actually start school until the age of seven, and unfortunately a large majority don’t finish.” Having already transformed life in Desa Ban for hundreds of families, Aaron and Lindsay turned their attention to improving their future prospects as well as solving their workers’ daycare dilemma. Global investment firm KKR Asia had provided the technical assistance which enabled EBC to raise $900,000 to expand the factory and hire more women. Now, the KKR team worked with Aaron and Lindsay as they established the AnaKardia Kids Early Learning
children of the workers. Providing educational opportunities could be the long-term solution to escape from poverty. Like most poor, rural communities, Desa Ban had extremely limited educational resources. As one recent visitor to Desa Ban noted, “most kids in Bali don’t
Center. Its name derived from the words Anacardia (the genus name for the cashew tree) and anak (“child” in Bahasa Indonesia), AnaKardia opened its doors in April 2014, and now has 60 pupils and 10 teachers. Building and operating a school is no small
task. Fortunately, Aaron and Lindsay’s noble goal (and their track record of success with EBC) inspired a great deal of generosity. First, the KKR Asia team provided personal donations to build the school and hire the teachers. “KKR chose to provide both business and personal assistance to East Bali Cashews and the early learning center because it shows both the impact a Social Enterprise can have on a community, as well as in the power of targeted corporate philanthropy, in which a business gives of its expertise in addition to funding,” said Steve Okun, Director of Public Affairs for KKR Asia. In addition to the funding from KKR, the Australian Consulate General in Bali provided for the construction of two buildings. Red River Foods Group, an American snack foods importer, provided subsidies for the students for one year, while Indonesia’s Kalbe Group provided nutritional advisory and a terrace classroom. The support Aaron and Lindsay attracted was not only financial. Four teachers from Singapore’s Stamford American International School went to Bali in April to provide training and lesson plan guidance for AnaKardia’s local teachers. Cognita, a leading international schools operator and portfolio company of KKR, has also provided supplies and playground equipment. The trainers developed lessons using reusable materials that are readily available in Desa Ban. “We aimed to make lesson plans sustainable for the school, and have tried to create lessons using materials that can be found in this part of the world,” one of the Stamford teachers explains. “We want
to make education accessible and show that learning can be fun.” AnaKardia provides comprehensive pre-elementary education for children as young as age 2. With its play-based lessons, the school has made an immediate and dramatic difference for Desa Ban. “The children are happy and curious to learn new games,” says Kutut Suri, one of the seven newly hired teachers at AnaKardia. “They are learning to love school at an early age because they love to play.” The community’s response has also been very positive. “We’ve found that there has been a real receptiveness to this approach at the early learning center,” says another Stamford teacher. “This is a positive sign given the huge need for educational development in this area.” The grand opening in April attracted over 400 villagers. Guests included United States Ambassador to Indonesia Robert Blake, who said AnaKardia “shows that it’s possible to bring prosperity and social development to every corner of Indonesia. And I think this can be replicated on a very wide scale to other parts of eastern Indonesia.” Co-founder Lindsay White agrees. “We are tackling the low-hanging fruit of education, and it is gratifying to see how this has already had a positive impact on the women of the village. We hope that this model will be replicated and will have an even larger impact on this community than we had even imagined.”
Photos by East Bali Cashews