Quora Answer: If Capital is the Sole Driver of Greater Capital, & the Basis of Business is to Maximise Capital, is Capitalism Doomed?

The following is my answer to a Quora question: “If capital is the sole driver of greater capital, and the basis of any business is to maximise that capital, is capitalism not doomed?  Does it not organically create massive inequalities over time?”

Firstly, we have to understand that capitalism is an economic system.  It is based on the centrality of private ownership as the means of production, and their operation for profit, not altruism.  Capitalism is the recognition that when we want things done, we appeal to other’s sense of self-interest, not altruism.  The purpose of this is the accumulation of wealth, through the free exchange of goods, and services, and competition.

Predatory capitalism, without legal and ethical controls, is destructive, and the system eventually depletes the economic, social, and physical environment, and destroys resources.  But then, this argument applies to every system taken to an extreme.  No system is perfect, and all of them, without any form of balance and control, are eventually doomed to failure.

One of the greatest myths of unfettered capitalism is that the market is self-correcting.  It fails to take into account human entrepreneurship.  The same genius that allows people to accumulate massive wealth and power, can also be the same genius that entrenches and consolidates it at the expense of others.  This creates a massive imbalance in the economy, leading to disenfranchisement and institutionalised poverty.  The system becomes corrupt, and whenever we have had massive portions of the population disenfranchised, we have had revolutions.  The social system “corrects” itself.

As such, whilst capitalism is a viable system, it has to be managed.  That is the purpose of government.  An effective government is able to navigate the balance between free enterprise and market control for sustainability and social welfare.

Quora Answer: If America & China Went to War, What Would Happen to the Value of the US Dollar?

The following is my answer to a Quora question: “If America and China went to war, what would happen to the value of the US dollar?”

If the US went to war with any country, the value of the US dollar would rise because it is the reserve currency of the world, and a hedge against uncertainty.  Almost all petrochemical contracts are denominated in the US dollar.

The sole exception to this rule is China.  China is the single largest external holder of American Treasury bonds, its sovereign debt.  China had a policy of buying T-bonds to offset the trade imbalance.  This has slowed down with the advent of the trade war with Trump’s America.

War is an expensive business.  The US government is funded by debt.  In the event of a great power conflict, the US would need to sell a lot of bonds.  If China is not buying, who else is going to lend the US the vast sums it needs?

Also, China holds, as of now, an estimated US$1.2 trillion in Treasury bonds.  That is almost 30% of all bonds held outside the US.  Should China decide to dump all that on the market, it would be an economic nuclear bomb that would immediately tang global markets.  China would suffer itself, but in the event of a war, preservation of the nation supersedes preservation of wealth.

Quora Answer: If a Conjoined Twin Commits a Crime, How Do We Determine Which One Actually Did It?

The following is my answer to a Quora question: “If a conjoined twin commits a crime, how do we determine which one actually did it?”

Firstly, we have to know where they are conjoined.  This helps us understand how to go about determining plausible guilt, and opportunity to commit the crime.  Also, some conjoined twins involve one parasitic twin, meaning that there is only one legal person in this case.

Secondly, conjoined twins are always identical, monozygotic, where there is an incomplete separation during cell division.  What this means is that the DNA will be almost identical, and that goes to blood type, and other body fluids.  However, fingerprints, toe prints, tongue prints, and even dental records are distinct.  They can be told apart legally, if there is such physical evidence.

We must also remember that the use of the hand causes distinct angles of impact, and it may be possible to narrow down which hand was used, for example, in a stabbing incident, or in shooting a gun.  It is the same with the leg, and footprints.

Finally, as part of the investigative process, there is the police interview.  The challenge here is that both twins cannot be interviewed separately.  Thus, it will take skill to match their body language with the account, and pinpoint the approach.

Coming back to the first point, since both twins are always present at the commission of the offence, one or the other is the perpetrator and accessory.  However, if it is a capital offence, unless both are guilty, we cannot sentence the other to death since the law precludes the death sentence on the twin who is not guilty of the capital charge.

Quora Answer: How Would Warren Edward Buffett’s Age Factor into Your Decision to Invest in Berkshire Hathaway?

The following is my answer to a Quora question: “How should Warren Edward Buffett’s age factor into your decision to invest in Berkshire Hathaway?”

Berkshire Hathaway has grown to the extent that it is more than just Warren Edward Buffett, and Charles Thomas Munger, making decisions, although they still make the final call.  What would factor into my decision if the numbers, their portfolio performance, their exposure and their healthy liquidity.

When Warren Buffett dies, this will not change overnight.  I do not see the remaining management team rocking the boat, and changing their philosophy.  They were recruited because their views aligned with the management team.  There might be a slight drop in the stock due to market sentiment, but unless there is an unlike change in their fundamental strategy, things will be on the same track.

That aside, due to the economies of scale and the nature of the market, it is illogical for us to expect the sort of growth that Berkshire Hathaway had in their growth years.  Theirs is a stock to buy and hold, not speculate on a secondary market.  People buy them to profit off the dividends.

Quora Answer: How Would the World Respond to a War between Australia & China?

The following is my answer to a Quora question: “How would the world respond to a war between Australia and China?”

The distance between Australia and China is over 7,000 km.  Neither nation has the ability to send significant numbers of troops, and all their equipment, to the other side.  How are they going to fight?  The only nation in the world that has the lift capability to send an entire combat ready brigade anywhere in the world is the US.  Not even Russia can do that.  Why?  Because no nation in the world has seen the need to invest in the capability of finding trouble across continents, and manufacturing conflict.  The most we would ever see between Australia and China is a trade war.

Quora Answer: How Would the 2019 Riots, in Hong Kong, Change the Political Situation in Singapore?

The following is my answer to a Quora question: “How would the 2019 riots in Hong Kong change the political situation in Singapore?”

The events in Hong Kong are not going to change the political situation in Singapore.  Hong Kong and Singapore are fundamentally different., and the underlying socioeconomic conditions that gave rise to the riots do not exist in Singapore.  There is no housing crisis, no disenfranchisement of the youth, and no perceived lack of economic opportunities.  These are institutional failures of the Hong Kong government.  Singapore has entirely different challenges, and a legal framework that precludes that level of civil unrest.

Singapore has actually benefited from the civil disturbance, with massive amounts of capital inflows from Hong Kong.  The downgrading of business confidence, and the loss of tourist receipts, have largely been diverted to Singapore.  Hong Kong’s unrest validates Singapore’s housing, and economic policy.  In short, the lesson learned is that stability is rewarded, and instability has a severe economic impact.

Quora Answer: How Would I Know if My Life Insurance Policy is Good?

The following is my answer to a Quora question: “How do I know if I have a good life insurance policy?”

Before getting a policy, it is important to know the status of the insurer, and their financial soundness.  This is not a problem in Singapore, since the laws are very strict and the reserve requirements are very high.  It may be a problem elsewhere.  Your insurance policy is a financial instrument, and the value of that instrument is dependent on the strength of the underwriting insurer.

Secondly, calculate the total regular premium paid, in relation to the coverage.  The total premiums of a considered policy should not be between 60 to 70% of the base payout, assuming you got a policy mid-career. The younger you are, the cheaper it should be relative.  If you get a policy early enough, the annual premium should be 0.01% or less, unless there is significant loading.  Otherwise, your policy may be expensive.  You need to relook the policy document to see why it is so, or avail yourself to your financial advisor.

Finally, consider the payout history and period of the insurer.  A cheaper policy may be more expensive because when you make a claim, the claim process is onerous.  An example would be an insurer hat has outsourced the claims call centre to reduce cost.  This means that when you speak to them, they are a third party, and it would take time for the information to be passed on, and there are also concerns about the verification process.

Considering the competitiveness of the insurance industry, it is unlikely that a specific product is bad.  They are all good enough for their target demographic and market segment.  That does not mean they are suitable for you.  Most people overlook the value of a good financial advisor.