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  • puggymcfat 11:18 pm on August 6, 2014 Permalink | Reply  

    Asset Valuation Models & Why job hunting is such a bitch 

    It’s been nearly 2 years since I wrote my last actuarial exam. Faced with the prospect of a PhD program, I turned in my actuarial hat for an academic one. I was relieved, but my wife decided fireworks were more appropriate for the occasion.

    Through a fortuitous turn of events, I landed a job and resumed the humdrum schedule of exam studying. My wife is understandably disappointed.

    A large portion of my time in limbo was spent on asset valuation models. I bring this up because some of that theory transfers to career planning. Bear with me.

    Asset valuation models largely fall into 1 of 2 categories. Either an intrinsic value is determined based on the asset’s behavior, or liquid market mechanics are used to select a fair value. The former, or intrinsic valuation, involves figuring out how much money the asset will generate in perpetuity. For example, renting out a home can bring in $500 of rent; if this $500 is collected every month forever, we can calculate the value of renting out a home.

    The latter, or fair valuation, requires a fairly liquid market where similar, if not identical assets are traded at observable prices. If an investor buys a home for $5m and expects to rent it out for $500 each month, we might conclude that the value of renting out a home is $5m.

    A similar concept is extrinsic value. Extrinsic value is defined as the difference between the fair value and the intrinsic value. If we calculate an asset’s intrinsic value as $100, but its fair value is $150, the asset has an extrinsic value of $50.

    But how does all this relate to career planning?

    To employers, we are assets too. And that means we have intrinsic and fair values. More often than not, employers decide not to hire candidates when they have large positive extrinsic values. Let me state that again in bold: large positive extrinsic values are detrimental to your career.

    Put another way, employers tend to shy away from people who cost more than what they are worth. You might say, “okay Jon I already knew that, way to be pedantic”.

    The problem with looking at this issue from a cost versus benefit approach, is that it implies we can only control how much we’re worth, not how much we cost. This is far from the truth.

    We all have intrinsic and fair values. Our intrinsic values can be quantified as the increase in revenue that we contribute to the company as a result of employment, while our fair values can be calculated as what someone of similar seniority in a similar position is earning.

    My intrinsic value is affected by what I’ve learned in life (school or otherwise), my software competencies, the soft skills I demonstrate on the job, any relevant experience I’ve gained so far, and anything else that will help my employer make more money.

    On the other hand, my fair value depends on what industry I’m in, the nature of my position, and the type of company I’m in. As an example, working in a consulting firm increases my fair value compared to working in an insurance company.

    Let’s revisit extrinsic value. Remember how large positive extrinsic values are detrimental to your career? Here’s what this means for you.

    To prevent extrinsic values from building up, you must either increase your intrinsic value faster than your fair value, or decrease your fair value to pace your intrinsic value.

    Let’s see that in an example. Emily, who spent her life in college as a closeted nerd, is proud that she graduated valedictorian. With perfect grades and an impressive display of business acumen, she is picked up by a large management consulting firm. At this point in her career, Emily has a small positive extrinsic value: she’s worth $100m to the firm, but the firm pays her $90m. Emily is happy.

    5 years later, Emily is very likely to have built up a fair amount of intrinsic value from learning on the job and developing her soft skills. Perhaps her intrinsic value is now $200m. Good luck trying to convince someone to pay you $200m in this economy Emily.

    So Emily has to lower her fair value, usually by stating up front that she can live with a lower salary. She contends that she can do without a weekly visit to Barbados.

    Conversely, someone else who has been on the job for 20 years might have a fair value of $200m. Unfortunately, this person, let’s call him Bob, decided that he was done with learning the day he graduated. Bob doesn’t have a fantastic intrinsic value, he might actually be worth only $100m to the company.

    I hope Bob gets to keep his job.

    With this new found knowledge in mind, here’s what you can do:

    1. Increase your intrinsic value
      1. Learn more, ask more, be curious about everything
      2. Pick up new skills, whether hard or soft
      3. Find new ways to refine the way you impact your company’s income statement
    2. Pace your fair value
      1. Choose an industry and company that you feel comfortable growing your intrinsic value in
      2. When your existing environment can no longer support the growth of your intrinsic value, find a new one
      3. If you find your fair value lagging too far behind your intrinsic value, learn how to negotiate

    I might explore some of these points in future posts, but I will conclude here. My wife wants me to keep a “time with wife” to “time with books” ratio of 2:1.

  • puggymcfat 6:13 pm on July 3, 2014 Permalink | Reply  

    Disruptive Technology, Actuaries and the Rest of Us 

    You shouldn’t use a spreadsheet for important work. I mean it. (

    Annmarie Communicates Insurance

    Disruptive technology — defined as a new technology that unexpectedlyFAST FORWARD displaces the established one — will change most professions.

    In the future, we will collaborate in the Cloud through mobile technology and intelligent interfaces while monitors track our vitals and aerobic activity. Big data will be fed into mega computers that will automate calculations and analysis. Insurance will be based more on the individual situations of people and companies.

    Artificial intelligence is already disrupting the medical field when computers can more effectively diagnose than doctors. Lawyers’ efforts to find precedents are already becoming automated and (sigh) computers can produce basic news articles.

    Actuaries are not immune, as I explain in my article, “Fast Forward: Emerging Technology and Actuarial Practice.”Published in the American Academy of Actuaries’ July/August issue of Contingencies, I believe it highlights disruptive technologies that will affect all of us both professionally and personally. I hope you…

    View original post 208 more words

  • puggymcfat 12:42 am on June 23, 2014 Permalink | Reply  

    Life and How to Survive It 

    An excerpt from the 2008 NTU convocation ceremony:

    I must say thank you to the faculty and staff of the Wee Kim Wee School of Communication and Information for inviting me to give your convocation address. It’s a wonderful honour and a privilege for me to speak here for ten minutes without fear of contradiction, defamation or retaliation. I say this as a Singaporean and more so as a husband.

    My wife is a wonderful person and perfect in every way except one. She is the editor of a magazine. She corrects people for a living. She has honed her expert skills over a quarter of a century, mostly by practising at home during conversations between her and me.

    On the other hand, I am a litigator. Essentially, I spend my day telling people how wrong they are. I make my living being disagreeable.

    Nevertheless, there is perfect harmony in our matrimonial home. That is because when an editor and a litigator have an argument, the one who triumphs is always the wife.

    And so I want to start by giving one piece of advice to the men: when you’ve already won her heart, you don’t need to win every argument.

    Marriage is considered one milestone of life. Some of you may already be married. Some of you may never be married. Some of you will be married. Some of you will enjoy the experience so much, you will be married many, many times. Good for you.

    The next big milestone in your life is today: your graduation. The end of education. You’re done learning.

    You’ve probably been told the big lie that “Learning is a lifelong process” and that therefore you will continue studying and taking masters’ degrees and doctorates and professorships and so on. You know the sort of people who tell you that? Teachers. Don’t you think there is some measure of conflict of interest? They are in the business of learning, after all. Where would they be without you? They need you to be repeat customers.

    The good news is that they’re wrong.

    The bad news is that you don’t need further education because your entire life is over. It is gone. That may come as a shock to some of you. You’re in your teens or early twenties. People may tell you that you will live to be 70, 80, 90 years old. That is your life expectancy.

    I love that term: life expectancy. We all understand the term to mean the average life span of a group of people. But I’m here to talk about a bigger idea, which is what you expect from your life.

    You may be very happy to know that Singapore is currently ranked as the country with the third highest life expectancy. We are behind Andorra and Japan, and tied with San Marino. It seems quite clear why people in those countries, and ours, live so long. We share one thing in common: our football teams are all hopeless. There’s very little danger of any of our citizens having their pulses raised by watching us play in the World Cup. Spectators are more likely to be lulled into a gentle and restful nap.

    Singaporeans have a life expectancy of 81.8 years. Singapore men live to an average of 79.21 years, while Singapore women live more than five years longer, probably to take into account the additional time they need to spend in the bathroom.

    So here you are, in your twenties, thinking that you’ll have another 40 years to go. Four decades in which to live long and prosper.

    Bad news. Read the papers. There are people dropping dead when they’re 50, 40, 30 years old. Or quite possibly just after finishing their convocation. They would be very disappointed that they didn’t meet their life expectancy.

    I’m here to tell you this. Forget about your life expectancy.

    After all, it’s calculated based on an average. And you never, ever want to expect being average.

    Revisit those expectations. You might be looking forward to working, falling in love, marrying, raising a family. You are told that, as graduates, you should expect to find a job paying so much, where your hours are so much, where your responsibilities are so much.

    That is what is expected of you. And if you live up to it, it will be an awful waste.

    If you expect that, you will be limiting yourself. You will be living your life according to boundaries set by average people. I have nothing against average people. But no one should aspire to be them. And you don’t need years of education by the best minds in Singapore to prepare you to be average.

    What you should prepare for is mess. Life’s a mess. You are not entitled to expect anything from it. Life is not fair. Everything does not balance out in the end. Life happens, and you have no control over it. Good and bad things happen to you day by day, hour by hour, moment by moment. Your degree is a poor armour against fate.

    Don’t expect anything. Erase all life expectancies. Just live. Your life is over as of today. At this point in time, you have grown as tall as you will ever be, you are physically the fittest you will ever be in your entire life and you are probably looking the best that you will ever look. This is as good as it gets. It is all downhill from here. Or up. No one knows.

    What does this mean for you? It is good that your life is over.

    Since your life is over, you are free. Let me tell you the many wonderful things that you can do when you are free.

    The most important is this: do not work.

    Work is anything that you are compelled to do. By its very nature, it is undesirable.

    Work kills. The Japanese have a term “Karoshi”, which means death from overwork. That’s the most dramatic form of how work can kill. But it can also kill you in more subtle ways. If you work, then day by day, bit by bit, your soul is chipped away, disintegrating until there’s nothing left. A rock has been ground into sand and dust.

    There’s a common misconception that work is necessary. You will meet people working at miserable jobs. They tell you they are “making a living”. No, they’re not. They’re dying, frittering away their fast-extinguishing lives doing things which are, at best, meaningless and, at worst, harmful.

    People will tell you that work ennobles you, that work lends you a certain dignity. Work makes you free. The slogan “Arbeit macht frei” was placed at the entrances to a number of Nazi concentration camps. Utter nonsense.

    Do not waste the vast majority of your life doing something you hate so that you can spend the small remainder sliver of your life in modest comfort. You may never reach that end anyway.

    Resist the temptation to get a job. Instead, play. Find something you enjoy doing. Do it. Over and over again. You will become good at it for two reasons: you like it, and you do it often. Soon, that will have value in itself.

    I like arguing, and I love language. So, I became a litigator. I enjoy it and I would do it for free. If I didn’t do that, I would’ve been in some other type of work that still involved writing fiction – probably a sports journalist.

    So what should you do? You will find your own niche. I don’t imagine you will need to look very hard. By this time in your life, you will have a very good idea of what you will want to do. In fact, I’ll go further and say the ideal situation would be that you will not be able to stop yourself pursuing your passions. By this time you should know what your obsessions are. If you enjoy showing off your knowledge and feeling superior, you might become a teacher.

    Find that pursuit that will energise you, consume you, become an obsession. Each day, you must rise with a restless enthusiasm. If you don’t, you are working.

    Most of you will end up in activities which involve communication. To those of you I have a second message: be wary of the truth. I’m not asking you to speak it, or write it, for there are times when it is dangerous or impossible to do those things. The truth has a great capacity to offend and injure, and you will find that the closer you are to someone, the more care you must take to disguise or even conceal the truth. Often, there is great virtue in being evasive, or equivocating. There is also great skill. Any child can blurt out the truth, without thought to the consequences. It takes great maturity to appreciate the value of silence.

    In order to be wary of the truth, you must first know it. That requires great frankness to yourself. Never fool the person in the mirror.

    I have told you that your life is over, that you should not work, and that you should avoid telling the truth. I now say this to you: be hated.

    It’s not as easy as it sounds. Do you know anyone who hates you? Yet every great figure who has contributed to the human race has been hated, not just by one person, but often by a great many. That hatred is so strong it has caused those great figures to be shunned, abused, murdered and in one famous instance, nailed to a cross.

    One does not have to be evil to be hated. In fact, it’s often the case that one is hated precisely because one is trying to do right by one’s own convictions. It is far too easy to be liked, one merely has to be accommodating and hold no strong convictions. Then one will gravitate towards the centre and settle into the average. That cannot be your role. There are a great many bad people in the world, and if you are not offending them, you must be bad yourself. Popularity is a sure sign that you are doing something wrong.

    The other side of the coin is this: fall in love.

    I didn’t say “be loved”. That requires too much compromise. If one changes one’s looks, personality and values, one can be loved by anyone.

    Rather, I exhort you to love another human being. It may seem odd for me to tell you this. You may expect it to happen naturally, without deliberation. That is false. Modern society is anti-love. We’ve taken a microscope to everyone to bring out their flaws and shortcomings. It far easier to find a reason not to love someone, than otherwise. Rejection requires only one reason. Love requires complete acceptance. It is hard work – the only kind of work that I find palatable.

    Loving someone has great benefits. There is admiration, learning, attraction and something which, for the want of a better word, we call happiness. In loving someone, we become inspired to better ourselves in every way. We learn the truth worthlessness of material things. We celebrate being human. Loving is good for the soul.

    Loving someone is therefore very important, and it is also important to choose the right person. Despite popular culture, love doesn’t happen by chance, at first sight, across a crowded dance floor. It grows slowly, sinking roots first before branching and blossoming. It is not a silly weed, but a mighty tree that weathers every storm.

    You will find, that when you have someone to love, that the face is less important than the brain, and the body is less important than the heart.

    You will also find that it is no great tragedy if your love is not reciprocated. You are not doing it to be loved back. Its value is to inspire you.

    Finally, you will find that there is no half-measure when it comes to loving someone. You either don’t, or you do with every cell in your body, completely and utterly, without reservation or apology. It consumes you, and you are reborn, all the better for it.

    Don’t work. Avoid telling the truth. Be hated. Love someone.

    You’re going to have a busy life. Thank goodness there’s no life expectancy.

  • puggymcfat 9:40 pm on June 5, 2014 Permalink | Reply
    Tags: career   

    Career Typecasting 

    It’s been a while since I’ve uncovered the dusty pages of this blog, and I always feel a pang of guilt when people tell me they’ve enjoyed a piece I wrote. But Jon, you’ve got to do another piece …

    I’m not really sure what this blog has turned into. I started with the goal of creating awareness of insurance-related issues, and I’d like to think this blog has spawned a generation of actuarial students who are acutely aware of events beyond the textbook (back me up Mono). Along the way, I did a miniseries on technical questions, and dumbed it down for the masses. Somehow that’s also forged me somewhat of an unusual legacy with students.

    But here I am with a completely novel focus. Having recently embarked on a new job, I thought it would be appropriate to discuss an unusual aspect about my journey: career typecasting.

    You might have read about typecasting for actors who portray such memorable characters that it becomes part of their professional identity. Can you picture Johnny Depp beyond the likes of an eccentric (Jack Sparrow) or fanatical (Willy Wonka) character? The cast of Star Trek were so extensively typecast that Patrick Stewart claimed to have a franchise career.

    Typecasting spills over to the rest of us too, but it isn’t always unfortunate. With proper planning, typecasting can help secure your first full time job. And it all starts with your first internship.

    Here’s the hiccup, graduating with 2 years of internship experience is somewhat of a double edged sword. On the one hand, you gain invaluable industry experience that will augment your chances of landing full-time employment. But let’s remember that having 5 different internships is akin to switching jobs several times. Over the course of 2 years.

    Sure you can treat those 5 internships as a way to sample the plethora of industries, the assumption being that you will end up picking a favorite industry to work in. Or, rather than treat this as a 2 year buffet, perhaps you could speed up the process by sourcing existing actuaries in the industry to get a feel of the work they do.

    Now if you ask enough people (n=50?), you’ll get a sufficiently accurate picture of what goes on in specific industries (central limit theorem anyone?). And maybe instead of having 5 different jobs, you could embark on a focused undergraduate career path that culminates in a full-time job offer the day you receive your diploma.

    In other words, typecast yourself.

    It shows focus, ambition, and ultimately, commitment to the industry you want to break into.

    So who wants to learn more about the P&C reinsurance industry? 🙂

  • puggymcfat 3:13 am on February 14, 2014 Permalink | Reply  

    IQ: What is the difference between capital and reserves? 

    The majority of actuarial students are well-versed in “statispeak” and can explain mathematical concepts to a technical audience. This is not always desirable. In this “Interview Questions” series, I attempt to relate abstract concepts to every day use by phrasing my answers as if they were used in an interview. Leave a comment below and tell me what you thought, or send me a question and I will (try to) answer it.

    This question was posed to me by Kevin, and it took a fair amount of research to come up with a suitable answer. In an interview, I don’t expect the average candidate to have these facts on hand, so I provide a heuristic definition that is suitable for a wide audience. Credit goes to Manisha for hashing out the nitty-gritty (she’d be writing about actuarial topics too if she weren’t so busy).

    Question: What is the difference between an insurer’s capital and reserves?

    Continue reading

    • adsatis 7:59 pm on February 14, 2014 Permalink | Reply

      This is a very cute clueless pug. 🙂

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