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Thread: What we can learn from cockroaches to survive the next crisis

  1. #1
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    Default What we can learn from cockroaches to survive the next crisis

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    What we can learn from cockroaches to survive the next crisis
    September 7, 2017



    Typhoon Hato lashed Southern China two weeks ago. Hong Kong and Macau were struck head-on with strong winds and heavy rain.

    A widely-shared youtube video of Macau showed thousands of cockroaches getting out of their underground hiding places and crawling one after the other over a sea wall. It was a well-coordinated effort to march to higher grounds to flee from possible flooding caused by the tropical cyclone.


    Response to natural disasters: cockroaches versus humans

    It is impressive to see how cockroaches can prepare an advance contingency plan when there’s a perceived danger ahead. They manage to escape to safety in an orderly manner to avoid unnecessary casualties.

    It is said that animals and insects have the sixth sense to predict natural disasters. Unfortunately, as humans we don’t possess the same sense.

    When Typhoon Hato attacked Macau, the local observatory downplayed the severity of the storm and held back public warning to avoid any financial impact on the casinos.

    As a result, over half of the city had water and electricity cutoff. Casino guests gambled under dim lights with no air conditioning. It also resulted in a death toll of 12 because many residents reported to work and the victims were trapped in flooded carparks.

    Despite huge government reserve from gambling taxes, technology to predict bad weather has not been upgraded since Macau’s return to China in 1999. Typhoon signal no. is determined by one person – Macau’s weather chief. Similarly, not much has been done over the past decades to solve the problem of flooding in low-lying areas.

    Are cockroaches smarter than humans?

    Well, didn’t they just prove that they have more advanced life-saving skills and better group coherence compared with us?

    Studies show that cockroaches live in closely-knitted egalitarian societies. When everybody is equal, it is easy to make group decisions. When no one has secret agenda, the group can make collective decisions for the greater good.


    Remember the 2008 financial crisis?

    Have you read Reuter’s recent article ‘Nine years on, another Lehman Brothers bankruptcy‘ (Sept 2)?

    Remember how the collapse of Lehman Brothers triggered the global financial crisis in 2008? Nine years later, the debts have not been settled yet. Last Thursday, two affiliates of the failed investment bank filed for Chapter 11 to generate $485 million cash for Lehman Brothers.

    The 2008 financial crisis was caused by the US housing bust and subprime mortgage debts.

    On the eve of the financial crisis, the Federal Reserve tried in vain to avoid a total collapse of the financial markets after dumping hundreds of billions to bail out mortgage banks and bond dealers.

    “It is a strange thing, but when you are dreading something, and would give anything to slow down time, it has a disobliging habit of speeding up.”
    – J.K. Rowling, author of Harry Potter and the Goblet of Fire

    Similar to many financial crises, the 2008 version started with a banking panic. When IndyMac Bank was taken over by the government on July 11, hundreds of nervous depositors gathered outside the bank since FDIC only insured up to $100,000 (in Singapore, it is capped at S$50,000 per person).

    U.S. Treasury Secretary Henry Paulson then reassured the public in a talk show that the US banking system is solid and there is a $25 billion bail-out of Fannie Mae and Freddie Mac. Shares of the two government-sponsored enterprises tumbled.

    “… when reality can no longer sustain the exaggerated expectations … when people continue to play the game although they no longer believe in it. Eventually a crossover or tipping point is reached.”
    – George Soros, The Crash of 2008 and What it Means: The New Paradigm for Financial Markets

    On the fatal day of September 15, U.S. Treasury thought it’s enough to bailout Bear Stearns ,Fannie Mae and Freddie Mac, and refused to take on more. Lehman Brothers had to file for bankruptcy. Merrill Lynch was sold to Bank of America, AIG was taken over by the Federal Reserve.

    Two days later, investors fled the once considered ultra-safe money-market mutual funds. They withdrew a record $144.5 billion from the financial market in a single day on September 17. Banks couldn’t get the money they needed to fund their day-to-day business. The US economy was close to a complete collapse.

    The stock market finally crashed on September 29. The Dow Jones Industrial Average fell 777.68 points in intra-day trading – the largest drop in any single day in history. It created a ripple effect through the financial system and created widespread panic of the global markets. Investors were desperate to sell . They were willing to get out at any price.


    How we react to financial crises

    Similar to a stampede in the crowd, a market crash is usually caused by mass panic. Trampling happens when people are scared and flee from a perceived danger.

    In an overcrowded market, a rumor or a piece of shocking news can easily trigger irrational fears which lead to disastrous results.

    How to prevent unnecessary damages and loss of wealth facing the onset of a financial crisis? Perhaps we can take the hint from a crowd management expert.

    “When you start to feel uncomfortable in a crowd, this is the time to start looking at leaving. This is very difficult, because if you’ve come a long distance, or you’ve waited for a long time, for example in front of a stage, you don’t want to leave. ”
    “Make a mental note of all the exits in a venue as soon as you arrive. The natural urge is to use the same entry when you exit, not because it’s safer, but it’s familiar.”
    – Paul Wertheimer, crowd control expert

    It’s easier said than done. In reality, because of greed and comfort, many people leave that decision until it’s too late and end up being trapped in a large panicking crowd totally out of control.


    The human instinct of self-denial

    By the end of the 2008 subprime crisis, Dow fell more than 50 percent from its last peak.

    The 1997 Asian Financial Crisis occurred in July when foreign investors fled the Asian markets which caused the collapse of the Thai, Indonesian, Philippine and South Korean currencies.

    On the Black Monday of the 1987 stock market crash, Dow lost 23 percent of its value or $500 billion dollars.

    The Wall Street Crash happened on October 28 and 29 in 1929. Dow fell 25 percent in two days. The stock market dropped 90 percent during the Great Depression.

    Despite history keeps repeating itself, we still choose to believe that this time it is going to be different, that prices still have room to go up.

    “We behave as if the Black Swan does not exist: human nature is not programmed for Black Swans.“
    “That night, on October 19, 1987, I slept for twelve hours straight. It was hard to tell my friends, all hurt in some manner by the crash, about this feeling of vindication.”
    – Nassim Nicholas Taleb, The Black Swan – The Impact of the Highly Improbable

    “Consequently, very few people survive an investment mania unscathed. The bears are either mildly hurt because they underperform on the upside or badly damaged because they go short too early while the bulls are eventually devastated because they “overstay” by remaining too optimistic too long.”
    – Marc Faber, Tomorrow’s Gold – Asia’s Age of Discovery


    To sum up, what are the things we can learn from the cockroaches in order to survive the next crisis?

    1. Put aside individual interest. Stay united for the common good.

    2. Plan for an exit strategy right at the entrance.

    3. Look out for signs of crisis. Recognize early and leave in time.

    4. Don’t panic and exit in an orderly manner.

  2. #2
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    Don't know whether I survived the 1997 and 2008 economic crisis or I sleep through it because I know nothing about money.

    After 2008 started to reprogram me from a worker to an investor.

    1997 Big Brother say small boy needs to listen to IMF.

    2008 Big Brother called all the small boy please go ahead and print money.

    The next crisis will be a Big party time, everyone print Money.

    Question, when they print Money are you ready to collect or are you ready to give?

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    1. Go and read up on game theory. Tell us whether cockroach hypothesis or game theory is more relevant here.

    2. Plan for a worst case scenario that one can weather through with buffer. But also prepare for the best case scenario of gains. Else others gain and you lose.

    3. Look out for signs of crisis. Recognize early and prepare for buffers through the crises.

    4. Don't panic because as long as you are not forced to exit, you (and the market) will grow stronger and larger past each crisis.
    Quote Originally Posted by vip View Post

    To sum up, what are the things we can learn from the cockroaches in order to survive the next crisis?

    1. Put aside individual interest. Stay united for the common good.

    2. Plan for an exit strategy right at the entrance.

    3. Look out for signs of crisis. Recognize early and leave in time.

    4. Don’t panic and exit in an orderly manner.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    gosh, we're talking animal stories now, eh? what's next? fairy tales?

    I don't take life lessons from a cockroach. I take them from an Eagle, or a Lion.

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    Quote Originally Posted by tonymontana View Post
    gosh, we're talking animal stories now, eh? what's next? fairy tales?

    I don't take life lessons from a cockroach. I take them from an Eagle, or a Lion.
    The cockroaches will still be around when Eagle or a Lion are long gone.

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    Quote Originally Posted by Arcachon View Post
    The cockroaches will still be around when Eagle or a Lion are long gone.
    Yes of course, I know. But I don't want to live like a cockroach.

    Do you?

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    Cockroach strategy is safest in places where there is no guarantee of safety of infrastructure. Anything can be bombed or collapse. Then don't need a place to stay and no point in investing in them.

    Living in any nook and cranny will do.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  8. #8
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    Quote Originally Posted by tonymontana View Post
    Yes of course, I know. But I don't want to live like a cockroach.

    Do you?
    There are a lot of type of cockroach, same with the human. Some human live worst than the cockroach.



    When you close your mind, you don't get to see what others see.

  9. #9
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    In game of thrones season 7, Jon Snow , king of the north, asked how many people were living in king's landing. And the answer was a million.
    He then wonders why anyone would want to live in such a crowded place.
    Tyrion Lannister then replies that it's because there're more jobs there and the entertainment options are far superior.

    How much do you think a property in king's landing would be worth (even though it's crowded, messy, ruled over by a mad queen, and soon to be besieged by dragons) vs up north in winterfell where you have a lot more space?

    So the moral of the story is: if you want to swap allegories, use better examples.

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