Wednesday, September 17, 2014

The Louis XIII of Rolls Royce

 
 
Rolls Royce Phantom Extended Wheelbase Macau
The motor car
 
Louis XIII Macau Hotel Stephen Hung
The casino
 
The man (on the left)
 
 
Luckily for the Rolls Royce Motor Car company, there's a new king in town, or at least as far as they are concerned. His name is Stephen Hung, he is a flamboyant 56 year old Hong Kong billionaire real estate developer, and he has just put in the largest order in history for the Rolls Royce Phantom. The deal is for a fleet of thirty of the uber-the-top cars, worth a total of $20 million, or roughly $667,000 a piece. As reported in this Business Insider article, the bespoke cars will be utilized by Mr. Hung's forthcoming Louis XIII Hotel and Casino in Macau, an ultra-luxury property catering to China's super-rich which might just make the palace at Versailles look like a university dormitory. The fleet of extended wheelbase Phantoms will ensure that the casino's top end clients will never have to confront Macau's chronic taxi shortage when they want to go casino hopping. Instead, they will be nestled in a gold-plated interior with diamond-studded timepieces by Graff. The opulent styling will match that of the hotel itself, which will offer accommodations costing as much as $130,000 per night. And both car and building seem to have taken creative inspiration from the man himself, who has been sporting red-dyed hair of late. As he has been quoted saying, he is at the point in life when he can do whatever he wants. These days, he seems to be in the mood to throw caution to the wind in the face of Macau's slowdown and Beijing's anti-corruption campaign, and make even extravagant French kings blush.   
 


Monday, September 15, 2014

College Admission - The Hedge Trade

And get a hall named after you to boot!!
 
 
Steven Ma of ThinkTank Learning is not your usual college consultancy CEO catering to Asia's aspiring Ivy League families. Sure, his San Francisco Bay Area-based practice provides tutoring for the SAT and the usual blend of guidance and motivation. However, he is willing to go the extra step and provide a money back guarantee of success. How does he do it and still maintain a viable business?
 
Like the former hedge fund manager that he is, through an algorithm, of course - a "secret sauce" formula based on the historical data that he has compiled from his clients over the years. In short, he crunches a candidate's GPA and other qualifications together with his/her targeted schools into his black box to arrive at a pricing proposal. For example, for a U.S.-born high school senior with a 3.8 GPA, an SAT score of 2,000, moderate leadership credentials, and 800 hours of extracurricular activities, ThinkTank predicts a 20.4% chance of admission to New York University and a 28.1% shot at the University of Southern California. Based on those odds, Ma might charge a guaranteed consultancy fee of $25,931 for NYU and $18,826 for USC.
 
For the particularly well-heeled and academically motivated client, Ma is also willing to tailor a more complex probability-weighted fee proposal that would look more familiar in Las Vegas, Macau or Wall Street than in the education sector. Consider the case of the wealthy Hong Kong CEO whose son dreamed of gaining acceptance from a good university. The problem is that Junior was not the brightest star in the far eastern sky. In fact, he was struggling with a C-ish average GPA and attended a small high school in Utah. With this client, Ma struck a deal as follows:
  • Client deposited US$700,000 as an ante, even before Junior began the application process
  • Client and Ma agreed that a 3.0 GPA and 1600 SAT score were Junior's threshold achievement levels
  • If Junior failed to get accepted into a Top-100 school, Ma got zilch.
  • If he got into a school ranked 81-100, Ma got $300,000.
  • For a 51-80 ranked school, Ma got $400,000.
  • For a top 50 school, Ma's payoff started at $600,000, and climbed by $10,000 for each higher ranking gained, up to $1.1 million for the #1 school in the US.
What margin Ma pockets from such hefty success fees when all is said and done is up for some speculation. However, this case can't help but call to mind the old adage about having more money than brains. In the enigmatic and hypercompetitive world of college admissions these days, it sure seems to help to have at least one of the two. 

As with hedge fund trades, not all of Ma's bets have worked out as well as hoped. His experiences included having to refund $250,000 to the family of Chinese student who was rejected from seven Ivy League schools. As for Junior above, the story had a happy ending. He got into Syracuse (and is reported doing well there), ranked 62nd. Ma pocketed $400,000.
 

Wednesday, June 18, 2014

My Tutor, My Rock Star

     Dreaming of a better education system


An exam question:

Korea's college entrance exam process is increasingly considered to be deleterious to public health because:


(a) it contributes to a startlingly high incidence of myopia (75%) and a doubling of curvature of the spine over the past ten years among testing-aged Seoul teenagers;
(b) an alarming number of families are going broke supporting an extracurricular “cram school” education that costs 12% of a household’s overall budget;
(c) it is the leading cause for teenage suicides which is the highest rate amongst OECD countries;
 
(d)  a few popular online private tutors who have reached superstar status have been able to earn millions of USD per year by attracting tens of thousands of pupils, thereby effectively negating any competitive advantage that the lessons purport to confer;
(e) the English curriculum is ultimately considered to be of little value because, while students might know how to define words like “deleterious” and “myopia” in a multiple choice exam, they can hardly converse well enough to order a pizza, much less save their own skins in day-to-day life;
(f)  all of the above.

The answer, sadly, is (f).

Though the rigors of the Chinese college entrance examination (the Gaokao, the subject of the previous blog article) are only now more widely coming to light internationally, the arduousness of Korea's college entrance system has long been well known. It has alternatively been admired for vaulting Korean students to the top of the global academic heap (as measured by test scores) or scorned for the mounting social costs forced onto a stressed out domestic population. Recent public focus has turned towards the increasingly negative impacts. In response, the government has been imposing regulations against Korea’s infamously demanding network of “hagwon” tutoring schools, including mandatory closing time of 10 pm, caps on hourly charges and a ban on front-running study materials taught in school. Nevertheless, real change is difficult to implement in hyper-competitive Korea society. Test-taking is a central tenet of the country’s Confucian tradition. Parents will risk sending themselves to an early grave or suffocating under a pile of consumer debt to keep Junior Kim up to snuff with his/her peers. And society idolizes the best tutors and pays fortunes to them every year. How many other countries treat bespectacled math or English teachers like Lady Ga Ga and Justin Timberlake?

Of additional concern is that some of the “hagwon” have developed a sufficiently strong reputation to export their systems to neighboring countries such as Taiwan. Asian students prepping for the US SAT are enrolling in increasing numbers in “hagwon” systems to improve their shot at getting into strong American universities. However, the growth of the “hagwon” system only creates a vicious cycle of competitiveness among an expanding applicant pool that needs to outdo each other. There should be real concern that the social ills endemic to such a rigid system may also be exported.


In an increasingly complex world, success requires flexible problem solving skills and creative thinking. Such attributes are too often inadequately exhibited through multiple choice exams. And living well - which should be every individual's goal - is a broad issue that has more than one correct answer.

 
Check out this
FT article about Hagwons


Wednesday, June 11, 2014

A Testing Test


Heading for a good university? Or a re-education labor camp?

 
To those US-bound students (and their concerned families) who just took the Scholastic Aptitude Test (SAT) last weekend: congratulations, but think that was tough? If so, just be glad that you don’t have to sit the Gaokao – China’s equivalent of the college entrance exam. Reports are that the SAT is a cakewalk in comparison. First of all, the pressure to do well is far more intense – the two days of the Gaokao can make or break a young person’s entire future, and Chinese teens don't have the do-over opportunities that are available to SAT-takers should they happened to have been feeling ill that day or simply caved into nerves. Secondly, the Gaokao math section is reputedly much more intense; it makes the US test seem like a color-by-numbers exercise by comparison.
Another Gaokao feature that routinely furrows brows is the essay questions. The SAT essay prompts tend to be relatively straightforward and often deal with personal growth and morality. Examples:
·         There is no success like failure. Comment.
·         Should you tell a friend the truth or avoid hurting their feelings?
·         Is it better to live for the present or prepare for the future?
·         Does character determine success in one’s life?
·         Is reality TV beneficial or harmful?
The Gaokao essay prompts are hardly so straightforward. Some of them read like they were written by a Zen Buddhist monk crossed with an aging hippie on dope. If you think that Asian tests are only about rote learning and rigid guidelines, think again. The Chinese essays require sharp interpretive skills and the ability to think laterally. Courtesy of the shanghaiist.com website at the link below, a sample of the mind-bending essay prompts that were included in this past weekend’s Gaokao follows (Note: these are real questions posed to students in different regions of China):
Beijing: The “old rules” prescribed by parents demand respect for elders, speaking in a quiet and gentle voice, and sitting or standing straight up. Recently, netizens have gone online to discuss these traditions. What is your understanding of this issue?
Shanghai: “The world belongs to you only after you stand up.” Discuss.
Jiangsu Province: Some say that only youth is immortal, that young people do not believe they will die some day. Is this naive? Are there things such as this in nature that are eternal?
Fujian Province: With the word “valley”, some people think “cliff”. Others think of the old road built along the cliff. What about you?
Anhui Province: “The authors say that the actors are allowed to change the screenplay, but the directors say that they are not.” Discuss.
Hunan Province: There was once a very poor place. Many left it. Others stayed, and over a few years, turned it into a beautiful village. Discuss.
Guangdong Province: Old black and white photos are few and far between. Because they are rare, they are precious. These days, digital technology has seriously diluted the value of photographic images. Thoughts?
Liaoning Province: Grandfather and grandson are standing on a hill. Grandson loves the neon lights of the city, how colorful everything appears. Grandfather hates the neon because it washes out the more beautiful stars in the sky. Discuss.
Every year, China observers try to discern if there are common themes imbedded in the Gaokao’s questions. This year’s bring two alternatives to mind for this blogger. First, the questions seem to grapple with the effects of a rapidly changing society on its individuals – how does one reconcile the old with the new? How should a person relate to a constantly evolving environment? An alternative and more ominous motivation for the Gaokao administrators to pose these questions recalls the Hundred Flowers Campaign in the mid 1950s, when government officials invited multiplicities of views to bloom amongst the intellectuals, just so the leadership could subsequently brutally stamp out the undesirable weeds. Let's hope that we don't need to be so cynical. Life is stressful enough for the millions of teenagers who toil away in hopes of securing a better future for themselves and their families to have to worry that they may be headed for re-education rather than college.  

 

Friday, June 6, 2014

Hitchhiker's Guide for the Wealthy Chinese


Hurun1
Makes for a decidedly complicated packing list

So, you're a stinking-rich Chinese person. You own three houses for yourself and your family, and possibly one for an illicit lover. You also own seventy floors of mixed use real estate that are fully leased out right smack in downtown Hangzhou. You've furnished your homes with fine Italian leather seating, high thread count bed sheets, marble wall tiles, snazzy German kitchen appliances and an underground cellar full of dusty wine bottles next to a mirrored karaoke lounge. Your pockets are stuffed with an LV wallet, a fat wad of red 100 RMB notes, and an even fatter government bureaucrat or two.

Travel-wise, you've been to the major European cities and New York, done the Harrod's DFS thing, toured a few vineyards (one of which you ended up buying), and lost some money playing baccarat in Macau.

You find yourself standing by the window of your teenage child's Park Avenue penthouse looking out at the foliage of Central Park. Suddenly, you are hit with an existential question that clenches your throat and leaves you gasping: is this all there is? Life suddenly feels devoid of purpose and meaning. You wonder why you bother to continue living.  

Luckily, you are not alone. There are many like you who have faced such a crisis and come out just fine on the other end, thanks in no small part to a few enterprising travel agents. So long as you have a trip budget that can stretch to US$150,000 or so (on average), there are an innumerable variety of "experiential" holidays that will replenish your vigor and life mojo.

As shown in the table above, and in this Jing Daily article, the world is indeed a vast place full of wild and wonderful adventures. First of all, there's South America. Forget Argentina and Brazil. Try Bolivia. Don't ask why - just trust the survey. If that involves too much flora, fauna and hip-shaking Latin dancing, then there's always the South and North Poles. It'd just be you, your guide, a pair of tall unshaven dudes speaking Norwegian, and a few gazillion ice crystals. Alternatively, there's Bhutan, the ultimate anti-China. The people there are dirt poor because they live by something called the Gross Happiness Index and are deeply Buddhist. Who knows, you may even like the country enough that you might want to buy it and turn it into your own spiritual theme park.

Of course, if you are so far gone psychically that none of these destinations get your juices flowing, you can choose to chuck everything tied to this god-forsaken world and take your leave of it, literally, by heading into space. Think of it: no gravity to weigh you down, no airwaves that carry the nags and complaints of your employees and relatives to your tired ears. Just a vast, empty place that will leave you at peace in the company of your own ponderings. Mind you, the re-entry could be a bit of a doozy, and you and your vehicle can risk going down in flames. If that troubles you, there's always the one way journey option. Rather than worrying about what it might feel like to be reduced to a burnt rice wafer, you can spend the rest of your days floating above the human beehive, up where you rightfully belong - closer to the sun.   

Thursday, June 5, 2014

Days of Protest, not Shopping



Jam-packed protests


Empty luxury stores

 
Where have all the shoppers gone? It’s a question that many luxury retail shops in Hong Kong have been asking of late. Yesterday, on June 4 – the 25th anniversary of the massacre in Tiananmen Square, the shop owners may have found the answer to that question by heading out to Victoria Park, where upwards of 180,000+ people gathered in a candlelight vigil to commemorate the event and raise their concerns to the world.

As reported in this SCMP article, the volume of luxury retail buying in the SAR has fallen off faster than the glass face of a cheap Shenzhen knock-off watch. The figures are startling. Jewelry and watch sales plunged by 40% in April. Sales of consumer durables were down by a fifth, and those of electrical goods and photographic equipment were down by 8.3 per cent. Financial Secretary John Tsang said: “The drop is the biggest since February 2009. If the decline persists, it could affect the economy and the employment situation.”

The abrupt change of fortunes over the past couple of years for the retail sector comes as little surprise to anyone who has taken note of the dismaying transformation of the urban landscape into an antiseptic sprawl of shops selling $3,000 hand bags, $300 jeans, $1,000 shoes and $100,000 watches in order to cater to a single demographic – the cash-flushed tourist from the Mainland. Now that the parade of well heeled Chinese has quieted to a peep as a result of the anti-corruption campaign and the slowdown in the Mainland economy, Hong Kong is left singing the double whammy blues of under-utilized retail space and a public that feels disaffected and jilted by its leaders for shunting aside their welfare. The luxury malls feel like ghost-towns during weekdays, while on weekends, eyeballs get a lot more action than wallets. Meanwhile, tea shops and family dinner tables are filled with locals who are increasingly pissed as hell about it all. It’s a safe bet that no one is going to cry over the demise of a bunch of Louis Vuitton, Valentino, or Vertu stores.

This year’s June 4th protest  has provided an occasion to reflect on interesting ironies about China’s development over the past quarter century. Back then, the Beijing protest was over government suppression of civil liberties in a society where poverty was also a widespread problem. In response to the uprising, the Chinese leadership liberalized the economy in order to increase the welfare of the country’s citizens, while still keeping thumbs firmly pressed down on personal freedoms. In the ensuing twenty five years, stunning rates of economic growth did much to keep a lid on widespread public protests; people were loath to upset the apple cart while they were able to bake larger and sweeter pies from them. However, the grotesque wealth inequality - much of it skewed in favor of the families of the bureaucrats who brutally crushed the student gathering - that has resulted from the government's go-go investment policies has been stoking public disgruntlement again. In essence, suppression of economy liberties caused by an uneven playing field has now become as big an issue as that of personal liberty.
 
The record crowds in Hong Kong that showed up to light candles and call out to Beijing and the world harbor a wide variety of concerns. They want to be able to directly choose their leader through free elections in 2017. They want those individuals and public institutions that are in a position to promote social equality to do more than look after themselves. They are outraged that rampant Mainland growth has imported pollution, inflation and scarcity for essentials such as quality healthcare, education, and safe foodstuffs. They want to be able to shop in their neighborhoods for things which they need everyday, rather than window-shop at glittery things they can only imagine owning without busting their budgets. But underlying it all, they want what anyone anywhere would want - fairness and freedom in a place where they have a sense of belonging. It would be sad (and potentially dangerous) to think that it would take another twenty five years to give those basics back to the people. It's not too much to ask for.
 

Thursday, May 15, 2014

Of Money Supply and Mattresses

Padding for a cadre’s good night sleep

This entertaining New York Times Op Ed penned by author Yu Hua raises the lid on the variously creative ways that corrupt Chinese officials attempt to conceal their ill-gotten gains. The Op Ed piece is ostensibly an explanation of why the faster growth of China’s money supply relative to its GDP has not resulted in runaway domestic inflation. The hypothesis? That a large proportion of the money supply is in the form of bribe money that is socked away rather than put into circulation. While the intriguing economic theory is not substantiated with empirical data, the inventive means that bureaucrats have used to stash the cash are worth describing here:
 
- $4 million in a safe deposit box;
- $1.5 million in the bathroom of a new apartment, which subsequently developed a water leak;
- $450,000 in a garbage heap next to his brother’s house;
- $3 million “wrapped in layers of plastic and hidden in a hollow tree trunk, beneath an ash heap, in a rice field and inside a latrine”;
- $200,000 in a rented luxury apartment. Despite wrapping the cash in plastic, it got moldy. Presumably, he should have reinvested part of the booty in a functioning air conditioner;
- $21.5 million (!) in cash and gold hidden away in a bureaucrat’s two houses. He later admitted that hiding the loot was a colossal headache.
 
It’s commendable that China’s reluctance to create a currency note worth more than RMB 100 ($16) is partially motivated by the desire to make cash-based corruption and money laundering more cumbersome. However, the bigger underlying problem of course is that such graft is still so rampant. And if the growing pile of dirty cash is not stemmed, at some point, inflation will indeed become a real problem. The iconic red RMB 100 notes may even become a cheaper material than cotton and coils for stuffing mattresses.