Posts Tagged‘risk’

Early Exposure Key to Reducing Allergy Development.

Much to the surprise of many I used to be a childcare worker back in the day. It was a pretty cruisy job for a uni student like myself, being able to show up after classes, take care of kids for a few hours and then head off home to finish off my studies (or World of Warcraft, as it mostly was). I consider it a valuable experience for numerous reasons not least of which is an insight into some of the public health issues that arise from having a bunch of children all packed into tight spaces. The school which I worked at had its very first peanut allergy ever when I was first there and I watched as the number of children who suffered from it increased rapidly.

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Whilst the cause of this increase in allergic reactions is still somewhat unclear it’s well understood that the incident rate of food allergies has dramatically increased in developed countries in the last 20 years or so. There are quite a few theories swirling around as to what the cause will be but suffice to say that hard evidence to support any of them hasn’t been readily forthcoming. The problem for this is the nature of the beast as studies to investigate one cause or the other are plagued with variables that researchers are simply unable to control. However for researchers at the King’s College in London they’ve been able to conduct a controlled study with children who were at-risk of developing peanut allergies and have found some really surprising results.

The study involved 640 children who were all considered to be at a high risk of developing a peanut allergy due to other conditions they currently suffered from (eczema and egg allergies) aged between 4 and 11 months. They were then randomly split into 2 groups, one whose parents were advised to feed them peanut products at least 3 times per week and the other told to avoid. The results are quite staggering showing that when compared to the control group the children who were exposed to peanut products at an early age had an 80% reduced risk in developing the condition. This almost completely rules out early exposure as a risk factor for developing a peanut allergy, a notion that seems to be prevalent among many modern parents.

Indeed this gives credence to the Hygiene Hypothesis which theorizes that the lack of early exposure to pathogens and infections is a likely cause for the increase in allergic responses that children develop. Whilst this doesn’t mean you should let your kids frolic in the sewers it does indicate that keeping them in a bubble likely isn’t protecting them as much as you might think. Indeed the old adage of letting kids be kids in this regard rings true as early exposure to these kinds of things will likely help more than harm. Of course the best course of action is to consult with your doctor and devise a good plan that mitigates overall risk, something which budding parents should be doing anyway.

It’s interesting to see how many of the conditions that plague us today are the results of our affluent status. The trade offs we’ve made have obviously been for the better overall, as our increased lifespans can attest to, however there seems to be aspects of it we need to temper if we want to overcome these once rare conditions. It’s great to see this kind of research bearing fruit as it means that further study into this area will likely become more focused and, hopefully, just as valuable as this study has proven to be.

BitInstant, BitCoin Market Corrections and Cryptocurrency’s Future.

There seems to be a prevailing idea that the price of BitCoins is somehow intrinsically linked to the overall confidence in the use of the nascent cryptocurrency. If you’ve read any of my previous articles on BitCoin you’ll know that I strongly believe that that isn’t the case and indeed a rising price is usually a signal of speculative investors gaming the market to turn a quick profit more than it being an indication of market confidence. Indeed I was most bullish on the idea of BitCoin when its price  stop fluctuating which meant it was far less risky for people to use it as a wealth transfer vehicle, especially for those who are taking the risk of using them in their business.

Now I’ll be completely honest here, when I saw the first stirrings of an upward tick in BitCoin’s price I wasn’t too worried that it would lead to a speculative bubble. Sure it was dangerously close to the same ramp up just a year previous but I felt that the higher transaction volume, larger amount of wealth contained in the BitCoin network and hopefully the market’s long term memory would ensure that any growth in the price was purely organic and sustainable. Of course this discounted external actors with larger amounts of capital working to skew the market in order to turn a profit but I felt that the speculators had had their fun last year and had moved onto other, more lucrative endeavours.

Looks like I was wrong.

As you can see from the above graph the BitCoin price took a turn for the volatile side around the middle of July. Since then there’s been several spikes in trading volume most of which have coincided with a jump in the price. Whilst there appears to be islands of stability that last about a week it never lasted long before another trading bout would push the price upwards. This culminated in a peak price of about $14 late last week quickly followed by a swift downward correction in price with it stabilizing around the $10 mark. As I’ve said before this kind of price volatility is very much at odds with BitCoin being a proper currency and it’s unfortunate to see history repeating itself here again.

Interestingly though the correction in price may actually be due to dwindling confidence, but not in the BitCoin idea itself. The first lawsuit involving BitCoins and the failed wallet service Bitcoinica was lodged just days prior to the value taking a swift nose dive. This was most likely exacerbated by people attempting to cash out at the current peak as you can see the transaction volume on that day was several times higher than the average for the preceding couple of months. Bitcoinica, unfortunately, isn’t the only story of BitCoin based services that have endured failure and this could have very easily shaken the market enough to attempt to dump out early to avoid losing all their value.

The underlying cause to much of the volatility that the BitCoin market experiences is the relatively small amount of value that it captures. Whilst as a whole the BitCoin market is valued at some $97 million (total number of BitCoins in existence multiplied by current price) the total transaction volume on any given day usually only averages $800,000. That’s incredibly open to manipulation and showcases just how crazy those peak trading days, the ones where the value changing hands is on the order of 3 times the average, really are.

Now I don’t pretend to have a solution to this but a new startup called BitInstant might have the right idea when it comes to injecting more value into the market and hence (hopefully) reducing its volatility.

BitInstant is a clever little idea using prepaid MasterCard debit cards which are then backed with either real US currency or BitCoins. The cards can be recharged either by traditional means or by using a BitCoin address that’s printed on the back of the card. They make this even easier by also including a QR code on the back which would enable users to transfer BitCoins between them using things like BitCoin enabled apps on their smart phones. The details on it are still being finalized but this has the potential to take BitCoins from their current niche operations to a much larger scale and hopefully with that bring a lot more stability to the BitCoin price.

BitCoin purists will probably detest the cards since they will require some level of formal identification for them to be able to use it, thus eliminating the benefits of anonymity, but I don’t believe BitInstant’s product is aimed at them. Indeed it seems to be more of a way to make BitCoin function more like a traditional currency as currently it really is only for the technical elite or those who have a need to transfer funds in a completely untraceable manner. Giving people a physical card they can use anywhere will go a long way to making BitCoins much more palatable for the masses, something that all the current BitCoin services I feel have failed to do.

BitInstant is just one piece in the larger puzzle though and realistically its going to take many, many BitCoin enabled services to make it viable as a currency. Good news is that appears to be happening with BitInstant being just the latest contender to throw their hat into the BitCoin ring. Hopefully this means that the peaks and troughs in BitCoin’s trading price will soon be a lot more tame and then I’ll stop harping on about how BitCoin’s price is the last thing we should be thinking about if we’re serious about it being a currency.

On Single Founder Startups.

I’m a very firm believer in the adage of “either put up or shut up”. I often talk with people about their ideas for things and how much better they’d be than what’s currently available. My usual retort is that should then go ahead and try to do that (usually not facetiously) otherwise they should just stop talking about since an idea without action doesn’t do anyone any good. Of course I’m not one to let people say the same thing to me so the vast majority of ideas that I have for a product that I talk about have usually undergone at least some preliminary work to make sure the idea is viable, just so that I don’t feel like I’m talking out my ass.

The problem I’ve often found though is that it’s easy for me to get excited about an idea that I’ve had but it’s 100 times more difficult to get someone else excited about the same idea. I can hear you saying now “well if it was a good idea anyone would be excited about it” but the problem is that since pursuing such ideas is inherently risky people tend to err on the side of caution instead of wanting to get involved. The second you start mentioning dollar figures (whether costs or potential revenues) it gets even worse as people have seen enough seemingly rock solid business go down in recent years to be wary of anyone coming to them with some outrageous idea.

If I’m honest I’m really just generalizing my own personal experiences here and depending on who you are and where you grew up the experience could be quite different. Canberra, and the majority of Australia for that matter, are a risk adverse lot tending towards proven ideas rather than new risky new ventures. This is especially true with the majority of investment in Australia with many choosing the “safe bet” of property rather than investing in new ventures. Thus for any of us wanting to lash out on our own we’re more or less isolated in a community of risk adverse people, and that makes developing a new idea inexorably hard.

I found this a lot when working on many of my previous ideas. Sure there were many times when I’d discuss an idea and its potential with people and receive amazing feedback, but should I ask more than to try it when I finally released and I’d be met with non-committal responses. There’s also not much of a start up scene here in Canberra either since 90% of the people employed here are public servants or working directly for the government. Sure I could probably travel a bit to get involved in say Sydney or Melbourne however the only time I currently have to spare is spent on working on my product, and the potential to find (and convince) someone else to work with me on my ideas seems small enough as to be a waste of my time pursuing it.

Thus for my first couple ideas (and application to Y-Combinator) I decided to go it alone as a single founder. Now the odds are really stacked against you if you go this route, both for start up accelerators like Y-Combinator and the real business world. Many people liken it to raising a child, sure you can do it yourself but its a much greater burden to bear and you’ll need to put in so much more effort to achieve the same results. For someone like me who’s in an environment that’s not conducive to pursuing new ideas sometimes the only option you have is to go it alone, lest you never go at it at all. Of course the simple solution here would be to then put myself in a more conducive environment, which I am looking to do within the next year.

This all being for my 2 most recent projects I have been able to find people who are interested in the idea that I came up with and have been willing to work with me on them. I think I can attribute my success in this regard to finding an area of common interest that we could then expand upon, each of us being able to have meaningful input that will sculpt the end product. I’ll admit it’s a lot easier when you’ve got someone to lean on, even if they’re not technical as that back and forth helps solidify your idea, keeping your eye squarely fixed on the end goal. I’m hopeful that these ideas will turn out a lot better than my last couple ventures, not least of which I’ll hopefully be able to credit to sharing the load with someone.

 

Sometimes Failure is Required For Future Success.

There’s always risk in innovation. When you’re creating a new product or service there’s always the chance that nobody will want what you’re creating. Similarly whatever you end up creating could very well end up grating against the current norms in such a way that your product is almost wholly rejected by those its aimed at. A great example of this, which I covered in the past, was Windows Vista. In order for Microsoft to move ahead into the future they had to break away from some of their old paradigms and this drew the ire of many of their loyal customers. The damage that was done there is still being felt today with slower adoption rates of their latest product but had it not been for this initial failure they may not have been enjoying the level of success that Windows 7 has today.

In fact many pioneering products and services were first faced with dismal (albeit, mostly profitable) reception initially. Steam was a great example of this, debuting back in a time where broadband penetration numbers in many countries wasn’t particularly great and sought to deliver all games digitally direct to the consumer. Couple this with the fact that they were cutting out the publishers and distributors in the process the guys at Valve faced an extremely long, uphill battle in order for their platform to gain dominance.  Still three years later they started to get big titles releasing on their platform and the rest, as they say, is history.

Interestingly enough I began to notice similar things happening with the Playstation Portable. Whilst the next version of the handheld, the NGP, is not going to be a digital only download device Sony has recently said that all games will be available digitally with only the bigger titles coming to the physical world:

“One thing we learnt from PSP, is that we want to have simultaneous delivery in digital and physical for NGP. Just to clarify that, all games that appear physically will be made available digitally, said House. He added, “Not necessarily all games have to be made available physically. And having the option of a digital-only method affords more creative risk-taking, and that’s because you don’t-have that in-built risk of physical inventory.”

For those who follow Sony you’d be aware of the dismal failure that was the PSP Go. Debuting at an insanely high price (costing just a hair below a full PS3) whilst offering little in the way of improvements the PSP Go was never going to be a phenomenal success. However it was particularly hampered by the lack of compatibility with its current gen brethren, doing away with the UMD drive in favor of a fully digital distribution model. This annoyed PSP customers to no end because their current collection of games could not be migrated onto the new platform (other than through nefarious means). Looking at the NGP there’s no way to get UMD games onto it but since most people are already aware that their current UMD titles will not have a format transition to the new platform they’ve avoided doing the same amount of damage to their next generation handheld as they did to the PSP Go.

Failure teaches you where you went wrong and where you should be heading in order to avoid making such mistakes again. Many successful products have been built on the backs of dismal failures,  just look at satellite phones and radio for example. Sometimes it requires a risk taker to pave the way forward for those who will profit from the endeavor and hopefully that risk taker gets some of the kudos down the line.  Digital distribution is one of those such areas where path has already been beaten and even some of the pioneers are continuing to profit from it.

Money Money Everywhere But Not A Cent To Spend.

I’m often asked about what’s the best way for people to invest their hard earned dollars so they can have their money work for them. I’d love to say I’ve coached people to make their fortunes out of the stock market or property investments but that’s just not the case. Typically I get as far as asking what their end goal is for investing and never hearing back from them. So today I want to give everyone some ideas and a bit of a framework so that you can go out into the wild blue yonder of investing and make proper decisions about what you want to achieve.

After many long night shifts working at one of my last jobs I ended up stumbling across a few good sources of investment information. The forums are filled with hundreds of people who are either looking to invest or are already well on their way to their financial goals. I spent many of the long 12pm to 7am drag reading through all the articles and asking all sorts of silly questions until I finally came to the conclusion that I needed to approach this just like any other project. The first step is to scope out your requirements.

So what’s the end goal for investing? For myself it’s to build up an asset base that will eventually replace my income and will also give me a lot of leverage so I can maximise my return. A lot of the time people tell me “I just want to be rich” but what that lacks is a real end point where you can call success. I’ve seen people often get too frustrated at not seeing any results early on and giving up on the investing game completely, that’s why it’s important to know your goals and set milestones so you can track your progress.

Let’s take a generic example that’s based off what I want to achieve:

  • Time frame: 5~10 years
  • Risk profile: low to medium.
  • Goal: passive income of approximately $150,000/year (in today’s dollars)
  • Chosen investment vehicle: property for asset base, managed funds or high yield shares for revenue

So the first thing you need to decide is how long you want to be in the game before you achieve your goal as this affects what investment vehicle you should choose. Property is a medium to long term with shares, managed funds, etc are more geared to short to medium term investments. However there’s exceptions with both these rules so you can make a quick buck with property (usually done through “flipping“) and there are many shares which mimic property trends (bank stocks are a good example of this).

Once you’ve decided your investment term the next thing to decide is how much risk you’re willing to take on. Risk is a complicated term especially when it comes to managed funds as it doesn’t mean exactly what most people think it means. For example, a lot of revenue geared managed funds (basically high interest savings accounts) classify risk as the potential for them not to make the targeted yield, whereas risk in direct share purchases is more aptly described as the potential for the stock to lose its value. A general rule of thumb is investments like shares and managed funds are medium to high risk with property being in the low risk area. Again there are exceptions to these rules (as we’ve seen recently) but you can usually guage risk by the return or yield the investment offers. The higher the return, the more likely it’s a risky investment.

Now for the juicy part, where do you want to be at the end of all this? Do you want to replace your income so you don’t have to work? Are you building a nest egg for retirement? Do you have your eye on a Bugatti Veyron and can’t get the finance with your current assets? This is the idea that will drive you through your investment and will be the base of your financial plan.

So for someone like me who is risk adverse, in it for the long game and is looking to leverage as much as he can property was the best investment for me. Once I’ve got my asset base up I’ll be shuffling money into managed funds or similar to get my revenue up, as property is a great leverage tool but not the best for revenue generation. Depending on your situation many of the other options out there might be the best thing for you. So, as always, have a look around at the vast options and use the 3 basic ideas I’ve described here and you’ll be well on your way to financial freedom.

This post does not constitute financial advice and is provided as is with no guarantees, warranties or support. Seek professional advice from a registered financial advisor before undertaking any investment decision.

It’s Pronounced “Nuclear”.

I can’t help but feel that there are some technologies out there that just get hit with a bad name once and are then driven underground because of it. Cold fusion was a great example of this since the scientists who were experimenting with it first didn’t follow proper scientific method but now any serious research into this area is immediately hit with disdain, even though there are some results that require further investigation. This becomes all the more painful when something that is proven to work gets the same sort of reaction. I am of course referring to nuclear power, or fission reactors.

Now what’s the first thing that comes to mind when someone mentions nuclear power to you? Is it a clean source of energy or do you get images of Chernobyl, Three Mile Island and nuclear weaponry? It seems the majority of the world is stuck in the latter mindset, only remembering the horrors that nuclear power brings to the world. The truth of the matter is that not only is nuclear power completely safe, it’s also a lot more friendly to the environment than any other fossil fuel based means of generating power.

The first round of questions I usually get concerning nuclear power is “Doesn’t it produce highly radioactive and toxic waste?” and the answer is yes, it does. However, per kilowatt of power produced a coal plant will release around 100 times more radiation into the surrounding environment. Additionally most of the waste produced by a nuclear plant that comes out radioactive means it’s still usable as fuel for a reactor, it just requires some more handling. This is done using breeder reactors which I do admit carry with them a small risk of proliferation. This can be easily offset by modifying the breeder to render the weapons grade stuff unusable, keeping the risk well within acceptable levels.

One country that has been listening to people like me is France, producing well over 85% of their electricity from nuclear sources. They’ve also only had 2 incidents arising from their use of nuclear power and breeding reactors, giving them an amazing track record for safety. You would think that if there was such a high risk in using nuclear power that the French would have had a multitude of accidents, but they haven’t. Clearly nuclear power is a lot safer than what the general public believes.

To give you an idea of just how bad public opinion is here’s a graph showing the number of nuclear reactors over time:

794px-Nuclear_Power_HistoryImage used under the The Creative Commons Attribution-NonCommercial-ShareAlike License Version 2.5 from Global Warming Art.

The Three Mile Island incident was a pretty minor affair technically and nuclear power continued to grow afterwards. However Chernobyl tarnished the world’s view of nuclear power and it hasn’t really recovered since. The fact of the matter is the reactor responsible for that disaster was known at the time to be an unsafe design and modern reactors are quite capable of shutting themselves down before such a disaster can occur.

It’s the old saying of once bitten, twice shy. The world suffered through a major accident with nuclear power and from then on anyone peddling it as the solution to the world’s energy problems has to work past lobbyists, politicians and the society at large. It’s hard to convince everyone that the risks are far lower than what they used to be, and for some reason the mythical idea of a clean coal power plant seems like a better idea than proven nuclear technologies. Australia as a nation, who’s uranium reserves are the largest in the world, is well positioned to take advantage of this technology. With so much unarable land available there’s no reason for us not to set up large reactors away from major population centres, keeping the “risks” to the population even smaller still.

So hopefully the next time you talk to someone about nuclear power you won’t see the green glowing boogey man that seems so ingrained in everyone’s heads. One day nuclear will be one of our few options left, and it is my hope that we begin working on implementing a nuclear based power infrastructure before its our last option.