Focus: The Hidden Driver of Excellence

This book by the bestselling author of Emotional Intelligence, Daniel Goleman is timely as I believe we are becoming the most distracted generation in recent history. With all the distractions presented by electronic gadgets such as smart phone, tablet, television, etc. and social media such as facebook, twitter, etc., focus has been become a rare commodity. I guess all of us are guilty of being distracted all the time and we may not realise that we are not living up to our full potential simply because we are easily distracted all the time. This book is timely as it shows us that focus is very important in all aspects of our life from working to personal relationship. It also shot down the myth on the importance of multi-tasking and shows us it is more important to be fully engaged at a particular task instead of juggling multiple balls and ended up dropping all the balls. I am a believer that focus is very important and in this age of distractions, the one who is able to stay focus and ignore the distractions will emerge triumphant.

 

 

Some excerpts from the book which I hope you will find useful in your journey towards being focus (and stop checking your facebook news) - words in blue are mine:

 

1) For leaders to get results they need all three kinds of focus. Inner focus attunes us to our intuitions, guiding values, and better decisions. Other focus smooths our connections to the people in our lives. And outer focus lets us navigate in the larger world. A leader tuned out of his internal world will be rudderless; one blind to the world of others will be clueless; those indifferent to the larger systems within which they operate will be blindsided.

 

2) Writing about the coming information-rich world, he (Nobel-winning economist, Herbert Simon) warned that what information consumes is "the attention of its recipients. Hence a wealth of information creates a poverty of attention." (The challenge for us is to make use of appropriate information and not be swarmed by information overload)

 

3) ..... Rick Aberman, who directs peak performance for the Minnesota Twins baseball team, tells me, "When the coach reviews plays from a game and only focuses on what not to do next time, it's a recipe for players to choke." (It is always better to be positive than negative)

 

4) While mind wandering may hurt our immediate focus on some task at hand, some portion of the time it operates in the service of solving problems that matter for our lives.

 

In addition, a mind adrift lets our creative juices flow. While our minds wander we become better at anything that depends on a flash of insight, from coming up with imaginative wordplay to inventions and original thinking. In fact, people who are extremely adept at mental tasks that demand cognitive control and a roaring working memory - like solving complex math problems - can struggle with creative insights if they have trouble switching off their fully concentrated focus. (The key is knowing when to focus and when to relax. Relaxation of the mind is also important. The part of our brain for intensive focusing also needs a refreshing break)

 

5) Open time lets the creative spirit flourish; tight schedules kill it.

 

6) A random survey of thousands of people found focus in the here-and-now understandably was highest by far while they were making love (apparently even among those people who answered that badly timed inquiry from a phone app). A more distant second was exercising, followed by talking with someone, and then playing. In contrast, mind wandering was most frequent while they were working (employers take note), using a home computer, or commuting. (Sex is also good for the mind!)

 

7) At the neural level mind wandering and perceptual awareness tend to inhibit each other: internal focus on our train of thought tunes out the senses, while being rapt in the beauty of a sunset quiets the mind. This tune-out can be total, as when we get utterly lost in what we're doing.

 

8) Tightly focused attention gets fatigued - much like an overworked muscle - when we push to the point of cognitive exhaustion. The signs of mental fatigue, such as a drop in effectiveness and a rise in distractedness and irritability, signify that the mental effort needed to sustain focus has depleted the glucose that feeds neural energy.

 

9) Such restoration (attention restoration) occurs when we switch from effortful attention, where the mind needs to suppress distractions, to letting go and allowing our attention to be captured by whatever presents itself. But only certain kinds of bottom-up focus act to restore energy for focused attention. Surfing the Web, playing video games, or answering e-mail does not.

 

10) ..... our tone of voice matters immensely to the impact of what we say: research has found that when people receive negative performance feedback in a warm, supportive tone of voice, they leave feeling positive - despite the negative feedback. But when they get positive performance reviews in a cold and distant tone of voice, they end up feeling bad despite the good news.

 

11) Another antidote to groupthink: expand your circle of connection beyond your comfort zone and inoculate against in-group isolation by building an ample circle of no-BS confidants who keep you honest.

 

A smart diversification goes beyond gender and ethnic group balance to include a wide range of ages, clients, or customers, and any others who might offer a fresh perspective. (Go and meet people!)

 

12) "Sunlight", as Supreme Court justice Felix Frankfurter once said, "is the best disinfectant." (This statement refers to transparency as the best policy)

 

13) Epigenetics, the science of how our environment affects our genes, tells us that inheriting a set of genes is not in itself enough for them to matter. Genes have what amounts to a biochemical on/off switch; if they are never turned on we may as well not have them. The "on" switch comes in many forms, including what we eat, the dance of chemical reactions within the body, and what we learn.

14) Willpower emerged as a completely independent force in life success - in fact, for financial success, self control in childhood proved a stronger predictor than either IQ or social class of the family of origin. (Delayed gratification must be trained from young)

15) High self-control predicts not just better grades, but also a good emotional adjustment, better interpersonal skills, a sense of security, and adaptability.

16) Bottom line: kids can have the most economically privileged childhood, yet if they don't master how to delay gratification in pursuit of their goals those early advantages may wash out in the course of life.

17) Another bottom line: Anything we can do to increase children's capacity for cognitive control will help them throughout life.

18) The timing of the gesture interprets its meaning. If your timing is off, a positive statement can have negative impact.

19) Empathy entails an act of self-awareness: we read other people by tuning in to ourselves.

20) One cost of the frenetic stream of distractions we face today, some fear, is an erosion of empathy and compassion. The more distracted we are, the less we can exhibit attunement and caring.

21) As William Osler, the father of medical residency training, wrote in 1904, a doctor should be so detached that "his blood vessels don't constrict and his heart rate remains steady when he sees terrible sights." Osler recommended doctors have the attitude of a "detached concern."

22) The most robust entity takes in the greatest amount of relevant information, understands it most deeply, and responds most nimbly.

23) Smart practice always includes a feedback loop that lets you recognize errors and correct them - which is why dancers use mirrors. (We must always learn from our mistakes)

24) Positive emotions widen our span of attention; we're free to take it all in. Indeed, in the grip of positivity, our perceptions shift. As psychologist Barbara Fredrickson, who studies positive feelings and their effects, puts it, when we're feeling good our awareness expands from our usual self-centered focus on "me" to a more inclusive and warm focus on"we".

25) ...... positivity, in turn, has great payoffs for performance, energizing us so we can focus better, think more flexibly, and persevere. (Ever wondered why successful people are always positive? I don't think they are positive because they are successful but rather it is because they are positive that they became successful)

26) "You need the negative focus to survive, but a positive one to thrive," says Boyatzis. "You need both, but in the right ratio."

That ratio would do well to flip far more to the positive than the negative, in light of what's known as the "Losada effect," after Marcial Losada, an organizational psychologist who studied emotions in high-performing business teams. Analyzing hundreds of teams, Losada determined that the most effective had a positive/negative ratio of at least 2.9 good feelings to every negative moment (there's an upper limit to positivity: above a Losada ratio of about 11:1, teams apparently become too giddy to be effective). The same ratio range holds for people who flourish in life, according to research by Barbara Fredrickson, who is a psychologist at the University of North Carolina (and a former research associate of Losada). (A balance between negative and positve feelings is important and successful people is generally more positive)

27) Global economic data shows that once a country reaches a modest level of income - enough to meet basic needs - there is zero connection between happiness and wealth. Intangibles like warm connections with people we love and meaningful activities make people far happier than say, shopping or work.

28) Directing attention toward where it needs to go is a primal task of leadership. Talent here lies in the ability to shift attention to the right place at the right time, sensing trends and emerging realities and seizing opportunities. (Leaders take note. One of our main task is to keep the team focus and at the same time are attuned to others and the outside world)

29) Leadership itself hinges on effectively capturing and directing the collective attention. Leading attention requires these elements: first, focusing your own attention, then attracting and directing attention from others, and getting and keeping the attention of employees and peers, of customers or clients.

30) ...... "deciding what not to do is as important as deciding what to do."

31) "The most successful leaders are constantly seeking out new information," says Ruth Malloy, global director of Hay Group's leadership and talent practice.

32) ..... nonacademic abilities like empathy typically outweigh purely cognitive talents in the makeup of outstanding leaders. (We all know why academic abilities alone would not guarantee future success. So, remember to always hone your soft skills like empathy, communication, etc.)

33) Baron-Cohen's research finds that in a small - but significant - number of people this strength (excels at systems analysis) comes coupled with a blind spot for what other people are feeling and thinking, and for reading social situations. For that reason, while people with superior systems understanding are organizational assets, they are not necessarily effective leaders if they lack the requisite emotional intelligence.


In summary, the book is timely for this generation which are constantly distracted. When we say focus, it is not merely at work or the task at hand. It encompasses every aspects of our life. When we are focused on our relationship, the relationship would flourish and we would have meaningful and quality connections with the people we love and care about. If we are distracted, what we have would be superficial connections and it is therefore, not surprising if the relationship do not work out or we feel something is missing. The same thing applies to work, the environment, etc. In summary, we should FOCUS on things that matter in our life, work, etc. during our short adventure on earth and hope that when we leave, we would leave our mark here, in a positive manner of course.

 

This Time is Different: Eight Centuries of Financial Folly

This book by Carmen M. Reinhardt and Kenneth S. Rogoff is well- researched and the title basically summarises the sentiment preceding a financial crisis, i.e. people always think that the party can always goes on, i.e. stock market will continue to rise, house prices will continue to rise and we can continue to "gamble" in the financial markets and retire in the Maldives because "this time is different". This book demonstrates that financial crisis is a norm rather than the exception from the early days of gold coins until the recent crisis in the late 2000s which the Authors termed as the Second Great Contraction. As such, it is important that we learn from the recent crisis and realise that perhaps there is nothing different from each financial crisis and it is always driven by greed and our ignorance. One of the main theme of the book is that fast rising house prices is an important indicator of potential banking crisis leading to full-blown financial crisis and regulators should also look at house prices for signs of trouble. This is important because traditionally, people always view investment in real estate as "safe" and house prices will never go down. However, in this book, it is shown that house prices will also go down in a financial crisis and it usually takes longer for it to recover compared to equities. Another danger of real estate fueling asset bubble leading to financial crisis is that politicians are usually reluctant to burst real estate bubble and very often, election pledges include a promise of everyone owning their own house including providing loans to those who would not be able to service the loan at the first sign of economic downturn such as rising interest rates, etc. and also encouraging speculative activities in real estate because it gives the impression of encouraging economic growth. However, this is all not sustainable and it is always the same leading to financial crisis, i.e. easy credit fueling unsustainable equities, real estate, etc. which ultimately lead to popping of the bubble. Perhaps, it is not so different after all.

 

The followings are excerpts from the book which I hope you will find useful (Words in blue are mine):

 

1) If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.

 

2) Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are. But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite.

 

3) Periods of prosperity (many of them long) often end in tears.

 

4) It appears that those that risk default the most when they borrow (i.e., those that have the highest debt intolerance levels) borrow the most, especially when measured in terms of exports, their largest source of foreign exchange.

 

5) ..... without taking into account country-specific debt intolerance factors, we can see that  when the external debt levels of emerging markets are above 30-35 percent of GNP, risks of a credit event start to increase significantly. (Note: Malaysia's debt is currently about 55 percent of GDP without taking into consideration other government-guaranteed debts and it does not look like it will reduce anytime soon. Scary numbers don't you think?)

 

6) ..... modern literature on empirical growth increasingly points to "soft" factors such as institutions, corruption, and governance as far more important than differences in ratios of capital to labor in explaining cross-country differences in per capita incomes. (Is it any surprise that Malaysia's per capita income is far less than Singapore? Just look at public institutions, corruption and governance of both countries)

 

7) ..... economic theory tells us that even a relatively fragile economy can roll along for a very long time before its confidence bubble bursts, sometimes allowing it to dig a very deep hole of debt before that happens.

 

8) Weakening global growth has historically been associated with declining world commodity prices. These reduce the export earnings of primary commodity producers and, accordingly, their ability to service debt. (I am just wondering if Malaysia's government ever consider the scenario when oil and palm oil prices start to drop and whether we would be able to service our debt?)

 

9) Peaks and troughs in commodity price cycles appear to be leading indicators of peaks and troughs in the capital flow cycle, with troughs typically resulting in multiple defaults.

 

10) An even stronger regularity found in the literature on modern financial crises is that countries experiencing sudden large capital inflows are at risk of experiencing a debt crisis. (We should remember that one of the contributors to the Asian financial crisis in 1997/1998 is the strong yen with massive capital inflows from Japan to other Asian economies and the bubble burst when the yen starts to appreciate and the capital inflows reversed. Interested readers should read the book by Andrew Sheng for first hand account of the Asian financial crisis of 1997/1998. Summaries of the book are in the following link: http://businessmanagementbooksreview.blogspot.com/2011/06/from-asian-to-global-financial-crisis.html)

 

11) As has been shown repeatedly over time, the governments of emerging markets are prone to treat favorable shocks as permanent, fueling a spree in government spending and borrowing that ends in tears.

 

12) Inflation during the year of an external default is on average high, at 33 percent. However, inflation truly gallops during domestic debt crises, averaging 170 percent in the year of the default.(Brace for massive inflation in the event of default)

 

13) Although many now-advanced economies have graduated from a history of serial default on sovereign debt or very high inflation, so far graduation from banking crises has proven elusive. In effect, for the advanced economies during 1800-2008, the picture that emerges is one of serial banking crises.

 

14) We find that real estate price cycles around banking crises are similar in duration and amplitude across the two groups of countries (advanced and emerging countries).

 

15) Periods of high international capital mobility have repeatedly produced international banking crises, not only famously, as they did in the 1990s, but historically.

 

16) One common feature of the run-up to banking crises is a sustained surge in capital inflows, which Reinhart and Reinhart term a "capital flow bonanza".

 

17) Mendoza and Terrones, who examine credit cycles in both advanced and emerging market economies using a very different approach from that just discussed, find that credit booms in emerging market economies are often preceded by surges in capital inflows. They also conclude that, although not all credit booms end in financial crisis, most emerging market crises were preceded by credit boom.

 

18) Notably, for both groups (developed and middle-income countries) the duration of declines in real housing prices following financial crises is often four years or more, and the magnitudes of the crashes are comparable.

 

19) ..... the outsized U.S. borrowing from abroad that occurred prior to the crisis (manifested in a sequence of gaping current account and trade balance deficits) was hardly the only warning signal. In fact, the U.S. economy, at the epicenter of the crisis, showed many other signs of being on the brink of a deep financial crisis. Other measures such as asset price inflation, most notably in the real estate sector, rising household leverage, and the slowing output - standard leading indicators of financial crises - all revealed worrisome symptoms (Malaysia is showing similar symptoms, i.e. asset price inflation, rising household leverage and slowing output. Should we be worried?)

 

20) Between 1996 and 2006 (the year when prices peaked), the cumulative real price increase was about 92 percent - more than three times the 27 percent cumulative increase from 1890 to 1996! Refer Figure 13.2 from the book which is reproduced here:

 

 

 Now, let's compare Malaysia's housing price index for high-rise below:

 

 

See any similarities?

 

21) Empirical work by Bordo and Jeanne and the Bank for International Settlements suggested that when housing booms are accompanied by sharp rises in debt, the risk of a crisis is significantly elevated. (This seems to be case for Malaysia where the housing booms are accompanied by sharp increases in household debt which reached a record high of 86.8% of GDP at end-2013)

 

22) This literature on financial crises suggests that markedly rising asset prices, slowing real economic activity, large current account deficits, and sustained debt buildups (whether public, private, or both) are important precursors to a financial crisis.

 

Let's have a quick comparison for Malaysia:

 

a) Markedly rising asset prices (Malaysia have that)

b) Slowing real economic activity (Looks choppy at the moment but let's assume that it is not slowing down at the moment)

c) Large current account deficits (Not yet, but it appears that our current account surplus is on a downward trajectory. Refer graph below.)

d) Sustained debt buildups (Malaysia have that) 

 

(Source: http://www.tradingeconomics.com/malaysia/current-account-to-gdp)

 

So, from the above, it looks like Malaysia is showing some signs of vulnerability and I guess we should monitor closely our current account and economic activity and hope it would not go into negative territory.

 

23) ..... sustained capital inflows have been particularly strong markers for financial crises,..............financial liberalization or innovation has also been a recurrent precursor to financial crises........

 

24) ..... a massive run-up in housing prices usually precedes a financial crisis. (Scary thoughts isn't it?)

 

25) More often than not, a financial crisis begins only after a real shock slows the pace of the economy; thus it serves as an amplifying mechanism rather than a trigger.

 

26) Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics:

 

- First, asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years.

 

- Second, the aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points during the down phase of the cycle, which lasts on average more than four years. Output falls (from peak to trough) more than 9 percent on average, although the duration of the downturn, averaging roughly two years, is considerably shorter than that of unemployment.

 

- Third, as noted earlier, the value of government debt tends to explode; it rose an average of 86 percent (in real terms, relative to precrisis debt) in the major post-World War II episodes.

 

27) Kaminsky and Reinhart's "twin crises" work;....... concluded that financial liberalization often preceded banking crises; indeed, it helped predict them.

 

28) For banking crises, real housing prices are nearly at the top of the list of reliable indicators, surpassing the current account balance and real stock prices by producing fewer false alarms.

 

In summary, this is an excellent book compiling various financial crises from the early days of Napoleonic wars to the recent crisis in late 2000s which the Authors termed as the Second Great Contraction. As the title suggests, too much of a good thing usually led to tears and we should learn from previous crises and not fall into the "This time is different" syndrome. I particularly like this quote from the book:

 

There is nothing new except what is forgotten.



 - Rose Bertin