As I was browsing through ITunes, I came across the Actuary Song, taken from the musical “I Love You Because”. Well, I had no idea there was an actuary song, as you can imagine. It turned out there were actuary two others songs on ITunes about actuaries. But I will focus for the moment on the Actuary Song. The Actuary Song is about a girl Marcie who broke up with her boyfriend and her friend Diana gives her some advice about finding Mr Right. I have lived happily as an actuary now for a number of years and I had never heard actuarial principles were used on the dating scene. If only I had known this, maybe I could have applied some of my mathematical skills to assess the likelihood of certain relationships.
So here is what I learnt from the Actuary Song... The Rebound Time (RT), that is the time (in years) you need before you start another long-term relationship, depends on the Relationship Length (RL) of the previous relationship. The first year is worth 6 months of RT, the next is worth half of that and so on... So RT = ½ + ¼ +... + (1/2)^RL
That leads to the formula: RT = 1 – (1/2)^RL.
As you can see, this can be made a continuous function, starting from 0 for RL = 0, with a limit of one year for RL → ∞ . This is yet another discovery for me, the rebound time after a break-up is maximum one year! Well, that means I have wasted some time in my life. But that’s alright; let me continue to explore the Actuary Song theories.
The next thing is the Adjusted Relationship Length, or ARL, which is supposed to take into account different factors that may alter the perception of the length of the previous relationship.
The ARL uses the NBI, that is the number of boyfriends index. You may be glad to learn that:
NBI = 4 / (3 + #BF)
So for a first boyfriend, #BF = 1 and NBI = 1. There is no adjustment made.
After boyfriend say number 21, #BF = 21 and NBI = 1/6. The RL is adjusted by 1/6. In other words, it feels like the relationship was 6 times shorter than it actually was.
The ARL also uses the Who Broke Up factor. If they broke up with you, WBU = 5/4. If you broke up with them, then WBU = 3/4. In other words, you cut down you RT if you break up first.
Finally, the Bitterness Factor, but I have to say that I didn’t quite understand how it works in the ARL calculation. But we already have a very interesting formula that can be summed up as below:
ARL = RL x NBI x WBU
Where:
NBI = 4 / (3 + #BF)
WBU = 5/4 if they broke up with you or 3/4 if you broke up with them.
And hurrah, your rebound time is:
RT = 1 – (1/2)^ARL
Now I have to say I was quite impressed by the cleverness of this formula. So much so that I think we can do much more than that. I believe we can figure out a formula to calculate the probability of finding Mr or Ms Right given a set of assumptions. I believe we can calculate the expected length of a relationship using variables such as your communication skills, your financial situation and your good looks. I believe we should start gathering the data right now and ask people to fill questionnaires on their relationships.
Or maybe I will let you do that. The danger here is the ‘Observer Effect’, where the one doing the research changes its outcome. If my formula tells me I may stay with a girl and marry her, and the girl finds out about my actuarial model, there is a chance she might call me an unromantic nerd and never see me again! That is what I will call self-destroying prophecy... A self-destroying prophecy is when an actuary destroys all his chances with a good girl because his stochastic model predicts there is a 76.5% chance they will get married. So I am back to square one, confronted by the thought romance may be governed by non-parametric random variables. Someone help me.
Wednesday, 16 November 2011
Tuesday, 15 November 2011
Croc-insurance for Obama
I was reading this most random story about president Barack Obama receiving an insurance policy in the event of a crocodile attack as he travels to Darwin in the Northern Territories of Australia. President Barack Obama's family will receive a $50,000 benefit if the most powerful man on planet Earth gets eaten by crocodile. How comforting is this! The man is probably insured for millions in the event of death. But they will get an extra 50K for a crocodile attack.
The article added that "the policy was designed to give Mr Obama's family peace of mind." An official said: "For Michelle and the kids they can be comforted if a terrible event did occur then $50,000 would be payed out by TIO to help support them."
Here is my question: how do $50,000 give you peace of mind when you lose a husband? I don't know about you, but I would have peace of mind up until the moment some random insurance company tells me I could be eaten by a crocodile. Then I would think about the crocodile more than ever before. Isn't it what a lot of sales people do anyway... First tell you what you need to fear, whether it's true or false, and then sell you what you need to get rid of the fear.
And here is my answer: it is likely that Michelle Obama might now think of crocodiles more often than when she didn't know they could eat her husband. How ironic!
If only the risk was real... but there is another kick in the article: "But as Mr Obama is not expected to get close to any wild crocodiles on his visit, Mr Henderson says he is pretty sure the Obama family will not have cause to cash it in."
So first, Michelle Obama is told her husband might be eaten by a croc, and then Mr Henderson, the insurance guy, says it is very unlikely it will ever happen. So why did he talk about crocodiles in the first place except for publicity purpose? Obama is probably more likely to die by trying Vegemite than by being eaten by a crocodile. So again, this doesn't make any sense. It looks like Mr Henderson doesn't understand the principles of insurance.
When taking personal insurance, here are a few questions to consider:
- Is the risk actually real?
- What is the likelihood of getting the benefit if the event happens?
- Will the adverse event affect me financially?
Because of a 'not really' answer to the last question and a 'very unlikely' answer to the previous, I have stopped taking insurance on most products and services such as travels. My take is that in the long run, I am better off saving up the insurance costs, even if occasionally I might suffer a financial loss. This is what I call 'self-insurance'. You can even do it physically, and transfer money on a separate bank account every time you don't take insurance. Just consider that for small insurance amounts, you can sometimes pay 50% of the premium for commissions, administrative costs, and corporate profits.
To come back to President Obama, I reckon the insurance company should provide a policy against spiders, deadly snakes, and sharks. This will really give Michelle peace of mind while her husband hangs out down under.
The article added that "the policy was designed to give Mr Obama's family peace of mind." An official said: "For Michelle and the kids they can be comforted if a terrible event did occur then $50,000 would be payed out by TIO to help support them."
Here is my question: how do $50,000 give you peace of mind when you lose a husband? I don't know about you, but I would have peace of mind up until the moment some random insurance company tells me I could be eaten by a crocodile. Then I would think about the crocodile more than ever before. Isn't it what a lot of sales people do anyway... First tell you what you need to fear, whether it's true or false, and then sell you what you need to get rid of the fear.
And here is my answer: it is likely that Michelle Obama might now think of crocodiles more often than when she didn't know they could eat her husband. How ironic!
If only the risk was real... but there is another kick in the article: "But as Mr Obama is not expected to get close to any wild crocodiles on his visit, Mr Henderson says he is pretty sure the Obama family will not have cause to cash it in."
So first, Michelle Obama is told her husband might be eaten by a croc, and then Mr Henderson, the insurance guy, says it is very unlikely it will ever happen. So why did he talk about crocodiles in the first place except for publicity purpose? Obama is probably more likely to die by trying Vegemite than by being eaten by a crocodile. So again, this doesn't make any sense. It looks like Mr Henderson doesn't understand the principles of insurance.
When taking personal insurance, here are a few questions to consider:
- Is the risk actually real?
- What is the likelihood of getting the benefit if the event happens?
- Will the adverse event affect me financially?
Because of a 'not really' answer to the last question and a 'very unlikely' answer to the previous, I have stopped taking insurance on most products and services such as travels. My take is that in the long run, I am better off saving up the insurance costs, even if occasionally I might suffer a financial loss. This is what I call 'self-insurance'. You can even do it physically, and transfer money on a separate bank account every time you don't take insurance. Just consider that for small insurance amounts, you can sometimes pay 50% of the premium for commissions, administrative costs, and corporate profits.
To come back to President Obama, I reckon the insurance company should provide a policy against spiders, deadly snakes, and sharks. This will really give Michelle peace of mind while her husband hangs out down under.
Friday, 7 October 2011
A Stressful World
Yesterday I spent the day helping my friend to set up a booth for a MasterChef expo down in Sydney. Her brother is a famous Chef at a local organic restaurant. As I was contemplating all the work that is involved with being a Chef – cooking, managing staff, judging competitions... I said casually “That must be quite stressful for your brother to do all that”. To which my friend replied: “It is stressful; I heard Chef and bricklayer are the 2 most stressful jobs.”
Chef, I can totally see that it is a stressful job, especially if you’re not just cooking but also building a reputation, running a business as in the case of my friend’s brother, and trying to advance the culinary science with innovative recipes. But bricklayer?...
Who would think being a bricklayer is a stressful job? Hard-working job, certainly. Physical job, absolutely. Stressful job? I’m not quite convinced. I still have the image that bricklayers are well-built guys with a nice tan, and they whistle at pretty girls walking down the street. So where’s the stress here? Is it about the whistling part? Do they have to practice their whistling at home to get it right when the hot girls show up? Do they ever get stage stress when the girl is about to walk by, it’s nearly the right moment to whistle at her, not too early or not to late, so she can hear the whistling and look at the bricklayer showing his biceps? But then they chicken out and mess up the whistling. The whistle comes out feeble and they miss their chance with the girl. Or could it be the stress about the bricklaying part?
Here’s my take: the stress is not about their whistling skills or their bricklaying ability. It is probably about their sense of significance. I heard the story of the 3 bricklayers who were working on a famous cathedral in France. You may be aware that those cathedrals, like Notre Dame de Paris, were built over several decades, sometimes centuries. The issue was how to keep people engaged as they would probably never see the end result of their efforts and the money they invested into the cathedrals. A man went to visit the place where the cathedral was being built. He asked the first bricklayer “What are you doing?” The bricklayer replied “I am laying a brick, sir.” Then the man continued and walked to the next bricklayer: “What are you doing my friend?” The second bricklayer replied “I’m building a wall.” Finally the man walked to the last bricklayer and asked the same question: “And you, what are you doing?” The third bricklayer replied: “I am building a magnificent cathedral.”
So it looked like the 3 bricklayers were doing the exact same job, but each one was building something different according to the perspective they had. The first bricklayer was only looking at the number of bricks he could lay in one day – probably a stressful task indeed. The third bricklayer had a sense of purpose and was probably getting the most satisfaction out of his work. This is the parable of the 3 bricklayers.
I must admit that now and again, I have complained about a lack of significance, saying things like: “Who cares about what I do? No policyholder has ever sent me an email saying how happy they were about the investment options of their annuity. No kid has ever looked up to me saying they want to become an actuary too when they grow up.” Sometimes it feels indeed like no-one cares. People thank their doctor, their coach, the chef at the restaurant, their hairstylist, but they never take the time to thank the actuary behind their life insurance policy. Have you ever complained about this reality, or am I the only actuary out there who thinks this is unfair and someone should thank me because they are insured? :)
Anyway, the lesson from the parable is that I get to choose which bricklayer I am. I get to choose if I want to be the one who lays bricks or the one who builds a cathedral. If someone comes up to me and says “What are you doing?” I have 3 possible answers to choose from. I can reply:
First option: “I am calculating this year’s mortality rates on annuity policies.”
Second option: “I am looking at mortality assumptions so we can know how much policy liability we have to put in the accounts.”
Third option: “I am looking at mortality assumptions so we can still be around and pay benefits when you’re 80 years old.”
My initial lack of significance comes from the fact that the end result of my work is so far removed from my daily tasks. But then I remember that I am building a cathedral and people I don’t even know will benefit from my work long after I’ve changed jobs. Significance is often a matter of perspective.
Chef, I can totally see that it is a stressful job, especially if you’re not just cooking but also building a reputation, running a business as in the case of my friend’s brother, and trying to advance the culinary science with innovative recipes. But bricklayer?...
Who would think being a bricklayer is a stressful job? Hard-working job, certainly. Physical job, absolutely. Stressful job? I’m not quite convinced. I still have the image that bricklayers are well-built guys with a nice tan, and they whistle at pretty girls walking down the street. So where’s the stress here? Is it about the whistling part? Do they have to practice their whistling at home to get it right when the hot girls show up? Do they ever get stage stress when the girl is about to walk by, it’s nearly the right moment to whistle at her, not too early or not to late, so she can hear the whistling and look at the bricklayer showing his biceps? But then they chicken out and mess up the whistling. The whistle comes out feeble and they miss their chance with the girl. Or could it be the stress about the bricklaying part?
Here’s my take: the stress is not about their whistling skills or their bricklaying ability. It is probably about their sense of significance. I heard the story of the 3 bricklayers who were working on a famous cathedral in France. You may be aware that those cathedrals, like Notre Dame de Paris, were built over several decades, sometimes centuries. The issue was how to keep people engaged as they would probably never see the end result of their efforts and the money they invested into the cathedrals. A man went to visit the place where the cathedral was being built. He asked the first bricklayer “What are you doing?” The bricklayer replied “I am laying a brick, sir.” Then the man continued and walked to the next bricklayer: “What are you doing my friend?” The second bricklayer replied “I’m building a wall.” Finally the man walked to the last bricklayer and asked the same question: “And you, what are you doing?” The third bricklayer replied: “I am building a magnificent cathedral.”
So it looked like the 3 bricklayers were doing the exact same job, but each one was building something different according to the perspective they had. The first bricklayer was only looking at the number of bricks he could lay in one day – probably a stressful task indeed. The third bricklayer had a sense of purpose and was probably getting the most satisfaction out of his work. This is the parable of the 3 bricklayers.
I must admit that now and again, I have complained about a lack of significance, saying things like: “Who cares about what I do? No policyholder has ever sent me an email saying how happy they were about the investment options of their annuity. No kid has ever looked up to me saying they want to become an actuary too when they grow up.” Sometimes it feels indeed like no-one cares. People thank their doctor, their coach, the chef at the restaurant, their hairstylist, but they never take the time to thank the actuary behind their life insurance policy. Have you ever complained about this reality, or am I the only actuary out there who thinks this is unfair and someone should thank me because they are insured? :)
Anyway, the lesson from the parable is that I get to choose which bricklayer I am. I get to choose if I want to be the one who lays bricks or the one who builds a cathedral. If someone comes up to me and says “What are you doing?” I have 3 possible answers to choose from. I can reply:
First option: “I am calculating this year’s mortality rates on annuity policies.”
Second option: “I am looking at mortality assumptions so we can know how much policy liability we have to put in the accounts.”
Third option: “I am looking at mortality assumptions so we can still be around and pay benefits when you’re 80 years old.”
My initial lack of significance comes from the fact that the end result of my work is so far removed from my daily tasks. But then I remember that I am building a cathedral and people I don’t even know will benefit from my work long after I’ve changed jobs. Significance is often a matter of perspective.
Friday, 4 February 2011
Where do I fit ?
There are 2 kinds of responses people have when they ask what I do as a living and I tell them I am an actuary…One response is “A what ?” The other response is “Wow, you must be smart.” Both responses are quite challenging. In both cases, I don’t know what to answer. To the first response, I answer something like “I make insurance products work.” I don’t know if that helps, but that’s the shortest I can come up with. To the second response, it’s even harder to find an answer. Am I smart? The reality is that you rarely feel smart when you’re sitting an actuarial exam. I would feel really good after a Maths exam in high school, but unfortunately I never had the same kind of inner confidence when I sat actuarial exams. I ‘felt’ smarter when I was in high school than when I was doing my exams to be an actuary.
Am I smart? I am smart enough to know that being smart is not all there is in order to move forward in life. Sometimes you don’t need to be smart, you need to be assertive, or you need to know the right people, or you need to communicate well… All those things that they don’t teach you at school. When I look through job descriptions for actuaries, they always want people with “great communication skills, oral and written, self-motivated candidate, excellent team player…” You’ve probably read those ads and thought “Wow, who’s looking for the stereotypical nerdy / boring smart actuary they portray in actuarial jokes then?” Seriously, they must be somewhere, these dull and unexciting actuaries that started the stereotype. They must exist. It can’t be all legends. But then, no company is looking for these actuarial geeks. After looking through dozens of job ads, no one wants a “verbally-challenged, anti-social, number-driven actuary”. Who’s going to explain to me what happens to the geeks? Who’s going to tell me where they work? Because these are the smart people a lot non-actuaries think of when you tell them you’re an actuary.
So I’m confused, because I’m just too cool to fit into the geek stereotype, but I don’t feel I am the communication expert companies are looking for.
Am I smart? I am smart enough to know that being smart is not all there is in order to move forward in life. Sometimes you don’t need to be smart, you need to be assertive, or you need to know the right people, or you need to communicate well… All those things that they don’t teach you at school. When I look through job descriptions for actuaries, they always want people with “great communication skills, oral and written, self-motivated candidate, excellent team player…” You’ve probably read those ads and thought “Wow, who’s looking for the stereotypical nerdy / boring smart actuary they portray in actuarial jokes then?” Seriously, they must be somewhere, these dull and unexciting actuaries that started the stereotype. They must exist. It can’t be all legends. But then, no company is looking for these actuarial geeks. After looking through dozens of job ads, no one wants a “verbally-challenged, anti-social, number-driven actuary”. Who’s going to explain to me what happens to the geeks? Who’s going to tell me where they work? Because these are the smart people a lot non-actuaries think of when you tell them you’re an actuary.
So I’m confused, because I’m just too cool to fit into the geek stereotype, but I don’t feel I am the communication expert companies are looking for.
Thursday, 27 January 2011
Wednesday, 26 January 2011
Long-Term Effects
Have you ever thought about the first person who ever call themselves an ‘actuary’? I imagine this person waking up one morning and thinking “Oh, I want to become the first actuary!” This person must have been very smart just to come up with this idea. The next day, someone asked them “What do you do in life?” And they replied “I’m an actuary, I tell people what’s the chance they’re going to die this year.” Well, that’s what Edward Rowe Mores did in 1762, when he decided, as the leader of what would become Equitable Life, that he should be called ‘actuary’. This is the first recorded time that the word referred to a role in business. I’ve looked up Edward Rowe More and what was the most fascinating thing to me is that he wrote a lot of papers in Latin. I suppose Latin was the Lingua Franca in the scientific community of that time. But still, it amazes me. I did 2 years of Latin, and my mastery of Latin doesn’t allow me to read more than the line “Cogito ergo sum”.
What is also fascinating is that Edward Rowe Mores took over the executive leadership of the mutual company and then asked to be called the actuary. Centuries later, in the context of the Equitable Life review, Lord Penrose writes in his famous report: “Should the existing appointed actuary system continue, it is clear that on no account should it be permitted that the appointed actuary should also be the chief executive.” In other words, Edward Rowe Mores started a great profession, but also sowed the seed of its troubles in modern days by merging the roles of chief executive and appointed actuary. This is a humbling reminder that what we do today affects people tomorrow,… or in 250 years.
What is also fascinating is that Edward Rowe Mores took over the executive leadership of the mutual company and then asked to be called the actuary. Centuries later, in the context of the Equitable Life review, Lord Penrose writes in his famous report: “Should the existing appointed actuary system continue, it is clear that on no account should it be permitted that the appointed actuary should also be the chief executive.” In other words, Edward Rowe Mores started a great profession, but also sowed the seed of its troubles in modern days by merging the roles of chief executive and appointed actuary. This is a humbling reminder that what we do today affects people tomorrow,… or in 250 years.
Friday, 21 January 2011
Does anyone care?
Does someone listen to me? Does someone care? I may not surprise you if I say that over the years, I haven’t found a lot of people who actually care about what I do as an actuary. People still say things like “You work in IT, right?” after years of telling them I work as an actuary. Would you find it frustrating if people kept believing you’re doing something but you’re not?
Would you find it frustrating if people said you were an accountant after telling them a million times you are an actuary? Life as an actuary can be frustrating. You develop great insurance products, and nobody comes to say thank you for the great annuity they’re going to get in 20 years' time. Life as an actuary can be unrewarding. Let’s be realistic, is there someone out there who cares about my actuarial contribution to the world?
Last week, I went to visit my sister, and I had this immense opportunity to have an actuarial conversation with my nephew. He’s 15 years old and he’s contemplating a career as an actuary. He’s already scoring in Maths at school and neglecting his haircut. Well, he asked me questions and actually listened to me for about 2 hours, as we were hiking together on a mountain. After all these years of indifference from the actuarial Muggles, one of them wanted to know what I do as a job, what the job is like and what you need to do in order to become an actuary. That was one moment of significance, having the opportunity to explain to an eager listener what it is to be an actuary.
Well, I wish you all to have this moment of significance, when someone outside the job actually cares about your work. Maybe you will realise more than ever that it’s not all in vain.
Would you find it frustrating if people said you were an accountant after telling them a million times you are an actuary? Life as an actuary can be frustrating. You develop great insurance products, and nobody comes to say thank you for the great annuity they’re going to get in 20 years' time. Life as an actuary can be unrewarding. Let’s be realistic, is there someone out there who cares about my actuarial contribution to the world?
Last week, I went to visit my sister, and I had this immense opportunity to have an actuarial conversation with my nephew. He’s 15 years old and he’s contemplating a career as an actuary. He’s already scoring in Maths at school and neglecting his haircut. Well, he asked me questions and actually listened to me for about 2 hours, as we were hiking together on a mountain. After all these years of indifference from the actuarial Muggles, one of them wanted to know what I do as a job, what the job is like and what you need to do in order to become an actuary. That was one moment of significance, having the opportunity to explain to an eager listener what it is to be an actuary.
Well, I wish you all to have this moment of significance, when someone outside the job actually cares about your work. Maybe you will realise more than ever that it’s not all in vain.
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