Mind Your Decisions

10 Tips for Traveling Safely with Valuables

22 July 2008   |   by Presh Talwalkar   |   1 Comment »   |   Print This Article

Every Tuesday is a Game Theory article at Mind Your Decisions

photo credit: GrooverFW

A successful vacation depends as much on safety as it does on activities. The best travel plans can be sabotaged by pickpockets and dishonest hotel staff. Travel risk is inevitable because valuables like money and passports are needed when traveling overseas. So how can you protect yourself?

This article arms you with my 10 favorite tips. You might not be able to prevent theft entirely, but by following these steps, you will make yourself a much harder target for thieves and greatly reduce your risk.

Before I get to the tips, I want to connect travel safety with game theory. In fact, what inspired this article is reading a tip that I thought couldn’t possibly work.

Traveling off-season: a questionable safety tip

I once read it’s safer to travel during the off-season, like say, going to Europe during winter. The off-season, it was argued, contained smaller crowds and hence fewer thieves.

But this logic doesn’t make sense when viewed strategically. The problem is that although there are fewer thieves, there are also fewer tourists. A tourist who travels during the off-season would stick out like a sore thumb and attract all available thieves. By contrast, a tourist who travels during the peak-season would blend in with others and could assure safety simply by appearing to be a hard target.

Since it might be easier to outsmart other tourists instead of trying to outsmart all thieves, a sophisticated traveler could be safer during the peak-season. This is a point overlooked by financial writers that promote the off-season for discounted airfare and accommodation rates.

Travel safety is a game

The example above illustrates that travel safety cannot be based on a static list of precautions like “travel in groups.” Travel safety is about outsmarting thieves. It’s a game of cat-and mouse. You have to be constantly warding off thieves preying on your valuables.

In a sense, travel safety is much like a biological predator-prey game. Thieves are predators that need a sustainable supply of tourists to line their pocket. Too much theft and travelers stop visiting a region entirely. By analogy, thieves, like natural predators, will focus their efforts on the low-hanging fruit: the weak, the confused, and the unprepared.

These tips are about putting you ahead of the curve. Even though this is public information, do not be concerned that others will instantly adopt them and lessen the advantage. Discussions of game theory only attract the smartest people, and enough people are likely to forget the tips.

So do yourself a favor by printing these out (see the “printer friendly version“) and checking them off one-by-one on your next trip. That’s what I plan to do.

The tips are divided between steps you can take “before you leave” and “during your trip.”

Before you leave

1. Remove unneeded valuables

It’s worth stating the obvious because this step alone would reduce damage while traveling. What are some items that are not necessary? This depends on your trip’s purpose. A basic step is to remove all unnecessary travel items like domestic store and membership cards. I go even further and avoid taking jewelry that I’d miss, like watches, chains, or rings. Many people suggest using a disposable camera to avoid yours getting stolen. I settle on taking a camera that I would not particularly mind losing—like an old digital camera.

2. Plan out secure ways of getting money

People debate about the best option between traveler’s checks, ATMs, and credit cards. From what I gather, the fees keep on changing, and convenience depends on where you’re staying. The main point is that all of these are safer, though possibly more expensive, than carrying paper money. Call around for fees (two years ago some exceptional credit cards had no fee on international charges) and plan it out.

3. Think about where you store your wallet

Many thefts occur with wallets in outer jacket pockets or back pant pockets. You can reduce theft by putting your wallet in your front pocket. Better yet, consider getting a security wallet that sits under your clothes. Now apparently thieves know about these too, so to be even safer, you might consider one that is stronger and can’t be cut with ordinary knives.

4. Divide up valuables between several areas

Two of my friends were debating whether one person should carry the passports or whether each person should carry it individually. I ultimately suggested that each should be separate. While putting both passports with the safer individual might lower the chance of theft, it increases the risk that both are lost. The same logic applies for cash, credit cards, debit cards, and traveler’s checks. Spread the wealth among responsible parties so that one theft isn’t going to leave your group stranded with nothing. Additionally, spread the goods among your various items—your wallet, camera pouch, and luggage.

5. Create a “throw-away” wallet

My friends in Chicago tell me you should always carry some cash to dispense with during a robbery. The thief goes away and you leave unharmed. I recently heard about a variation of this advice: create a decoy wallet with a small but decent amount of cash. If robbed, you can give this wallet to send thieves on their way. I cannot personally vouch for this advice, but it is logical and one story in this message board thread makes a convincing case.

6. Photocopy documents and have important numbers

This is a step aimed at quick recovery rather than theft prevention. Make copies of traveler’s checks numbers, passport information, driver’s license, and airline tickets so you can inform appropriate agencies quickly and limit damage. Keep a copy with you and leave one at home—just in case your copy gets stolen. Also include numbers like the American (or your country’s) embassy and your credit and debit cards’ customer service to get replacements.

During your trip

7. Use your room or hotel safe

When my friends went to Italy, they always made sure to lock up passports and other valuables. Some hotels might charge for this service, but it’s probably worth it. Former New York City cop Bill Stanton explains why:

Even if hotel employees are beyond reproach, you don’t want to make it easy for anyone to dart in and grab your valuables. Cleaning staff frequently leave room doors wide open, sometimes when they’re not even in the room. “I’ve walked in, as a test, acting as if it were my room,” Stanton says. “All you have to say is, ‘Can you excuse me for five minutes? And they leave.’” (source)

8. Ask your hotel manager about unsafe areas

Neighborhoods can be surprisingly small in large cities. In Chicago and San Francisco there are dangerous areas just a few blocks from extremely safe ones. Since neighborhoods change over time, it’s best to ask a local who is up on the news. It always surprises me how helpful people are in these situations if you just ask. You might even get a tip about the latest scam while you’re hearing about good places to eat.

9. Act like a local

We forget how easy it is to stick out. My history teacher told me how Americans are easy to spot because they often wear clothes with the American flag and they wear sneakers everywhere. It’s wise to dress modestly and learn a bit about the culture in advance. Another good tip is to go to a local store that other tourists would avoid, like a supermarket. Then use one of their bags to carry things in public. In a similar vein, if you rent a car, consider putting a local newspaper in the back seat. And then there’s the obvious: walk with intention even when you’re lost, and avoid taking out a map in crowded areas.

10. Be careful when drinking alcohol

I know enough stories where people get in trouble domestically when drinking too much. The same risks are there when traveling in another country. The story I want to share concerns an amusing business episode. One of my friends was traveling to Europe and ran into colleagues working at a competitor. They bought some rounds to get him relaxed so they could extract information. The only problem was they ended up tipsier than my friend and so they ended up leaking information. My friend quickly called his boss back home so he wouldn’t forget. His competitors didn’t size up the risks, and they paid for it. Literally.

Sources and Additional reading

Safe ways to carry valuables (Independent Traveler message board)

Travel safety tips (Better Health)

Travel safety (Bugbog)

Outsmarting thieves (Rick Steves)

12 ways to trick thieves (Journeywoman)

Thieves love tourists (National Post)

Tips for traveling with valuables (Associated Content)

What are your tips? Share in the comments, and I’ll add valuables suggestions and links.

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My “Secret” to Feeling like a Million Bucks

18 July 2008   |   by Presh Talwalkar   |   7 Comments »   |   Print This Article

Update: This article is an editor’s pick in the 162nd Carnival of Personal Finance at Taking Charge

Some highlights of my “secret:”

• It costs nothing.
• Most of us can do it naturally.
• We willingly ignore it to our own detriment.
• Though when we occasionally do it, we feel like a million bucks.

My “secret” is something all of you know: getting a full night’s rest. Sufficient sleep is the basic step to feeling amazing. It erases the stresses of the day and promotes good health.

But you didn’t need me to tell you sleep is important. I’m here to address another question: why don’t more people get in on the “secret” of sleep?

Why is sleep ignored?

For one, sleep isn’t sexy. If you look at this Wisebread article on “10 killer ways to feel like a million bucks,” it has a lot of catchy tricks, but no mention of sleep. It is full of things you can do during the waking hours. In my opinion, the real reason the advice is “killer” is that it does nothing to reduce sleep debt, a major contributor to lethal traffic accidents.

But there’s another reason for our neglect of sleep. It is the result of our tireless American work ethic and our drive to be busy. Paul Martin, Ph.D., captures our strange view of sleep:

A century ago the majority toiled long hours while the affluent few idled away their time. Today, however, the more conventionally successful you are, the less free time you will probably have. Having nothing to do is seen as a sign of worthlessness, while ceaseless activity signifies status and success. Supposedly unproductive activities are deprioritised or delegated. And according to the prevailing cultural attitudes, sleeping is one of the least productive of all human activities – more worthwhile perhaps than sitting around picking your nose, but not much. In their ceaseless pursuit of work and pleasure the cash-rich buy time from others, hiring them to cook and clean their houses, look after their children and cook their food. But one of the activities you simply cannot delegate to anyone else is sleeping. –Counting Sheep [emphasis added]

(If you’re looking for a book on sleep, I highly recommend Counting Sheep by Paul Martin. I improve my sleep habits each time I read from it. Get it from your library or buy it from Amazon.)

Sleep should be financial advice

Financial advisers often talk about the miracle of compound interest. If you sock away money for several years, have decent stock returns, and wait it out, you’ll surely be a millionaire and make your investment worthwhile.

I recently reflected on how we financial writers fail to make meaningful change. We spend our time telling people to be patient, to control temptation, and to hang on to bear markets for the hope of monetary gains at retirement. Imagine if we also told people to sleep more so they could feel like a million bucks right away.

I’d call that one heck of a return on investment.

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162nd Carnival of Personal Finance at Taking Charge

A couple of articles caught my eye. Please check them out:

• Review of MyGallons.com by Wide Open Wallet. Reminds me of the adage of “Heads I win, tails you lose” for prepaying gasoline. The company wins if gas prices go down, but you might lose if gas prices go up and they don’t have money to pay.
• How many retirement accounts can you have? at Cash Money Life. Brief and accurate summary of various retirement accounts.

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Why Moderation Fails

17 July 2008   |   by Presh Talwalkar   |   No Comments »   |   Print This Article

Everyone is in love with moderation. We’re told to eat a “balanced meal.” Fox News proudly claims it is “fair and balanced.” Moderation dates back at least to the ancient Greeks who said “nothing in excess.” Today, the same idea holds but with a slightly different wording: “everything in moderation.”

While moderation is universal, it fails as a practical rule. Moderation has no clear-cut definition and it can be exploited. Fifty years ago, one soda per week might have been moderate; now, it’s more like one per day.

Societal-defined moderation inflates baselines as we “keep up with the Joneses” and it simultaneously justifies bad behavior. Rarely do people cut out soda. They instead make a moderate change to diet soda, a switch that might be counterproductive for weight loss.

Money moderation fails

A few years ago I had a chance to counsel a friend. He was in credit card debt and wanted to get out. His problem was clear: while he earned a good amount, he was spending all of it.

What did I advise him? Money is a touchy subject, so I told him to make some small, moderate changes. I went with the popular advice of using budgets and cutting back. Every penny counts, I said. I told him to tackle small debts first, for a psychological advantage. I told him to eat at less expensive places and buy fewer clothing items.

I didn’t tell him the truth for fear it would be “extreme” and that he’d be overwhelmed to follow it. But in judging his behavior, I failed him. To this day, he’s still in debt and feels guilty he can’t keep to his budget (a fault of budgets in general, not with him). But to his credit he has improved—moderately.

I should not have sugar-coated the task. I should have told him to do everything to save his credit and take control of his money. Rather than focus on helping him make small changes, I should have focused on getting him to want to save money. Then he wouldn’t need to budget. A simple and free expense spreadsheet would suffice to keep him on track.

I feel guilty about my role in moderation. I have since vowed to spread the truth, even if it is unpopular or unconventional, and that’s what motivates every article I write.

In conclusion

Realize that “everything in moderation” is typically an excuse to justify bad habits. Even worse is that most advisers who know better still offer moderate advice. They think clients won’t listen to “drastic” but necessary changes, so they just avoid it. When they do that, they have failed not only themselves, but society at large. Be weary about joining the crowd.

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Why Patience Pays Off in Negotiations

15 July 2008   |   by Presh Talwalkar   |   6 Comments »   |   Print This Article

Every Tuesday is a Game Theory article at Mind Your Decisions

photo credit: MShades via flickr

A family caught my attention in a restaurant. A young kid was keeping his parents busy. He demanded an appetizer because the main course took too long. He then passed time playing video games on his cell phone. Soon he became bored again, so he took out a portable DVD player. I wanted to see his next toy, but just then the food arrived to occupy him.

Times have really changed, I thought to myself. It was not so long ago that I was the kid waiting for food, but if got bored, I didn’t have toys. My parents simply told me to be patient. I hated it then, but my parents convinced me patience would pay off. If I learned how to be patient, they told me, then I’d get along with people better and have a more relaxed life.

In fact, those benefits are only half of the story. Patience has paid off for me, but less in my personal life than in my business life. The biggest payoff has been that patience provides a competitive advantage during negotiations. It’s a weapon particularly useful against impatient opponents who grew up with instant gratification.

To illustrate, I will share an experience where patience was important. I’ll then discuss the situation using a game theory model to suggest how the strategy can work for you.

A motivating story

I was moving out of state and needed to sell many of my belongings. Because I was still using the items I intended to sell, I waited until the last minute to list them online. I was an extremely desperate seller without much leverage.

I started out by listing my items at a reasonably high price and added “or best offer” to indicate my willingness to bargain. Because time was a premium, my main goal was to find buyers that could act quickly. I would have easily chopped 10 to 20 percent of the price to sell immediately rather than wait for someone willing to pay more. Despite my negotiating disadvantage, I was able to sell each and every item for full asking price.

My trick was exploiting buyers’ impatience. Since I was listing my items on the internet, I suspected the buyers would be accustomed to one-click shopping. They didn’t want long negotiations. If anyone started negotiating, I would just show I was a bit more patient.

My intuition proved correct. Most buyers didn’t even try to negotiate and paid the full price right away. For the few that did negotiate, I simply made a counteroffer of the full asking price, explaining it was a fair price. No one called my bluff, and I received full price. One buyer demonstrated his impatience in the negotiations, “Oh, you just want full price…Okay, what the heck. I am not going to argue over $20. I’ll come by today.”

It was my relative patience that provided the edge. Although I wanted a quick settlement, I took advantage that the buyers wanted an even faster one. Like the child in the restaurant, they wanted instant gratification. And they got it, but at a cost.

How can this interaction be modeled? What does game theory have to say?

The negotiating game

There are many ways to model bargaining. The method I discuss below is based on the Rubinstein bargaining solution (ppt).

The interaction can be seen as a division of a surplus. My desperation meant that 10 to 20 percent of the price was up for grabs. The question is who would get that surplus? Would I get it—and receive full asking price—or would the buyer get it—and get a price reduction?

The negotiations can be modeled as a series of alternating offers. I start out with an offer (“I want full asking price”), and the buyer can choose whether to accept. If the buyer accepts, then the game ends and we conclude the deal. Otherwise, the buyer then proposes with a counteroffer (“I want 20 percent off”). It is then my turn to choose whether to accept and conclude the deal. If I choose not to take the counteroffer, then the game starts over again with me proposing another offer. The only difference at this stage is that time has passed, which is wasteful for both parties.

On an academic note, this interaction is like the ultimatum game but with three key differences. First, the other party is allowed to counteroffer. Second, the game continues indefinitely until both sides agree on an offer. And third, there is a time component to the game: deals concluded earlier are preferred by both sides.

Time value is crucial

How can one measure time value? The idea is that we discount money promised in the future. Getting $1 in the future is the equivalent of getting some smaller amount, less than $1, today. The size of the reduction is dependent on an individual’s time preference for money. The time value can be thought of as an interest rate. For instance, a person that views getting $1 in a year as equal to getting $0.95 today has an “interest rate” or “discount rate” of 5 percent.

Each person has an individual preference. Patient players are ones that place a smaller discount on future money so they have lower implied interest rates. This is why patient people are more likely to invest for retirement or go to college—they consider the future rewards to have substantial value today. A very impatient person, by contrast, desires instant gratification. As one comic illustrates, if you offered an impatient person $1 million in retirement versus having $10,000 today, the impatient person would take the money today and buy an iPhone. The decision should not be considered right or wrong—rather the result of weighing value differently.

But there are consequences to impatience. As you might expect, impatient players do not fare well during negotiations because they are less capable of waiting for good offers. They would rather get things done quickly, as the one-click internet buyers demonstrated in my story.

The solution (intuitive)

Negotiations are a step-by-step process. In the beginning, each party wants to claim the entire surplus and get value. The seller starts at a high price and the buyer starts at a low price.

But as time passes, the surplus shrinks. Thus, players are willing to meet each other halfway, so to speak, to speed up the negotiation and get the deal done. Eventually, both offers converge to an agreement, as the following diagram illustrates:

What determines the final selling price? The key observation is that patient players give up less at each negotiating step because they see more value in future dollars. Therefore, their strategies are represented by flatter lines. Impatient players want the deal done quickly, and their strategies are represented by steeper lines.

As a consequence, the agreed-upon offer ends up closer to the original demand of the patient side. As the above diagram illustrates, the selling price is much closer to the patient seller’s starting offer than it is to the impatient buyer’s.

In Rubinstein’s model, the seller and buyer anticipate this interaction through backwards induction and make the deal right during the first stage of the game. In practice, agreement may take some time, but ultimately the patient side takes a larger share of the surplus.

A complete mathematical derivation can be found here (ppt).

A concluding example

It is only appropriate in an article about patience that I save the best for last. The advice about being patient isn’t just important for small negotiations, but even for big ones. The strategy saved my friend thousands of dollars.

It happened when my friend was negotiating an offer on a house. He placed an offer $20,000 less than asking price. Within an hour, the seller called back with a counteroffer that was only a small reduction on the asking price. The speed and casual response indicated the seller was very impatient and wanted to act quickly. My friend too wanted to close quickly, but hid that from the seller as a negotiating tactic. He countered with essentially the same bid and told the seller to sit on it for one night. He did this to demonstrate his patience to wait it out. That got the seller nervous, and sure enough, wanting instant gratification, the offer was accepted.

Related Reading

How can I make my threat credible using game theory?

How to deal with bad service

Notes from the war (of parenting threats, at Game Theorist)

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Smart People Simplify, Simplify, Simplify

11 July 2008   |   by Presh Talwalkar   |   13 Comments »   |   Print This Article

photo from Exfordy

Today’s advice: don’t get too busy. It’s foolish to cut back on something as pleasurable or healthful as sleep. It’s equally misguided to pack the hours in your waking life.

The happiest people I know live very simple lives. Some of them don’t use email, if you can believe that. And yet they are productive.

Their genius comes from a natural idea, expressed by Philip K. Howard:

Smart people spend time alone. They don’t fill their days with appointments from 8 a.m. to 10 p.m., as many politicians and executives do. Great science does not emerge from hard logic and grinding hours. It comes from the mysterious resources of the human brain and soul. Inspiration is nurtured by activities like chopping wood and raking leaves, preparing dinner and reading to the kids. These activities soften the rigid pace of the day’s pursuits and allow all our God-given intuition to work its unlogical magic. Only then can we reach our fullest potential. Only then can we leap from thinking to understanding. [source]

Most of us are busy from the minute we hear our alarm clocks to the time we collapse in bed and reset our alarms (after sending that last email, of course).

We ought to consider the path less traveled. Go simplify and relax. Sleep in, meditate, take a walk, or do whatever eases you. Who knows, you might even experience that relaxing provides a competitive advantage.

I often think about how busy we are. I think, perhaps this is why we get great ideas in the shower. It’s the primary time we spend alone. It is the last sanctuary that connects us to our natural form.

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