Buddy Capitalism Continues

 A few nights ago, the Young Pork Guzzling Muslim Politician sent me a photo of several Linkedin profiles of people working at Standard Chartered Bank. The only thing that that connected them, other than the fact that they were working for Standard Chartered Bank was the fact that everyone was from India. I told him that I didn’t know why he was sending me the photo; a copy of which can be seen below:

He called and explained that people in one of his WhatsApp chats were getting agitated by the fact that Singaporeans were getting upset that plum jobs were going to Indian Nationals and not to Singaporeans. It was, as they say, the same story about the Indian Nationals stealing jobs from locals and only helping themselves and so on and so on. As far as most Singaporeans (or at least the ones on the net are concerned) the Indian Expats are a group of unqualified louts stealing from the hard working honest, Singaporeans graduate.

Unfortunately, this isn’t quite true. While it’s easy to take a snap shot of someone’s Linkedin profile, it’s another thing to actually read that person’s profile and assess whether he or she has gotten to where they have been through fair or foul means. If you look at the 15 profiles, you’ll note that one of them was from the National University of Singapore and another one was from INSEAD. If you look at those who were from Indian Universities, one was from Indian Institute of Management Ahmedabad (IIMA – the place that gave you Ajjay Bangha, CEO of Mastercard) and another was from Indian Institutes of Management Calcutta (IIMC, - the place that gave you Indra Nooyi, former CEO of Pepsico). If you were to delve deeper into these profiles, you’d notice that the majority of them had at least a decade of experience working with the bank and more often than not, they had experience in the big market of India and within the Southeast Asian region.

So, while I don’t doubt that there are Indian Expatriates who are not qualified to be where they are (which is the same that can be said for any other group), Singapore as a collective, needs to get rid of the idea that the only talented people in the world are Westerners and Singaporeans as the loyal servants of the West.

The reality is that “developing” Asia is producing people that are qualified to do great things and are doing great things. If you look at the world’s game changing companies, there is Sundar Pichai of Alphabet, who from Indian Institutes of Management Kharagpur (IIMK) and there’s Microsoft CEO Staya Nadella from Manipur Institute of Technology. It may be hard for the average Singaporean to swallow, but the fact is Mr. Nadella is credited for making Microsoft sexy again after years of being dull when it was being run by Steve Balmer.

By contrast, I can’t think of a Singaporean, trained in Singapore who has gone onto run a company outside the Singapore and the Singapore government. OK, Ogilvy hired Tham Khai Meng to be its world-wide creative head, but Khai was trained in the UK. There was apparently a vice-president on the board of 3M who was from Singapore.

However, nobody talks about this because it’s politically inconvenient. For the “opposition” camps in Singapore it’s easier to talk about how our government has sold us out to India and China. It’s easy to talk about how unfair life is for the ordinary Singaporean who will be overwhelmed by unqualified Indians stealing their jobs.

If the “opposition” camp is guilty of playing on native resentments against dark skinned people, the government is playing an equally insidious but far more subtle game. The government is currently playing a rather confused game. On one hand, it is claiming that welcoming foreigners is good for Singaporeans and on another it is calling Singaporeans racist and xenophobic when they complain that they are being discriminated against in their own land. What is going on here?

I believe there’s an element of distraction here. If Singaporeans were to look at the “real” cause of their job losses, they’d realise that they’ve been screwed by what I’ve called “Buddy Capitalism,” rather than by evil geniuses from India and China. This came out very clearly in a blog piece by Emanuel Daniel, on Piyush Gupta, the CEO of DBS. Mr. Daniel’s blog entry can be found at:

https://www.emmanueldaniel.com/singaporeans-dont-deserve-piyush-gupta/

Mr. Daniel, who runs the Asian Banker, is a well-connected figure in the Asian Financial Industry and he’s spent decades studying trends in the industry. He takes Mr. Gupta to task for not doing enough to prepare his bank for the future (He’s accused Mr. Gupta of believing his own hype and enforcing a system rather than preparing for a changing world), but at the same time he argues that Mr. Gupta has done more for DBS and Singapore than his four immediate predecessors (all foreigners) and when compared to the CEOs of the other Government Linked Companies. Mr. Daniel points out that under Mr. Gupta, DBS has continued to see a growth in revenue and profits (https://www.macrotrends.net/stocks/charts/DBSDY/dbss/revenue) unlike a good portion of the GLCs who have lost money despite having a near monopoly on their respective markets.

A few people were offended by Mr. Daniel’s article, arguing that he was ignoring the fact that the other GLC’s like Singapore Press Holdings (SPH) and the Singapore Mass Rapid Transport (SMRT) were run by military men who had been parachuted in with no commercial experience and thus screwed it up. It wasn’t Singaporeans per se.

However, I think their missing the point. Mr. Daniel has very clearly articulated that the key issue in Singapore is the fact that “talent” is inevitably about creating compliance rather than competence. Brilliant people are taken over by the government and made so comfortable that they have no need to excel at anything in particular. One only has to think of the number of military scholars who have been promoted effortlessly to very cushy positions. In the SAF, competence can be a handicap. You will inevitably be replaced by a scholar with no experience. I think of 21 SA in my day. There was a CO called Tan Chong Boon, who was what we call a farmer (A-levels, worked his way up). The then, Major Tan turned a sleepy unit into a fit fighting force by sheer guts. Then, 21SA was awarded the best artillery unit, they posted him out so that a scholar could replace him and get the glory.

The second point that Mr. Daniel makes is that the big GLC’s have a habit of knee caping small enterprises with the blessing of the regulators. In another blog piece, Mr. Daniel argues in another blog piece that the Monetary Authority of Singapore (MAS) has made it such that all Fintech Systems must have an actual bank account with an established bank, unlike say China or the USA. This ensures that the Fintechs will never be able to take away from the banks and in turn serve as convenient contractors rather than competitors.

https://www.emmanueldaniel.com/why-dbs-is-not-the-worlds-best-bank/

Why would the government do that? I believe that as much as the government talks about wanting to be “future ready,” it is in fact unwilling to prepare for the future and thus moves to protect its established companies from anything resembling competition. As such, you get companies that think of monopoly profits as a right rather than something that has to be earned.

Let’s look back at the attempt to introduce competition into the media in the early 2000s. That experiment ended within four years when both MediaCorp and SPH found they were losing money. They then spent the next few years arguing over whether readership or viewership figures were more meaningful without realizing that people found more relevant news sources online than they did in print or TV. Unfortunately for both media houses, the advertisers noticed too and before you knew it, SPH was trying to reinvent itself as a real estate company and has shed Singaporean jobs.

Why does the government mollycoddle companies like that? Well, it’s a case of buddy capitalism. Where can you put your buddies if you don’t have profitable sectors?

Our system has worked to make the Singaporean incapable of shinning in their own land and the need to hire foreigners to run the show is the inevitable result. If you listen to government communications, you’ll notice that its always the same theme – Singapore has a limited talent pool and therefore you need to rotate buddies from the government and private sector and supplement them with people from elsewhere.

In 2016, this was proven untrue at the Rio Olympics. We had Joseph Schooling, who beat the world’s greatest swimmer to win our first ever gold medal. What should be very telling is the fact that had Mr. Schooling stayed behind, he probably would never have won anything. His good fortune was to have parents who were willing to leave Singapore so that their son could develop his talent and in the end, bring glory to Singapore.

You’re not going to make life better for Singaporeans by mollycoddling them on this island and telling them everything is OK when it isn’t. You’re not going to help by banning foreigners. You will only get a solution when you break up the buddy system and ensure that Singaporeans have to develop their talents.  

“Not competitive at all.”

One of the highlights of my working life in corporate insolvency came from a meeting which involved one of Singapore’s foremost insolvency and restructuring practitioners. I was part of a team bidding for a case that was being held up in the American courts and my employer felt that it was necessary to rope in a “brand” name practitioner and so got this particular practitioner into the coalition that we were trying to assemble. Towards the end of the meeting, the solicitor who was trying to build the team turned to this practitioner and asked, “Are your fees competitive.”

At that very instant, the practitioner said, “I’m NOT competitive at all,” and he said so with a certain amount of pride.

I think of this moment and the way this man took so much pride in being “NOT competitive at all,” because it underlines one of the most fundamental aspects of doing business – price. One of my favourite clients said it best when he told me – tell me:

1. 1.      What can you do?
2. 2.      How quickly can you do it?
3. 3.      How much will be cost me?

As someone who was inevitably desperate for the job, the answer to these questions were as close as one could get to the following:

1. 1.      Anything you want?
2. 2.      It was done before you even thought of it?
3. 3.      Nothing at all.

Quite often, the most important factor in deciding who got the job, often boiled down to the third point. It is in the buyer’s interest to get away with paying as little as possible and the seller will inevitably try to show that he or she can give the buyer the price that he or she wants.

If I look back at my freelancing days, I realise that I had one key advantage over my competitors, who were inevitably sizeable companies – price. I could do the job at a certain standard at price that my competitors could not do. When I took my last big job in the industry, I was presented with a quote that the client had gotten from a multinational and was told – “It’s yours if you can do it at half the costs.”

I was hungry enough to agree and we ended up settling at around 40 percent of what the competitor had quoted. However, while I had won the job on the third point, the client had high expectations about the first point. I was expected to deliver coverage on a multinational level without the multinational team (which would have required a budget). I managed to deliver the expected results at the expected budget (so much so that they told me to invoice and paid on the spot) by working through a relationship that are not commonly used by conventional practitioners.

Business is inevitably about balancing points one and two with point three. The adage is that success inevitably boils down to being able to be “good, fast and cheap.”

I’ve noticed that national economies, particularly the Asian ones do something similar. Japan, the most advanced economy, built itself up by being able to make things cheaper and better than the West. Gradually, as prices rose in Japan, manufacturing moved to South Korea, Taiwan, Hong Kong and Singapore.

Being able to work cheap has done wonders for Asia. Millions have left poverty because we were able to give the multinationals a cheaper alternative. This went into hyperdrive when China started becoming the world’s workshop and India the back office.

However, while price is often an important factor, I have to ask if this is sustainable, particularly for the mature economies like Hong Kong and Singapore. Our politicians are particularly fond of reminding us that in order to stay competitive in the global economy, Singapore needs to be competitively priced.

I don’t think they’re wrong to suggests to say that Singapore needs to be “competitive.” We are a pipsqueak island with no domestic market or resources. Our larger neighbours have more to offer and so we got to be on our toes and constantly find things to offer the world.

While I do understand that we need to be competitive in the global economic arena, I do question if the “need to be competitive,” is becoming an excuse to justify unacceptable practices, especially when it comes to making life better for the poor and needy. Just think of the two most common instances when the need to stay competitive is brought up to stop a discussion. They are inevitably:

1.      Having a minimum wage – common argument is that this will make us less competitive (read cheap) and therefore our economic system and well being will collapse;

2.      When it comes to slave labour from South Asia. Once again, the common point is that if we gave the slaves a dollar an hour more (and actually gave it to them) and got them to spend an hour less in the sun, our infrastructure costs would sky rocket and our economic system would collapse (believe it or not, even when Covid-19 was showing us very clearly that slave hovels were endangering the rest of us, there were people fretting that improving the lot of slaves would endanger our economic survival).

Shouldn’t it be clear by now that a mature economy like Singapore’s can no longer compete on being cheap and we need to reinvent our focus on being good instead of being cheap. This is not to say that price will not be an important factor – merely that we need to compete on something other than price.

I go back to my freelancing experiences and the insolvency practitioner who is proudly not competitive. I competed on price because I went to look for my customers. The insolvency practitioner has reached the stage where customers look for him. He does not need to be cheap. He does not need to do every job to stay alive – merely the ones that pay very well.

There are examples of this. The most famous example of Apple, which designs products and reinvents the way we do things. Apple is an example of a company and business that creates our need to need their products. This is an example of what type of business Singapore Inc needs to aspire to.

Unfortunately to be good, you need to pay and this where Singapore needs to get away from its obsession with “cheap.” Let’s face it we will never make things cheaper than China or 3D printing or do back office work cheaper than India or AI and that’s even if we give away factory land away and exempt foreign multinationals from paying CPF contributions to locals.

Our economic role models can no longer be other developing countries. I think of the German model as an example. Germany has one of the highest hourly wages in the world:

https://worldpopulationreview.com/country-rankings/minimum-wage-by-country

Yet, at the same time, Germany is also the third largest exporter in the world. Germany with one third of the population of the USA and not even 10 percent of China’s, competes in the global market.

https://en.wikipedia.org/wiki/List_of_countries_by_exports

What does Germany export? It exports good quality products. The ones that come to mind are Mercedes and BMW, which are known as some of the best cars in the world rather than the cheapest:

However, there are others. The German economy or Europe’s largest and the world’s fourth largest, is driven by SME enterprises that specialize in unique goods for very niche industries. I think of the Rational Combi-Oven that every chef I’ve worked with used to drool over as an example.

Isn’t it time we moved away from trying to be the world’s cheapest for the world’s big boys? Why can’t we be proud of being good and not being embarrassed of getting the world to pay for Singapore Inc’s products what it pays for that of the West.

We’re a small economy but in the interconnected world we live in, there’s no reason why we can’t do big things on the world stage? Surely this is something the government should drive us towards.

Slow but Steady Wins the Race

It was an election result that everyone expected. As usual, Singapore’s ruling People’s Action Party (“PAP”) ended up with 83 of the available 91 seats in parliament and 61 percent of the popular vote. Yet, despite winning an election margin with more resemblance to a North Korean referendum approving the hair style of Kim Jong Un than what might consider a democratic mandate, Singapore’s Prime Minister appeared like a chastened school boy appearing before the principle. He muttered some words about how the electorate had made its intention for more diversity in parliament and talked about external conditions like Covid-19 that damaged the economy. The Prime Minister’s post election comments can be found at:

https://www.youtube.com/watch?v=KlxfbE2VvfY 

Why would a Prime Minister of a ruling party in the middle of an economic meltdown appear like a chastened school boy after a thumping electoral win? The answer could be found in the fact that instead of wiping out the opposition, the ruling party lost another Group Representation Constituency (GRC – a particularly unique Singaporean feature Westminster Democracy, which involves four constituencies being molded together and you get four MPs for your vote – which means that its possible for a heavy weight minister to bring in fresh blood into parliament on his coat tails). Just as the loss of Aljunied GRC had come with the costs of losing then Foreign Minister, George Yeo, the additional loss of Sengkang GRC came with the loss of Minister in the Prime Minister’s Office and Secretary-General of the National Trade Union’s Congress (NTUC – our only union), Mr. Ng Chee Meng. The party that celebrated the most was the Workers Party, which had up to that point received minimal press coverage.

You could argue that Singapore politics has had a turning point. The ruling party can no longer take winning GRC’s for granted and future election results are more likely to be like 2011 rather than 2015, which saw the death of founding Prime Minister Lee Kuan Yew and the Nation’s 50th anniversary. The bad news for the ruling party is that the main opposition party, the Worker’s Party has been very good at holding onto seats that it has won. Mr. Low Thia Khiang held onto their first win in the Single Member Constituency (SMC) of Hougang for nearly 20-years before jumping over the Aljunied GRC, which they have held onto in the last two elections (2015 and 2020).

The benefit for the ruling party is that ministers no longer guarantee electoral success, which means that new candidates will have to fight harder and smarter to gain votes. The ruling party, which has gained a sense of belief that elections are a given, there is the reality of having to change its mindset to a changing world. Policies will have to be sold in a more consultative manner rather than in a “Me, smart and you stupid” manner.

While the ruling party will have to go through a bit of a cultural change, the biggest change that the election gave us was in the nature of opposition. The biggest winner of the evening was the Workers’ Party, which had its position as our main opposition party cemented. While the Workers Party has remained the only other political party to have seats in parliament, it had been quiet throughout the election.

The attention was focused on the Progress Singapore Party (PSP), which was led by former Presidential Candidate, Mr. Tan Cheng Bok who had been endorsed as “the leader that Singapore needs,” by non-other than Mr. Lee Hsien Yang, the Prime Minister’s Younger Brother.

The story of the Worker’s Party’s success his highly instructional for entrepreneurs. The party has worked on the “slow but steady” strategy, a strategy that should be credited to its former secretary-general, Mr. Low Thia Khiang. The strategy is simple, to win seats one at a time. The Worker’s Party faces criticisms on a regular basis from both sides. The government has a way of lambasting Worker Party MPs for being quiet in parliament. The more radical elements criticize the Worker’s Party for being “PAP lite,” and not proposing anything terribly different from the PAP.

Despite this, Mr. Low and his team have understood that the most important element in the game is seats in parliament. For the Workers Party the key is to win seats and hold onto them. Speeches in parliament and talking about holding the executive to account are pointless if you don’t have seats in parliament. Hence, Mr. Low ensured that his team worked hard enough for their respective constituents to ensure they would hold onto their seats.

What makes this such an effective strategy is the fact that the PAP has been effective in running the show and takes great pains in drumming in the message that its not worth changing a winning group. The subtle message (which is not very subtle in as much as the government has famously withheld funds to opposition held constituencies) has been voting opposition will turn things to crap. 

Hence, while we may want to irritate the ruling party or we vote opposition to protest certain things, we’d always give the main votes to the PAP to ensure our standard of life continues. However, by winning seats and holding onto them, the Worker’s Party is showing that it can run things despite the handicaps of lack of resources, law suites etc. This counters the ruling party’s argument that it holds a monopoly on managerial competence. 

The seeds of change in the nature of opposition politics have been sowed. Within three elections, it looks very likely that there will be an opposition party that campaigns on the premise that it is capable of forming and running a government, as opposed to the current situation where opposition parties’ campaign on the premise that they’re there to be opposition to the ruling party.

The business analogy best explains Singapore’s political landscape. We have the former monopoly player in the shape of the PAP, which dominates just about everything. There is the sexy start-up which looks good and has a great visionary founder in Tan Cheng Bok, with the backing of a rich VC in the shape of Lee Hsien Yang. This is the player that everyone talks about.

The Workers Party is by contrast, a slow growth business. The initial founders have spent their fortunes building the ground-up infrastructure and product and the current and future generations test and expand markets. 

The records speak for themselves. Sexy start ups are sexy but unless they’ve built a real business and prepared for life after the hype, they tend to fade. Think of We Work as a cautionary tale. Then there are the former monopolies that have had to undergo painful changes in order to adapt. Those that have succeeded have continued to thrive, like SingTel, those that failed have ended up costing tax payers billions – think of the Detroit Big Three. Finally, there are the businesses that grow slowly but steadily, getting their products right. Think of Apple as a positive example. The lessons are there, it’s just whether we want to take them.  

When David Became Goliath

Just received an op-ed from the New York Times in my email. The story is entitled “Tech Goliaths Act Like Davids,” and the main thrust of the story is that the tech giants like Google, Apple, Facebook, Uber and so on have become the corporate bullies that they once fought against. The story can be found at:

https://www.nytimes.com/2020/06/22/technology/big-tech-underdogs.html

If one studies history, one will notice that this isn’t a new story. History is filled with examples of young, vibrant revolutionaries who fought to overthrow an overbearing power and once they had succeeded, they proceeded to behave as the power that they overthrew.

As an ethnic Chinese, I think of Mao, who lead a peasant army to overthrow a corrupt regime that was oppressing the poor. However, once in power, the communist proceeded to enforce an iron grip on power and proved to be as nasty if not more so than the nationalist that they overthrew. There are other examples. In the Middle East, there’s the example of Naser who overthrew a corrupt and repressive monarchy, only to replace it with another form of dictatorship that has stifled progress.

I think of Singapore, the country that has been my home for the last two decades. We’ve been run by the same party since our independence in 1965. While the party has delivered prosperity and done well by the citizens for the most part, they’ve moved a long way, as in a very long way, from the party that was a plucky upstart fighting to rid us from the yoke of colonial rule and later race-based politics of the Malaysian Federation. The part that once wrote a national pledge of “Regardless of Race, Language or Religion,” now stresses the fact that “The population is not ready for a non-Chinese Prime Minister,” and delightfully uses every trick in the book to ensure that it wins more than 60 percent of available seats in parliament (it remains an achievement for our rag-tag opposition to contest let alone win seats).

Why is this the case? The answer is as simple as this fact – power is exceedingly addictive. The people who get power tend not to want to lose it. Young idealist who become revolutionaries to get rid of entrenched powers becoming the very entrenched powers that they overthrew. This remains true in business and politics.

Some systems have found a way to survive this. In America, the political system was designed to limit the damage a bad leader could do. Presidents have to share power with Congress and a Supreme Court and much of the power over citizens is devolved to local governments. Furthermore, Presidents are limited to two terms of four years. Thus, you only put up with an incompetent leader for eight years at the most and no individual has to chance to hang on for years until they get drunk and senile with power.

This system works in America because there’s a reverence to the constitution and laws and there’s a press to keep the powers that be on its toes. In places that don’t have this, there is a real danger that the man in charge can merely change the laws. China is a case in point. Prior to President Xi’s ascension, it was understood that a generation of leaders would step down after a decade. While China didn’t have elections, it had some form of leadership renewal. Unfortunately, this is no longer the case and one cannot assume that President Xi, may enjoy his power a little too much, even at the risk of the wealth that the Chinese people have grown used to.

The same is true in business. The story in dynamic economies is that of plucky start-ups with a bright idea or a new technology taking on and taking market share from established firms. The problem is that once the start-ups become big firms with deep pockets, the game no longer becomes about coming up with new products that delight consumers but about enhancing market share and getting consumers to continue buying what you’ve been selling them. As I was once told, “Big firms don’t innovate, they just buy small firms that do.”

While the dangers of minimal competition for businesses are less obvious than that for political leaders, they are non the less very present. Businesses that become too interested in their market position tend to forget that consumers can find and will find alternatives. I think of Singapore’s media scene, which could not accept competition and kept peddling the myth that Singapore was too small for media competition. The established media powers were so busy defending their turf that they failed to see people moving away from printed newspapers and terrestrial television. They even got the government onto their side in branding online media as “anti-establishment.” There was one small problem. Consumers stopped reading newspapers and the advertisers noticed. Singapore Press Holdings (SPH) has had to diversify into old folks’ homes to keep shareholders happy and more recently had to suffer the indignity of being kicked off the stock exchange index.

Successful big firms are the ones that find a way of growing big but keeping their units running like start up enterprises. Big law firms are trying to do that, working as a big unit in the centre for things like branding and HR policy but getting their respective practices to compete for business like sole proprietorships. In theory this should prevent the groups from becoming immune to market forces.

The other factor for businesses is law. Laws that prevent companies from becoming monopolies should be made stronger.

Let’s go back to tech as an example. Microsoft was once a start-up that had a clear goal of having a desktop on every desk running its software. It became a monopoly and defended it tooth and nail. Unfortunately, Microsoft was late into the internet and thus lost ground to Google. Microsoft has only become a dynamic player under its current CEO, Satya Nadella, who moved it away from defending its old business market.

Limits on power are not just good for consumers or voters. They are actually good for incumbents as it keeps them on their toes and forces people to innovate. The Goliaths of the day should remember that they had their best victories as Davids and trying to crush today’s Davids will only lead to them sharing the fate of Goliath.