I feel that it is important that I write a counter-opinion to this article as when it comes to risk aversion, dividends investors are many times more conservative than workers who only want to work for MNCs. This is because the ultimate aim of dividends investing is to work for anyone we want based on work which we find gratifying. In a place like Singapore where work-life balance is largely a myth, the aim of investing is to stop work entirely.
As such, we investors are the bad guys in this narrative.
The first point I would like to argue is that we should not begrudge locals for seeking a lower risk alternative. They are just protecting their own interests. When I was an IDA officer, I noticed that there was a lot of posturing in Block 71 which wanted to lionize risk-taking at the expense of prudent life planning, but some hackers I spoke to admitted of the difficulty of finding a girlfriend or spouse because of the lack of stability with their lives.
I have two studies to back me up on why normal people should avoid starting businesses :
In a study by Korteweg and Srenson of Stanford business school on outcomes for venture capital investors, most high-tech start-ups will either fail or exist in a zombie state. Specifically, 10.3% of venture capital backed companies end up going public, 23.3% get acquired, 23% get liquidated and 43.4% would exist in a zombie state. So there is a 10% chance of succeeding when you build a start-up and after you succeed in VC backing. 40% of these businessmen would neither succeed nor fail and would spend their lives pointlessly cultivating zombie businesses - a more horrible fate than failure if you ask me.
Which makes us wonder, what are the odds of someone who cannot even get this kind of VC backing ?
The second study is even more depressing. According to Adrian Furnham's New Psychology of Money, a 2012 study by Skandia on UK millionaires showed that 74% of UK millionaires made their wealth through employment with 57% admitting that investments contributed to their fortunes. Only 15% made their money from their own businesses.
Combined together, these two studies are damning to the government's efforts to promote entrepreneurship in Singapore. A reasonable fresh graduate is very likely to be turned off at the idea of starting a business after reading this.
Of course, you did not come to my blog to read an article which reinforces mainstream thinking without offering solutions.
I think that proposing a mindset change is tantamount to intellectual masturbation - chui gong lam par song ! There is too much of this in Law School and the Straits Times.
All the posturing of VCs and macho-capitalists cannot change the fact that Singapore women, being also risk averse, would think twice before marrying a start-up founder. ( Unlike their US counterparts )
My proposed solution is based on the article about why successful businessmen in silicon valley are mostly about white privilege.
If you accept that most successful business have middle and upper class upbringing, then the efforts of the government have been directed at the wrong place.
The government traditionally believes that engineers in local universities will create the enterprises of tomorrow. That belief and policy intervention is wrong and a waste of taxpayer's money. Study the social economic status of any computer science and engineering cohort and you will find that most of us come from humble families that really need to have stable jobs so that we can uplift our families.
The successful businessmen generally comes from rich families who can bear the risk of kids starting businesses. They come with the contacts and the capital to make these bets succeed. They also want prestige. This is backed by the theories of Gary Beck on human capital. The rich have enough financial capital to make risky bets on human capital possible. Society can incentivise this by giving not money, but prestige and sexy press coverage.
A good policy intervention should be two pronged :
The first policy is to choose scholars and civil servants primarily from the middle income and lower income groups leaving capable members of the upper income groups free to become entrepreneurs. This is not discrimination of the rich as the companies they build will generate more jobs for Singapore than if they were to become a Admin service mandarin.
The second policy which is more controversial is to promote entrepreneurship and build centres of excellence not in universities but in schools where the rich congregate. A entrepreneurship centre is better off being in ACS Barker road campus than in NUS.
Typically a rich scion will move from ACS onto an overseas program, so the government has to catch them earlier in secondary school.
I think that these policy interventions may unlock the mystery of the Mittelstand which is the Singaporean dream of building large specialized tech firms of Germany which are largely family owned.
Let engineers be engineers who can work for these Mittelstands and bring more social mobility to their families.
Therefore, the rich are the best people to bear the risk of start-ups.
This includes the children of successful dividends investors as well.