Hard truths about entrepreneurship !

A careful reader of my books will realise that I get very self-conscious when writing about entrepreneurship and starting businesses. The reason is obvious - since I do not have start-up experience, I feel unqualified to advice business people.

My confidence has grown of late. I dare say that if I every publish a fourth book, I should be able to speak quite authoritatively about running businesses.  Law school has made be used to the idea of reading research journals and my previous engineering and finance studies has always allowed me to be very comfortable dealing with statistics. 

I want to follow up with my previous article on entrepreneurship to dispel a lot of folk wisdom which was thrown my way when the last article on entrepreneurship was published. My materials are drawn from a working paper from the National Bureau of Economic Research by Ross Levine and Yona Rubinstein entitled Smart and Illicit : Who becomes an Entrepreneur and do they earn more ?

Here are some bitter truths :

a) Before we even start, what kind of entrepreneurship are we really talking about ?

There are actually two kinds of entrepreneurs. Entrepreneurs who incorporate private limited companies and limited liability partnerships (LLPs)  are very different from entrepreneurs who run sole proprietorships and partnerships. Let's call the former type A and the latter, type B entrepreneurs.

Type A and type B entrepreneurs have very different income characteristics and tap into different skills when conducting every day businesses so they should not be discussed the same way. 

The government is clearly trying to get more young  people to become type A entrepreneurs because only type A's were found to be Schumpeterian in character - they can disrupt and overturn economies, make millions for investors and can potentially create thousands of jobs in the future.

b) Type A entrepreneurs have strong analytical and knowledge-based skills.

The kind of entrepreneurs behind the Facebooks and Googles are generally geeks who also can lead. They are streetwise intellectuals, not the Boh Tak Cheks that the obsolete baby boomer uncles admire. 

Type A entrepreneur's primary skill set involved non-routine analytical skills and non-routine direction, control and planning skills. While these skills are non-routine, they require a certain amount of book smarts and can be cultivated in a strong liberal arts program - being street-wise is important but no longer enough. A higher-order intelligence is required such that a person who drops of of secondary school is unlikely to have (but a Harvard dropout would).  

Type B entrepreneurs mainly employ non-routine manual work in their daily lives. The ability to hack and rig equipment, make minor repairs and drive trucks is more important for Type B businesses.

c) Type A entrepreneurs are way ahead of Type B when it comes to financial remuneration.

Do not read further if you have a weak heart.

Type As make a lot more money per hour than Type Bs. 

Type A's typically will be paid more when they return to employee status. Type B's typically take a pay-cut to jump into business and generally earn more by working longer hours. 

I see this finding as particularly important for policy makers, if Type As can get a higher pay when they exit from running businesses, more undergrads can be encouraged to build start-ups as there exists a viable exit strategy when they get older and wish to start a family. 

Type A entrepreneurs even make more than their life-long employed peers when they go back to salaried sector !

( Which is great news for the wonderful folks of Block 71 ! )

d) Type As are predominantly white males who have privileged backgrounds.

While this does not directly apply to Singapore. I have said before that only privileged families can sustain this form of risk taking from their children.  

Particularly interesting is that this idea is what you readers resist the most. 

Singaporeans have a romantic notion that the scoundrel who drops out and starts a businesses is the ultimate winner in life, that might work in the 80s but not anymore. Baby boomers talk about the lack of hunger in generation Y when brow beating them even though they know that Gen Y is more highly educated and tech-savvy. 

Some scoundrels do win, but most scoundrels don't.

Innovation and creativity requires a few more years of schooling. In the future, advanced statistics will be employed in basic marketing and citizens are getting more educated and skeptical. A smooth tongue and confident swagger will no longer be enough to start a business empire. People will google to compare prices. 

There is also less arbitrage opportunities in real estate so don't expect to the next Li Kashing by buying property.

e) Successful Type As entrepreneurs are 'illicit' !

It is not "hunger" but "naughtiness" that makes a good entrepreneur.

Not only should Type A's be smart and come from privileged backgrounds, they need to have this attitude that rules simply do not apply to them. Many successful businessmen used marijuana when they were younger. Facebook was first written as an app to rate women on campus. 

Thus, a good entrepreneur will know that he is suited to run a business. He has fairly good results in school but should be naughty and be quite a handful in class. Sometimes this can even lead to criminal behaviour.  

In summary, research clearly shows that the folk wisdom from our well-meaning Boomer generation uncles on successful businessmen is wrong. There is no evidence that hunger drives innovation, otherwise Silicon Valley would be in Africa.

The government needs to target that special category of Singaporeans who come from wealthy families who are smart but have demonstrated a history of illicit behaviour to build the Facebooks and Googles of tomorrow. 

This reinforces my proposal of locating an Entrepreneurship centre at Barker Road. 

Treat hawker centres as incubators, not soup kitchens !

I had a reputation in the past for being hyper-frugal when I was single. When me and my missus had a date 9 years ago was to look for foodcourt food which comes in huge portions and split a portion between the two of us. Shami Banana Leaf Restaurant at Northpoint in the good old days sells a $7 dollar chicken briyani which made an adequate dinner for a dating couple. In one move, we cut dating costs and had great food along the way.

So I was mildly irritated by the recent exchange between a new age hawker and Vivian Balakrishnan even though I knew that both come from the position that they want to do good for Singapore.

Particularly upsetting to me is that the authorities was willing to go to extremes to set pricing caps on food. The disagreement was over whether fishball noodles even made sense if you cap its cost at $2.70.

Generally speaking, intervention from the government will only do ill for everyone else because business people know how to price their products to maximise revenues. A business can compromise on hygiene, the amount of fish meat, or the portions to create a negative experience for anyone who eat in hawker centres. Poorer folks who live on $2.70 fishball noodles may even develop cancer at a later stage in life because the government cannot regulate everything.

[ To understand why I hate the price cap, think about how much the government hates minimum wages ]

Even worse, where is the freedom for hawkers to innovate ? Do we categorise  a plate of pasta accompanied by a medallion of fish in balsamic vinegar as a fishball noodle as well and cap the offering to $2.70 ? Should we allow civil servants to even create these food taxonomies ?

A better model would be to charge rent as a proportion of hawker sales and reduce the marginal rent as sales increase. eg. First $5,000 revenues results in 20% rental fee, subsequent sales is charged 10% rent. Every year, managers can decide not to renew the stalls with redundant food categories which underperform to maximise food diversity. This aligns the taxpayer/government with the hawker and gives the hawker the ability to manage determine the product and pricing to maximise revenues. If consumers overpay, there is certainty that a fair amount will always be returned to tax-payers.

[ As an added point, having point of sale terminals an allowing EZ-Link cards can give data scientists some insight into food habits of Singaporeans. If you want a Smart City, start here. ]

I think NTUC Foodfare is pandering to voter populism when Singaporeans actually just want a better way to preserve our food culture. The concept the government wants to adopt is that hawker centres are soup kitchens where lower income groups can have access to cheap food. What I absolutely hate the idea that the providers of the welfare are not taxpayers but the hawkers themselves, one of the hardest working people in Singapore and national treasures in their own right.

 [ Can you picture this ludicrous image of senior Administrative officers being paid millions making the decision that hawkers like Douglas Ng is to subsidise for the food for lower income groups ? ]

The approach to hawker centres needs to change.

Hawker centres should be treated like incubators, not soup kitchens.

Managers of hawker stalls are not obligated to create cheap food for citizens. Like Blk 71, a hawker centre's foremost responsibility  is to incubate hawkers like Douglas Ng so that he can evolve into a Damian D'Silva or a Justin Quek in the future. Hawker centres are preservers of Singapore's food culture and a magnet for tourist dollars.  Rents should not be cheap but comes as a form of profit sharing between tax payer and hawker so that the younger generation can invent the cuisine of tomorrow.

Of course this goes back to the problem of lower income groups and how hawker centres may cease to be a place they can afford to eat at. I don't think that's a problem as Singaporeans have grudgingly accepted the pricing and poor quality of foodcourt food for many many years.

Maybe some Singaporeans may have to accept that sometimes cooking at home may be the best way forward.

Why being an entrepreneur is risky business for a Singaporean !

An opinion piece has been circulated around in social media lately. The author of this piece asserts that a mindset change is required on entrepreneurship as Singapore would suffer if everyone stops taking risks.

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.

Crowdfunding : The next frontier in yield investing.

Thanks to the fact that Moolahsense makes all bids to lend money transparent, some readers should be aware that I started participating in peer-to-peer lending. In fact, for folks who have been following, I was able to lend $1,000 of my own money successfully to Leap Networks at about 8-9% interest rate about a week ago.

The decision to start investing in crowdfunding platform was not a financial one. There are higher yielding investments in the local stock-market like shipping trusts.

Getting into crowdfunding was an academic decision. I was doing a subject called Legal Issues in E-Commerce and wanted to write something which was cutting edge and novel so I chose crowdfunding as my research topic. Doing the research paper forced me to look at legal reforms in the US ( Obama JOBS Act 2012 ) as well as different equity crowdfunding models in the UK ( Crowdcube vs Seedrs ).  An interesting benefit from all this research was that I was able to befriend two lawyers who are familiar with the subject matter so I will trying my luck at getting an internship and perhaps even a training contract with these law firms.

After finding out that fraud is relatively rare in the world of crowdfunding, I decided to punt $1,000 of my own capital into Moolahsense so that I can eat my cooking instead of being an ivory tower academic. So far so good, the interest rate I offered was below the finalised interest rate of the loan.

My personal opinion about crowdfunding is that it will be the next big thing in finance. I think businesses and people in general will find ways to help each other online and cut off the banking middlemen to save business costs. This potentially creates multiple markets which are risker than our stock market institutions but can potentially be more rewarding.

Here is some advise for readers keen to get into crowdfunding :

a) Keep it within 5% of your total net worth.

MAS is still in the process of finalizing how to regulate crowdfunding platforms, so it's a wild wild west out there. You should limit your exposure to 5% of your total portfolio. No one really knows what happens if a borrower defaults even though the platform has a set of steps which they can take to help you recover part of your money.

( In legal parlance, you may not have a recourse in contract against a crowdfunding platform. You may have a recourse in tort but you really don't want to go there. )

b) Bid the minimum amount so that you can diversify your crowdfunding assets.

If the lowest bid possible is $1,000, bid only $1,000. If you have $5,000 capital for crowdfunding, spread it over 5 loans to 5 different parties.

c) Go for companies with less than 5% of default probability.

The great thing about the Moolahsense platform is that they have information on probability of default. That is the chance that you will lose your pants. Bid only for companies with a default percentage below 5%.

d) Have a minimum yield that you would like that you cannot find elsewhere.

For me, I generally bid about 16% interest ( which is actually 8.88% ) after meeting the 3 criteria above. I can find decent investments in SGX for lower yields.

I cannot expect every reader to be the same as I do because I take fairly high risks in the stock-market so you may be willing to loan for 6% or 7%. But please don't offer 4% or less because CPF-SA can give you a better deal.

e) Avoid property crowdfunding.

This is the most controversial advice which may piss off some parties in Singapore.

Stick with peer to peer lending and avoid property crowdfunding for now. Based on my research, I'm not sure whether fractional property ownership will come under MAS regulation for equity crowdfunding in the future and the proposals all seem very much like land-banking to me. For the past 10 years, there has always been a a lot of advertisements on purchasing foreign property. As a natural skeptic, I always wanted to know why the locals in their own country would be uninterested in those homes.

Furthermore, I suspect that many vendors are jumping on the crowdfunding bandwagon by abusing this buzzword when the original aim of crowdfunding was to help businesses raise capital because banks were underserving them.

Finally, REITs have always been the official means to crowd-fund property and all of them pay a decent amount every year.

Anyway, just take note that I got into crowdfunding because I benefit from writing legal research papers which my lecturers find novel and refreshing. It covers areas which still lack solid regulation in Singapore and other parts of the world. My risk of loss is really law and easily less than 0.1% of my portfolio so far.

In the future, if I ever write another book on Personal Finance, Bitcoins and Crowdfunding will definitely be part of it.

Are you wiser than an ITE student ?

Was attending a wedding last week and was very honoured to have a conversation with an ITE Life-skills lecturer so naturally I became very curious about her work. I wanted to know what would constitute life skills because it would potentially benefit readers of this blog.

I was quite impressed when I was told that ITE employed the DISC personality profile system.
Having a knowing one's personality is quite crucial in the working world because it helps a person decide on a vocation. The ITE lecturer also shared with me that ITE uses personality profiling to detect whether a student problems with self-esteem where more intervention then becomes necessary.

Naturally, having very successfully googled the Maths syllabus for Normal Academic students, I proceeded to find out what life skills really contain but I was quite disappointed to find out that detailed syllabus information was not available on the Internet. 

Instead I found some references to the following :

Personal Effectiveness

Group Effectiveness

Interpersonal Skills

Communication Skills 

Thinking Skills

Information Technology 

Sports and Wellness

The result is humbling. I'm pretty sure that I will fail the Sports and Wellness modules and there were two modules which had to be passed.

Anyway, I am calling out readers of this blog to help me obtain details on ITE Life skills.  I think that if these skills can be generalised, we could create a self-help body of knowledge that is useful to all professionals regardless of educational qualifications and could lead to future blog postings.

Catch you guys this weekend, I will write about highly-anticipated article on Crowdfunding !!!

If Budgetbabe can save $100,000, what's your excuse ?

Budgetbabe recently wrote a concise blog article on how easy it is to save $100,000 before age 30.

I thought I wanted to join in the fun, so I asked my FB what's their excuse for not being able to save $100,000 before age 30.

The results were quite predictable, some friend carefully crafted a life situation which was intelligently distinguished from my life situation or some other financial blogger which was well-argued even from a legal perspective.

It's all fine and good, I don't really judge my friends these days. At age 40, a balanced scorecard matters more than accumulated wealth. Hokkiens say Huar Hee Jiu Hor !

In fact, I think I want to provide on this blog a a better excuse than the one's crafted by many friends and well-meaning critics ever since I wrote about taking on the $100,000 challenge about 10 years ago in my first book. If you are my age and did not meet the target, you may have failed, but you may have succeeded in some other area of your life.

Maybe one day, a friend will ask " Chris, I am happy, drink lot's if birdsnest. I look like I am 30 but I am actually 45, what's your excuse ? " to which I can only answer "Exhaustion ? "

So, suppose you are a Gen-Xer like me, some si-geena Millenial comes up to you and says " Hahaha ! I can save $100,000 before I am thirty. what's your excuse uncle?"

For goodness sake, don't say shit like marriage and kids to a Millenial.

Because I have gone through the process myself, I know the critics will use marriage as an excuse until I had gotten married myself, and then use kids as an excuse after I get married but before I had Clio. After I had my kid, critics naturally complained that they have have two kids. Now, I just can't beat them all if they keeping having more kids than me.

( I need to pull up my pants and go to school - not keep making babies at home. )

So don't slam BudgetBabe for being single and childless.

In my opinion, I think the best reason is this....

The hard, bitter truth is $100,000 is chump change for this generation of workers !

It is worth only $63,000 in 1999 dollars when I just started work or $73,000 when was 30 years old if we just assume an inflation rate of 3%.

So good news for Gen-Xers, if you had $73,000 at age 30, you would have met Budgetbabe's challenge and you can now buy yourself a Pet Shop Boys CD as a reward if you are feeling nostalgic.

Anyway, kudos to BudgetBabe for starting this discussion. She's simply awesome for having that willpower to resist all the online marketing companies throw at us these days.

I think it's great that younger financial bloggers are stepping forward to vindicate my $100,000 challenge and meeting their financial targets at a much earlier age.

But that leaves one problem for the folks my generation...

... If you do not have $73,000 when you are 30...

...what's your excuse ?

Why you should support marriage equality too !

When Heather Chua came into  scene some months ago and crafted a story of how much she despised her classmate for dating an ITE graduate, I had an inkling that this was a troll who was out to seek attention. After some thought, I also would not really want to find out about the truth as to whether this Heather Chua was a real or fake because, if Heather was exposed, members of the natural aristocracy would be relieved to know that one of their own was not an elitist snob. The flip side was that the story of RGS girl who dated an ITE guy would turn out be a myth as well.

That is extremely harmful for the self-esteem of Singaporean men.

Of course, the context now has changed.

In reality, some men do meet the standards of the best women Singapore has to offer. I am very relieved that we now know for sure that billionaires are good enough for the ladies of our natural aristocracy and daughters of a better age.

But that leaves another problem for our society.

It's a problem of marriage equality.

While we celebrate unions between billionaires and RGS alumni, a certain group of Singaporeans are not doing all too well in their own marriages.

Right now, blue collar worker's spouses are unable to obtain a permanent residency in Singapore. Many have to rely on the Long Term Visit Pass to stay in this country and they are unable to find jobs to support their family. In fact, their ability to stay in Singapore becomes even more doubtful when their husbands die.

I think this is a serious problem for Singapore.

Our society discriminates blue collar workers so much as they are not getting marriage equality.

Let me go further to explain the problem :

a) Some blue-collar workers are indeed born into their current circumstances.

Blue-collar workers are born like that.

Not every Singaporean gets access to a family which can nurture them into members of the natural aristocracy. some may be born into single parent families, others may not be natural inclined for academic performance.

We sometimes have to be sympathetic to people who are born into their current circumstances.

b) Children of blue collar workers and foreign brides may be considered people who come from lesser families.

If their mothers are unable to obtain at least permanent residency, the children of such unions can also face discrimination. Perhaps their mothers would have trouble staying in the country but this creates a situation which puts these children into a serious disadvantage in school and society.

c) Blue-collar unions do not threaten the marriage and family of white collar families in Singapore.

Just because the government gives blue collar spouses permanent residency this will not make normal families have more blue-collar children.

Yes, white-collar parents should not fear that their children will turn blue-collar just because government policy has changed !  

But of course, children of white collar parents may choose a blue collar vocation out of personal choice. We should welcome this diversify in our economy and not view as such a bad thing.
 
Fortunately, the problems faced by blue-collar males is now well documented by publications like the Economist but I am sorry to say that a lot of bigotry still exists in Singapore. I have witnessed at least one well-known Singapore poet who is currently in the UK has taken to social media to claim that blue collar men who take on foreign wives are actually exploiting them.

We should condemn the words of this Singapore poet. But we should also pity him as he sees blue-collar marriages as a threat to his own bigoted and archaic personal view of gender roles and marriage today.

I'd like to share one final thing about the evolution of society.

Society has the capacity to be kind. When the workplace looked like it came out from the set of a series like Mad Men, we reformed it, added maternity leave, child-care benefits and telecommuting so that we can have more workplace diversity and create a more inclusive society for everyone. 

Engineering as a discipline also became softer with less emphasis on equations and programming and more emphasis on communication skills and language.

When Silicon Valley was created to celebrate male qualities of focus, discipline and decisiveness - a safe harbor for men.  It was immediately condemned for not being inclusiveness even when Asian male engineers have been working in Silicon Valley for years without facing discrimination. The accusations conveniently came about when it became profitable to be a software developer.

There are any loud voices, some reasonable, some unreasonable for different categories of minorities in all societies. Some of the fights has even been won in the US Supreme Court.

Why shouldn't we fight for our blue-collared male workers ?

Marriage equality should be upheld in Singapore.

I beseech my reader - support marriage equality !

That is the marriages between blue-collared husbands - foreign wives should be equal to that of marriages between Billionaire-Aristocrats.

Quick and dirty mental filters when confronted with new ideas.

Just a story to set the tone for this discussion.

If you had known me 20 years ago, I was not exactly a charming specimen of the male gender.

I'm soft of like Ted, but not cute. A female undergrad once asked me to carry her bag for her. I told her no, "Because scarly I fall down how ?"

During my NUS days, I struggled to get a date, then I normally screw up my chances for a second date because I am a troll. I can't really help it - Gen X girls are so self-contradictory about marriage, relationships and career and I had a great time pointing this out to them - as a result my wife still laughs at me for getting a girlfriend so late in my life. I also never understood when I should be providing a listening ear versus giving advice. I am engineer. If you have a problem, I'll solve it for you.

But the difference between me and other guys is that I know about my problem with girls and have no illusions about how 'attractive' I was. Note that those days, my net worth was negligible. I might also be argued that I had low esteem on relationship matters.

So when I was attending an entrepreneurial seminar, a hot chick came up to me and introduced herself.

Being a cynical asshole, I reduced this to three possibilities : she's either into insurance, MLM or wants to convert me into a Charismatic Christian.

So I went with MLM and decided to troll her with a pre-emptive strike. I said "Haha ! Hot chicks don't just talk to me just like that. You must be into MLM and I'm not into MLM. Sorry !"

Man, the look on her face was priceless !

She nodded in agreement, looked a little embarrassed and sat back down.

Looking back, I think that was dumb, I was pretty sure if she was hotter, I would have pretended to be interested in MLM just to get a date, but what I did was clearly cynical, not skeptical. I crossed the line.

The last article got some people into thinking about reading a whole new set of books which demonstrate how skepticism is ideally carried out against new ideas.

A good friend  then told me on FB that this may not be enough, he wanted something actionable on a much smaller scale. And after all, developing a healthy approach to a new idea takes years ( And many opportunities to date women ) to refine.

I'm just going to share three quick suggestions on how to approach a new idea. They are not a collectively exhaustive list of what you need to go through, but generally it should be helpful at the street level.

a) What's in it for the person if you accept this idea ?

The first filter is to ask, what's in it for the person who is selling the idea to you.

Everyone who was into real estate or selling housing loans was selling the idea that real estate is a sure winner in good times and bad. Why ? Because if you buy the idea, they have the possibility of earning commissions.

Contrast that with a dividends investor.

I get asked all the time which REITs are good. I can't just answer "Sabana" for it's current high yields, there's the complicated issue of expiring master leases and that horrible manuever in Chai Chee. A contextual discussion on Sabana would take investment bloggers hours.

So instead, I very reluctantly tell people that perhaps the best approach to avoid idiosyncratic risk is to simply buy up all REITs which would yield about 6.5%.

Would I make any money if these guys succeed. Hell no ! They might just go NLB to borrow my books.

But I might get cursed here if they lose money so expect my advice to be sound but reluctantly given.

b) Is the idea falsifiable ? ( impossible to disprove, tautological )

The second filter gets rid of all that detritus that common well-meaning folks will throw at you, as these are issues of faith and not science.

Take for instance the Law of Attraction, which has generated a whole new legion of fucking idiots who believe in wishful thinking.

The Law of Attraction is not falsifiable. But morons who believe in it will asset that if what you dream about comes true, the law works. If the law does not work, you do not have enough faith to make the law work for you. The believer will not accept the idea that the Law is simply not true. It is as if I can dream my way to a training contract in a law firm or a beef steak in my pockets.

Compare that with the assertion that global stock equity can defeat inflation. There is enough data in Bloomberg to show that this might not even hold true in some market conditions. You can prove this assertion wrong, but you will find out that at a horizon of over 20 years, the odds of beating inflation goes up by quite a bit.   

c) Is the evidence credible ?

The third filter is that on balance of probabilities, the idea is believable based on the evidence given. You just need to assess the credibility of the evidence.

In this case, I can be a little elitist, I would peg an assertion by The Economist more accurate than a left-winged website like The Salon ( which I do read just to experience how stupid liberals and a progressives are.  )

This is important as a last filter as even I was misled by self-help books which claimed that a Harvard study confirmed that business students who had personal goals were richer than those who did not - this study was entirely bogus ! It spawned a truckload of literature based on a big lie ( SMART goals anyone ?).

And, no,  Einstein did not talk about making fishes climb trees either.

This also means that you have to pidgeon-hole some of your friends because they tend to draw evidence from the sources that they like.

I have developed a strong suspicion of lawyers or law students who are making an assertion  even if they have a strong body of evidence to support their views. I know they are just advocating a position, and that it's not too difficult to dig out evidence to to suggest the contrary. Lawyers are aces at evidence.

As a consequence of this, I do not trust my classmates on legal matters and reasoning but I do trust them if they bring up insights from their first degrees.

Anyway, in summary, if you do not really know how to develop your skeptic muscles, just ask yourself three questions :

a) Does the context imply that someone will benefit from you believing in this idea ?
b) Is there a way to falsify the idea by referring to research or just waiting for some results to appear ?
c) Is the evidence credible ?

Masterclass in Skepticism.

I noticed that a large number of readers or folks who are interested in passive income or personal finance are also very susceptible to messages from self-help gurus. Some folks I have spoken to have shared personal stories of putting money into the wrong Internet Marketing programs or have been roped into MLM at a certain stage in their lives, others have paid possibly thousands attending some seminar on forex trading or real estate flipping. The older ones even went to bucket shops.

Readers and other financial bloggers have this problem :

How do we tell the difference between someone who genuinely have something to teach you about financial success versus someone who is just trying to become a financial success at your expense ?

If we were to go really deep into technical differences between a real investment specialist and a financial bullshitter, we'd probably end up with covering the entire CFA syllabus and do note that in the early 2000s, asset-backed securities and CDOs were covered in great detail in the exams at level 2 as no one could foresee that they would play such a big role the Great Recession.

The answer to resolving this problem is to develop a healthy does of skepticism. But skepticism is merely the ability not to take something at face value and critically think about what the other party is trying to tell you accounting for information asymmetries and the context of the engagement. Mastering skepticism is also quite challenging, you may need to complete a liberal arts degree to tell bullshit from the real McCoy. Be too skeptical, and you run into the problem of cynicism, where even good ideas and investments are discarded in the name of prudence.

Before I actually get into the Masterclass, I'm just going to share with everyone why Skepticism is so important.

Start with this idea : We bloggers are experts in engineering diseases of the mind !

Ideas are like viruses, sometimes an idea comes around and its not designed so much to harm you, but to make you more susceptible to other ideas. This is what I would term the immuno-deficiency of the mind. Some ideas are AIDS viruses, it opens your mind to other ideas like MLM, Pyramid marketing, land banking, internet marketing and ILPs. As an example, a book by Robert Kiyosaki would hardly harm the reader and generally have the positive effect of motivating him, but it subliminally prepares the reader for a life engaged in MLM as it keeps harping about building businesses and helping other people -themes which keep getting repeated in MLM seminars. Similarly, I can imagine self-help guru espousing the concept of "saying yes to everything" which inspired a hilarious Jim Carrey movie some years ago. Which is why I really hate stupid websites like Elite Daily and MindBodyGreen.

I think I have developed a vaccine against the immuno-deficiency of the mind.

Here are three books which, if read and processed, leads to the development of healthy skepticism.

a) The first book SHAM, exposes the key issues and flaws with the self-help movement. It is easy to read and immensely entertaining. Almost all your favourite self-help gurus are put to the torch in this book.



b) The second book is Bright-sided by Barbara Ehrenreich which replaces your Pollyannish positive thinking with a dose of gritty realism.



As  a side-note, I advise you to always read this book with the works of Martin Seligman who is the father of Positive psychology. I do not find that both author's ideas are mutually exclusive.

c) The third book, which I recently read, is a true classic. Oliver Burkeman hates self-help so much, he practically read the entire body of knowledge of self-help to expose it for his readers and highlights what works and what doesn't. It's hard to imagine a person who now knows more about self-help than Oliver Burkeman.



I think Oliver Burkeman is more than qualified to start a CSHA or a Charter of Self-Help Analyst accreditation body. Life Coaching is pretty good money in the US.

d) Google "John T Reed". John T Reed was an early crusader who set up a website to debunk and expose the real-estate gurus who were his competitors, his points are well thought out and his website contains a lot of dirt on your favorite self-help guru. 

A savvy reader would notice that I did not include the ancient philosophers of Skepticism like Pyrrho or Sextus Empiricuswho comes up when you wiki skepticism. The four resources mentioned actually demonstrate how to take down and process key ideas which plague our modern world and form examples on how to skeptical about new ideas.

In the process of reading them, you will also find that they all qualify as great self-help books on their own.

Perhaps in a future book, I will make Skepticism a key skill before we even consider the basic skills required to attain financial independence.

Some thoughts on parenting on Father's Day.

Thought I'd share some thoughts on parenting.

Giving parenting advice is inherently dangerous for us bloggers because we wouldn't really know what to expect from our kids in the future. Even the children of ministers and top lawyers end up being sidelined by the education system and fathers typically end up paying to send them overseas for a "paper thosai" qualification.

I count myself lucky that my 4-year-old daughter, Clio, is a normal and healthy kid. Other than trying to issue her own currency 2 weeks ago after my mum pretended that she has no money left and trying to mimic Donald Trump's hilarious speech, Clio has not really demonstrated any real talent yet. The only thing she inherited from me so far is that she likes to sing and tries to mimic pop lyrics as she is unable to read yet.

Statistically, I believe that Clio, like most Singaporeans in her generation, will struggle with getting a seat in a local university.

I don't know very much on parenting, I have read many books on child development but I do not conscientiously apply the principles I pick up from those books. One thing I don't do is to stop my mum every-time she says that Clio is smart or pan-lai ( even though me and my wife do not do this on a regular basis as its bad for her intellectual development ).

The insight I wish today on Father's Day is the concept of capital transfer to future generations.

Parents transfer wealth in two ways which I believe should be equivalent to each other if proper planning takes place.

a) Transfer of Financial Capital

Transfer for capital assets happen upon death or on special events. Money and financial securities changes hands from parents to children when parent's die or feel that children are ready to take over some of the assets. This is dominant form of wealth transfer which presents a lot of problems ( or lucrative fees for lawyers ). Asian children are sometimes not ready to take on this amount of wealth and have a strong propensity to spend it all away.

My personal philosophy is teach my kids to manage their wealth properly. Not just in terms of learning how to save, but they also need to play with the capital markets early in life.

b) Transfer of Human Capital

The second form of transfer is the transfer of human capital. The parent makes a wealth deduction to increase the human capital of their children.

This is a huge industry in Singapore. Parents can spend thousands a month to give their kids tuition. The best tutors can be a as rich as hedge fund managers.

On a very disturbing note, there are now camps to prepare children to get into the Gifted education program. I read brochures threatening parents that if their kids are really gifted and nothing is being done to give them special training, they would get bored and would lose interest in their studies.

The first important insight is to recognise what tuition and these gifted boot-camps are, a means of transforming financial capital into your kid's human capital.

c) Balancing financial and human capital transfer is the killer app of parenting.

With the realisation that everything is just a form of capital transfer, parents should be able to move more tactically when making decisions to develop their kids.

Suppose you spend $2,000 a month on tuition and boot-camps, and you believe that if you do this from age 3 until the age of 18, you would be able to push your child into a university program. It is helpful to ask yourself whether you can invest this same $2,000 in a portfolio to generate passive income for your kid such that when he graduates from a polytechnic, the passive income and his salary would be higher than his starting pay as a fresh graduate.

As it turns out that compounded at 7%, paying $2000 for 15 years ends up with a pretty large portfolio of $650,000.

Your kid can get enough capital to build a start-up with that amount of cash.

d) Why I lean towards financial capital transfer.

It can be argued that being somewhat against tuition, I am less kiasu than other parents, but I want to argue that I am actually more kiasu.

When your kids enter an expensive Montessori program or attend an expensive play-school, is there documented evidence that these children go on to university programs after accounting for social economic factors and other variables ? Instead, if a parent were to invest a bit of his own time, he can teach his kids to use Khan Academy and Coursera to pick up skills based on the child's own personal interest.

The statistical evidence for the return of a portfolio of equities, however, is easily accessible over the web. With a time horizon of 15 to 20 years, the odds of a portfolio beating inflation is definitely higher than the odds of your kids getting into law or medical school in NUS.  

Of course, to be able to balance the extent of human and capital transfer, you will need to be intimately familiar with the strengths and weaknesses of your child and make decisions accordingly. I believe that tuition should be targeted at the crucial subjects your kid is hopeless at but must pass to get into a good tertiary institution (Like EL1), or at subjects where your kid is so good at, a slight nudge from a trained coach can get your kid into the Olympiads.

It is entirely possible that your kid would not make it academically but can succeed as an entrepreneur instead and would appreciate financial capital instead.



 

Time as an asset class.

Initially the title of my blog post today was supposed to be about RGS and billionaires, but fortunately (or unfortunately),  a series of events has allowed me to interrupt my article planning for something which is more useful to readers. ( Although I think many readers want to know what I think about the assortative mating between RGS and Billionaires as well... )

Two events serve as a catalyst for this post.

Just today, I had a great honour of having breakfast with a reader John Smith, we spoke about many things but one idea stood-out and I felt that it is useful to share that with readers today.

The second incident concerns blogger 15WW. 15WW has written an excellent post about an old JC alumni gathering which went horribly wrong. You can read all about it here.

The essence of the problem is this : 15WW was sharing about his family's approach to life and his very successful JC classmates ( who would be considered assholes in my book ) hinted that by downshifting one's lifestyle is tantamount to lacking ambition and I felt that 15WW's feeling were hurt after he did some thinking about the words exchanged on his JC gathering.

My stand has always been clear about other financial bloggers. 15WW remains, financially, one of the most successful bloggers out there who has accumulated a mind-boggling huge portfolio for someone his age. The idea that he or his wife lacks ambition is ludicrous and a should be a cautionary tale on JC reunions more than about financial independence. After reading the post, I was thanking my lucky stars that  a secondary school or JC class reunion for me would be very tame as most of my peers are doing IT work.

The insight on this problem coincidentally came from friendly breakfast I had with John Smith (which clearly shows that bloggers do learn a lot  from readers).

John Smith was commenting to me about the nature of jobs like that the in public service. His insight is that the stability and predictability of jobs in the civil service can be source of allowing someone to take on bigger risks and innovate in other areas of his life. 

I think John is onto something really important when he shared this insight with me.

A steady job in a company which takes up a reasonable amount of one's time is not the lack of ambition but a pretty prudent life strategy. A civil servant with a steady track record has a job which looks very much like an investment bond. Moshe Milevsky, author of Are you a Stock or a Bond ?would say that this allows him to take on more equity investments and even use some leverage in his financial portfolio. Vicki Robin, author of Your Money Or Your Life would also argue that this person is optimising the exchange of his life energy with money.

This is a buildup into a more interesting idea that Time is an important asset class which I had been harping about but could not develop the idea further in my writings. As of now we do not have the tools to manage Time like a portfolio yet. Certain life philosophies like Getting Things Done might allow one to succeed at the tactical asset allocation level, like how to save time when going through email using the GTD system to prioritise work, but there is no formal discipline on allocating your time around careers which maximise the exchange of time for money at the broader level.

So one things for sure, not all jobs are created equally.

Some office jobs end on time and you are assured of reasonable amount of leisure time per week. Other jobs may exhibit time volatility in spite of low contact hours at work : An IT engineer on call may be lounging at home, but he cannot plan his leisure time as he may be interrupted to resolve a server outage. It also makes it hard for the same engineer to sign up for investment seminars in the evening.

I would probably need more time to come up with the framework to show folks how time can be managed at a strategic portfolio level which would probably require that I think about the arcane statistics of various careers choices. For example, what is the standard deviation of the duration a litigator spends in the office ? Datasets such as these would start to become available once devices like Fitbits are used to track employees in the office. Ideally, employees should be compensated for absolute time spent in office as well as variability.

So in conclusion, I would say that the doctor who snubbed 15WW is pretty sad idiot who was fixated with the idea that ambition is the optimising of career capital, as downgrading to being a GP is being less innovative or useful to society, that is a very limiting belief.

I would even argue that 15WW has even more ambition as he is trying to optimise his financial capital as well as his human capital / temporal capital assets.

Conflating 15WW's financial independence as a lack of ambition is likely a accumulated problem of Singapore's singular obsession with only one dimension of success. It is sad that a doctor, someone who should know better, can adopt such a parochial stance on success.

Sharon Au's faux pas warrants a relook into SAP education.

I had wanted to blog about this earlier, but I really had to give myself a break so I went off to Kuala Lumpur on a carnal food fest. After I got back to Singapore, my lecturer started spamming readings for the second half of summer term, so I spent the last 3 days mugging up 2 weeks worth of e-commerce lectures.

So let's talk about something non-financial for a change.

When I heard that Sharon Au made some remarks which made some ethnic minorities uncomfortable during the opening of the SEA games, I googled her educational background because I felt that the education system was probably more guilty for the incident than Sharon herself. After all, Sharon can be said to be acting a comedian, and Sharon's infraction was no more culpable than a Russell Peters in a stand-up comedy show.

I have confidence that ethnic minorities in Singapore are magnanimous people and they have already moved on from the incident, however, I can't help but feel that this incident can be a good catalyst for policy makers to relook SAP education in Singapore because, after all, Sharon Au spent 6 years in SAP schools and very Chinese-inclined colleges, she may not even be aware that what she has done is even offensive to others.

SAP school are not a good way to educate ethnic Chinese students, why the does the government need to isolate a group of ethnic Chinese students for 6 or more years, then apply the 'elite' label to them just because they take CL1 as a subject ? If American whites were to come together and then start harping about how they are elite and special, you wouldn't end up with SAP schools, you'd end up with something like the KKK, no one wants to be associated with them.

In Singapore, history is littered with similar infractions in the past where some insensitive was said about ethnic minorities, I leave it to the readers to google the incidents involving Seng Han Thong and Choo Wee Kiang and then make a value judgement as to why reforms to SAP education are an urgent priority now if we want to push our multi-ethnic society forward.

Here are the reforms I propose :

a) End the isolation of SAP students.

Have the standard Express stream program for all Singaporeans regardless of race but have classes for 4 days a week. Reserve one day for training in electives. CL1 should be an option but we should have more flexibility for what students can do with their time. There can be an Institute for English Literature for folks who want to get deeper into the English language. There can be an Advanced Science Institute as well.

b) Remove the elitist label for student who take CL1.  

With China being a burgeoning market, it would be insane not to promote the Chinese language. CL1 should be open to all students who get an A* for CL2, even students who are weak in other subjects. SAP schools should be retooled as Chinese Institutes where CL1 students gather over weekends to learn Higher Chinese.

This allows specialization in Chinese and eliminates the downside of isolation.

c) Scholarships can incentivise students to take CL1.

To encourage more students to pick up CL1 over other specialisations, perhaps scholarships can be used to entice students to pick this elective.  There should be more opportunities to get subsidised travel to Shanghai.

Student may be able to choose between Higher Chinese or Higher Mathematics but he may choose higher Chinese because it has more travel opportunities and scholarships.

d) Create institutes to promote the Singapore's business agenda without isolating ethnic Chinese students.

We do not need to end with just promoting the learning of Chinese language, institutes which cover India and Indonesia can provide Singaporeans opportunities to learn Hindi and Bahasa Indonesia to tap into the growth of emerging markets.

In conclusion, Chinese chauvinism is a hidden disease of Singapore society. You can argue that minorities like ethnic Indians and Malays have to live with it, but do not forget that English-speaking Chinese like myself and Peranakans are victims too !

I have been told over and over again that my inability to memorise proverbs is affront to my Cantonese ancestors.

I hope that in time, we can forgive and forget about Sharon Au, but we should keep telling policy makers that the root of Chinese Chauvinism have grown deep into the SAP program, and there are ways to promote racial harmony without sacrificing language proficiency.

Why Kim Jong-Un would approve of my insurance planning ?

I spend about $120 a month on AVIVA SAF group term life insurance which gives me about $1,000,000 of protection, this is the only insurance I have. Everything else is taken care by my passive income flow. This is the essence of buy term and invest the rest.

Today, I received a letter telling me that I have just received a $570 rebate. I have received this amount last year which has effectively reduced my insurance expenses by a further 40%.

Why is my insurance so cost effective ?

Simple.

I refuse to have an agent.

No one can advice me better than myself.

Compared to a commission-hungry advisor, I think that I can do better because there is no conflict of interest. If i am willing to pour my personal time into the study of money and investments, my own advice would be worth many times that of an agent as no cook would willingly poison his food when he is cooking for himself.

So a central part of my philosophy is that it's better to advise myself wrongly than to rely on someone else who gives me good advice.

This is not an easy philosophy to adopt in this modern world. I have spent 5 years combing through almost every single certification on investing. Worse, I have extended this philosophy into legal advice - no one can advise me legally better than myself, even if I do have to seek help from another legal expert, I would at least know how to use him.

This is not an easy road to walk. For one, you need to very curious and enjoy an academic life.

One other country which adopts this approach is North Korea. North Korea's philosophy of self-sufficiency is know as "Juche". I remind myself that if I misapply this philosophy, my family can starve like North Koreans during a drought.

As much as I would wish to, I have not extended this to seeking medical advice, unless my daughter gets into medical school.

If you are a financial planner, agent or a private banker, it might be tempting to write nasty stuff on this blog to question my approach.

First of all, I actually welcome interaction from insurance professionals, especially if it is hostile.

Second of all, you need to reflect upon the lack of trust in members of your profession. Having a code of ethics will not get anyone anywhere. Policy makers are doing the right thing with DIY portals but the next step is to eliminate sales commissions on your industry and toughen up penalties for fraud.

Third of all, my strategy got me out of the rat race at age 39 - I was an IT guy for 14 years, not some banker, lawyer or doctor. You need to propose something better for your clients before you second guess my approach. But we all know, that between you and your client, you are more likely to reach financial independence first.

So what can the industry do ?

The industry needs to disrupt itself aggressively and come to the realization that consumers are getting smarter. When an agent churns his client's account, consumers will know that the reason is not dishonesty, but the incentives built around the sales of particularly high-expense products.

Agents will have to abandon commissions and accept that the fixed fee is the way to move forward which leads to the next problem - Asians don't like to pay for advice.

Tough luck ! If there is low perceived value in your advice, you obviously need to up your game.

Perhaps paying customers can be allowed to attend seminars where my fellow bloggers would conduct, who knows ?

Mad Max shows us how the Singaporean Dream can become a Singaporean Nightmare.

I think by now most readers would have watched this face-melting action movie so it's time to write an article on this action flick.

Why is Mad Max a teachable moment for the investor capitalist ?

The reason is this....

...If you follow my advice, work hard, save a large chunk of your earnings and learn the arts of investment well, you would be just like Immortan Joe, the villain of the movie !

I just can't relate to the two heroes of the movie. Instead, I found myself cheering for Immortan Joe, a self-made leader who carved a new society in his own image.

If you really think about it, what has Immortan Joe done wrong ?

He found a way to pump water up from the ground, quietly built a garden to raise crops, and built a loyal corp of war boys who obviously loved him like their own dad. Yes, he has a harem because he worked so hard to accumulate his assets but he's eminently human about it - there was this one scene where he would rather crash his vehicle than to hurt his unborn child. He also demonstrated much angst and sadness when one of his wives died.

If one character represents everything this blog and it's fan base stands for, it's Immortan Joe.

So why should all of you eager beaver capitalists need to watch Mad Max ?

Because Mad Max is about what kind of folks who will eventually lead to your downfall and the destruction of your Singaporean Dream.

Let's start with Imperator Furiosa.

The true protagonist of Mad Max is a woman who rose up the ranks to hold the title of Imperator, which clearly goes to show how much Immortan Jow respects women of ability.

The equivalent of the Imperators in our society today are the Latte Liberals in Singapore today - armed to the teeth with liberal arts degrees, living in their expensive district 10 condominiums and drinking Civet Cat-Shit coffee while lamenting about the state of income inequality in societies today. Of course, to these liberals, it's not enough to be the right hand of Immortan Joe, Imperator Furiosa has her perverse vision of a egalitarian society represented by an evergreen land where all mothers reside in. Interestingly, such lands do not exist anymore and has been destroyed by the so-called Vuvalini crones ages ago.

In short, liberals lead you to a utopian society which cannot be sustained.

What about Mad Max ?

Mad Max's equivalent in Singapore is what I term the Mediocre Middle-class. MMs are family men like me, actually enjoying the asset inflation created by the government and giving their kids a world class education. But unlike most of the middle-class, MMs desire more than what life gives them. There is this sense that society robbed them in the past. Maybe the education system short-changed them, maybe they have a tyrannical boss, but the bottom line is that the fault must lie with the government and the capitalist if they are mediocre and can't afford the best Patek Phillipe watches or drive the awesomest BMW cars.

MMs also want equality, they hate the financial independence of the capitalists, thinking that that they will have a New Zealand lifestyle. In a sense they are as Mad as Mad Max because at the end of the day, they are too rich and well-to-do to be given welfare. A more distributive society actually hurts them more as they end up paying more taxes to fund these welfare schemes that they want so much.

But in the movie, Mad Max played into Furiosa's plans fairly well. He is but a base thug and henchman to Furiosa, working for a deluded elite who has stolen from the capitalist and wants to lead everyone to desolate and barren land.

Watch the movie and take a good look at Singapore.

Is is not true that the liberal elites are often joined by the dissatisfied middle class in Singapore politics ?

The lesson for us capitalists is to figure out how not to end up like Immortan Joe, some of us are innovative, worked hard to build up our assets, but this can be easily lost when someone like Furiosa and Mad Max gangs up to steal and misappropriate your property then kill you and your entire family.

The question of how Immortan Joe could have done better will not be discussed today.

What is important is that now you know who are the Imperator Furiosas and Mad Maxes in your midsts today.

Let them win, and your Singaporean Dream will become a Nightmare.

<< In case you are wondering, this is a satirical piece written with a hint of irony. >>

What kind of prata does your job resemble ?

The Thosai article has attracted quite a lot of attention so I'd thought I'd follow up with a similar article about career management. This framework is inspired by Robert Reich's The Work of Nations has been explained before in my previous books but I have updated my ideas to include some new insights from Law School.

a) Mechanical jobs resemble Roti Kosong

I think by now, people agree that many jobs are dead end jobs in Singapore. If you are manufacturing worker who performs mechanical work, you are probably already jobless in this country. Even in China, automation is rapidly changing the modern factory  why hire a villager when a robot can do the task with greater precision and will not commit suicide or engage in industrial action.

It's not just production operators who need to be afraid, I would consider legal work which fills templates equally at risk as this work can be fronted locally but outsourced to India. This is the same for stock brokers who just enter enter orders and send out house research mechanically every week.

If you career resembles Roti Kosong, be prepared to go hungry quite soon. How many people can be full after eating just one Roti kosong. In fact, you need to eat two pratas to be minimally satiated.

Better hold two jobs if you are stuck doing mechanical work.

b) Service jobs resemble Ice Cream Prata

Some jobs cannot be outsourced and are a safe haven from outsourcing. Taxi drivers, sales representatives and hair dressers belong to this category.

Service jobs are relatively secure but the problem lies in disappearing mechanical jobs forcing the bulk of citizens to fight for service oriented employment. This keeps a lid on salaries. In the 90s, my haircuts at Sri Dewa at Coronation Plaza was $8. These days my haircuts cost me $5 in the Woodlands heartlands. Malaysian staff relocate to Singapore to help Singaporeans with affordable haircuts.

Ice-Cream Prata looks sweet just like service staff and can be filling, but after a while you get hungry for meat and want some proteins in your diet.

c) Symbolic Manipulation jobs are like Murtabak

Highest paying jobs invariably require very solid symbolic manipulation skills. The ability to use personal knowledge to produce insight and advice to solve very complicated problems.

Software engineers in Silicon Valley command $100,000 premiums. SMU's recent information on law students show 97% employment rate and a starting pay of $5,500 - Although I advice my classmates not to be too cocky - the restriction of a few universities play a big role in this.

But degree holders should not be too happy to read this. Robert Reich wrote his book prior to the Second Machine Learning revolution. A lot of symbolic analytical work is getting replaced by artificial intelligence. The learning for symbolic analysts should never stop, a good programmer needs to develop strong domain knowledge and architecting skills to stay ahead of the curve, otherwise he can get drowned by competition.

This is why the Enhanced Diploma Programmes from our local Polytechnics is crucial to develop the consistently evolving symbolic analysts of the future.

Murtabak is ultimately rich and filling, you can vary what goes into the prata and come out with combinations of your own, results can be surprising and delicious. The problem is Murtabak is expensive and costs $7 a piece these days. Degrees cost time and money and there "paper thosai" problem I highlighted in an earlier post.

d) Convergence jobs are like Indian fusion cuisine from a 3-star Michelin Chef.

I thought I'd go beyond Robert Reich to talk about jobs which do not exist yet. There's something to be said about symbolic analytic work which spans multiple domains. Potentially a lot of innovation and great jobs await those who are schooled in multiple disciplines.

The best jobs of the future is similar to fusion cuisine. Imagine Indian prata wrapping a nice slab of Wagyu Beef and then infused with blend of chilli hot-sauces then served with a dessert derived from Lassi and molecular cuisine.

I experienced it personally in Law School, I saw a problem with regards to awarding contractual damages which top academic legal minds struggle to resolve. Contracts are based on words and absolutes. I tried to adopt the view of an options trader and found various hidden derivatives in the contracts and was able to suggest an innovative way to look at future rulings.

It's not just me, AI experts are now trying to predict which english words are likely to become extinct and making a lot of headway in English Literature. A paper was released recently on looking at Big 5 personality traits from Facebook posts.

This evolution of jobs is not entirely good news for policy makers. The biggest innovations and opportunities for job creation will come from insights from multi-disciplinary studies. This means that folks need to spend more time in school to power these new companies.

Perhaps a possibility is to adopt your career in stages and move from Murtabak to Indian Fusion Cuisine later in life when you have more capital to invest in your studies.

This is a highly advanced area of financial planning and career development which involves tactical asset allocation of your human capital. I bet no one has even invented this discipline yet.

Why hanker for a safety net or a trampoline when you can have a jet pack ?

Singapore is really lucky, we had a one in a million chance of being ruled by Lee Kuan Yew and after he passed away, we continue to come under the able administration of Tharman Shanmugaratnam.

( I'm not PAP IB, I like Low Thia Kiang's brand of constructive politics as well and actually think that WP will survive the AHPETC scandal. ) 

Lately Tharman's interview with the BBC at the Gallen Symposium has impressed almost everyone. When cornered about Singapore's unwillingness to provide safety nets, Tharman executed an awesome rhetorical manoeuvre saying that Singapore's approach is to provide a trampoline instead.

When I first heard the interview, I was stunned like a vegetable. Our politicians are only beginning to really understand the need for rhetoric in statecraft and Tharman seems so much ahead of the curve. The trampoline is a very powerful metaphor and counters the decades of use by progressives and liberals to employ the term social safety net for welfare schemes. 

Personally, I think we should paint welfare payments as a crutch rather than a safety net. A responsible government would not want its citizens in crutches but would have been considered cruel by international standards if they don't provide safety nets. 

I want to to build on the metaphor of a trampoline and propose that our government has indeed gone beyond providing a trampoline for Singaporeans. 

If you review the tax policies and how transparent we are with taxes, for the folks who learn how to invest and manage their affairs, every Singapore can have a jet-pack if they want to. This is largely from the introduction of REITs and Business trusts in Singapore. 

Over here, Corporate taxes are low and dividends are not individually taxed. No other country can produce this combination of low taxes, public services and high dividend yields. I dare to even challenge fans of Hong Kong to show me where their high dividends stocks are. 

The jet-pack looks like this :

a) If you are single, studied hard, willing to live with parents, work your butt out and save your income.

b) By taking steps to save your income every month preferably at rates higher than 50%.

c) It is possible to accumulate $300,000 of cash before age 35.

d) There is nothing stopping you from reading the blogs of my fellow financial bloggers to figure out a combination of stocks, REITs and business trusts to yield about 8% a year. 

At 8% a year, you can get an annual income of $24,000 or $2,000 a month. And if managed carefully, in perpetuity.

[[ Note that at this point 8% is achievable but considered a risky target ]]

$2,000 a month is enough to pay for all your expenses as a single person.

With the exception of countries like the UAE, no society can provide a welfare payment of $2,000 a month making this jet-pack a viable metaphor on how powerful our low tax regime is.

Which brings me to the second part of the argument about the question Tharman fielded on creativity and freedom. At least from my personal experience, even having dividend payments exceeding your monthly earned income would not necessarily lead to laziness. 

The beauty of dividends is that they are not guaranteed over the long term, your jetpack may run out of fuel. 

I am always in the lookout for more personal security for myself and my family, hence the hours spent poring over legal cases in SMU today. In time, most of us will take the time out to improve ourselves or even run a small business to produce jobs. I still have my dream of leaving a big dent in the legal industry with my programming knowledge.

In short, folks with jetpacks don't just cruise around in the skies. We earned our jetpacks the hard way and is always concerned that we'll run out of fuel. 

I also like Tharman's allusion to the folks in the Bay Area. 

Singapore's tribe of financially savvy can bring its own brand of creativity. It takes knowledge and discipline to build up a portfolio to allow one to retire and stop work. This knowledge and discipline would be useful if we can be unshackled to pursue our ambitions in ways which is not limited to the confines of a normal workplace. 

What kind of thosai does your degree resemble ?

For this weekend, I wanted to write an article on treating a degree as an investment just like a portfolio of stock and bonds. Fortunately for everyone, I was also ordering my thosai while thinking about this idea so I thought I could write an article on choosing degrees and eating thosai.

Let's start with some fundamentals.

Degrees serve two purposes :

a) Equipping you with the skills to take on the modern workplace.

Skills are a degree's secondary purpose, in spite of what a minister tells you. If degrees genuinely equip someone with actual skills, then the university ranking would not be important when considering a new hire, management consulting firms would not fixate on just the Ivy League and Oxbridge qualifications.

In practice, there is simply too much domain knowledge that needs to be absorbed on the job before you can become a useful member of your company.

So get real about degrees. You get a degree in Engineering. You do not get a degree in Engineering in General Electric.

b) Signalling to the employer that you have the intelligence and intensity to be turned into a company asset.

This is the true purpose of a degree. It signals to the employer that you have what it takes to get the job done even if the industry changes.

The degree makes you solve complicated problems you will never see in real life, write horribly convoluted essays on arcane concepts and throw  group dynamic issues at you when you form project teams. If you survive, it tells the employer that you are a very safe option as a new hire into a management associate program.

I suppose this is the hardest truth that a savvy Singaporean has to grasp.

Now we talk about Thosais, degrees can be classified based on the Thosai they resemble.

a) Professional degrees are like Thosai Masala

Professional degrees are like Thosai masala. Thosai masala costs twice as much as plain thosai but is packed with potatoes and other goodies. Thosai masala is filling and robust.

The cut-off to get into these programs are high but the investment returns are also high. Survival is based on both the skills actually developed and the degree's signalling value.

Doctors must be able to cut someone up with great proficiency. Lawyers must understand the law. Engineers risk killing thousands if the bridges they design collapses.

My advice, that you do not need to agree, is that if possible, always eat Thosai Masala. It is high skill and high signalling. It is also exclusive.

b) General degrees are like Plain Thosai

Local general degrees are like plain thosai. Plain thosai is an institution and can be paired with different kinds of sauces for great taste. General degrees equip someone will skills which depreciate slower than professional degrees so they last longer and flexibility is a valuable trait.

Degrees like Arts, Sciences and Business Administration are high in signalling but the skills are not directly required by the industry. If you analyse a job which requires a general degree, the skills requirements is normally no higher than that of a job which requires O levels. You can talk, operate email and present yourself, your skills qualify.

But things are not that simple.   You will need to understand that the degree that you are getting is more signalling than skill. You will need to write well, speak well and network like an ace.   Inevitably, HR practitioners will look at your honours classification and "provenance" to determine whether they should you, so grades will still matter.At the end of the day, such jobs pay well and continue to have their fair pick of top degree holders.

Over time, plain thosai can beat thosai masala. Plain thosai blends better with the sauces and sometimes thosai masala makes you full too quickly and you don't really enjoy your meal.

You need to signal well after graduation and then develop the domain knowledge with your general intelligence after entering your first job.

Ruthless Tip : Go for prestige. Don't try to pao kao liao in a SME. That's a decision for gimps. Wanna work for an SME, start one of your own.

c) Private qualifications are like Paper Thosai.

Fundamentally there is nothing wrong with paper thosai, but what drives me crazy is that they cost twice as much as plain thosai but it's creation is very wasteful. To make paper thosai, the cook actually scrapes some flour off to create the paper-like texture. It takes lot of effort and sad waste of money to make a paper thosai. It is also very oily.

This is the main issue with Singaporeans and private degrees.

The Singaporean's insist that a degree equips someone with relevant skill and is the key to a better life in Singapore, so they invest more money into private degrees. Private institutions exploit our kiasuism and see us as goldmines.

Problem is that HR practitioners and MNCs continue to see degrees as a signalling mechanism, so they continue to review these private degree brands to be stacked against local universities and expensive overseas elite universities.

This is the rub,

If you invest in a private university, you need to look at your resume and ask yourself the brutal question: What am I signalling to an employer when I show the company my academic history ?

The issue is not that you now have the skills of a graduate.

The issue is whether you can be elevated above the plain thosai and thosai masalas to qualify for the competitive job.

Maybe it's time to consider label this the "Paper Thosai" problem.

If a private institution takes on anyone who can afford the fees and lack quality control, they damage the signalling value of their degree even if their graduates leave with the proper skills.

A degree without signalling value is no better than a piece of paper thosai.

Our government does not want Singaporeans to waste resources getting paper thosais in their resumes, it is unhealthy and the economy cannot have so many people spending so much time in school.

In conclusion, I think ASPIRE is the right move for our government to adopt. Think like an investor. Maybe getting a job is better than buying  a paper thosai qualification. As you will be younger, there will be more years to compound your savings. You can get into sales where your qualifications would not matter at all and may get your first million you are thirty.

P.S. The missing un-named thosai which is all skill and no signalling has not been invented in Singapore yet. It is either the apprenticeship system the government is trying to build on the German model or the idea of development bootcamps. Pray that this idea succeeds and we get a new thosai to munch on.

On IDA, fake degrees, and investing in human capital.

It looks like a previous employer of mine is unable to get itself out of the limelight. First it was Alan Ramos, then xenophobes decided to take issue with the Deputy Chairman's FT status and now there's an issue with IDA hiring folks with dubious qualifications.

As Singaporeans, we need to be fair to IDA.

Thanks to IDA, we have relatively fast internet connections, just try logging in in parts of the US if you do not believe me. As a foot soldier when the hackers attacked government websites, I was proud of the defence we made. I am also fairly pleased with some changes IDA made after I left which gave technologists and geeks a decent functional specialist track.

But this issue of fake degrees is not something alumni like myself would be proud of, but for reasons which has yet been shared on the Internet.

Follow my train of thought here :

a) Society rewards those with the greater success intelligence.

You have to agree with my assumption before I proceed.

I apologise if it sounds elitist.

I define success intelligence as a combination of intelligence, conscientiousness and intensity independent of paper qualifications. This blend of factors allows someone to draw the highest pay and reap the biggest rewards of society.

Unfortunately, companies can only reward a certain percentage of folks with the highest success intelligence.

b) Increasing local university intake cannot broaden the number of great jobs for more citizens.

There are limits to what increasing local university intake can do. If we are lucky, a new cluster of industries can form and generate fresh jobs for graduates for most graduates but otherwise, the number of great jobs remain the same, and the bar will be lifted to admit only graduates with a special honours or cum laude classification.

My first job was with Procter and Gamble, the number 1 employer in Singapore today. They conduct their own entrance exam.

c) This create a problems for Singaporeans who cannot ordinary get into a local university.

Local employers simply do not have great jobs for these Singaporeans who have mid-range success intelligence. But there are plenty of decent or good jobs.

d) Majority of citizens mistakenly associate a degree as the sole requirement to getting a great job.

Once you see another citizen obtain a great job because he went to NUS, NTU or SMU, you start to think how your life would be different had you obtained a degree.

You mistake the degree as key to getting a great job, when in fact, MNCs have only these limited jobs and are looking for the best people regardless of paper qualifications.

e) Getting an overseas or private degree will not resolve your problem.

HR departments were very willing to accept overseas or private degrees in the past when only 15% of the population can get local degrees. These days with 25% local intake for universities, HR departments have plenty of local graduates to choose from, so instead folks with private degrees get treated as non-degree holders in the 1980s with a poorer starting pay or 6 month contract offers.

f) The government wishes to prevent over-investment in education.

Diploma holders getting private or overseas degrees are a huge strain on the economy. They delay getting a decent income for a qualification which makes a little difference to their human capital.

This is an investment mistake. It is tantamount to buying a bond that defaults on its coupons.

The government launches ASPIRE to try to create better jobs for everyone regardless of paper qualifications to provide options to Singaporeans who do not make that "investment mistake".

g) This is where IDA opens a huge can of worms which can erode public trust for the whole of Government.

This explains why IDA has so much to answer for.

Singaporeans are already very upset that they have to settle for second best.

Our polytechnics have higher standards compared to many universities in emerging economies. It does not feel right that a Singaporean who plays by the rules have to contend with foreigners even with unaccredited qualifications, if anything the role of Application Consultant should have gone to a Polytechnic diploma holder with some added industrial training from ISS.

Why ?

Because IDA is a seen as part of the public service which in turn is driving for ASPIRE and wants it reduce instances of poor investment in our human capital assets.

h) The good faith argument is invalid.

The fact that an agency worker took an unaccredited degree in good faith is no defence.

Singaporeans also have good faith in our local institutions.  We want to believe that our local ITE and diploma qualifications can entitle us to local jobs as well.

i) Smart City should start acting Smart.

There is nothing stopping MOE from creating a list of degree mills and unaccredited institutions and placing it in a dataset for hackers to play around with. After all, we are very clear as to what universities our lawyers can come from before they can practice.

We pay taxes, why leave this to the private sector ?

At the moment, I think IDA has to beyond proving that Nisha took an unaccredited qualification in good faith.

What Singaporeans want to see is this:

IDA needs to prove that Nisha's original degree from the University of Mumbai which got her into the organisation in the first place, is better than a top flight computer science diploma student in our local Polytechnics.

If IDA thinks that her degree is better than our local polytechnics, it should be a public declaration so that MOE can reconsider the way we educate our diploma students.

Of course, most folks do not care about personal financial planning !

The financial blogosphere is suddenly abuzz when Cheerful Egg wrote about the indifferent attitude to personal finance.  Upon reading the article. I wanted to throw my hat into the ring as the article may become quite viral over the next few days.

I have only one real point to make.

Why is this a bad thing ?

Almost all value and yield investors know that the profits they extract come either from collecting rentals or exploiting inefficiencies of the market. The reason why we have a comfortable lifestyle without needing to report to a horrible boss or defer to a tyrant is because our investment profits provide that kind of lifestyle for us, and that we spent years honing our investment abilities to provide that level of security for our loved ones.

Of course, if we do not give a damn about the investing public, the existence of financial bloggers who share their insights for free would be paradoxical and a contradiction in terms.

So why do I care ?

It's simple.

I grew up as a geek.

Many of the rich kids in my landed estate and even my secondary school used to bully me because I was socially awkward, rode imitation BMX bikes, and played Dungeons and Dragons. I probably wasn't hip right until graduation.

The fear we geeks have is this - If society does not find a way to reward knowledge and skilled application of theories, we geeks will find our adulthood as unwelcoming as our childhood.  

My blog and the books I publish is not easy to read because I believe that knowledge is power.

Financial independence should not be bought from private bankers simply because somebody comes from a dynastic line of billionaires. I certainly know my childhood bullies will be using their wealth to gain an edge and make the rich-poor gap wider. That idea makes me absolutely furious and I need to find ways to fight back.

For financial independence, from a geek perspective, you must pay the iron price.

You pick up the arcane equations, set up your own brokerage accounts and risk your capital. In the meantime, you learn about the world around you and what kinds of loopholes exist in this universe.

If we apply this geek vision to the rest of the world, not everyone deserves finance independence.

Some deserve to max out their credit cards so that the folks who invest in the banks can have a shot at early retirement. At the end of the day, the conscientious and hardworking folks should rightfully triumph over the lazy poseurs who lack the willpower to save.

It is these folks that us pro-bono financial bloggers want to share our ideas with. For me, I don't care what rich kid snob school you come from - save 50% of your income and invest it and odds are good you'll be a free man before you hit 45. Along the way, we bloggers will provide you guidance from social sciences, the humanities to make your transition to wealth as smooth as possible.

And to the rest of the blogosphere, I have one piece of advice.

People do care - When you succeed, it generates so much cognitive dissonance that they want to know why you won the money game when they haven't.

When I got featured in the Straits Times for becoming financially independent in my thirties, you should have seen the kind of hate that was directed at me in the local message forums. Many of these guys don't even know me as person. But I know that ultimately, as a geek, I knew that I succeeded in getting under their skin by using my rigorous engineering skills in developing my personal finances.

So don't say that people do not care about financial planning.

People do care and they will hate you when you finally reach the point where you don't have to work voluntarily for anyone anymore.

So my final message to financial bloggers is this :

Be a Troll !

Misappropriate the cultural norm of your audience. Find a way to subvert their morality on what is success and happiness.

A cultural norm is that a man in his thirties and forties should be struggling under the heels of a tyrannical boss and paying mortgages.

Now subvert that.

Become financial independent yourself.

Be no one's slave.

Next, you challenge their very notions of hard work and offer them a means to be exactly like you.

Rich is karma neutral.

The whole world will have no choice but to listen to what you have to say.