About iron rice bowls and paper plates.

This is a short article. I have a discussion with a friend about careers today and we were talking about the differences between the public sector and private sector.

Now most folks from the private sector have a tendency to scoff at government or quasi-government bodies because of the impression that no work really gets done in these organizations, staff are jiak liao bee because they're protected by the iron rice bowl syndrome.

As someone who spent a decade in the private sector before deciding to look for more work life balance, I have a different perspective.

Public organizations and NGOs do a lot of back-breaking work. Results also take time to show itself  because of the intense amount of paperwork to push a proposal through. It's also important that decisions involving money are above-board and not compromised by a sexy IT sales manager, so a lot of pains have to be taken to provide a paper trail.  The other challenge is that it is a lot a harder to justify something without a simple ROI or IRR model that the private sector works by.

The other reality is that these organizations cannot hire and fire at will because of the political pressure from the electorate, so much work is required to outplace a non-productive worker, it's simply easier to tolerate them and give them work that provides less value add. Overtime, managers end up with a large contingent of such workers who cannot work for any other organization other than the ones they are stuck at.

Which brings me back to managing people in NGOs and government organizations.

While an iron rice-bowl may be the envy of the private sector. Never forget that we do not actually eat rice-bowls. We eat what's actually inside it.

If you have an iron rice bowl but report to a terrible manager, that's the equivalent of someone sprinkling dog food into your next meal. Your bowl will not break, but it's not exactly something that you want to eat for the rest of your career.

While a paper plate may not last many meals, a good careerist can always always walk around with some steak and foie gras on it. It the plate gets ruined, as it always happens because some kind of restructuring is just around the corner, just ensure that you know where to get the next paper plate.

A smart careerist can make do with an iron rice-bowl, ceramic plate or even a paper cup. The important thing is to manage your resume and experience, so that you will always have some caviar, champagne and foie gras to go with each party you attend to.

Singapore dollar - Bane of Online Entrepreneurs.

MAS is taking a policy of strengthening the Singapore dollar to fight inflation. This means that if you run a web business and earn in US dollars, you're very likely to experience a downwards swing in earnings if you convert it back to Singapore dollars.

This reflects one of the many uncertainties of running an online business.

At first, these so called entrepreneurs think that they can earn in USD and spend in SGD, the underestimate the power of Singaporeans who are more than happy to save for their future and strengthen their currency in the future.

 Of course, a smart online entrepreneur can do better if they bring geo-arbitrage to it's ultimate logical conclusion.

 It is definitely possible for a Singaporean with a savings of about $20,000 to settle down comfortably in a place like Thailand and pay minimal rent to see through their online businesses.

 Here's a dream combination if you are single and have weak family ties :

 a) Invest in SGD 

I can't emphasize enough that our low tax regime makes investing in SGD real estate assets an almost sure winner. Some REITs continue to yield over 8% and does not generate any taxes beyond the first 18% deducted at the company level.

b) Spend in MYR/THB

 Find a place to stay where the cost of living is about 40% less than Singapore. Johore Bahru and Phuket comes into mind but you need to blend in with the locals so that you will not be singled out by criminals.

c) Work and earn in Dubai or Aussie dollar. 

 IMHO, the best places to work should be friendly to foreigners and have a lot of natural resources such that the currency has a strong correlation with gold/oil.

So the best combination out there is probably some Malaysian Dude with a Singaporean PR who invests in the Singapore markets, works in an oil company and now stationed in Abi Dhabi and has a family in palatial mansion in Johore Bahru.

My American Pie Reunion Epiphany.

Some people are touched by great movie epics like The Titanic or Chariot's of Fire.

I have a much lower taste. The movie that affected me a lot lately and touched my heart was American Pie Reunion. It attempted to answer one of the key questions I've been asking myself for the past decade.

Looking at my University classmates, I witnessed so much youthful exuberance and promise, I started to wonder years ago what would they be like as working adults. Would they be the hotshots in our generation, or would they fade into the background like the working folks I saw 10 years ago.

American pie is a work of fiction, but is as a mirror of the real world, it worked because it reflected the inner world of generation X that is fast approaching an explosive mid-life crisis of its own.

Here's some insight I picked up from the movie :

a) There is an inherent dissatisfaction with married life after kids.

As a father of a 1 year old, I'm beginning to see that making a choice for a stable family life has it pitfalls. While it gives security, it takes away variety. The key to making it is contentment. The movie is almost a tragedy for Jason's family because the couple was not content with their family life.

b) It does not pay to be a romantic or a Chinese poet.

The most tragic character in the movie is Evan. He parallels the Chinese poets in NUS ten years ago, you know the stable, boring unimaginative types that come from Chinese medium schools who aim to start a family at a young age. Evan is stupid enough to wish that he would be with Vicki when when he was at high school. In the end, he had to let Vicki go.

It was heartbreaking even for someone like me to see a nice guy fail like this.

c) Overextension has its pitfalls.

Ostreicher would have been the fly-boy of my generation because he turned out to be a celebrity. Closest thing to Ostreicher would be someone like Adam Khoo. But unlike Adam Khoo, Ostreicher made an ass out of himself in a reality show and had to be humiliated during his class reunion.

I have the most respect for Ostericher because at least he's somebody. But it's so ironic that he wished for a stable family life when he was in high school.

d) The most interesting guy turned out to be a liar.

The most pathetic character was also my favourite in previous American Pie movies. Finch was someone with a stable job who disrespected his secure and predictable life. After being denied a raise, he stole his boss's bike and made tall tales about his adventures around the world with his closest friends.

These days I see so many of my peers from NUS giving themselves fancy titles like Social Media expert ( like it's possible to even be an expert in social media ) who claims to do some charity work on the fly.

e) The asshole wins !

The funny thing is that Stiffler won the game of life in the movie. He's the only dude with the simple dream of rocking with his friends ten years down the road. Because he was authentic and never had a second thought about being a lovable jerk, he was the only guy rewarded with self-actualization at the end of the movie.

American Pie is a great movie for Generation X. Gags aside, it chronicles how lives can go so wrong from where it begins in campus. The jury is still out on how my life turned out, my unnatural fascination with my financial independence is slowly bearing fruit but it comes at a huge expense of my blood sugar control.

But one things for sure, growing up and having a well-adjusted midlife has a lot to do with understanding your limitations, loving your family and accepting your mediocre status in society today.

It takes a movie like American Pie Reunion to remind us of these things.

HDB resale or car ? Which is the better investment in Q1 2012 ?

Recently an article mentioned a 0.6 percent increase in HDB prices while private properties have fallen. At the surface level, some HDB buyers may be feeling a little smug. They took in smaller losses than the folks who bought a condominium.

If you look at the projected inflation rate in 2012 which is expected to come at 4.5%, a 0.6% increase is way less than the inflation rate in Q1 2012. Comparing HDB prices to equities which have risen over 10% in Q1 2012, it's pretty clear which asset class is likely to be the winner in Q1 2012. In fact, a 1.6 litre second-hand car would have performed better as an investment in Q1 2012. COEs went from $46,889 to $58,501 through Q1 this year.

Here's some considerations for folks who intend to get wealthy by property ownership :

a) Rental yields of residential properties are pathetic.

Rental yields of residential properties straddle around 2-4% in Singapore. You are better off looking for industrial or commercial property if you are looking for yields.

b) This leaves capital gains which does not look good in the medium term.

By cutting down on foreigners, Singapore should look to less demand on resale flats. Making matters worse, HDB is expecting to ramp up the development of BTO flats for second timers in Singapore. Without any personal expertise in property, with shrinking demand and increasing supply, it does not take a genius to figure out that HDB flat prices will generate negative real returns.

( Note that politically I doubt the government will allow prices to decline, but having a n increase below the rate of inflation is one way of easing prices without a political backlash, hence I'm betting Q2-Q4 of 2012 to have similar results. )

Here's a better way of thinking about property:

a) Buy a flat or condo only if you need to stay in one.

Don't make your assets multi-task. Buy insurance for protection, equities for investment gains and a HDB to stay in. The moment you think that you are Warren Buffett's second incarnation if you own a resale flat, you will be expecting a disappointment pretty soon.

b) If you really think that you are some property punter, then get a good location.

Personally, if your unit is within 10 minutes of an MRT, your HDB may outperform the others. There is a psychological reason for this - Commuting ranks as one of the most unpleasant moment's in a person's working day, once people realise this, flats in a good location will become more expensive relative to a larger unit at inaccessible places.

Of course, some locations start out bad but future developments can make things better.

Which is better, higher monthly income or higher bonuses ?

Thought I'd share something with blog readers because I'm pretty surprised some people actually may not be able to to understand this concept and may make serious career mistakes in their lives.

Suppose your income is $120,000 a year. You have a choice between getting it over 12 pay-checks at $10,000 a month or getting getting it over 15 pay-checks of $8,000 with 3 month bonus for average performers.

Intuitively, the former the pay scheme is a superior one. Reasons can be very valid, a monthly income of $10,000 is useful for negotiating salary for subsequent jobs. You also get more money earlier on throughout the year which allows you to farm your money into investments earlier. There is also little pressure to perform at work as salaries are fixed.

Actually, if you offer me a choice of two pay schemes, I'd actually choose the latter.

Here's why:

a) CPF contribution caps are higher with the latter scheme.

One of the funny things about the CPF program is that the employer will contribute CPF up to $5,000 month. This means that you only pay CPF for up to $60,000 a year for your monthly income.

However, the CPF board has an Additional Wage Ceiling of $25,000 which allows an employee to contribute part of their bonuses to the CPF program with the appropriate matching from your employer.

This means that the former pay-scheme, your employer pays CPF up to $60,000 of your income but in the latter payment scheme, your employer has to match up to $84,000 of your income.

Many HR departments in Singapore have saved a lot of money by offering to pay their employees based on a 12 month fixed scheme instead of paying them bonuses. Employees happily accept those terms because it's more cash in hand and the program was touted as being income neutral. In actual fact, the employer is creating huge savings for themselves by contributing less to employee CPF.

b) The problem of higher taxes.

In many cases, when employees get more money, their contribution to CPF drops which means that more income becomes taxable. This actually means more money paid to the government.

To prevent manipulation and gaming of the CPF system, we will be better off simply setting the ceiling to be indifferent to whether the income is normal monthly income or bonus income. Simply limit a year of income matching to $85,000 regardless of the nature of the income for each employee.

This way companies cannot exploit workers by switching to a 12 month payment program and declaring that the switch is income neutral.