Monday, July 27, 2015

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.


  1. Hi Christopher, nice analysis & conclusion.
    I have not done a detailed analysis but I have observed that entrepreneurship runs in families.A progeny of an business owner is more likely to go into business. It may be related to family values & also related to opportunities & contacts ( as you mentioned in your analysis).
    Thus it is highly likely that children of a rich bureaucrat will join civil services rather than starting there own business.
    This is true of most of the countries in developed & developing world.
    The bias is higher in Singapore due to high pay packages of high ranking bureaucrats.
    Another factor which kills entrepreneurship in Singapore is our aversion to failure. Singapore is a 1 chance country( in most cases). So I am likely to take up something which is more likely to succeed & has lower returns rather than something which is high risk but with potentially higher returns.

  2. All your points are valid.

    Singapore needs to rethink it's talent distribution because it does not make sense for the smartest and richest kids to get the bureaucratic jobs with the least amount of risk. Singapore will do fine even if we draw talent from the lower and middle income groups.

    It's also pragmatic to embrace the fact that that private businesses are going to be a little nepotistic in Asia.

    I am proposing that the door to government scholarships should actually be barred to the upper class so that we can have a vibrant private sector.

    I expect many readers to resist this idea.

  3. Rather than barring scholarships completely for upper classes, a better system will be redistributing more scholarships from the not so privileged class.
    It will also fit in the principles of meritocracy as a student from not so privileged class deserves a better deal than one from a privileged class. But a truly brilliant student from any category still needs to be rewarded.
    it may not produce more entrepreneurs but it will look and feel more fair.

  4. We need to invent a new form of scholarship for the rich which is not subsidised by tax-payers. This allows them to signal their worth and, should they still choose, still serve the Government bond-free.

  5. Hi Christopher,

    I seldom come across writeup on the above-mentioned topic, with detailed analysis and yet provide balanced view & alternative innovative solutions that could solve the real issues facing current generation of Singaporean PMETs. Good work and well done!

    I'm one of the PMET Baby Bloomers,that have gone through life much in tandem with the trials, tribulations and successes of modern, fully independent and sovereign Singapore. Many of us have achieved financial independence along the way and feel a desire to do something for the current generation of PMETs. Beside, meeting personal need to have a more fulfilled life, we want our fellow Singaporeans to enjoy continued prosperity in their lives too.

    Currently, there are not many avenues where such sharing of knowledge, skills and experiences can be expounded in a friendly, cohesive, effective and supporting way.

    I decided to do something about it in 2016. I have initiated a United PMETs community. It is still in a very preliminary stage.

    If you or any of your readers are interested to be part of the community Life Changers, you're welcomed. We need all the help to get it kicking and running,to meet the meetup community's objective.

    Please provide your feedback on the above.

    Thank you.

    Reuben Ong

  6. Thanks for the kind words, Reuben.

    Do you have a blog to track how your meetup sessions progresses ?

  7. Thanks for your feedback,Christopher.

    I find has all the community meetups & scheduling tools (available to the meetup organizer) more than sufficient to track and improve on each and subsequent meetup, and also manage as a self contained social networking blog site.

    All meetup sessions progresses are recorded and make "live" to the community by default. See community status, using the below hyperlink.

    I believe most valuable feature is, of bringing people together in the real world around a common theme or interest, to facilitate real-life interaction -- going beyond Facebook and Twitter,where so much of our communication is digital.

    I hope I understand your query correctly.

    Best regards,


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