In the times we live, the quality of a first rate mind is to be able to identify spin. The only negative side effect is that in the process one gets labeled as cynical. What was once purely seen as creating an image to put a sheen on performance, has now degenerated into an orchestrated spin often to substitute performance.
June 27, 2009
June 21, 2009
Just finished reading Daniel Gross’s book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation. It is available as an e-book too. It is a book that I recommend to all executives and civil servants who are responsible for developing policy and strategy because it is important to place emphasis on perception tools as much as we do for analytical tools. There are similarities between the actors in the dumb money operation and in the Singapore civil service.
“The Dumb Money creed rested on four pillars: perpetually low interest rates, perpetually rising asset prices (especially for housing), borrowers of all types remaining perpetually current, and perpetually strong markets for debt. The high priests of this cult were the nation’s central bankers.
In 2007 and 2008, each of the pillars of Dumb Money began to crumble. The rules of physics still applied to finance. Interest rates, it turned out, could rise. Asset prices could, indeed, fall. Borrowers, having seen no income growth in a decade, fell behind on their debts. All of which helped cause the markets for securitizing debt and derivatives to break down”
The people who blew up the system weren’t anarchists. They were members of the club: central bankers and private-equity honchos, hedge-fund geniuses and Ph.D. economists, CEOs and investment bankers. And the (overwhelmingly legal) con they perpetuated on themselves, their colleagues, their shareholders and creditors, and, ultimately, on us taxpayers makes Madoff’s sins look like child’s play.”
Looking back, the investors who believed the stories told by Madoff and Stanford—that they could deliver steady, positive, market-beating returns in any type of climate, despite the manifest failure of virtually every other money manager to do so—were obviously foolish. But our best financial minds also spun tales and theories with great assurance, making seemingly irrational and unprecedented activity seem completely sensible. And we bought them.”
So, Why do the best and brightest get it so wrong? One easy way to explain it is here.
The arrogance of power. Combine that with great wealth, quick progress, a group think syndrome, limited thinking style and big responsibility at a relatively immature age and you have a potent mix. It invariably leads to hubris. Hubris was typically responsible for the downfall of heroes in Greek tragedy.
In addition, people in positions of great power and/or wealth will often interact primarily with people like them, both at work and in their social life, most of whom share a similar world view. They start believing that they are the only ones who understand what is going on and what needs to be done. Everyone who disagrees with them is just plain wrong or worse downright stupid. When problems occur, they tend to circle the wagons and become even more isolated.
Now Singapore’s civil servants are intelligent people, but they have become ensconced in their ivory towers. There is too much group think and there is rarely a marketplace where ideas compete. Most Ministers and civil servants come from the same elitist institutions and often have a tendency to very much function like a club. I do not know how much debate happens during the cabinet meetings, but after observing Parliament proceedings closely I have rarely seen a good debate or alternate viewpoints being pursued.
More importantly, having seen civil servants and executives in Ministries and statutory boards interact, the “group think” syndrome just continues to strengthen because they don’t want to be left out of the club. Worse, any alternate view is interpreted as a challenge to the authority, not just to a point of view. Has kowtowing the superior become the SOP (standard operating procedure) or is it a “survive and grow” strategy or worse the natural default behavior? With so many Minsters and civil servants coming from the military side, I would not be surprised if compliance fetches a better premium than creativity.
The Singapore media has never had a track record of triggering new ideas or debating current ideas. It has always served to propagate official thinking and giving it a spin.
Now, can the top honcho always get it correct? And what’s the risk of his reading the situation wrong or coming up with the sub-optimal solution? I shudder to think.
If the financial crisis has one thing to teach the Singapore government and civil service, it is that systemic failures of massive proportions are possible. And the best and the brightest (in Singapore they are judged when they are 18 years old based predominantly by their school leaving scores) with their group think cannot be the fountainhead of wisdom.
Wisdom and government dominance have been strange bedfellows. And incompatible too.
June 18, 2009
I am not talking about the entrepreneur who sells red bun and starts yet another coffee shop. I am talking about technology entrepreneurs who create products, services, generate jobs and stimulate growth.
Singapore is probably the only country in the planet which has a Ministry of Entrepreneurship staffed by eminent and scholar Ministers. The first to head the Ministry in 2003 was Raymond Lim a Rhodes and a Colombo Plan scholar. Subsequently it was headed by Dr. Vivian Balakrishnan for a very short time before Lee Yi Shyan took over.
Despite such scholar Ministers, Singapore has had limited success as entrepreneurs and very less of technology and new media entrepreneurs. The Government has put in all kinds of incentives and generous funding.
My own assessment after having done some serious thinking is as follows:
- Few angel investors or Series A investors
- Start ups don’t collaborate and create partnership networks themselves
- Start ups don’t think global – they depend too much on the local market
- Big Singapore companies are not encouraging about start ups
- Start ups build business the traditional way – Not disrupting anyone
- They try to copy other successes blindly
- Clearly no game changing ambition
- Less idealistic, hence do not get the new business models.
- Excessive focus on making money quickly – No big picture or long term picture in mind
- Focus on sales, not on a compelling value proposition
- Start ups don’t even do simple, free marketing – blogs, viral marketing etc.
James Chan has some interesting observations and I would agree with all of them.
Does anyone have anything to add to this?
Isn’t is a paradox that we were once a nation of entrepreneurs? Our forefathers from China and India arrived here without any support with barely to survive and set up businesses. Even today the Chinese and Indians have successfully set up businesses not just in their own countries, but all over the world.
Where and how have we lost the spirit?
June 16, 2009
This has always been intriguing. I always thought that it was perhaps the smart people do things on the spur of the moment. Courtesy my friend Shekhar Gupta, I understood that intelligence and rationality are different. Once one understand this concept, it is easy to understand why smart people can do stupid things.
Think of the mind as having 3 parts:
Autonomous mind that engages in problematic cognitive shortcuts or “Type-1” processing. The mind jumps to the first available solution automatically and without any conscious control.
Algorithmic mind that engages in Type -2 processing — the slow laborious thinking, often leading to analysis paralysis.
Reflective mind that decides when to make do with the judgments of the autonomous mind and when to call the algorithmic mind.
The reflective mind determines how rational a person is. When and how one’s reflective mind springs into action is determined by a number of behavioral attributes including whether one is dogmatic, flexible, open minded and so so. Most importantly it also depends on whether one has fixed mindset or a growth mindset.
An inflexible mindset or a fixed mindset person has trouble assimilating new information and hence invariably ends up force fitting the problem to the solution that he has in his head. And then even though he is smart, he is lazy to find a better solution.
This article provides a succinct analysis. For a thought provoking analysis I strongly recommend reading Carol Dweck’s book. It is bound to influence any thinker. For a very entertaining yet thought provoking book that can significantly change your perspective, I recommend reading Dan Ariely’s book — Predictably irrational.
Have you known of any smart thinkers doing stupid things?
June 13, 2009
Many people have realized that the Singapore model of attracting MNCs to locate their operations here and use that as the base for expansion has run its course. The markets in China and India are big, complex and growing and cannot be run out of Singapore. Every MNC that I have known has a China strategy, a India strategy and most of the operations (factories, R&D centers, support centers) are all located there.
If that is reality why does sections in the civil services in Singapore and even politicians sing the old tune of attracting MNCs to Singapore? And in desperate attempt to get MNCs to start operations here and create jobs, they offer lots of incentives. Once the incentives have run their course, the MNCs pack their bags and go elsewhere.
Rob McDonald the incumbent CEO of Proctor and Gamble who is also on the IAC of the EDB has some clear homilies to offer. One, he is absolutely right when he says that the single minded pursuit of foreign investment (sometimes at the cost of local industry development) has ceased to be a winning proposition for growth. Labour costs have gone up and so has the cos tof doing business. Moreover other countries have become equally attractive.
Singapore’s R&D sector despite Government pumping in billions of dollars have not borne fruit. Though it is early to make conclusive judgment, trends seems to indicate that we have a long way to go. It is as easy to set up a R&D centre in Shanghai or Bangalore and may be more effective, given the availability of talent and cost. Mr. Ngiam’s article here also reinforces the view.
Singapore needs an urgent makeover. One key aspect is to reduce its dependence on MNCs, support more local companies, reduce the role of the GLCs and reduce business costs. It is not that Singapore doesn’t pursue initiatives here, but it has a strong preference for MNC courting.
What is interesting is that for the first time, the Straits Times actually carried the candid views of the International Advisory Committee of the EDB. Normally you see PR speak, but this time some truths and homilies have also come about.
Guess, things are changing.
June 9, 2009
Amongst the few Singapore civil servants I hold in great esteem for their clarity, sense of purpose, courage to stand up for what is right, one of them is Ngiam Tong Dow. He was the Perm Sec of the Ministry of Finance and the PMO . During the last few years, he has written some excellent pieces on the Singapore policy making process, governance, current quality of civil servants and other topics.
I have always found his writings thought provoking as he judiciously blends the philosophical with the pragmatic. There is always some clear takeaways from his writings. I wish I could chat with him and pick his erudite mind for some of the public policy dilemma that I have not been able to understand or reconcile with.
Mr. Ngiam in his usual characteristic style hints that Singapore’s R&D sector needs a rethink. He doesn’t dwell much on it neither does he make any specific suggestions.
But as I see a lot ails the R&D sector, especially in the IT area which I understand well. Here’s the record: Despite having a IT R&D sector for close to 20 years, and having spent hundreds of millions of dollars, the R&D sector has produced nothing to be even remotely proud of. There was the ITI, the ISS, JSAIC, CWC, just to name a few. They all had grandiose visions, programs, and ample funding. Then they were merged, combined, they took on new names and yet after 20 years, not a single technology, product, process, framework or anything worthwhile which the industry could use has come out of the labs. It was always a small “r” and a big “D”, and even there, the results have been dismal.
It may be ironical that the 2 best private sector firms that Singapore produced — Creative and Hyflux did their own R&D outside Singapore — the former in the U.S. and the latter in China as Mr. Ngiam points out. I met the CTO of Creative a few years back and he smiled indulgently when the talk about Singapore R&D sector came up.
Yet the Government focuses on R&D and each year their budgets have gone up. It is sad that the metrics of R&D performance is still predominantly input driven and no one is accountable for the outputs.
The only thing that I would like to ask Mr. Ngiam is how long will the Ministry of Finance continue to be satisfied with input metrics in the R&D category and when will it look for active output metrics. If companies like 3M, Microsoft, DuPont, P&G as well as some of the university labs are moving towards zero based budgeting, output driven metrics and clear directions for R&D effort, why is Singapore Inc not emulating them?
For those interested, Mr. Ngiam’s entire article is reproduced below. It makes very interesting reading.
June 6, 2009
FINANCE MINISTRY’S 50TH YEAR
Building more world-class S’pore firms
By Ngiam Tong Dow
THE year 1959 was a fateful one for Singapore. It was granted self-government by the British after 140 years of colonial rule. Other than foreign affairs and defence, the new Singapore Government led by Mr Lee Kuan Yew was free to pursue its own social and economic policies.
Mr Lee chose Dr Goh Keng Swee, the only economist in his team, to be our first finance minister. The Ministry of Finance (MOF) was housed in Fullerton Building. The General Post Office occupied the ground floor; MOF occupied the second to fifth floors.
As MOF alumni, we can be proud of belonging to the pioneering team, led by the inspiring Dr Goh, our minister, and by the late Mr Hon Sui Sen, our permanent secretary. We worked our guts out to pull the economy out of stagnation.
The Finance Ministry that Dr Goh established was not your traditional Treasury. Together with Mr Hon, he created the Economic Development Division to spearhead our economic development. The Economic Development Board (EDB) was set up as the operating arm of this division, tasked with finding jobs for the thousands of young students pouring out of our schools each year.
The EDB was given a grant of $100 million to get going. In return for the freedom to operate, its performance was continuously assessed. It was rated on outcomes more than outputs. The EDB chairman had to report annually the dollar value of the foreign direct investments committed to Singapore. He still does.
MOF’s fiscal policy has always been to stimulate growth through investment. As Permanent Secretary (Budget), I accorded higher priority to the development over the recurrent budget. The development budget invests for the future. In the early stages, the development budget was spent mainly on building infrastructure.
Over the last 50 years, we have seen Singapore’s budget priorities move from physical infrastructure to defence capability and now, education and training.
Though we are not totally free of ‘white elephant’ boo-boos, MOF’s track record in allocating scarce capital is good. Our current revenue was enough to pay for both operating as well as development expenditure. If the Government were a private corporation, we would have been able to finance all our capital expenditure without a cent of debt.
Was Singapore’s MOF more virtuous than our counterparts elsewhere? The fact of the matter is that we did what we did because we had no alternative. Without oil or other natural resources, budget surpluses and CPF savings were our only sources for accumulating reserves. Except in extremis, reserves are not intended to be spent on rainy days of the business cycle. The fundamental role of reserves is to serve as backing for our currency. A stable and convertible Singapore dollar is our lifeline to international trade on which our very survival depends.
In spite of the immense pressures exerted by the rest of Government on the MOF, I would be wary of dipping into our reserves to tide us over the troughs of business cycles. I remember the first global oil crisis of 1972. Mr Hon, by then Minister for Finance, refused to subsidise consumption. He thought it better for Singapore to swallow the medicine of inflation in one gulp. The cost of living index stabilised within 18 months.
MOF’s mission as guardian of the national budget will be more challenging in the future. For instance, before we can decide on how to allocate the research budget, we need to have some idea of the knowledge domains that Singapore has a more than even chance to compete in. Is it biotechnology, nano-engineering, solar energy or something else?
Spending on R&D in my view is too narrow a focus as a growth strategy. In any case, we do not have the breadth and depth of talent to compete successfully with the Americans, Europeans, Japanese, Russians, and in the near future, the Chinese and Indians.
We may be able to hire a few superstars to head our research institutions. But a Nobel laureate cannot work in isolation. He or she needs teams of young researchers to do the basic experiments. Young PhDs in China work for a fraction of the wages we pay our young dons at our two research universities. Ms Oliver Lum of Hyflux told me that the core membrane research work of her company was done at Hyflux laboratories in China.
Rather than pursuing high science whatever the cost, we may have to adopt a less lofty approach. We should ask ourselves: What are the knowledge domains we can excel in?
Singapore has a fair track record in building townships, industrial parks, container ports, submersible oil rigs, vocational and technical education and water treatment installations like Hyflux. As the example of Singapore Airlines shows, it is possible to build up a world-scale Singapore company on our own. SIA’s founding board had no foreign director or CEO.
The way forward for us is to have the guts to build another 25 world-scale ‘SIAs’ in the knowledge domains where we have a competitive advantage.
I learnt many lessons in economic policymaking from Dr Albert Winsemius, Singapore’s first Economic Adviser. The most valuable lesson he taught me was that you have to do the things that matter yourself.
After pulling ourselves up by our own bootstraps in the pioneering years, we now outsource the CEO jobs to foreign talent. The irony is that when trouble looms, the foreign CEO just dusts off the seat of his pants and walks away with his sign-off bonus negotiated when he first signed on.
I refuse to believe that the Singaporean has so lost confidence in himself.
The pyramids of Egypt were built by the Pharoahs’ Hebrew slaves. The Egyptian Pharoenic race is now lost in antiquity. The Jewish Hebrew nation continues to thrive.
Quo Vadis Singapore? The above is an excerpt of a speech Mr Ngiam, a former senior civil servant, delivered yesterday to mark the 50th anniversary of the Ministry of Finance.