My Two Cents

Singapore will be ‘cheaper, better and faster’, says Swee Say

2011-11-26T20:09:00.001-08:00

26th of November 2011. Lim Swee Say brought the message of hope for the hopeful at the YSA (Young Sikh Association) Ministerial dialogue session held at Suntec City. Singapore will be resilient and shall grow at 3% – 5% per year for the next ten years growing to a whopping size of S$0.5T by the mid-2020s. By his account, Singapore has done better than the rest of the OECD countries. We are not plagued by the same issues of structural unemployment or high unemployment rates. However, going forward our challenges are two fold – an ageing population and widening income gap. The income disparity was a forgone conclusion, as long as it didn’t affect the crowd gathered to listen to him, it was a non-issue.

No, we are not going to have cheaper and better housing. He was referring to our economic philosophy, that Singapore will attain sustained growth through high skill, high innovation and high productivity; something that I can relate to. However, my e-thesaurus showed a different list of synonyms for the words skill, innovation and productivity. As to how he translated skill-innovation-productivity to cheaper-better-faster is a wonder. Thesaurus malfunctions perhaps!

I hung around long enough to hear his spiel about globalisation and localisation. I learned two new words from Swee Say and they are ‘glocalization’ and ‘corecalization.’ The audience seemed to be awe struck by how he could fuse two opposing forces of globalization and localization into a single force of glocalization to bring unprecedented growth for Singapore. In essence, it was down to the number of jobs created for locals versus foreigners. Corecalization was even more aggressive, it was about whether the core Singaporean team managed to gain essential skills; it didn’t matter even if the rest of the workforce was made up of foreigners. Swee Say asked the crowd that were gathered as to how many Singaporeans were experienced aircraft engineers with the talent and ability to manufacture aircraft engine blades. There was no retort.

We can expect a headline like, ‘Singapore enters a phase of high tech manufacturing’ in the local newspapers soon. They have exclusive bragging rights for this one, that’s for sure.

Like a good salesman he didn’t fuss over the disclaimer clause or what’s written in fine print. It was an important clause nonetheless, that many PMETs may become structurally unemployed in the future, the price we need to pay for induced economic growth. No worries for now though, for we can kick that can down the road or cross that bridge when we get to the river.

I am glad that they are as predictable as ever. One thing for sure, the existing growth policies will remain for a long time to come. We will continue to record stellar economic performances in the years ahead, which is a good thing. The current economic malaise is just a speed bump. There is hope, or is there?

Either, I worry too much, or they don’t see it coming. The question that was unanswered was how we are going to deal with the people in the fringes of the economy, the people who are going to lose their jobs and those who are left behind. Is there really any hope for the under-privileged and the marginalized, or should they just wallow in their hopelessness?

Lemon economics: Why some people are always better off than the rest

2011-09-13T05:04:00.000-07:00

Lemon is an American slang for a lousy car – the sale of low quality products get sold in the market because of asymmetric information. A popular example of this phenomenon is in the second-hand car market, where sellers know that their car is a lemon, but where buyers cannot make that judgement without running the car or may not have the knowledge to ascertain the quality at the point of sale and merely relies on gut instincts to make the purchase. The lack of information about its quality creates conditions for sellers to exploit the buyer. In all cases, the seller is always better off than the buyer.

Information acts as an arbiter in any economic transaction. When pertinent information is withheld by any economic actor, the other party makes an adverse or negative selection. Adverse selection can also take place when choices are limited through regulation as in state run pension programs or when government conducts business exclusively with interrelated entities. Social and economic inequality sets in when the bulk of the population or the government continues to make adverse selections for prolonged periods of time which leads to instability.

A case in point is when the government purchases solely from state-run companies, it runs the risk of stifling innovation through chronic adverse choices and crowds-out other better players in the market. This result in low-productivity levels, low efficiency and low throughput and it is akin to buying lemons; in this case, the buyer makes the selection based on affiliation rather than quality. Temasek Holdings, which owns major enterprises in Singapore, has been returning 17% annually since it was established in 1972. During the same period, the economy has been growing at an average growth rate of 7%. This shows that the Temasek has out-performed economic indicators such as GDP growth. While the government has been proudly boasting its achievements, the policy makers have failed to realize that it has achieved growth at the cost of other privately run local businesses. Mathematically, if the GLC’s grew faster than the economy, then it would have taken a larger slice of the economic pie.

The other inherent problem in our economy is that small medium businesses will have to content with peripheral business opportunities and cannot compete effectively with the GLCs due to the lack of capital and funds. The GLCs, in this situation, have access to fiscal surpluses and CPF funds as low-cost capital. Again there is evidence of crowding-out whereby Temasek and GLCs utilize public funds to fuel their internal growth and at the same time leaving too little to stimulate private sector growth. Take CPF our state-run pension funds as another example, where both employers and employees make mandatory contributions. Until 2002 the funds were exclusively managed by the government since 1955. The rate of returns consistently underperformed GDP growth rates. The investment choices and interests rates were arbitrarily set by the government because it knew it best. The government has also channelled these funds through its sovereign wealth funds abroad leaving little capital to fund local enterprises. Our monies have been utilized to develop other economies at the expense of our own local enterprises being under developed. Majority of CPF account holders are not even aware of how their funds are being utilized and contribution is enforced strictly by the state.

There is also an interest rate arbitrage at work here; the government gets low-cost capital from CPF and on top of that, fiscal surpluses which are utilized as the capital base for the investments both locally and abroad. It is imperative to note at this juncture that, while Temasek has been making an investment return of 17%, the CPF account holder makes a modest 2.5% per annum. Suppose if you had invested S$20,000 with Temasek in 1980, you would have made a whopping S$2.2M by now. Conversely, at the current rates of 2.5% per year, your CFP savings would have only grown to a paltry $42,000.

In the book ‘The Age of Turbulence’, Alan Greenspan said, “Chronic surpluses are as destabilising as chronic deficits.” All our wealth is accumulated in two companies, Temasek and GLC and it is like putting all our eggs in one basket. Should these entities fail, much of our reserves will be wiped out. There is also the dilemma of ‘moral hazard’ whereby executives of these sovereign funds have no liability or any risk, as their losses are underwritten by the citizens. The wealth of our nation is controlled by a closed network of elite, which may destabilize the socio-political situation of the country. There is also empirical evidence from other wealthy nations in the Middle East to indicate that structural surpluses can stifle innovation and productivity.

The state continues to make all the economic choices, which limits our capability and what we are able to achieve as a country and as a people. It is clear that we have yet to achieve our true potential. The fundamental root cause is because the people here have limited freedom of speech, civil liberties and access to information. It is only when we have unbiased press and freedom of expression that we will be able to surface issues in a cordial and civil manner.

Stop Our Government’s Oversized Executive Control Now!

2011-08-18T16:29:00.000-07:00

The will of the people, freedom of speech, independent judiciary and property rights are the cornerstones of democracy. George Washington took great care to ensure that these principles of democracy were never compromised as the first president of the United States of America. He retired soon after winning the war against the British Empire and took up the presidency at the invitation of the people. When he retired from his presidency he led a private life. He did that to ensure that imperialism was not replaced by despotism. Washington often referred to himself as the Chief Magistrate and not the head of state or the commander in chief, a title which gained currency with the later presidencies.

The 1^st United States Congress voted to pay Washington a salary of $25,000 a year—a large sum in 1789. Washington, already wealthy, declined the salary, since he valued his image as a selfless public servant. At the urging of Congress, however, he ultimately accepted the payment, to avoid setting a precedent whereby the presidency would be perceived as limited only to independently wealthy individuals who could serve without any salary. The president aware that everything he did set a precedent, attended carefully to the pomp and ceremony of office, making sure that the titles and trappings were suitably republican and never emulated European royal courts. To that end, he preferred the title "Mr. President" to the more majestic names suggested. Nor did Washington believe that it was the chief magistrate's role to serve as "Tribune of the People," promising great works, and demanding the power to carry them out.

There are lessons to be learnt from Washington as we contemplate on our choices for president. Our political situation is markedly different from the US and the institution of elected presidency in Singapore is still in its nascent stages. This is the second time an election is held for the office of presidency.

We worry, and rightly so, about the concentration of executive powers in the ruling party. With over two-thirds majority, the PAP has the power to legislate and amend the constitution at their will. There is little or no freedom of press and there is little information publicly available about the state of our national reserves. Just like the parliament, the office of the elected presidency represents the will of the people. However, the current constitution is written in such a way that the president only acts as the guardian of our reserves apart from the numerous ceremonial functions. As this institution matures, one hopes that the elected presidency evolves as some expect, to represent the moral conscience of the people and keep the executive branch in check.

Electing someone from the executive branch or someone who has recently retired from office, like Dr. Tony Tan, as the president does not provide the adequate checks that are required – pertinent information about our past reserves can still be withheld from the public and it is still kept within the closed network of PAP elites. Keeping such information secret and kept close to their chests only brings more distrust about the ruling party. The build-up of distrust and misgivings will only lead to further pent-up ill feelings about the PAP, which will lead to their ultimate downfall.

We have been witnessing such breakdowns all around us; Bersih in Malaysia, rioting in the Middle East, and clashes between various factions in Thailand. These civil unrests could have been avoided if the press in those countries had played their part in reporting fairly or even in helping broker power between polarized factions. But, sadly, they chose sides or remained silent which have proven to be disastrous for some regimes. PAP’s outsized conception of executive responsibility has driven their need to have an exclusive grip on power. Only by reducing those demands and through the office of an elected presidency can we restore the executive branch to its proper constitutional place: a modest office with modest powers.

Vote for Tan Jee Say.

Are we growing with our economy or not?

2011-08-07T19:10:00.000-07:00

From 1980 to now, Singapore's economy has been steaming ahead at an average growth rate of 7% per year. Last year, in 2010, the economy grew by a whopping 14.7%, making Singapore the fastest growing economy in Asia and the second fastest in the world. By all accounts we have done well. To add to our feat, Temasek Holdings ("Temasek") has been returning 17% annually since it was established. It is estimated that Temasek together with GIC, MAS, HDB and other GLCs and Statuary Boards manage about a S$1 Trillion in funds. Our reserves are about five times the size of our GDP. So, what's there to complain?

Our public debt, on the other hand, which is mostly domestic debt is financed primarily by CPF and the local banks in Singapore. The public debt stands at about S$200B. While our public debt is considered very high in terms of public debt to GDP, it is only 20% of the national reserves and therefore, a default risk is minimal. The thing that caught my eye was that a large proportion of our public debt is financed by CPF, meaning to say, our national savings are used to power our economy. So what does that mean to CPF holders?

Fund managers do hold government bonds and securities at prudent levels because it is considered a low risk investment with very modest returns. Currently, the CPF Board gives out about 2.5% interests per year on our CPF balances. While this may be higher than the bank rates, it is much lower than the rate of economic growth and much lower than the 17% returns that Temasek is making each year. This has prompted me to compute the opportunity cost of keeping your monies in the CPF.

Suppose if you had invested S$20,000 with Temasek in 1980, you would have made a whopping S$2.2M by now. Conversely, at the current rates of 2.5% per year, your CFP savings would have only grown to a paltry $42,000. That is a HUGE difference, I must say... be wise with your monies.

Who are your best clients?

2011-04-19T23:49:00.001-07:00

I am beginning to wonder if there is such a thing as a lousy client. And if you're in a position to choose between an employee and a bad client, who would you choose?

Is acceding to everything the client asks for good customer service or saying 'no' would be better at the end of the day?

It turns out that there are organizations that squeeze everything out of the service provider. These are the guys who use illegal software, manipulate service providers through fixed contractual terms and try to include everything under the ambit of the scope of works. My only advise is 'get out' of this kinda of situations. It's not worth your time and energy.

In this case, retaining your employee is the way to go.

Quote of the Day.

2011-04-08T21:15:00.000-07:00

Arbitrageurs keep the markets honest. They bring perfection to imperfect markets as their hunger for free lunches prompts them to bid away the discrepancies that attract them to the lunch counter. In the process, they make certain that prices for the same assets in different markets will be identical.

- Peter L. Bernstein

Email from Reid Hoffman, Co-Founder & Chairman of LinkedIn

2011-03-25T17:10:00.000-07:00

Dear Kumaran,

I want to personally thank you because you were one of LinkedIn's first million members (member number 391148 in fact!*). In any technology adoption lifecycle, there are the early adopters, those who help lead the way. That was you.

We hit a big milestone at LinkedIn this week when our 100 millionth member joined the site.

When we founded LinkedIn, our vision was to help the world's professionals be more successful and productive. Today, with your help, LinkedIn is changing the lives of millions of members by helping them connect with others, find jobs, get insights, start a business, and much more.

We are grateful for your support and look forward to helping you accomplish much more in the years to come. I hope that you are having a great year.

Sincerely,

Reid Hoffman
Co-founder and Chairman
LinkedIn

Interview by Tampines Junior College Link

2011-02-19T18:23:00.000-08:00

In conversation with TPJC Link:

TPJC Link: Mr Pillai, you highlighted in your speech that success is mainly a matter of attitude. Could you please elaborate?

Mr Pillai: Yes, surely good attitude goes a long way in paving your success but the other important attribute of success, along with attitude is aptitude. I'm more inclined to use the word competencies instead of aptitude. Aptitude seems to suggest that one has the innate ability to achieve a skill, whereas competencies seems to suggest that skills can be acquired through education and training.

If my experience is anything to go by, I'd say that success is rather illusive; like beauty, it's in the eyes of the beholder. So you need to have your own definition of success and make sure that you set your sights on something that is achievable in a reasonable period of time. Sometimes, I find that having incremental successes (or minor milestones) helps in achieving your overall goals and objectives.

Success is a commitment you make - You need to declare your love for success before success loves you back in return!

TPJC Link: What advice would you offer to TPJCians who wish to succeed not just academically but also in life in general?

Mr Pillai: I need to live another 40 years to talk about life in general. Nevertheless, what is important to me is the means rather than the end. There were instances in my life to make an awesome lot of money. But, I knew that there are no shortcuts in life and the law would certainly catch up when one goes down the wrong path. So I deliberately avoided such trappings and focused on developing my skills further, nurturing the relationships that matter most to me and to conduct my business ethically. As it turns out, these good traits paid off and I have earned the trust and confidence of my clients, investors and the community. There is nothing more to life than this, actually.

TPJC Link: What values do you feel attributed to your success?

Mr Pillai: Freedom of mind and the power to influence / change the mindsets of my constituents. Life as it turns out, is not a one man show. My success depends on the people around me – so I focus on the successes of the individuals around me who in turn make me very successful at what I do.

Questions

1. What kind of challenges did you face in College or in your career while working towards your goals and trying to realize your dream? How did your values and attitude enable you to overcome these challenges?

My first business collapsed during the 2001 recession. I found myself broke, depressed and unemployed. If I ever had a dream, it was shattered the day I put the shutters down on that business. Conversely, I also found myself enriched with more knowledge about business operations, profitability and had a deeper understanding of what contributed to my initial failures. I used these as lessons in life and moved on to achieve even more successes in my career and business. I realised that when one fails in a task, it is a message from the world around you that the job done is sub-optimal.

A lot of the values that I hold today are a culmination of my successes and failures. I graduated with flying colours from the school of hard knocks and I often wished that there was an easier way to learn all this or if I had paid more attention in school, I could have avoided these hardships.

2. Given the fierce competition that students today face in terms of gaining admission to the local universities, what is your advice for students, especially the JC2s, who intend to vie for a place in courses where there is high demand?

The last time I checked, your competitors have the same amount of grey matter as any one of you. So you don't have to sweat about the fierce competition. There is something sexy about the underdogs beating the top dogs in their own game. So, go for it!

The question that you need to ask yourself is whether these courses are the best option for you for the careers that you intend to pursue in the future. You may want to consider careers in areas where there is a severe talent shortage in Singapore, for instance. Above all, choose a course that interests you and one that'll give you the best skills to succeed in your intended careers.

Life is pretty strange, so you will really need to learn how to ride it as it comes to you with all its awe and wonder. I wish all TPJCians all the success in their studies and future endeavours.

Speak confidently and deliver your message clearly

2010-05-23T02:23:00.000-07:00

Recently, I gave a speech at the TPJC Annual College day as the Guest of Honour and someone came up to me and asked me, 'How do you give a speech like that?'

The trick I have learned is to focus your thoughts and energies into what you are currently doing, and in this case to speak confidently to the audience and to deliver the message in a clear concise manner.

The hardest part of giving a speech is in the beginning, when you are up there on the stage and all the eyes are glued on you to say something smart. I always focus on getting my opening remarks right. This sets the tone of the entire speech. I have also found it to be effective to make a positive remark or comment about what was said by the previous speaker. Adding humour to the opening remarks helps break the ice.

Public speaking is about both form and substance. You need to connect to your audience and establish rapport with them almost instantaneous. Lets face it, you are not going to win them all. There will definitely be a group of people who will be against whatever you say. Therefore coming across as someone who is friendly, humble and approachable helps you connect to the audience better.

The funny thing about public speaking is that people focus on what you're saying while you are saying it, but days or weeks later, when they have forgotten about what was said, how you said it becomes the primary focus.

So make an impression in your speeches and you'll be alright. All the best!

If you can't take the heat, get out of the kitchen.

2010-05-21T19:59:00.000-07:00

It takes more than just business skills (salesmanship) to run a successful business. While business practices have been standardized across many countries, there are cultural differences between country to country, and it is sometimes the idiosyncrasies in a particular country or an industry that can drive the businessman nuts.

As apparent as it seems, there are people who do not understand what constitutes a commercial transaction. Money is exchanged in return for a good or service. There are laws to protect the buyer from the unscrupulous seller and the buyer is entitled to check the goods for quality before payment is made.

However, there are situations where a service is rendered over a prolonged period and the buyer has little or no control over the process. In some cases, the entire project may be off-shored and the exposure to risk may be further heightened. (Cos once you transfer the money, your money is gone forever!)

It becomes the seller's responsibility to define proper milestones and deliverables and above all manage the expectations of the buyer throughout the project life-cycle. Service providers in this space are not employees of the party that is procuring the services - they are merely contractors and they undertake the delivery risk.

While there are laws and legal framework to protect us and while I have complete trust in our judicial process, I feel that we are not completely immune to fraud and mismanagement. So this is really a case of 'buyers beware' and sellers, 'show me the goods or your track record!'

This is definitely not for the faint hearted. Every year I see new entrants into this business and they simply can't take the heat!!!

Are we losing our edge as we grow older?

2010-05-15T20:08:00.000-07:00

Dear Mr Kumaran,

I'm Haikal from the Tampines Junior College Hat Programme.Thank You very much for the inspiring speech during our Annual College Day.Its good to hear that you are doing well in business.I would like to ask you some questions sir.You mentioned that you were mentored by bankers when you were starting up your business.I really wondered how are you able to do that as not many people have the privilege to be mentored by a banker when they are starting out.Secondly,to be a successful businessman,how long do you think we should work in order to gain expertise and knowledge before we venture into business.Thank You very much for your time.I look forward to your reply soon.

Warmest Regards,

Haikal Mohd Noh

***************************************************************************

Hi Haikal,

As it turns out, I am also a good sales man and very successful people have an uncanny ability to convince people to do things for them.

The thing is, starting a company is a risky business and it is hard to predict which one comes to you first - fame or fortune. If you get fortune, you are lucky and if you get fame followed by fortune, you are lucky twice. But, rarely do entrepreneurs start a business solely for the reason of making money, they usually start cos they want to make a difference to the world. Fame and fortune comes as a by-product.

A mentor doesn't suffer from the consequence of bad advice - the mentee does! Even though I had a privilege of being mentored by a top-banker, I suffered a great deal from his bad advice and I paid the price for it. Anyway, he is still a good friend of mine and he also parted some words of wisdom along the way... This brings me to my first opening remarks, which is, you are your own architect. While the mentors can show you the way, you will still need to choose the path that you want to take.

There is no fixed formula for number of years you need to work before starting a business. Some of the successful businesses were founded by very inexperienced people. After 1 or 2 years in the industry would give you enough exposure to start getting your feet wet. Start young cos if you do fail, you'll have plenty of time to recover from your failures. Ironically, older people bring their own set of baggages from their experiences and tend to be over cautious and risk averse - they are the tamed ducks!!! To tell you the truth, I take lesser risks today than 10years ago.

Good luck in your endeavours, Haikal. I'm glad you found the speech inspiring.

Have a good weekend.

Regards,

Kumaran

Punctuality is a Virtue

2010-04-17T18:59:00.000-07:00

Dear Chosunghye,

Its good to hear from you and it was my pleasure to meet young and brilliant minds like yourself. I confess that it makes me reminisce my college days - some of the best days in my life.

As I look back, since my college days I have had the privilege of having very spectacular successes and equally spectacular failures in my life. Over the years, I have realized that it is both the successes and failures that are portrayed in my public persona. It defines me.

There is one thing that I like to share with you - a lesson that I had learnt later in life but I thought that I could get away with it as a teenager:

I used to be regularly late for assembly in the mornings and this was due to the limited bus services that were plying between Bedok South and Tampines JC in 1987/88. I had to take two buses to get to college. I'll be arriving right on the dot at 7.30am even if I took the first bus in the morning.

My Civics Tutor called me up one day and she was very angry that I was always late. I tried to explain to her that it was not my fault and that it was the fault of the transportation system here. Obviously, she did not accept my reasoning and said that I will have to be punctual even in the adult world. I didn't think much back then, but I told her not to worry and that I will own my own business someday and I can go to work anytime.

True to what I said as a teenager, I run my own enterprise today but I have realized that punctuality is even more important to me now cos I pay people to work for me and if I make them wait, I'll have to pay a price for it (cos I pay them salaries). So I am kinda forced to be punctual and early and so Miss. Yap was right after all.

As a teenager, I was very rebellious and thought that I could change the world. But, as I grew up I understood there is a reason why people do the things they way they do. The world changes and progresses no doubt. But, our fundamental human value stick around for a long long time. All the best in your endeavours.

P/s- I am mentoring some college students from Tampines Junior College. This is my response to one of the students. Do email me at cumeran@gmail.com if you need any advise.

The World’s Greatest General

2009-07-24T05:58:00.000-07:00

Mark Twain told a wonderful story about one man’s search for the world’s greatest general. The man spent an entire lifetime looking for the general and finally the day for his last journey. When he arrived in heaven he walked over to St. Peter and said, “I’m looking for the world’s greatest general.”

St. Peter said, “I know, we’ve been expecting you and I have good news. If you’ll look over right over there, you will see the world’s greatest general.”

The old man excitedly looked over and said, “That is not the world’s greatest general. That man was a cobbler on Main Street in my hometown!”

St. Peter responded, “But had he been a general, he would have been the greatest general ever.”

The moral of the story is that sometimes you need someone else to tell you who you are and what you are capable of. There is a hidden talent in all of us – the unpolished gem. Go discover it!!!

GTM Strategies: Going the distance

2009-07-17T07:13:00.001-07:00

When I first started doing business, I used to read a lot of books written by business leaders like Charles Handy, Thomas J. Watson, Peter Drucker, and Guy Kawasaki. If there was one thing that I learned from them was their absolute dedication to a single mission – some call this strategic focus.

Most people put a lot of emphasis on setting up an infrastructure for their new business. While basic infrastructure is the basic building block of any good business, setting up the superstructure is the basis of a great business. Infrastructure refers to the capital goods, tables and chairs, office space and so on. On the other hand, superstructure refers to the intangibles like partnerships, branding, innovation, capability or core competency. The intangibles are the hardest to build. Often building your superstructure becomes the strategic obsession.

For a startup company, the strategic focus is based on the key success factors of your business. In an industry that is highly innovative with low costs and low barriers of entry, our key success factor was gain leadership position in one key market segment. Ironically, doing this is contrary to conventional wisdom of spreading the risks by diversifying the business.

Depending on the financial resources available to the startup, the company at this stage can exercise one or more of these options:
1. Develop new capabilities in the adjacent vertical markets.
2. Develop new products and services in the horizontal base markets,

Most companies at this stage plunge further into their own micro-verticals to enjoy the fruits of their labour without any consideration for opportunities in the horizontal market segments. However, in a lot of cases, especially in mature markets, the company would be better off serving and dominating their own markets.

Transitioning into a horizontal market is like making the next big bet. The team needs to evaluate not just the financial ramifications but needs to make as assessment on the formation of new partnerships, product/service capabilities and execution time.

Don't ever teach a Pig how to sing - It is a complete waste of time and it annoys the pig!!!

2009-07-12T06:31:00.000-07:00

I dont mean any disrespect to anyone who has worked with me or anyone else for I am just intrigued by this title and I hope you'll go on to read my post.

I used to run a startup before starting Protegesoft and it was a complete failure. Just as I sit down and reflect on what went wrong -- I just can't seem to put my finger on anything. There was nothing right about it from the word GO!!!

The company was well funded by the National Science and Technology Board, Singapore (now known as A*STAR). I had a professional Board of Directors, had $600,000 cash to develop a product. Hired a top class student to head the product development, a senior banker to manage the finances, an ex-banker to incubate the company and despite the best intentions and effort by all - the company failed to develop a product and ran out of gas!

I was new to business - so I got an Incubation Manager to manage my business. The result was nothing short of disaster. There was so much emphasis in recruiting a full management team. The priorities were all wrong. As a company focused on R&D, we should have spent more resources on product development and less on having a professional team.

Learning from these lessons, I have been extremely careful with the people that I hire. I insulate the engineers and the product development team from the rest of the corporate guys. I handle and direct the product development.

For the same reasons, I have also kept the company private and away from the venture capital firms. Having third party capital would put undue pressure on delivering revenue and profit targets with little regard for long term development of capability.

The structure of innovative young startups is very different from a large multi-national corporation. The corporate reporting lines are blurred and if you were to draw an organisational chart for a young startup, it should look more like a concentric model with the CEO/ Founder in the centre... because, the company is small and there is really no need to have formal reporting lines. This kind of structure also promotes innovation and invention through infomal lines of communication.

I find that smaller teams or groups are more effective and innovative than larger teams. Big teams are completely useless when it comes to product development. The most effective team sizes range from five to seven. Anything bigger seems to get too political and ineffective.

Unless you want to run your business aground - never ever hire a manager from a large company managing a large team to run your innovative startup. Somehow, they dont seem to appreciate that smaller innovative startups thrive on messy informal communication and organisation structures. They may be exceptions -- but you may need to kiss many frogs before you find your prince!!!

The Road Less Traveled

2009-07-11T09:04:00.000-07:00

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveller, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference

...Robert Frost

I read this poem as a student twenty years ago.... and after all these years I can really say that this is my favourite poem for the road that I have taken has made all the difference.

I do wonder from time to time if another career would have given me the same opportunities in life. It is hard to say but the path that I have taken was full of trials and tribulations.

The Great Depression II

2009-04-13T18:31:00.000-07:00

We are currently undergoing one of the toughest periods in our time. Most of us weren't around when the last depression took place in the 1930s. However, from what we have recorded we can learn a few things from the past:

1. Protectionism will lead to a lot of societies being isolated from the global economy. This isolation may lead to conflicts and eventually war between some countries.

2. Expect prices to rise rapidly during the recovery phase. Currently, prices are depressed and at the first instance, firms will raise their tariffs to make up for their losses.

3. Opening of new markets. We hope to see new markets being nurtured and grown. This is a great opportunity to see wealth changing hands. The marginalised communities have an opportunity to participate in the next growth cycle.

4. The recession is nature's way of getting rid of the rotten apples. I will not worry if my business does not make it through the recession. And I am not worried to say the least if my client's business goes under either. We all have a way to survive this crises. The pain is only temporary. We'll survive this crises in the long run.

Startup

2009-03-24T06:19:00.000-07:00

So you have a great idea and you think that it will be the next big thing. This is going to bring in the riches and the glory that you deserve. But, before you quit your job and leap into the unknown there are some things that you will need to do to get things started.
Firstly, most businesses fail within the first year due to poor financial planning or discipline. So this will be first order of business. You will need to know if your business can generate enough cash to sustain yourself. This is called bootstrapping.

Secondly, if you think that your business will not be able to generate the cash so fast but will be able to do so within the first 18 months, then you will need to raise money from somewhere or someone. Often, it will be from your friends and relatives who will give you their hand. However, in some cases, you will need to raise alot more cash in order to sustain your operations for the first few years. You can then approach business angels who can invest in your business. Biz angels are usually successful business persons in some way. They may have the spare cash to invest in your business. However, before you approach them, you will have to have a business plan detailing as to how you will put their money to good use and how you will return the money with a good returns in a reasonable time frame. Business angels usually do not require any form of collateral from you.

You need to understand that when a business angel says no to you, it is not because they think that your business is lousy, but they may be averse to taking that kinda risk at that point in time. So learn how to cultivate your own pool of investors.
The other important point is that capitals seeks investments with best returns. So you are actually competing with the equity, bond, and other markets for the same money. They may consider those investment vehicles to be less risky. Really, you need to have a good measure of luck and a good business plan to raise any money.