Monday, 15 December 2014

GUTS 1: Moving towards Singapore 2.0. Part 2 What Singaporeans Need

The Grand Unified Theory of Singapore (GUTS) today 
and what We need to move to SG 2.0

Part 2: What Singaporeans Want. Or Need.

Part 1 covered the problems of Singapore today - An Ageing population, rising costs of living, Inflation from an emerging, rising China, the problem of home ownership, falling birthrates, rising healthcare costs, and the Sandwiched Generation.

In Part 2, we consider what Singaporeans want. Or need rather. How to get Singaporeans to be more entrepreneurial. And why we are so kiasu.

Singaporean want many things. They want cheap COE, affordable HDB flats, good schools for their children, and cheap hawker food, probably.

But what they need though, is peace of mind.

What they fear is that they may fail. That they may fail to be a filial son or daughter. Or fail to be a good provider for their family. Fail to be a good parent. Fail to raise their children well. Fail to give their children the advantages in life that every other parent seems to be giving their children. Fail to nurture their children's talent. Fail to notice their children's talent! And it is so easy to fail when you are living from pay day to pay day. It is so easy for everything to fall apart when you're just one catastrophic event (e.g. a major accident), or medical crisis away from disaster, failure, poverty, destitution.

What the sandwiched generation, the stuck generation, the generation under pressure wants and needs is some relief. What they need is the assurance of a safety net so that if he or she fails, their parents will be taken care of. Their children will not starve, will not have to drop out of school to earn a living. And they can have the freedom, the peace of mind, the option to fail.

At Obama's second inauguration, he said,
"We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great."
- Barack Obama, Inauguration speech, 21 Jan, 2013

It is time to re-look at welfare. Not as the slippery slope or moral hazard of an entitlement mentality, but as the safety net that gives Singaporeans the freedom to take risks, to try and to fail and to try again. Because without this freedom to fail, the option to fail, this peace of mind, this security, this social safety net, Singaporeans will be stuck at SG 1.0 unable to make the leap to a more innovative people.

Because this freedom to fail "gives us wings", gives us strength, gives us courage. And it is this strength, this courage, these wings that will take us to SG 2.0.

Why is there only one Sim Wong Hoo?

Among the many problems of Singapore today, there is one that is only sometimes mentioned: Why aren't Singaporeans more entrepreneurial?

Or to put it more colloquially, why is there only one Sim Wong Hoo?

Home Ownership

Surprisingly (or not) Home ownership may be a suppressing factor. And since about 90% of Singaporeans are homeowners, Singapore may be handicapped at producing entrepreneurs.

One study suggests that home ownership dampens entrepreneurship. This seems intuitively obvious. Owning a home invariably means a mortgage, and a mortgage is a long-term financial commitment that requires the mortgagee to be able to pay the mortgage installments regularly. This is a constraint and if he had an opportunity to explore entrepreneurship, he would have to weigh the costs and risks of entrepreneurship with the risk of failure, uncertain income, and the high start-up investments. It is inherently risky, and will risk his home and his family's home and security.

In other words, once you have committed to buying a home, you cannot commit to starting a business.

The other (hidden) cost of a well-paid public service

In the aftermath of the US sub-prime mortgage financial crisis, one critique of the US system was that the salaries for US civil servants were so low that the brilliant "A" students were looking for jobs in the banking sector after graduation while the merely competent "B" students were getting hired by the government to regulate the banking sector. And they would be totally outclassed by the "A" students who would come up with new instruments (such as derivatives, collateralised debt obligations, etc) that the "B" students could not understand, let alone regulate, which led to the sub-prime crisis. (This is the short, highly abridged, explanation of the crisis.)

Singapore has the opposite problem.

Singapore has pursued and sought "A" students (scholars) and brought them into the ranks of the civil service. This allows for forward planning, policy development and review, and competent regulation and administration of policies and services.

Certainly we need "A" students in the Singapore civil service to develop coherent policies and regulate the private sector, but the "A" students are also needed in the private sector. We can tell if there are not enough "A" scholar graduates in the civil service  - poor regulatory oversight, private sector running circles around the regulators, etc.

How do we know if there are too many "A" students in the civil service? How can we tell if there is not enough innovation in the private sector?

We are working with a finite pool of talent. Paying for talent in the civil service may prevent a lack of talent in the civil service, but there is no way to prevent an over accumulation of talent in the civil service.

How do we know if there is not enough talent in the private sector? Maybe the lack of innovation and entrepreneurs is an indicator?

If all the "A" students are in the government coming up with regulations, and the "B" students are in the private sector trying to work within the regulations, and unable to come up with innovative ways to succeed in spite of the regulations, perhaps that is why we have so few entrepreneurs?

Home Ownership and the well-paid Civil Service - A double whammy?

We want to believe that the school-smart kids may make good administrators, but they would probably get eaten alive if they tried to venture outside the walled garden of the civil service. We want to believe that the successful entrepreneurs are the street-wise kids - they don't flourish in academia but in the rough and tough streets of business their natural flair that cannot be taught in school will see them through.

However, how many parents are actively nurturing street-wise (but not school-smart) kids and hope that they make it as entrepreneurs?

Do parents say, "don't worry if you don't do well in school. You can still do business and succeed!"

Or do they pressure the child to re-double their efforts and strive to succeed?

Based on the fact that almost 2/3 of every cohort is graduating with a degree or diploma - that is, on track to be a PMET (Professional, Manager, Executive, or Technician) - not many parents or students are aiming for the "drop out of school and make it big in business" path to success.

This may go back to the Singaporean Right to own an HDB flat. Because most if not all of us depend on our CPF savings to buy a flat, and because the best way to get a fat balance in our CPF is with the dual contribution of employee (yourself) and employer (your company or the civil service), a steady job with a regular salary. With 36% (37% from Jan 2015) contribution, a graduate could easily expect about $10,000 in his CPF ordinary account in the first year. Within 2 years, the graduate and his or her spouse-to-be should be able to afford the down payment for a 4-room flat.

That may be the safest, surest, most certain way of achieving the Singapore Expectation, the Singaporean Right.

A self-employed entrepreneur, would probably not be putting money in his CPF, would probably not be making as much money (in the initial struggling years), if he or she is even making any money, and would probably put any revenue back into growing his (or her) business. In other words, the entrepreneurial path leads one away from the Singaporean right to own a flat.

On top of that, the risk of failure is very high for start-ups.

If owning a flat is the Singaporean's Right, then Failure is the Singaporean's Wrong.

Free to Fail

Well... Not exactly "free".

But we should make it less expensive. More "affordable".

The government tried to show that it is okay to fail, okay to be wrong. In the case of the Infocomm Development Authority (IDA) vs a local telco, the court ruled that IDA had no legal claim to some windfall that the Telco gained because of a mistake by IDA. There was baying for blood, for accountability of the person or persons responsible for losing public monies. But the authorities decided that it was "an honest mistake" and no action would be taken, but that it would be a learning experience.

The decision was not wrong.

But the public reaction was one of disbelief, and the phrase "an honest mistake" is now used derisively and sarcastically whenever the government makes a mistake or even just a misstep.

One reflection on this reaction is that the public seems to have learned the lesson of being intolerant of failure all too well, and is keen to feed this bitter pill back to the government.

Or, if the public is so intolerant of failure or mistake, how can we expect them to take risks and be entrepreneurs?

But perhaps the bitter pill for the public is not that the government was tolerant of mistakes, but that in their view, the government was only tolerant of mistakes from the "chosen few" - the elites. Only an elite could afford to fail and be forgiven. Perhaps what irked the public was that if they had made such a mistake, it would not have been written off as "an honest mistake". They would not have been able to afford to make such a mistake; they could not have been able to afford to fail and fail so spectacularly without repercussions.

[April 2016 Afternote: With the death of a NSMan from smoke grenade allergy where the officers in charge were sanctioned administratively (the Coroner's Inquiry did not find them culpable), and the internal punishment of 16 staff of MOH for the Hep C outbreak, whose identities were not released to the public, the public continues to perceive a different standard for "chosen ones". This is a difficult perception to refute.]

So for them it was yet another distinction between the privileged scholars, the "A" students and the rest of us.

Perhaps they would have been more forgiving, if forgiveness (for failure) was also offered to them more regularly.

Singaporeans want a kinder, gentler society. One that forgives failure in a practical, pragmatic and meaningful way. If your business fails, yes, you should regroup and reassess your business strategy. Maybe lick your wounds and commiserate. But it should not kill you! It should not kill your family. It should not cripple your spirit to the point where you will not try again!

I don't intend to go into the motivational mode and tell you that "failure" is only a set-back if you stop trying. Then and only then is it failure. For as long as you try and try again, they are only temporary setbacks, from which you learn.

But there is truth in that advice. And if we kill off all our would-be entrepreneurs with their first failure, it is no wonder we have just one Sim Wong Hoo.

But entrepreneurs need not be global brands. We do have entrepreneurs. But we could do with more. At least 10 times more.

And it would help if they do not have to feel that they have to bet their future, their families future, on their business venture.

It would be helpful if they were helped to get through their "honest mistakes". And not left to fend for themselves under the principle of "self-help".

"Self-help" is an oxymoron. If I can do it myself I don't need help. If I ask for help it's because I cannot solve the problem. "Self-help" is no help.

But it is language like this - self-help, self-reliance, turn to your family first, the government is the last resort, that fills the public with the suspicion that the government is offering no help, or help for the truly helpless and hopeless.

In other words, you will only be helped when you are truly and totally a failure with almost no hope of getting back on your feet even with help.

Why? Why such hard-hearted, tough love?

Meritocracy. And a "Just World" belief.

Meritocracy and the Just World Belief.

Simply put, a "Just World Belief" is a belief that good things happen to good people, and bad things happen to bad people.

Meritocracy as a system works on the principle that one is selected based on one's merits and so it is not contradictory to the Just World Belief. In fact, if meritocracy is practised and implemented consistently, it is highly probable that Meritocracy reinforces the Just World Belief, and the Just World Belief in turn inclines one to support the principle of Meritocracy.

Certainly the founders of modern Singapore subscribed to the Just World Belief. S. Rajaratnam is quoted as having said,
"We want to disabuse people of the notion that in a good society the rich must pay for the poor. We want to reduce welfare to the minimum, restricted only to those who are handicapped or old. To the others we offer equal opportunities and it is up to them what they make of [them]. Everyone can be rich if they try hard."
(S Rajaratnam quoted in Vasil, 1984, p. 168).

Whether we subscribe to a Just World Belief is a personal choice (?). And certainly, we cannot deviate from meritocracy as a principle for selecting or appointing suitably and appropriately qualified people for various tasks. But the idea that anyone can be rich if they try hard enough, or that good things happen to good people and bad things happen to bad people is rather simplistic, if not outright simple-minded.

The corollary to "anyone can be rich if they try hard enough" is "Anyone who is poor obviously didn't try hard enough. Or deserves to be poor."

The fact is most people DO NOT have total control over their lives. Most people are at the mercy of forces beyond their control, beyond their ability to influence, and these forces are not Santa Claus and care not if a person "has been bad or good".

They can be the most hardworking person in the company, but in an economic downturn that is beyond their control, they lose their job when the company closes down, along with the laziest, most unproductive employee in the company.

Similarly, successful persons are also lucky, as Michael Lewis makes the point in his address to the Baccalaurate of Princeton University 2012:
"Life's outcomes, while not entirely random, have a huge amount of luck baked into them. Above all, recognize that if you have had success, you have also had luck — and with luck comes obligation."
   - Michael Lewis,
     Princeton University's Baccalaurate's remarks, 2012
     "Don't Eat Fortune's Cookies."

In other words, meritocracy works... Up to a point. Luck also has some role to play, but it is human nature for the successful to discount the role of luck. Lewis suggests (in the same speech):
"...success is always rationalized. People really don’t like to hear success explained away as luck — especially successful people. As they age, and succeed, people feel their success was somehow inevitable. They don't want to acknowledge the role played by accident in their lives. There is a reason for this: the world does not want to acknowledge it either."
The fact is the people who have the MOST control over their lives are those who are the elites of society. They may well have their career paths planned out for them by a mentor or some other "godfather". Their next job waiting for them. Their next appointment scheduled for them.


That doesn't sound right.

That sounds like they DO NOT have control over their lives either.


Lewis makes this point to the Princeton Baccalaurates:
"You are the lucky few. Lucky in your parents, lucky in your country, lucky that a place like Princeton exists that can take in lucky people, introduce them to other lucky people, and increase their chances of becoming even luckier. Lucky that you live in the richest society the world has ever seen..."
The point is, for most people who are not privileged to have a career path worked out for them or a pension plan, or a salary that puts them in the top decile or percentile, life holds uncertainty.

And if one holds onto the simplistic Just World Belief, it is easy to believe that the misfortunes of the non-privileged are of their own making, that they need to live with the consequences of their poor choices, and to learn from their mistakes. And we are justified in denying them aid, a helping hand, or a second chance.

But it is also increasingly clear that a just world belief is untenable as a personal world view, and if it is the (unspoken) basis of public policy (because of Meritocracy), it's validity as a basis for public policy should be questioned.

There is a lot of talk about "compassionate meritocracy" which is meaningless until someone explain what it means. I have no idea what it means. Or what people intend it to mean.

People who use that phrase are just politicking, as far as I am concerned.

But what  Singaporeans need is a kinder, gentler society, one more tolerant of failure. One more encouraging of risk-taking.

But can Singaporeans be encouraged to take more risk?

Can Singaporeans be more entrepreneurial?

To Be Continued...

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