More strategic, less opportunistic. This spells things out simply. (I intend for this to be a very short blog post.)
We should not be doing too many investments of the opportunistic variety, such as taking apparently cheap equity in struggling banks. (Look where that has got us. I do not plan to look for where and how much the losses are. Suffice to say that they have amounted to billions over a very short time frame.)
Strategic investments in the obvious technologies of the future and the maturing technologies of tomorrow (... or next week) would make more sense from the point of view of national sustainability (also known as "relevance to the world").
With strategic investments in relatively young firms, growth potential exists. Furthermore, there is scope to use our large stakes to steer those firms towards collaborations with, or investments (building plants) in Singapore.
While this would remain a hit and miss process, any hit would increase our relevance to the world by putting us among other world leaders in the roll-out of some eventually ubiquitous technologies. As we have seen in the past years, capabilities spawn services. Our small size allows for an agility in roll-out that would allow our services sector to build and grow quickly locally with respect to a given capability. The next step: the world (or at least South East Asia).
In this respect, we need fewer "quantitative finance types", who mostly see value and risk as plain vanilla numbers handling our investments (this is harsh and pejorative but not too far off the mark). We need more technologists and academics, who would have a more strategic view of desired capabilities and technologies that might enable them, advising on acquisitions.
(It is my belief that fund managers with a risk profile featuring a high upside and no downside should not be running a national sovereign wealth fund.)
Our sovereign wealth funds have a unique opportunity to play a major role in bolstering our nation's future relevance to the world. Let us not throw that opportunity away.
Showing posts with label Strategy. Show all posts
Showing posts with label Strategy. Show all posts
Sunday, March 11, 2012
Thursday, April 14, 2011
On National Strategy
Over the past years, issues of housing, inflation and real household income growth/decline have been increasingly central in the public discourse, pointing to the deeper issue of what national strategy is appropriate going forward.
Traditionally, we have pursued a high rate of growth which has, unfortunately, been accompanied with a rising cost of living relative to income, which in turn has led to many Singaporeans feeling left behind. While one must acknowledge that billions are spent on targeted aid to speed up the trickle-down process, which usually takes decades in other countries, targeted aid is a reactive solution to a side-effect of our pursuit of growth.
Our first generation leaders presciently pursued the strategy of growth while building an umbrella of security. The execution of this strategy raised the average standard of living and kept Singaporeans safe, and is now well studied by both governments and corporations as a textbook case study of well-crafted and implemented national strategy.
Empirically, economists have observed that high growth in a country is often accompanied by rising prices and increasing concentration of income with the richest, in turn leading to decreasing purchasing power of the poorer segments of that country. This leads to the question of whether high growth and increasing income inequality is, on balance, the best option for Singapore. In a related sense, is the growth chasing hot money a risk to our financial system? We have to make an informed decision on how to pursue growth and to what end. After all, the pursuit of growth should be a means to increasing the welfare of the citizenry.
Key to designing an appropriate national strategy is the articulation of our national objectives in terms meaningful to Singaporeans. Such objectives might include ensuring, by 2020, than no more than 1% of adults in a certain age bracket fall below a set income threshold (as pegged to a representative basket of goods and services), which, under the CPF scheme, would ensure sufficient retirement funds for most Singaporeans. National objectives might also include a list of privileges we would like Singapore citizens to enjoy, such as substantially longer paternity leave with job security or free tertiary education. Such examples represent a consolidation of the gains that generations of Singaporeans have labored for. With a clear sense of what we want to achieve, Singapore will be better able to negotiate the trade-offs necessary to realize her objectives.
As PM Lee as emphasized, this coming election is about the future. As such, and our nation’s long term objectives and strategy should be debated.
Traditionally, we have pursued a high rate of growth which has, unfortunately, been accompanied with a rising cost of living relative to income, which in turn has led to many Singaporeans feeling left behind. While one must acknowledge that billions are spent on targeted aid to speed up the trickle-down process, which usually takes decades in other countries, targeted aid is a reactive solution to a side-effect of our pursuit of growth.
Our first generation leaders presciently pursued the strategy of growth while building an umbrella of security. The execution of this strategy raised the average standard of living and kept Singaporeans safe, and is now well studied by both governments and corporations as a textbook case study of well-crafted and implemented national strategy.
Empirically, economists have observed that high growth in a country is often accompanied by rising prices and increasing concentration of income with the richest, in turn leading to decreasing purchasing power of the poorer segments of that country. This leads to the question of whether high growth and increasing income inequality is, on balance, the best option for Singapore. In a related sense, is the growth chasing hot money a risk to our financial system? We have to make an informed decision on how to pursue growth and to what end. After all, the pursuit of growth should be a means to increasing the welfare of the citizenry.
Key to designing an appropriate national strategy is the articulation of our national objectives in terms meaningful to Singaporeans. Such objectives might include ensuring, by 2020, than no more than 1% of adults in a certain age bracket fall below a set income threshold (as pegged to a representative basket of goods and services), which, under the CPF scheme, would ensure sufficient retirement funds for most Singaporeans. National objectives might also include a list of privileges we would like Singapore citizens to enjoy, such as substantially longer paternity leave with job security or free tertiary education. Such examples represent a consolidation of the gains that generations of Singaporeans have labored for. With a clear sense of what we want to achieve, Singapore will be better able to negotiate the trade-offs necessary to realize her objectives.
As PM Lee as emphasized, this coming election is about the future. As such, and our nation’s long term objectives and strategy should be debated.
Sunday, August 8, 2010
We Need a Clean Slate Analysis of the Economy and a Road Map
I've just watched The Yes Men Fixed the World (P2P Edition). The synopsis:
Economies attempt to increase efficiency by progressing up and right within the production possibilities, where one group can be made better off without making anyone else worse off. It's not possible to stray out of the set of production possibilities (those are "possibilities" after all). Economies can only progress along a continuous curve. Therefore to get over the "Humps" in the Pareto frontier, considerable sacrifice may be necessary. This is not easy.
Free market advocates say that economic shock (disasters) are "useful" for producing economic progress. Economic progress, on the above diagram, entails helping getting us over the humps. Disaster based "shock" enables this by shaking the economy so far from the Pareto optimal frontier (into the production possibilities set) that it ends up to the left and below the hump, from which it can progress up and towards a more improved economy. But is "shock" truly the only way?
Future envisionings exist that show, in reasonable detail, how the options for a possible future, given the current state of technology, would be better than those that exist today. On the diagram, technologists in a world of Region 1 or 2 might be able to envision Region 3. The question is how to progress on a continuous trajectory towards it. (Let's not nitpick how the regions are depicted and whether they are the frontier or the area, I used MS Paint to draw it.)
The fact is, it is politically difficult to move towards it. Asking constituents to make sacrifices is difficult. However, it might be possible if there was a (public) road map with projected progress towards that future (over time) being charted.
We need a clean slate analysis of the economy, independent of where we are today, to show where we can go. Then we need a road map to show in detail how we might get there. Finally, we need to move in that direction with will and conviction.
The one political point I want to make: The situation with renewable energy (as brought up by the movie) falls squarely into this category. On 27 Jul 2010, the US House Majority Leader unveiled the "Clean Energy Jobs and Oil Company Accountability Act" with the two most powerful clean energy provisions missing: a cap on carbon emissions from the electric power sector and a national Renewable Electricity Standard, which would require utilities to generate at least 15 percent of their electricity from renewable sources by 2021. No doubt, this was influenced by the old economy energy firms (fossil fuels) that are now rich with the pickings of their full product life cycles and using these resources in a harmful attempt to extend these life cycles via lobbying. The Aug 2 - Aug 8 2010 edition of Bloomberg Businessweek warn that this will result in USA losing out to China in the renewable energy race. (In the above framework, China's economy might be operating at a point left and below its hump, which its status as a "developing" power might support.)
In summary, a clean slate analysis reveals the possibility and what we must sacrifice, over some time horizon, to get there. A road map is a plan to get there. Political will and awareness of where we are going will get us there. Visibility of where we at all times in the process are will help maintain that will.
- THE YES MEN FIX THE WORLD is a screwball true story about two gonzo political activists who, posing as top executives of giant corporations, lie their way into big business conferences and pull off the world's most outrageous pranks. This peer-to-peer special edition of the film is unique: it is preceded by an EXCLUSIVE VIDEO of the Yes Men impersonating the United States Chamber of Commerce.
Economies attempt to increase efficiency by progressing up and right within the production possibilities, where one group can be made better off without making anyone else worse off. It's not possible to stray out of the set of production possibilities (those are "possibilities" after all). Economies can only progress along a continuous curve. Therefore to get over the "Humps" in the Pareto frontier, considerable sacrifice may be necessary. This is not easy.Free market advocates say that economic shock (disasters) are "useful" for producing economic progress. Economic progress, on the above diagram, entails helping getting us over the humps. Disaster based "shock" enables this by shaking the economy so far from the Pareto optimal frontier (into the production possibilities set) that it ends up to the left and below the hump, from which it can progress up and towards a more improved economy. But is "shock" truly the only way?
Future envisionings exist that show, in reasonable detail, how the options for a possible future, given the current state of technology, would be better than those that exist today. On the diagram, technologists in a world of Region 1 or 2 might be able to envision Region 3. The question is how to progress on a continuous trajectory towards it. (Let's not nitpick how the regions are depicted and whether they are the frontier or the area, I used MS Paint to draw it.)
The fact is, it is politically difficult to move towards it. Asking constituents to make sacrifices is difficult. However, it might be possible if there was a (public) road map with projected progress towards that future (over time) being charted.
We need a clean slate analysis of the economy, independent of where we are today, to show where we can go. Then we need a road map to show in detail how we might get there. Finally, we need to move in that direction with will and conviction.
The one political point I want to make: The situation with renewable energy (as brought up by the movie) falls squarely into this category. On 27 Jul 2010, the US House Majority Leader unveiled the "Clean Energy Jobs and Oil Company Accountability Act" with the two most powerful clean energy provisions missing: a cap on carbon emissions from the electric power sector and a national Renewable Electricity Standard, which would require utilities to generate at least 15 percent of their electricity from renewable sources by 2021. No doubt, this was influenced by the old economy energy firms (fossil fuels) that are now rich with the pickings of their full product life cycles and using these resources in a harmful attempt to extend these life cycles via lobbying. The Aug 2 - Aug 8 2010 edition of Bloomberg Businessweek warn that this will result in USA losing out to China in the renewable energy race. (In the above framework, China's economy might be operating at a point left and below its hump, which its status as a "developing" power might support.)
In summary, a clean slate analysis reveals the possibility and what we must sacrifice, over some time horizon, to get there. A road map is a plan to get there. Political will and awareness of where we are going will get us there. Visibility of where we at all times in the process are will help maintain that will.
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