Monday, August 10, 2015

More Singaporeans need to be entrepreneurs but ...

I have always respected entrepreneurs. Even more if they are fellow Singaporeans. They dare to execute on their dreams despite the high odds of failure. How to not respect? I am glad to be of assistance to give free product reviews of fellow worthy entrepreneurs on my blog in the past.

I recently stumbled on an article which lamented that Singaporeans are not risk-taking enough and that this is bad for the country because the country needs more entrepreneurs and more workers to join risky entrepreneurial start-ups to create value. The writer, Mr Devadas Krishnadas, is an entrepreneur with a shining career history in the civil service. He earns my admiration to have the courage to quit a high-paying and stable job to become an entrepreneur. He walks the talk. However, there are some points which I do not agree with the article from the perspective of a salary worker and investor.
The young woman sitting across me was being interviewed to join my firm as a consultant. Well-travelled, highly qualified and poised, she spoke eloquently on why she wanted to join the firm - indigenous, small but growing.

Having gone through several stages of recruitment, we were finalising her appointment. She suddenly said she wanted a much higher compensation than the range discussed.

When prompted as to why, she replied that it was a great risk to work for a small local firm. I asked her to expand on her logic. She said her best option was to work for the civil service or a multinational company and that she was, in effect, doing the firm a favour by joining, and thus merited a market premium.

This attitude towards risk is disappointing individually, but troubling when we expand it to the national scale. It suggests that the young generation value the payoff for their education in terms of occupational safety. While at one level rational, such an attitude may help explain why small and medium-sized enterprises (SMEs) have great difficulty engaging the best talent.

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The attitude of the job applicant makes perfect sense and not at all troubling even if we expand it to the national scale. When a SME asks for a loan from a bank, the bank charges higher interest rate compared to a big company because of the higher risk. Similarly, for someone applying for a job at a SME, it is absolutely reasonable to ask for higher compensation because of the higher risk. It will be very troubling if a bank does not expand this risk-management practice on a national scale. The country's financial system may face systemic risks due to too much bad debt later. Likewise, given the very low odds of success for start-ups, several families will be in financial trouble if there are many Singaporeans who are not compensated enough when they lose their jobs working in start-ups.

Job seekers should not be expected to take risks. Otherwise, they would have become entrepreneurs. What is troubling on a national scale is that we do not have enough talented Singaporeans who have a higher chance of success as entrepreneurs but choose to remain as salary workers. Singapore needs more people like Mr Devadas Krishnadas who resigned from a good job to create risk-driven value as an entrepreneur. However, can we blame most Singaporeans, including myself, for not being like him?

Some reasons I can think of why there is a serious shortage of entrepreneurs in Singapore. I am not qualified to comment as an entrepreneur. I write from the angle of a salary worker.

  • It does not make financial sense for Singapore's best minds to become entrepreneurs
The dumbest reason to become an entrepreneur is to become rich. Look at the numbers. Most start-ups fail. Not just that. Most of the promising start-ups who got venture capital funding fail. Why would our best and brightest Singaporeans who have the option to work in the civil service and big MNCs want to become an entrepreneur? The risk-reward ratio simply does not make sense. Does it make sense for someone to exchange a low-risk-high-gain job, say in the civil service, to become an entrepreneur with no work-life balance, negligible or negative pay and despite all these sacrifice, the odds of having nothing to show at the end of the day is very high? I have met entrepreneurs in the course of my engineering work. I know they have no work-life balance because some have unwittingly made appointments on weekends and public holidays. They worked so hard until they forgot which days are weekends and public holidays. Unlike salary workers, they fail to appreciate that today is Friday although they have no Monday blues as well because they HAVE TO love what they do. Given the low odds of reward and guaranteed sacrifice, how to sustain without passion?

A worrisome trend has been developing in the Singapore economy in recent years. Some big MNCs are moving out. This explains the government's generous moves to support local SMEs in the form of grants and innovation support. Singapore has got to build our own indigenous big companies to replace these MNCs. Fortunately or unfortunately, I believe there will be more entrepreneurs as a result of the MNCs moving away. Mid-career professionals who got retrenched by the MNCs may start thinking of becoming entrepreneurs because they have lesser to lose now. Besides, their chances of success is higher due to the long experience and network built working in industry. Unfortunately, I believe most of the concentrated local talent in the civil service will remain locked in the public sector because the risk-reward ratio is simply too compelling to stay.

If a person just wants to be rich, please don't become an entrepreneur. He will surely give up later. He has a better chance at becoming rich by slogging as a high-level big company executive or government scholar earning a high-paying, stable salary. If he holds a middle-class job that pays around the national median-income, he still has a fair chance of becoming comfortably well-off by keeping to a simple lifestyle, patiently saving and investing for at least a decade.

Just don't be an entrepreneur if your sole objective is to be rich.

  • Cannot afford to take the financial risks of an entrepreneur
Many Singaporeans have financial obligations to support the family. For a Singaporean breadwinner, it would actually be irresponsible of him to become an entrepreneur if he does not have adequate savings to cover the initial years of building up the business. During this dry period, there is probably no income to feed the family. Even if he is able to get funding from investors, it is unlikely the salary will be high. If I were a venture capitalist, I want the entrepreneur to have skin in the game and not pay him as if he is back to working as a salary worker in a low-risk environment. The entrepreneur should not expect his investor to take risk that he would not take himself. The entrepreneur's workers, if any, will probably earn more than him in the initial years.

Most young, energetic Singaporeans have taken up huge loans to buy property. This cannot be helped. In the Singapore context, they probably have to in order to get married. The girlfriend and future parents-in-law may disapprove if the man cannot afford a HDB. Unfortunately, some middle-aged Singaporeans who have otherwise accumulated enough savings to take on the financial risks to become an entrepreneur have taken up even larger loans to invest in a second property. A person in huge debt cannot afford to take on the financial risks of an entrepreneur. His interest expense comes due every month. Without a salary job that generates a stable cash-flow, the risk of financial ruin is not low. This issue indirectly affects me not because I invested in a second property (I prefer stocks and avoid huge debt to keep my options open for entrepreneurship), but because I am not able to find peers as potential entrepreneurial partners. I have personal weaknesses and I hope to find partners who can complement and make up for my weaknesses before taking on this risky path. However, if I want to become an entrepreneur, I do not want a heavily indebted partner who is forced to be in a hurry to make money. From my investing experience, those who are in a hurry to make money end up making less or lose money. I believe it will be even worse for entrepreneurs who are in a hurry to make money. They may end up not only losing money but their reputation as well by short-changing customers and their investors. I can afford to lose money but not my reputation. Emotionally, I find the latter extremely depressing whereas I am numb to losing money. As an investor, you have got to get used to losing some $$$ now in order to make more $$$ later.

  • Majority of people do not have the temperament to be entrepreneurs
This is a problem common everywhere and not just Singapore. For an economy to function normally, most people should work as salary workers. If not, where are the entrepreneurs going to find the workers? Besides, most people do not have the temperament to be entrepreneurs. The moment you broach the idea of becoming an entrepreneur, everyone around you, particularly your family, starts to make discouraging remarks. This happened to me and my beloved, normally supportive wife was the strongest opposition voice. It is not easy to go ahead with a risky project when well-meaning friends and family says negative things and they all sound right. Like investing, there is merit in being contrarian as an entrepreneur. A contrarian entrepreneur is likely to move into or even create a niche business where the profit margins are higher and the competition is lesser. In this kind of business environment, it is easier to earn more money while working less hard compared to businesses with cut-throat competition. It is easy to be a contrarian investor but much harder to be a contrarian entrepreneur. I am a lone operator in my investing/trading activites. I think being a lonewolf helps in the investment process because I do not have to deal with distracting and negative views. No entrepreneur can be a loner because there is so much to do and so little time and no one person can possibly have both the strengths and time to do everything himself. An entrepreneur has to persevere against all odds despite the negativity from well-meaning people around him.

Fellow financial blogger Christopher Ng has suggested that a fertile soil to cultivate potential entrepreneurs are kids from rich families. I will add one more group - middle-aged workers who have accumulated enough savings and investments to weather the storm. I agree with Christopher and will not repeat the details on the how. I will talk more about the why. Given that most start-ups fail, would-be entrepreneurs better be able to afford failure. Rich people can afford to fail. In fact, this may even help narrow the wealth-inequality social problem if losses from failed start-ups are concentrated to the rich. On the other hand, out of the few who will succeed spectacularly, no one will begrudge them for getting even richer if they create value to their customers, employees and suppliers as entrepreneurs. The poor will not begrudge the rich if the wealth-inequality is caused by value-driven entrepreneurial activity. If those who cannot afford to fail rashly choose to become entrepreneurs, there will be social problems when enough of them fail and most of them will.

Singaporeans have been complaining about job discrimination in our own country. The foreign PMET (Professionals, Managers, Executives and Technicians) workforce has gained critical mass in Singapore labor market, giving rise to the foreigner-hire-foreigner complaints. It is only human nature that people tend to feel comfortable working with people similar to themselves and hire according to these in-built prejudices. To be fair to the foreigners, they could complain the same about Singaporean employers preferring to hire Singaporeans. I am confident our government is able to solve the infrastructure-overload problem given the talents employed in the civil service and the money they can throw at the problem. However, I am doubtful the rising PMET unemployment problem attributed to unfair discrimination can be eased. It is a problem that money and intelligence cannot solve. It is a social problem that involves changing people's behavior and this will take lots of time. Furthermore, even if this problem does not exist in Singapore, foreigners can still take away our jobs without coming here. Foreign MNCs are already moving out of Singapore to cheaper locations. Instead of complaining and waiting for solutions from the government, unemployed PMETs who can afford to take risk should partner each other to start their own companies. Create jobs for yourselves. You have lesser to lose financially when you are jobless. Having said that, I admit I lack the moral authority to encourage entrepreneurship. I am hiding behind a full-time salary job on weekdays and a part-time investment job on weekends/public holidays. As an investor, I do not feel as socially useful compared to entrepreneurs. I mean no offense to fellow investors but entrepreneurs do create much higher social value. (*I take a deep bow to all the entrepreneurs in Singapore*)


  1. hey hyom, Drizzt here. good post and i was about to point you to Christopher's post but looks like you are aware. hope you are well.

    1. Hi Kyith,

      Wow, this is a fast reply. Honored to have a prominent financial blogger like you read my long post despite my long absence from blogging.

      By the way, may I ask if you have ever entertained "foolish" thoughts of becoming an entrepreneur? :)

    2. hi hyom,

      don't like that say la, I actually have your blog amongst my list and am presently surprised to get 3 post alerts (although they are all on the same post).

      i agree with majority of the points. whether i considered entrepreneurship or not is a difficult answer. part of my hobby to immerse myself in various podcasts talking about various models, so i am interested. however, from my experience with interaction on folks who have seen many businesses, since it is their job to help them get Spring funding or some other form of collaboration, the two bugbear have been rentals and manpower cost, with the latter being very very underestimated by a lot of people.

      This tend to shift my mindset that yes, i can do business once i am financially secure, but it has to be something that works around this 2 issues.

  2. hyom hyom,

    Wah lau!

    AWOL for more than a year and now this "tock gong" post!

    To me, there are 2 types of entrepreneurs:

    1) Born entrepreneurs - it's evident during their younger days. The natural ring leaders. Independent, can't be herded like cats. Like to do their own thing.

    2) Bo pian entrepreneurs - like those Chinese educated Singaporean graduates of the 60s and 70s; and those with little formal education. Yup, I agree with you. If jobs are hard to find, a portion of these people will create jobs for themselves - and this in turn create jobs for others ;)

    1. Hi SMOL,

      Thanks for your compliments. I see you are getting very popular on blogosphere today. Your blog is fun and funny to read. So relaxing to read because you write for leisure. How is life getting on now? Still having fun with leisure?

      If the poorly educated and Chinese-educated bo-pian entrepreneurs 40 years ago can make it in an English-educated business environment, then the chances for today's much better educated and retrenched bo-pian entrepreneurs should not be too depressing. Sad to say, many of the bo-pian entrepreneurs today are my type - mid-career retrenched engineers. So far, their back-up plans as bo-pian entrepreneurs are to become taxi drivers, insurance agents or tutors. Maybe not the Sim Wong Hoo type of entrepreneurs that the government is desiring but those types are low-risk and pays the bills.

    2. hyom hyom,

      Touch wood!

      I still staying alive and have not busted my account yet.

      I got go pray at Kwan Im Ma Temple you know!? Always conveniently forgetting it's a Taoist, not a Buddhist temple.

      4.5 years of blogging... Imagine that!

      1/2 more year I think I should be up for a 5 year medal in blogging ;)

      Life is good, better, best!

      Now got some mei meis willing to banter with me at my blog. I am balanced!

      You know, financial bloggers and readers are mostly man/man. Wait people whisper, whisper....

      You take care now.

      Free come to my watering hole and play play!

  3. Hi Hyom,

    Awesome post and welcome back. Next time when people ask why I don't want to manage my site full time, I'll refer them to your post. Financial bloggers like you are also adding social value by promoting financial literacy. One voice may be small but a collective group of voice amplified by social media can have a huge influence.

    1. Hi Derek,

      Thanks for reading this long post out of the many posts that pass through your site everyday. Honored.

      I wrote that post actually to encourage people with good potential to become entrepreneurs. Hopefully, it has not become ammunition to argue against entrepreneurship. But come to think of it, if enough people ask you why you don't manage the site full-time, maybe it's because they think you got potential?

  4. Investors and traders do play a role in the financial market and directly and indirectly does help to contribute liquidity to the economy. Watch what happen when the market freeze!

    1. Hi Createwealth8888,

      Investors and traders certainly do have a useful role to play in financial markets by providing liquidity. I am also an investor. But I have to honestly admit that investors like me are overpaid relative to our contribution to the real economy. As a REIT investor, I made some money from high rentals which are squeezing our entrepreneurs. Don't want to sound hypocritical. I still squeal with delight when I see my dividends coming in, squeeze or no squeeze :).

  5. This blog post is close to my heart as I am seeing more PMETs on their challenges with their career - job switch, retrenchment, job hunting, etc.
    Some had thoughts of trying out in business but the years of being in the corporate life, the usual naysayers who claims it wouldn't work else everyone would have done it has an adverse effect on them. So they are stranded , at mid point and not sure which path to take.

    I was lucky I took the path, worked for a few years, tried business, failed, went back to 9-5 job , tried again, failed again, returned to the corporate life once more and recently, I took the plunge again.....

    So, I can relate to why some wanted to give it a shot but has hesitations, it's normal.....
    Failure is a great teacher - one of the most endearing experience that nobody can take away and at least for now, the education system here and culturally, in Asia it is not as well accepted and "celebrated" when one fails.

    Most would want to go attend how someone who got bankrupt and after xx years became a millionaire and now he is sharing his secrets - at least the previews would not be empty , haha.

    To a certain extent, I think the personality of a person does influence his decision to jump ship from a cushy corporate life to doing business. The grass seems greener on the other side still holds true - be your own boss, nobody to control, write your own check, etc

    Neither do many realised a business owner has no such thing as 9-5, leaves, PH , insurance benefits ,etc. He is a hunter , 24/7 else he goes hungry one more night....

    And as the lion chews on the ants for his supper, he is reminded of the good meals he used to enjoy and the lavish dinner he could have IF ONLY.............
    This is the moment of going on OR going off for most

    It is this unbearable feelings of being alienated from his past "comfort", his social circle and all that he finds it hard to stomach.....

    And it is this uncertainty that truly drives me - this delusional atmosphere of almost got it, maybe one more call, how about this idea or that ?

    And like you say rightly, the books and free resources are my loyal friends, offering me great advice and strategies and ideas - so that tears can be dried up and another battle awaits ......

    Now that I am a father of 2 kids, I know it is even more crucial that I continue on this journey. The end to some may be getting the company listed and all, which is very good. But to me personally, I want to pass on this important values - believe in yourself and not to give up, be bold to chase your dreams

    Sometimes, like you say, it is the ones that are the closest to you that are the wet blanket and you felt the stings in your heart because you care about what they say. Maybe too much.......

    From a spiritual perspective, I do encourage more people to take on more risks. Entrepreneur or not is secondary. At work, they can also show this spirit and not their ideas drown in the boring meeting or fear of not being accepted.

    Thanks for your touching post :)
    Keep it up!

  6. Hi Anonymous (Wednesday, August 12, 2015 at 12:49:00 AM GMT+8),

    Thanks for taking the time to write a long comment. You mentioned you tried setting up your business, failed and tried again. It is to your credit that you managed to recover each time you failed. You kept the cost of failure down each time. How is your new business getting on? All the best to you.

  7. Replies
    1. Hi Kenji,

      Thanks for dropping by. Reading your blog now. Looks good :)

  8. Awesome post on "Get Real with thought of being an entrepreneur". Well said!
    We need more insightful posts on issues, uniquely Singapore in blogosphere.
    Thank you.

  9. Hi, I didn't read 100% of your post, but i read most of it. I totally agree with you. I like the fact that you have a fair perspective which brings into consideration for the situation of others. Most Singaporeans (successful or not) made comments based on own concerns and perspective.

  10. I also read on your sharing of thoughts on choosing US brokers for US shares. I am surprise a newbie investor like me is thinking the same as a pro. I too want to reduce costs and are searching for an overseas broker to open account. That is why I found your post. =)



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