TR EMERITUS

The big news in the world of business is the collapse of the crypto currency exchange FTX. The collapse has wiped billions off the value of crypto currencies and investors have been sent scrambling for cover to lick their wounds. In Singapore, the collapse has been double compounded by the fact that Temasek Holdings, one of our sovereign wealth funds (technically Temasek isn’t a SWF but acts like one), was a prominent investor. A lot is being said about the collapse, so I shall not dwell into what happened. However, a recap of events can be found at CNA: While I shall let the more intelligent deal with the collapse of FTX, I will make the point that it appears that FTX is part of a larger trend in the world of business. Back in the day (1990s), I remember being told by a very senior banker that business at its most basic was simple – you bought a product or service at “x” dollars and sold it for “y” and then kept the difference. Everything in the world of business was about helping increase the difference between the buying and selling. Just as the basic concept of business was simple, so was the basic concept of accounting. There was the top line, which was your “revenue” or how much you sold of your product or service. Then, there was the bottom line, or your “profit,” which was what you had left after you paid off the expenses (rent, salaries, stationary etc). Based on this concept, it was said that businesses would only see a profit after three years of operations because they would have to take the time to get their product or service known at a scale where they could make money. Then, after surviving long enough, that business might grow to the level where it would be attractive enough to get people wanting to invest in it. The investors would then pour over the financial statements because the story what was going on was there. What did investors look for? This was best answered by a few years back when I ran into a mainland Chinese customer who asked how much the Bistrot would be sold for. I told him the owners asking price and gave him an indication of what our revenue was from two branches. His next question was “what’s the profit?” This was something the owner was not willing to disclose and so the deal didn’t go through. Where the businesses biography is written? Interestingly enough, the basic concepts of business and accounting started to change in the 1990s with the arrival of the internet. This was a time when everyone was talking about how the internet would change business. This was not wrong in the sense that the internet had the ability to change the way things were done. Small businesses could overcome geographical hurdles and team up with businesses from elsewhere. The Indian IT and call centre business started to grow in this period because it became easier for Western companies to get cheaper Indian labour to do certain task, which they could then resell at Western rates. Western companies grew their margins and a new industry grew in India. However, the one thing that changed was the nature of business. The “internet” hype created a new way of doing business – find something – hype it up as the latest thing around and then get the Venture Capitalist to pump in money and on IPO day, everyone would be popping champagne. There was a reality check at the start of the millennium with the dot com crash and old economy businesses started to take over the once sexy dot coms. One only has to think of AOL, which bough Time Warner and ended up as a subsidiary of Time Warner. However, this reality check seems to have been forgotten. We’ve seen a number of “rock star” CEOs of start ups who were supposed to make and create billions on the stock market because they had the latest and greatest business idea. However, a number of these CEOs and their IPOs have come crashing down. Before FTX there was “WeWork,” which failed in its initial efforts to lift because there were questions of its business model. Here is a list of failed IPOs. [LINK] There are companies coming up with revolutionary technologies, which will need financial backing and will, if backed, make fortunes for their investors. However, companies brining out such technologies also need to get their business models correct, which in turn means ensuring that they really have a product or service that will live up to their promise. Investors must also examine the companies they putting money into. Fortunes will be made but only for those who are capable of looking beyond the hype and understanding what they are investing in. Top line and CEOs drumming up their achievements makes good headlines but one should check the rest of the P&L statements before putting money with today’s business heroes.   Tang Li *Although I’ve been based mainly in Singapore for nearly two decades, I’ve had the privilege of being able meet people who have crossed borders and cultures. I’ve befriended ministers and ambassadors and worked on projects involving a former head of state. Yet, at the same time, I’ve had the privilege of befriending migrant labourers and former convicts. All of them have a story to tell. All of them add to the fabric of life. I hope to express the stories that inspire us to create life as it should be.      Read More →

The contest of GE has extended into the contest between PH and PN to garner support from other parties and alliances to form the next Gov. Purely from Game Theory perspective, PH should have a slight advantage over PN. The two major block of alliances that could decide who will form the next Gov are BN and Borneo block which consist of GPS, GRS plus Warisan. But it first seems that PH has stepped on alot of people's toes in the past so much so that many non PH parties or politicians have openly declared they won't want to form coalition gov with PH! These includes GPS, PN and some other individual politicians within BN. This is the major shortcomings of PH beside being seen as "too Chinese" as DAP is seen to dominate PH with highest number of seats in it. Any other minor parties which want to join PN to form coalition gov will have to share and dilute its own significant influence with other parties. This is because PN needs to get at least another 2 alliances or parties to get the required number of seats to cross the magic number 111. It's already difficult and complicated to negotiate with 1 potential coalition partner, what about 2 or 3 or even 4? Although PH doesn't have good inter party diplomacy, but circumstances may create an odd and rare opportunity for BN and PN to come together and form a coalition gov! First of all, BN will be the only coalition partner and naturally it will benefit most without other competing interest. Most importantly, it was PN which forced BN coalition gov to break down and call for snap GE. They were basically backstabbing each other rigorously even though they were in the same coalition gov. Beneath the massive losses, it is clear that BN's real political competitor is PN instead of PH. BN and PN were competing for the same core block of Malay votes and most of the seats BN lost were taken up by PN. Thus most probably BN under Zahid comes to realize that if BN continue to come under the shadow of PN, particularly suppressed by PAS, it will continue to lose its core Malay vote bank. The only obstacle for BN to join PH is DAP. Surprisingly, the "spiritual leader" of DAP Lim JS had openly said that it's possible for PH to get BN as coalition partner to form the next Gov! The only problem with such arrangement is the coalition gov may be weak and unstable with a minimum simple majority. PH may lose its credibility in its anti corruption rally call in future elections. Furthermore, can PH tame the BN culture of treacherous backstabbing and politicking which had played the important role of breaking up the 2018 PH gov? Never say never in politics, especially Malaysia Boleh. Note: what's happening in Malaysia right now maybe the mirror of what will happen in future SG.   Goh Meng Seng      Read More →

Our sovereign wealth fund, Temasek, has written off it entire so called investment in FTX. The investment is now totally down the drain and the amount involved was reported to be US$275 million or S$376.7 million. Singaporeans must never forget that even though the S$376.7 million loss is ah gong's money and may represent less than 1% of Temasek's nett portfolio value, still, it is our collective hard-earned and precious money accumulated over generations. Too many questions are awaiting answers and I am unsure if all the questions relating to this failed FTX investment loss will be satisfactorily answered. Still, I would like to strongly urge both PSP and WP MPs to bravely bring it up in Parliament and hold pap ministers to a thorough and proper accountability. Please also never, never let any pap ministars snake away without proper accountability and satisfactory explanations with excuses such as Not Meaningful to disclose lalala... or What is The Point of the Question crap... I believe that many fellow citizens will also be watching to see if the Speaker does his job fairly enough, professionally enough and without fear or favour enough. Think.   Simon Lim      Read More →