Be My Santa 2018

Last year was Be My Santa’s 9th year anniversary and we are indeed delighted that it has struck a common chord among people to participate in the season of giving. Though the scale of our program was much smaller than previous years, it does not diminish the fulfillment we find in our endeavor.

As we look forward to expanding Be My Santa this year, we are excited by the myriad possibilities and opportunities. This year marks our first decade of existence, and potentially the most transformational yet! Stay tuned!

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Moment

I was lying beside Sarah the other night and it has become a daily ritual whereby I would tug her to bed, read her stories, and wait for her to fall asleep before I continue to work. She would insist I wait till she falls asleep so that she won’t be alone.

That night, though, it took a different turn. As she was about to fall asleep, she turned to me and asked me to go and do my work. She told me she could sleep alone and that she did not want me to work till too late. I was pleasantly surprised, and I thank her for her sweetness and consideration, but I wanted to still lie beside her and wait for her to sleep because I rather enjoy doing that.

I think in our hectic society, life passes so fast and you won’t even notice how things have changed unless you take a deliberate pause and smell the roses. Parenthood can be frustrating at times; but they are equally able to stir the deepest of emotions and gratification.

10-Bagger

There are a few holy grails in investment – and one of them is the 10-Bagger.

10-Bagger is a stock that increases 10x of its purchase price, which translates to a 1000% gain. It is incredibly hard to find one and to stay vested long enough to achieve that gain.

Through my 10 years in the market, I have come to realize there are a few factors that contribute to the occurrence of a 10-Bagger:

  • An outlier market condition that drastically depressed prices of stocks in a particular industry +
  • A particular stock within that depressed industry that investors really have negative sentiments about +
  • The inherent strength (mainly financial resources and global operations) possessed by the company to withstand 12-24 months of depressed market conditions +
  • The possibility that the market will swing back to positive conditions within 12-18 months +
  • A massive dose of luck

Each of the 5 factors must come into play before giving rise to a 10-Bagger.

There is, of course, another possible scenario of getting a 10-Bagger and that is with respect to buying a growth stock within a growing industry. It is, though, an unfamiliar territory for me and out of my (limited) circle of competence.

Super Entrepreneurs

Recently, I chanced upon one of the best research papers ever written about entrepreneurship. The paper is by Tino Sanandaji and Nima Sanadaji from the Centre for Policy Studies and is titled “SuperEntrepreneurs.”

In this paper, the authors undertook ambitious tasks of understanding the differences between self employed and entrepreneurs; the environment conditions that are conducive for entrepreneurship activities; and the key characteristics of super entrepreneurs (defined as people who have amassed a net worth of US$1Bil). Through this research, the authors also seek to debunk common myths about super entrepreneurs. Using this research as a foundation, we can understand more in relation to our local context.

In Singapore, the term “entrepreneur” is often used to describe someone who chooses to be self employed rather than one seeking employment. A distinction must be made between the self employed and an entrepreneur. Whereas entrepreneurs start highly innovative companies that often create (and destroy) values and have scalable potential; people who are “self employed” often start small companies that have limited growth potential. This is not to discount the fact that self employment is highly essential to any economy nor that it cannot be hugely successful; but that jobs, wealth and value creation are mostly associated with innovative companies started by entrepreneurs.

Having a clear demarcation allows for policy makers to know and implement policies accurately. Apparently, in Singapore’s context, entrepreneurship with innovation is what policy makers desire. This is due to the fact that the associated technological progress and economic growth would bring benefits to the citizens and the country.

Knowing this, then, we can examine the optimal environmental factors that can promote entrepreneurship. Some of the more important factors are tax rates, regulations and legislation history. Firstly, tax rates must not be excessively high such that profits generated by innovative companies are transferred to the state. This reduces the economic benefits of entrepreneurship. Singapore has one of the most competitive tax rates in the world, and thus tax rate isn’t an impediment. Secondly, Singapore places a strong emphasis on IP rights and has one of the lowest cost in terms of setting up a business. These reduce the economic risk of pursuing entrepreneurship. Lastly, hailing from British Common Law origin, there is strong protection of property and asset rights. All the above seem to suggest that Singapore has the necessary bedrock for highly innovative entrepreneurship activities. However, though there has been a recent rise in “entrepreneurship”, the country still do not seem to have many of such activities. Why is this so?

Firstly, innovative entrepreneurship often require founders to be highly educated and/or having strong, specific domain knowledge. Common myth dictates that highly successful start ups can be founded by college dropouts. However, research has shown that more than 50% of Super Entrepreneurs in US actually have a Masters or equivalent. This should not be surprising because to create innovative companies, the founder must surely have obtained specific domain knowledge and are intellectually capable enough to improve and innovate on it. While we are witnessing more people coming out of school to pursue self employment either via opening a small cafe or creating an app, these activities are more often than not not scalable and limited in innovation.

Secondly, pursuing entrepreneurship involves huge opportunity costs: time, stable job, and good salary, in return for something that is more often than not zero in terminal value. The trade off can be too drastic and improbable for many individuals to undertake.

Lastly, highly innovative products and companies require a substantial core market backing for them to work. Unless the products can almost completely eliminate the national boundaries segregating us from our neighbors, the 6mil local population will be a limiting factor.

Let us not romanticize entrepreneurship. It is an arduous journey and often does not pay off. There is indeed an economic premium for the founders, and value creation to the society, but it is not for everybody.