On the New Civics and Moral Education Imperative

"Pity the student who does not surpass the master."

The new Education Minister announced a new focus on Civics and Moral Education a few days ago.

Let's leave aside the issue of how ineffective classroom teaching generally is on imparting a values system. If you need comic relief on a related topic (the so-called MBA Oath), look here. 

Mr Heng Swee Keat spoke on the importance of inculcating "social responsibility, personal and citizenship values in students".

What I find remarkable is how anyone can take seriously this pledge to uphold the importance of personal and citizenship values in Singapore. 

Oh, I do not doubt the intent to place high importance on this initiative (although I have much darker things to say about the nature of that intent), but I question how much anyone can really expect to reap in terms of results, when so much in our environment demands a survivor's mentality.

The harsh environment begins as early as childhood, when students have to claw their way to the top of the heap in our highly competitive education system, one that allows no room for failure, since streaming starts so early. This is an education system that gave birth to acronyms such as ITE ("It's the end"). In addition, the fact that so many parents feel the need to resort to extra measures outside the state educational system, such as tuition, reveals the ineffectiveness of the educational system to act as a social leveler, and to improve social mobility here on this island.

Once kids reach adulthood and join the workplace, they have to compete with the numerous foreigners here for employment, and it certainly doesn't help that government imposed handicaps like National Service disadvantage citizens in their own country. Then there are the tax-payer sponsored inducements that are used to attract foreigners to come here that our own citizens aren't entitled to (such as university scholarships).

All the while, we are repeatedly told that there is "no free lunch", that we need to be "hungry" and have "spurs stuck in our hide". All this amid the highest levels of income inequality just about anywhere on Planet Earth.

We are also admonished frequently by the government that we have to avoid the dangers of a welfare state, that we need to take personal responsibility for our employment / health / retirement / elderly years etc. 

It is sometimes ironic how Singapore can be thought of as a nanny state when in reality, many of our policies are designed for mandatory inclusion precisely so that the state can unburden itself of responsibilities onto the individual (e.g. CPF, Medisave and CPF Life), responsibilities that I might add, have traditionally been borne by the state in many developed countries.

The evidence of daily living in Singapore for the average citizen points to an existence marked by individual struggle. 

And the flip side of meritocracy, as it is so avidly pursued here it is almost a state religion, is that individuals that 'make it' often feel they deserve their success, and can blithely ascribe their success solely to their own talents and abilities, and that those that fail deserve every iota of misery they endure.

Here in Singapore, it's every man for himself. If you want lunch, you had better go out there and get it yourself. There is a reason why every NSman knows and understands the acronym of SAF, "Serve and F*** Off".

Daily living in Singapore will inculcate values in students stronger than anything that can be taught in a classroom setting, government-sanctioned, civics, moral or otherwise. What those values are, you need only look around you in everyday Singapore to see. 

And since the experience of daily living is shaped by government policies, it is only natural that students, upon growing to adulthood, will apply those same strictures that they have learnt in life to evaluating their own country and their government, with the same or greater degree of exactitude. 

Pity the student who does not surpass the master.

The government shouldn't expect a free lunch themselves; the ever more pragmatic and survivalist Singaporean of the future will not pledge anything, much less his loyalty, to a place and its people simply because he was born and raised there. This breed of Singaporean includes, perhaps more so than any other group, those who are fervently pro-PAP and supportive of the material benefits that the PAP promises to deliver year after year. 

Here's an interesting chart showing the negative correlation between income inequality and levels of social trust. And let us not forget that we have official confirmation that the income gap is not important. Old fogies like me who are just barely 30 may argue this point with the PM, but the PM need not worry. 

The kids younger than me will be much more obliging towards taking the PM's words at face value. They will simply internalize this truth, adapt to reality, and concentrate on making more money for themselves. Just like the foreigners who come here because this is a great place to make money, enjoy the rich living (if you can afford it), and move on to someplace else if and when the weather changes. Hey, if you can't beat 'em, join 'em. Just as the system encourages survivalist and individualistic leanings in its own citizens by design, it attracts foreigners with the same values system.

As for the personal and citizenship values Heng Swee Keat wants so badly, well, let me put it this way. 

The government has long wanted its citizen proletariats to put in their all for the economy, which isn't exactly a positive for family life. Belatedly, the government decided it wanted the fertility rate to be higher, which it is failing miserably at raising.

The government wants "hungry" citizens as well, which students are today internalizing the importance of. Now, the government wants social responsibility, personal and citizenship values to be emphasized in addition. 

I think that's going to work out about as well as the fertility rate. 

The Two-Tier Society

The Straits Times today featured a fairly bland and benign, even banal story. It was entitled "Premium healthcare grows at a healthy pace." The full transcript is available (for now), strangely enough, at IM$avvy, a CPF companion website. I say strangely enough because the lux health screening packages described in the article are far beyond the reach of the average Singaporean, and yet, if there is one government institution all Singaporeans are acquainted intimately with, it is the CPF.

It has happened in business and banking (think private banking). It has happened with restaurants and fine dining. It has happened in the real estate market (Sentosa Cove, and too many condos to name). It has happened with entertainment venues, like our integrated resorts, and events, like Formula I. And it has happened in our healthcare as well. If the words "medical tourist hub" did not resoundingly ring in your head when you read this story, they should have.

Singapore is also home to the One Degree 15 Marina Club, Jetquay and FreePort. I could have chosen other examples, but these three resonate most with me as symbols of the excess, exclusivity, and expatriateness that define the new Singapore.

We have truly arrived as a first world city. Our level of immigration, connectedness to the global economy, our availability of goods and services, standards of quality, and costs of living, rival those of any of the global cities that Saskia Sassen describes in her work.

Unfortunately, at least for me, I am belatedly realizing that as much as I enjoy the energy associated with living in the "big city", warmth and homeyness are increasingly not what I identify with this city, Singapore, that I currently live in.

Inveighing against the wealth that comes to our shores from afar is a pointless, perhaps even foolish, exercise, given the benefits it brings to our economy.

I am not going to go into the complicated arguments that delve into whether inflation here has been driven up by foreign liquidity, or that medical tourism has indirectly caused an exodus of doctors to the private sector, or the multitudinous pernicious effects that income inequality has on measures of societal health, as detailed in The Spirit Level. That is better left to a day when my dispassionate, more analytical self, feels moved to comment.

But my quieter, more philosophical self senses the ineffable feeling that this city is increasingly being designed variously as a playground, a global bolthole, winter retreat, or Asian gateway, marketed primarily to the wealthy expatriate, and perhaps, incidentally, to the wealthy local (who may be a naturalized foreigner).

The feeling is particularly difficult to dispel when one considers the sorry state of public transportation while struggling to board a subway train at rush hour (with hordes of foreigners who are working class, of which I guess I am one too), or when one marvels at the price of government flats as they spiral ever higher out of reach, until the dream of owning a home becomes mere fantasy.

Each day I turn the pages of our increasingly irrelevant national newspaper, and my eyes glaze over the risibly fanciful names of newly launched condos in property ads, or the expensive marques that tout ever more sophisticated levels of automotive engineering and tasteful design. And I continue to wonder how relevant all this is to my life, beyond the evanescent pleasures of daydreaming that perhaps one day, I could have all this too.

Wishful thinking.

I am not overly worried about my future; not optimistic, but not worried either. I can differentiate between needs and wants, and my psychological constitution is strong enough to withstand the corrosive effects of income inequality.

Still, the feeling that Singapore is Home continues to recede. Feeling is irrational, and it defies logic and explanation. Yet there it is, and it persists in existing.

It is difficult to love a city that doesn't love you back, and that is both cold and hard. And it is not for nothing that cash is described as cold and hard. 

Quick Thoughts on Sunday Times, 13 March 2011

"Not just an 'ordinary' girl from HDB family" - Think p.37

This article profiled Rachel Eng, a managing partner from the top law firm WongPartnership. Interestingly, Ms. Eng said little, if anything, about social mobility in her interview, but the Sunday Times chose to put a spin on it that way, billing the article as "Rachel Eng: Top Lawyer is a study in social mobility" on the front page sidebar. The writer, Wong Kim Hoh, also started his article by citing her as a prime example of social mobility.

Ms. Eng used the word "lucky", "blessed", and "alignment of the stars" in her interview. Granted, none of the these were in relation to her transcending her humble background to becoming a high-powered lawyer, but more in relation to her current living and working situation. But clearly, this is a woman who knows and counts her blessings.

In contrast, in today's edition, the quote from Ng Eng Hen on social mobility can be found on the next page, Think p. 38, "You are the one who can determine your own success - yes, life might be hard for you, but if you try, you can succeed, and other have."

To relate to a previous post of mine which resonated with many readers, I've found that people who transcend their backgrounds tend to fall into one of two categories. One is exemplified by Ng Eng Hen, who takes the view that "If [insert underprivileged person here] can do it, anyone can." In recent parliamentary proceedings, he used himself as an example.

Ms. Eng fits more closely with the second category. Such a person tends to recognize that while their own talent played a major role in their lives, luck, chance, opportunity and just being in the right place at the right time are also very important. They are more likely to, on seeing someone less privileged, go "There, but for the grace of...".

Ms. Eng's example drew from her own pioneering experiences in the then growing WongPartnership, now one of the largest law firms in Singapore. That must have been a remarkable opportunity for her, and she probably realizes that.

Is there a "correct" view? I am not wise enough to answer that, but I am without question more sympathetic to the latter view, that luck and opportunity are just as great determinants of a person's success as talent. The former view has always struck me as being somewhat narcissistic and presumptuous. Perhaps not coincidentally, Ms. Eng is a woman, while Ng Eng Hen is a man. Make of that what you will.

Needless to say, whichever view a person hews to will have implications on their opinions on what kinds of public policies should be implemented. The fact that we have ministers such as Ng Eng Hen (and Mah Bow Tan) in government who come from very humble backgrounds is no guarantee that they will look out for the little people from their perches. Indeed, the opposite may be truer than not.

"Google Looking for a Bigger Town" - Home p.19

Google Singapore is expanding. But as I realized years ago when I first graduated as a freshly minted engineer, you have a better chance of working for Google in Singapore if you're an accountant or a top sales and business development person than if you are an IT professional.

The same goes for any number of technology and engineering MNCs in Singapore. There are engineering jobs available, but the really interesting engineering jobs are simply not here.

If your ambition is to work in manufacturing, quality assurance, batch testing or any number of technical, ok-paying (and perhaps not even that), but relatively dull jobs, you should have no problems.

But if you want really interesting work, the kind that happens in the Googleplex, you can stop hoping right now.

It's a vicious cycle. Because the interesting jobs aren't here, good students are increasingly not taking up engineering. In my time, engineering was a relatively sought after choice (but many engineering graduates did not end up in engineering). Today, as my interns and psychology experiment participants (recruited from local universities) tell me, engineering is a "dumping ground". It is not even a popular choice of study now, much less working in engineering. Popular majors now are economics, business, banking and finance and information systems.

And because good students aren't taking up engineering, there is little reason for companies to relocate high value work here. Not that talent alone is enough to ensure that; there are a multitude of other reasons why high value work does not come here to Singapore.

Is this necessarily a bad thing? Well, it's bad if you're hellbent on being an engineer. But, than again, this is a situation that artists, musicians, writers and designers have long had to live with in Singapore. And they cope with it as best as they can, either venturing abroad or moderating their expectations here on this island.

Being a lower income student in an "elite" institution

The Straits Times had an article today, "Non-grad parents, but they made it to top schools". No transcript available, but very briefly, it talked about how only a minority of students today in top schools in Singapore hail from households where parents are non-university graduates. It also had some short interview-like snippets from the minority students.

In truth, the title of this article was disingenuous. It would have been more accurate to characterize these students as coming from low-income households rather than with non-grad parents. Perhaps some editor from the Straits Times wanted to avoid any association with that hot potato issue of income inequality.

Reading some of the students' comments stirred some memories. I too, was a lower income student studying in a top school. My family isn't poor by any measure, but disparities were still stark. Some background here.

The truth is, top schools have had a skewed income distribution for several years now. I certainly felt it keenly almost two decades ago. It is NOT a recent phenomenon.

On the off-chance that one of those kids might read this, here's the two cents worth of my reminisces, and some advice, if they will have it:

It is entirely understandable to feel a sense of being apart from your peers who come from much more privileged backgrounds. I call it that sense of "otherness".

Newsflash: It never goes away entirely. So, deal with it as best as you can.

Here's why that feeling of otherness never fades away entirely.

Today, in secondary school, you might feel inadequate because you can't afford to tote the latest iPod, iPad or iPhone. Or you might decline to join your friends at Starbucks or Cafe Cartel, or wherever it is young folks today hang out.

When you reach JC or in the early years of university, some of your wealthier peers will start experimenting with alcohol and clubbing. A few will start driving when their parents gift them with new cars. You'll probably still be taking public transport.

If you do well in school and decide to take up a scholarship to fully fund your university studies, congratulations, you'll have a fairly generous allowance to live on. Finally, some cash in hand!

Unfortunately, that's about the same time your wealthier peers, who might be studying abroad in the same university as you, start talking about ski vacations at Aspen, Whistler or Lake Tahoe. Or weekend getaways to New York for Restaurant Week (Nobu apparently is a great deal). Not exactly your average student's weekend plan.

[For the record, a scholarship allowance probably could pay for these luxuries in moderation, with cutbacks in other areas. But if you were raised in privation, you would find it difficult to justify the expense.]

And when you finally start working, you might see your better-off peers land prestigious unpaid internships, get a new car as a gift from their parents, or have their lavish wedding or new apartment paid for by family.

If you've been following so far, you would probably start wondering why any kid would voluntarily hang out with richer folk after they've grown up when the risk of feeling inferior is so great.

The problem is, when a student joins a top school, whether they realize it or not, important parameters for their social life are being set that will persist for years into the future.

There's a reason socio goes with economic in socio-economic status.

A person's education and upbringing determine their ambitions, drives, values, concerns and perspectives.

A student that has attended a top school will share a very similar set of characteristics (for want of a better word) as their peer group in their school, irrespective of financial background. But, family finances will impose very practical constraints that prevent the student from truly feeling a sense of kinship with their peers.

On the other hand, while a student attending a top school will empathize with someone who comes from a similarly less privileged background, they won't be able to identify with them because their set of characteristics are completely different.

This is just a very convoluted way of telling those lower income kids who attend top schools that they might find that they don't feel like they truly belong anywhere. Now, and in the future.

I first realized this to true when I had the privilege of serving as a man (that is, a corporal. I sooo did not want to liable until I am 50.) during NS. My platoon mates came from fairly average backgrounds, and their concerns were quite different from the friends that I had in school. Some clearly had family problems, and even today, their worries concern more about things like saving up for their parents' medical bills.

In contrast, friends I know from school are generally concerned with weighty matters like, which are the top MBA programs to apply for, what are the opportunities to work as a quant in a hedge fund, or is membership in One o-15 marina a good investment?

The problem is not that I can't appreciate why no one should attend an MBA program outside the top 8. The problem is that I can. Just like I know that getting Wilmott certification is advantageous for working as a quant. I just don't see myself getting hung up over stuff like that. Nor could I ever see myself discussing matters like this over a mess tin of Maggi noodles with my platoon mates during an outfield exercise.

This incongruity between social and economic status is something that any lower-income kid who attends a top school is going to have to grapple with in the years to come.

Do I have advice for lower-income kids who attend top schools? Absolutely.

First, if at all possible, get a part-time job. It can be at McDonalds, Starbucks or just giving tuition. It's something I didn't do as a kid, and I wonder if I made the right decision.

This might sound like irresponsible advice, but hear me out.

It's enormously empowering to make, and spend, your own money. On a practical note, it gives work experience at an early age, and it exposes you to different perspectives. Even minority lower income kids are cloistered to a certain extent in a top school. For once, you'll meet people who don't view not getting an "A" in Physics as an absolute disaster.

As for time taken away from studies, there is always enough time. It's only a matter of priorities. You don't need to top the class in a subject, especially if there is no financial incentive to go with it. If you were smart enough to get into a top school despite being financially disadvantaged, you're smart enough to wing an "A", if just scraping in. Don't work beyond what's required to get the maximum marginal benefit of good grades. That's valuable time you could be spending on something else.

As for how you might spend your income, there's no need to splash out on designer goods. You probably couldn't keep up with your peers anyway. But it would be nice to pay for the occasional meal out or movie.

And not to have to ask parents for the money to attend the school prom, and to actually have something nice to wear to it, priceless! Really, not having money just makes the awkwardness of the teenage years that much harder to bear.

Second piece of advice comes courtesy of Tim Ferriss, author of the 4-hour Workweek, whom I had the pleasure of transcribing an interview of on mturk not long ago.

Diversify your identity.

This is, in fact, very good advice for anybody. Ferriss advises the start-up founders he consults for to take up at least two activities outside of work, one of which is a sport. The rationale is that start-up entrepreneurs have a tendency to get caught up with and obsess over their companies. If they had a bad week at work because of setbacks, which are common with start-ups, it can still be a good week if they, say, clocked a new personal best for their running, or finally succeeded in their personal project at home.

Diversifying your identity is a way of avoiding or delaying burn-out.

I never experienced burn-out as a student, but I have often regretted spending as much time as I did on studies. I tell myself I should have cut loose and relaxed a bit more when I could.

If you're a lower income student in a top school, you're already under enormous pressure to "succeed", which makes it all the more important that you don't burn-out.

This is why having a job could be useful. If you make coffee part-time at Starbucks, you can be the best barista you can be, instead of just another student.

If not a job, instead of angling for a leadership position in school, take up a CCA just for FUN. If you go to church or temple or mosque, volunteer a few hours a week. It can be very helpful to step out of the bubble that a school, especially a top school, can resemble.

Go widen your social circle a little, get some perspective, and grow in different ways. As a person, you'll grow to become more resilient, not to mention much more interesting.

A rising tide lifts all boats?

The PM recently rubbished income inequality as being of little importance.

There is an excellent book for those who wonder why people like myself are deeply concerned with income inequality and why it matters to modern society - Falling Behind: How Income Inequality Harms the Middle Class, by Robert H. Frank.

Very briefly, Frank argues that there are two kinds of goods, positional, and non-positional, and rising inequality forces people to devote more resources to purchasing positional goods, neglecting the non-positional, and leading to a loss of social welfare across the whole of society.

What are positional goods? They are goods for which the relative rank of what the consumer consumes has importance.

There are lots of good examples in Singapore. Education for instance. A university degree is practically a requirement now for a person to make a decent living. 30 years ago, it wasn't. The reference point for education has shifted upwards so that most people view a university degree as a necessity. Hence the deep unhappiness whenever tutition costs are raised. Housing is another. Oh, we're not talking about luxurious condos or bungalows. But consider this, it is common wisdom in Singapore that because of the 1 km proximity rule, housing that is nearby to "good" schools is considerably more expensive than comparable housing located elsewhere. Clearly, not all HDB flats are built equal. And getting, or rather, not getting, the "best" HDB flats could literally seal the fate of your kids.

And for a more pan-national perspective, we can consider defense spending as the ultimate positional good. To illustrate this, let's rework what the mainstream media article wrote:  "Worried about low defense spending? What's important is not the absolute gap between Singapore and Malaysia/Indonesia, but whether Singapore's defense spending is moving up."

Does that statement sound absurd? Of course it does. What matters is how much more we are spending than our neighbors, not how much we are spending in aggregate.

Positional goods are real; concern with the positional nature of goods should not be dismissed or belittled or deemed irrational. Context matters. And it isn't simply just a matter of keeping up with the Joneses or about the politics of envy. It's just that rising inequality raises community standards of what is deemed normative in the community.

So how does rising inequality hurt Singaporeans? 

Singaporeans today are spending more on a whole range of positional goods, to their own detriment. It is akin to a positional goods arms race: We are spending more on housing (got to be close to those good schools!), on raising children (think tuition, enrichment classes, childcare), on education (both for our kids and ourselves - retraining, reskilling, postgraduate degrees), and even, basely, on consumer goods.

Think of it this way, at a job interview, who gets hired? The best candidate of course. But all candidates being equal, would you rather hire the guy dressed in the sharp Zegna suit or the typical guy in shirt and slacks? Never mind that the Zegna guy is a trust fund baby and can well afford his threads. The next job interview, everyone shows up in a Zegna suit. Problem is, every other candidate put the suit on their credit card, resulting in four-figure debt.

That's how income inequality hurts the middle class. Rising income inequality stretches the boundaries of what are considered normative, because the rich invariably purchase the things that give them a leg up in whatever they're doing. This isn't about envy, it's about how people try to keep up in order to achieve things that are really important. Jobs, schools, kids' futures, a better quality of life for the family.

In Falling Behind, which speaks specifically to an American audience, Frank lists the ways middle class folks use to "afford" to keep up. The list isn't pretty. They are: working longer hours (to which I would add increasing prevalence of dual income households), reduced savings (that certainly sounds familiar: CPF accounts emptied by housing anyone?), increased indebtedness (ditto), longer commutes (yes, yes, yes), growing sleep deprivation (maybe, maybe not) and public service cutbacks (not so much here).

I would add another way that is more uniquely Singaporean. Fewer kids. Rising income inequality means fewer kids, as Singaporeans marshall their resources to pin their hopes on just one or two offspring.  The last I checked, encouraging Singaporeans to have more kids was a government priority. Income inequality isn't important...really?

Income and career choices

As a corollary to my most recent rant, here's a few news stories that were fortuitously published within a few days of each other.

Amherst Grads Shun Wall Street, Save World as $45,500 Teachers, partly due to wilted Wall Street prospects. Funny, for all those high-sounding ideals, if finance jobs were plentiful and sign-on bonuses were de riguer, I'm pretty sure we wouldn't hear about Amherst graduates going “My experience in finance just wasn’t as satisfying.”. And now that many people can't afford to spend as much as they used to because of the recession, hankering for material goods and conspicuous consumption are suddenly so gauche.

Citigroup is said to be raising pay, while despite recession, demand for skilled labor is high. For all the demand for skilled welders and petroleum geotechnical engineers (petroleum engineers!), who actually do something productive and useful, the pay for these two kinds of jobs is still lower than bankers who, with pay increases, will make about as much this year as last year. 

A geotechnical engineer's job, or a critical care nurse's job, is not as hard as a banker's, nor does it require as much training. 

It's waaay harder, requires much more training, and lives are actually at stake. And yet, at $65,000 a year, or $100,000 a year, it's a fraction of what a banker rakes in.

The invitation

Warning: This post is a rant. It has the veneer of civilized and reasoned discourse, but it is at heart a rant. And I am honest enough to admit that it is a stinking, envy-soaked, so dyed-in-the-green-it's-environmentally-friendly rant. More disclaimers to follow.

And as for those people reading this blog who know who I'm referring to, please be discreet. Thanks!

So I received an invitation for this weekend to attend a barbeque house party at a friend's place. Now, I won't actually be attending and the reason is that I have a Father's Day family dinner this weekend. It's important for me to state this upfront as you will soon see. I would otherwise attend this little shindig at my friend's place.

When the email invitation arrived, one glance at it was enough to arouse a seething cauldron of somewhat uncharitable feelings.

First, let me say that I have nothing but good things to say about this friend. He's kind, generous and an all round nice guy. In fact, I bunked in with him one time I was in New York when we were still students (he attended Columbia). So this isn't really about him.

So what got my ire up?

It was the address on the invitation. He stays in one of the toniest districts on the island. You can check out the price of an apartment in his condo right here. Bear in mind that he's my age (not yet 30). But clearly he's doing much better than me (and just about 99% of the people I know). It could be family money, although I seriously doubt it as I have been to his parents' place and it is less lavish. It certainly seems like it is his own (and his wife's) apartment.

Why is he doing so well? Well, probably because he's a banker. He works for Credit Suisse. He did some time on Wall Street and the City dealing in something credit related (I do not know for sure if it was CDS's) and now he's back in Singapore.

The point is...doesn't it seem just the teensiest bit inequitable that bankers can earn literally millions of dollars just by "pushing" money around?

Now I am far from being a card-carrying member of the kill-the-banksters, pitchfork-wielding crowd, but it is obvious that the finance industry has destroyed far more value in the last 2 years than it has created in the previous decade. 

Here, I have to reiterate again that it is nothing personal against my friend. It is with banking in general.

I don't think people begrudge the vast wealth of people like Bill Gates, Sergey Brin or Larry Page for the enormous value that their creations (Microsoft and Google) have given the world. But it's a rare uninterested (in the financial sense) person who does not question why bankers and financiers are so heavily rewarded when their societal contributions are manifestly less valuable (or even destructive as we have seen in the past year). What makes it even more odious is how arrogant financiers are in general (my friend above excepted of course). See how Fred Goodwin is quoted in this article. "Hard work, focus, discipline...". Right.

Even if you accept the argument that finance plays an important role in imposing discipline on capital allocation, which in fact I do, much has been written on how large the finance economy has grown in relation to the real economy, and the costs such a large financial sector exacts on all of us, notwithstanding arguments to the contrary.

How do grossly overpaid bankers and financiers affect you and me?

The first most obvious effect is on inflation. Starkly high income inequality causes the prices of goods to be bid up, affecting all of us. This includes what we normally consider goods, as well as such "goods" as a college education and work-life balance. Having a group of very prominent people in society who work crazy hours tends to have some kind of effect on working hours for all white-collar workers.The economist Robert H. Frank has written extensively on phenomena related to this.

But I'm not rich enough to afford an apartment at Le Arc at the Draycott you say, unlike my friend above. Perhaps, but most of us will probably buy homes one of these days, and the price of land anywhere on this land-scarce island (like say at Draycott road) will have an impact on the price of land where we do buy our homes.

Ditto that for the higher rent on Orchard Road, which translates into higher prices for goods and services.

And because wealthier folk invariably consume more upscale goods and services, and can afford to pay for them, naturally the vendors that service them will gravitate to locations of greater convenience, pushing out the shops that most of us patronize to the suburbs. New York City is a great (and ironic) example of this. The concentration of wealth in Manhattan means that many of the people who work in Manhattan providing essential city services cannot actually afford to live there. This includes: sanitation workers, nurses, police officers, firefighters, and government workers. There is just something so intrinsically wrong with that. We are starting to see this in Singapore in an ever widening ring centered on the CBD.

Beyond the effects on inflation, the presence of overpaid bankers has other pernicious effects. Like how the financial sector has been siphoning off talent that would otherwise have gone on to careers more productive in their output to society. Instead of being enticed into "pushing" money around, bright young people could actually be doing useful things. The irony is that the high cost of living, and the massive costs of a debt-financed college education, influenced by income inequality brought on at least in part by an oversized finanical sector, compel young people to actually seek out the most highly remunerative careers they can ... in finance. This is peripherally addressed in the books Strapped and The Trap.

And even for those who have chosen to work in other careers, the inevitable comparisons with bankers arise. Nassim Nicholas Taleb recounts a story in The Black Swan about how an otherwise wealthy lawyer has an unhappy wife because they stay in a condo filled with much more highly remunerated hedge fund managers. Perhaps that is why bankers are mostly friends with other bankers and very rich folk. No one else cares to associate with them; the juxtaposition is just too uncomfortable.

The resentment can be especially sharp if one does not consider oneself the inferior in talent or hard work to a banker. Such as I discovered when I received an invitation this week.

Singaporean's net wealth higher, really?

The New Paper today (23 November 2008) ran a column by "Harvard-trained economist" Zhen Ming, who's self-styled moniker is Boston Brahmin. It's on page 16 if you have a copy of it handy.

The gist of the column had to do with the net wealth of the average Singaporean household, and how despite the recession, the average Singapore household has actually grown in wealth and is in relatively good shape for the economic downturn. I reproduce the statistics below:

                                              End-2000                             End-2006

Assets

Currency & Deposits          $136,310                               $157,930

Shares and Securities         $75,340                                 $120,360

Life Insurance Equity        $30,750                                 $76,820

CPF/Pension Funds           $94,190                                 $119,930

Residential Property          $386,830                               $384,920

Total Assets                     $723,420                              $859,970

Liabilities                              

Mortgage Loans                  $106,800                               $110,390

Personal Loans                    $38,450                                 $39,180

Total Liabilities             $145,250                              $149,570

NET WEALTH                 $578,160                              $710,400

The source is from the Yearbook of Statistics Singapore, 2008. Interestingly, the figures that Zhen Ming cites are slightly different from those I found online (p. 201), but they are in the same ballpark (no foul there).

This column is a reminder why everyone should school themselves to have at least a passing familiarity with statistics.

What are the problems here?

First up, "average wealth of the Singaporean household" can refer to the mean, median or mode. In this case, (I have to admit that I didn't check) it seriously looks like the figures refer to a mean rather than the median. There is good reason to believe this since households run the gamut from young couples with no kids, to nuclear families to retirees whose children have flown the nest. Each of these types of households have a different spread of assets vs liabilities (retirees are likely to have much less in the way of liabilities vs young couples) so it wouldn't really make sense to calculate a median instead of a mean.

Now what's wrong with reporting the mean. Nothing, except that it is well known that Singapore has a high and rising Gini coefficient (p. 14) and that the mean conceals the fact that many Singaporeans have far less in the way of net assets than the figures above suggest. 

Next, time lags in the data being reported. The Yearbook of Statistics provides data only up to end-2006 (which admittedly was still boomtimes), and Zhen Ming compares these figures to end-2000 (when Singapore was just coming out of the Asian Financial Crisis). I think it's safe to say that the comparison in net wealth between these two periods, while informative, tells us little that we would not otherwise expect. Oh, and if you're thinking of the comparison between end-2000 vs end-2006 and vs end-2008, I also think that it's safe to say that the economic environment in 2008 has deteriorated markedly since end-2006 (like duh).

In particular, assets such as currency deposits (especially forex holdings in AUD and NZD, highly popular among naive Singaporeans for their high interest rates), shares and securities, equity-linked endowment assurances, and real estate are likely to have fallen in value since end-2006 (and will continue to fall in value).

Finally, the effects of inflation may not have been accounted for. If they haven't been adjusted, the figures for end-2006 should be deflated by approximately 4.32% going by the CPI figures reported by Singstat. Adjusting for inflation however, does not address the other problems I have listed above. It's also pertinent to note that inflation has been especially detrimental to the finances of the lower income groups, particularly since it has been reported in the past that their real income has actually fallen in past years.

[I understand the irony in analyzing an article published in a tabloid like the New Paper in such detail as I have done here, but the same accusation could be levelled at Zhen Ming. Harvard-trained or not, telling the typical downmarket New Paper readership that their average household wealth is north of half a million dollars is to invite ridicule.]  

Private Banking and Trickle-down Economics

My previous post on private banking focused on it as a career option. Thinking about private banking led me to consider the wider effect of private banking, and more broadly, finance on the economy.

Singapore has aggressively pursued the finance hub idea for the past decade or so to boost economic growth, but with decidedly mixed success. Just a simple glance at IPO figures and you’ll see that Hong Kong and Tokyo are leagues ahead, particularly Hong Kong. With the size of the larger Chinese companies listing on the Hong Kong exchange, it’s New York and London that are starting to feel the heat of the competition. Competition from Singapore is a non-issue for Hong Kong.

But in the area of private banking, we are doing much better. This is thanks mainly to the strong banking secrecy laws here (stronger than Switzerland, which has to comply with EU directives) and the Singapore government, which is, how shall we put it, politically stable and open to foreign investment.

While private banking does create a number of high paying jobs, it’s interesting to consider what the high-flying banking industry means to the ordinary population. This is especially so since doubt has been cast on trickle-down economics in the US of A.

Mainstream economics would contend that any industry doing well would lead to trickle-down effects. For example, a private banker needs teams of assistants and analysts (which means jobs), and their consumption would in turn benefit providers of other services (such as restaurants, real estate agents and nannies). This goes for the private banking clients as well, assuming they reside in Singapore at least some of the time.

But as a thought experiment, sometimes I do wonder how much the wider economy benefits from banking and finance as an industry. For example, while New York City does derive a large chunk of its tax revenues from Wall Street and spends this on public services, it’s undeniable that the greatest beneficiaries from Wall Street’s largesse, aside from the bankers themselves, are the luxury car dealerships, real estate agents, jewellers, luxury retailers and the like. We can include the $400 dollar a head restaurants, $300 a cut hair stylists, the highly paid Mandarin-speaking nannies, the couturiers, furriers and spa therapists.

It’s less than clear how much the general city population benefits from such an industry that consumes mainly high-end goods and services no one else can afford.

This is especially so when we consider the damaging effects of income inequality. The obscenely wealthy tend to bid up the prices of goods that they desire, and this causes knock-on effects on all sorts of goods. Real estate is a good example. We have had whole floors of condos purchased by foreign money in Singapore in the last two years for investment purposes, at the peak of the real estate boom. This surely influenced the affordability of HDB flats.

The economist Robert Frank has written on some of the pernicious effects of income inequality, and it’s worth thinking about whether gains from economic growth that encourage income inequality are worth their detriments.

What exacerbates problems in the case of private banking is that in general, wealth is not created through these activities. While many private banking clients that conduct their business through Singapore are nouveau riche, they didn’t create their wealth here. They created it in China, India, Indonesia…anywhere the pan-Asian and commodity boom touched. Singapore is merely a convenient place to park their funds.

Private bankers are essentially paid to push money around, and with the influx of foreign money into Singapore, it’s difficult not to suspect that at least some of the recent price increases in Singapore have been due to demand-pull inflation resulting from very large capital flows. Certainly, we saw it with real estate.

And with the rising cost (some say value) of real estate, we have escalating rents, higher business costs, and invariably … higher prices. Who knows how much of inflation something like private banking is responsible for?

Elites aren't really nasty people; they're just clueless

I've been motivated to write this post after reading the comments on an article on The Online Citizen.

Broadly speaking, there's generally a great deal of negativity in the Singapore blogosphere surrounding the issue of 'elites' as produced by the system of meritocracy in Singapore. Elites are usually regarded as arrogant, lacking in empathy or common sense, with an inflated sense of entitlement. We saw this with the infamous Wee Shu Min incident. In addition, government sponsored scholars are also frequently derided as being scholar mandarins or scholar mafia, and gifted really is a dirty word in Singapore.

My answer to that is that the public is actually right, but things are not as simple as they are perceived to be.

What makes me qualified to talk about elites? In the interest of (my) privacy, I seldom talk about my personal life. But it happens to be relevant here for this post.

I was a student in the Gifted Education Program. I attended one of the premier secondary schools in Singapore, when there were only three secondary schools offering the program. I attended a top 5 junior college, and in my JC, I was in a 'stream' class, where all the best students were. My class had the highest number of student councillors in my year, and after 'A' levels, a considerable number of us got into NUS medicine, law, architecture or took up scholarships. I myself applied for and received an overseas government scholarship. I was funded to attend a US university, and majored in what is frequently called the most prestigious biomedical engineering program in the nation [it's a good program, but the prestigious part is a bit overrated].

Now, before you hurl accusations at me for being elitist, let me follow up with other details.

My family was and is solidly lower middle class: my mother was a homemaker who also worked part-time assembling electronic parts at a JVC factory, while my father was a technician who worked shifts at an offshore oil refinery.

I was a latchkey kid from the age of eight. I walked to school every morning, often past the huge Mercedes Benzes that ferried the other kids to school. I wore those ubiquitous white canvas shoes that you hardly see kids wear today, while most of my classmates wore Asics shoes. On rainy days, I would actually wear slippers and a dorky raincoat, and change out of the soaking wet slippers into shoes once I reached school, often eliciting weird looks from other students. During NS, I was a corporal in a combat role, and many of my platoon mates came from far less privileged backgrounds than I had previously encountered. Most of my friends from school were at OCS, and almost all of them were at a certain very special company. 

So yes, by the trappings of my education and my qualifications, you might imagine that I am one of the elite crowd. But if you saw only my socio-economic background, you wouldn't have guessed that.

The interesting thing about how I grew up was that I had a supremely good vantage point from which to observe how the elite live. And continue to live, because I still keep in touch with several friends.

And yet, my background is literally a world apart. That gives me a unique perspective on the more privileged segment of society.

[For brevity, I will refer to the more privileged segment of society as the 'elites'. Although, how I hate this word! I who have been labeled so many things before that I know labels are just a form of stereotyping. Take it from someone who belongs to a vanishingly small minority, people should NOT be put in boxes. It's just not a healthy way to start a discussion.]

Elites have been accused of being arrogant and out-of-touch. But the truth is that most elites are for the most part, genuinely nice people. As the title of this post states, elites aren't really nasty people; they're just clueless.

Do you know what is the hardest part about attending a school where the median income of your classmates' families is literally an order of magnitude higher than your own? It's not the snobs that need worrying about; you can always ignore the snobs.

It's having friends, good friends, who think nothing of going out after school and spending the equivalent of your week's allowance on movies, meals and stuff, and asking, would you like to come too? And you making up excuses to avoid saying no, I can't afford to.

I can come up with endless variations on this example. Four words. Story of my life. The important idea here is that the elite aren't bad or vindictive or arrogant; they're simply not clued in to a life that is different from their own.

For someone who belongs to the upper classes, worrying about how to fund their university education is not a problem. The problem is not getting into an Ivy, or NUS medicine, or landing that scholarship.

Worrying about getting a summer internship at a bank is also not a problem; the 'rents have already lined one up with their connections. Struggling to get a job is definitely a non-issue. Failing to get into McKinsey, or Goldman Sachs, however, would be utter disaster.

Rising prices? Inflation? Elites don't generally bat an eyelid. I recall one memorable dinner with a good friend whose father, a CEO of a listed firm, took us out to a fancy Chinese restaurant in Bayswater, London. Well, actually, it was the father's JP Morgan banker who took us out to dinner. She was the one with the expense account. And one interesting vignette that was dropped by the banker was how kids of a certain friend of hers had never eaten in a hawker center before. Never. Always restaurants. Imagine that.

If you've been following so far, you'll note that the elite really are out-of-touch. With the problems of regular people that is. It's a fair accusation. But the fault doesn't lie with them, it lies with the circumstances under which they have lived their lives. Their reference points, their standards are all different from regular people. I repeat, they simply aren't clued in to a life that is different from their own.

They can't comprehend the normal problems that regular people face simply because these have never been problems they've had to deal with before. It's like an Eskimo trying to explain the 17 words they have for snow to a non-Eskimo, or explaining the concept of color to someone who is blind. 

[As an aside, you might want to think about how you lack perspective on the different, less fortunate lives that other people live. Some Singaporeans don't actually have to look very far; they have maids in their own homes who work 7 days a week, for admittedly not very much pay, far away from their own families, and yet these same Singaporeans may talk endlessly about work-life balance and better baby benefits.]

The next time you have to deal with insensitivity from an elite, a sharp rebuke will do, but don't make it personal. There is no reason to criticize a person's character unless they really are in need of it. Sometimes, you only need to ask that the person consider a different perspective. That might make all the difference.

Book Bundles: Superclass, Asian Godfathers

Superclass (2-stars) is a recently published book that talks about the 6000 people who are each literally one in a million, and who collectively wield enormous influence over society and the way we live. There's a review by Salon here.

It starts out as a relatively interesting book, but I found my attention wandering after the first half of the book. The ideas presented in the book are obvious enough once enumerated. That network effects, globalization, markets, corporations and political systems have created a class of vastly powerful individuals. But for all the book pontificates about how influential the superclass is and how we should all be aware and also wary of such concentration of power, it also acknowledges that the status quo is likely to remain for the foreseeable future. [That’s not to say that the author thinks that the existence of the superclass is necessarily bad. I don’t either.]

In other words, it’s nice to know who runs the world. Now, is there anything we can do to change it, assuming that we would want to?

No? Next.

Just about the most interesting part of the Superclass had to deal with the lives of the superclass and how they hobnob with each other (ok, I admit I am a bit of a voyeur here, but who isn’t). Which brings me to the second half of the book bundle.

Asian Godfathers (3-stars) talks about the, often corrupt, history behind the wealth of Southeast Asian (plus Hong Kong) tycoons. While it might be easy to pan the book as a rabble-rousing call to indignation for the masses, the book is not about the questionable origins of the wealth of Southeast Asian tycoons or their peccadilloes (fascinating as those may be: e.g. most tycoons are Christians for a rather special reason). Indeed, by the author’s own admission, Asian Godfathers is really about the rather unique history behind the cozy relationships between governments, political establishments, and local big businesses in Southeast Asia. For example, the book repeatedly asserts that much of the wealth of Southeast Asian tycoons is derived from economic rent, that is supernormal profits from businesses made possible by exclusive government concessions. We still see that in today’s business environment in Southeast Asia, whether by conscious design or historical inertia.

[For the record, I don’t think these relationships are unique to Southeast Asia. They’re not even uniquely egregious. The situation in Latin America closely resembles that in Southeast Asia. You could make a case that Carlos Slim’s fortune is built on concessionary businesses whose profit margins wouldn’t survive true no-holds barred competition.]

Reading Superclass tends to give one a better, more complete perspective on Asian Godfathers. While the first book gets only 2-stars, Asian Godfathers gets 3-stars for its more in-depth look at Southeast Asia, its greater relevance to Singaporeans, and also its plain readability (it really is a juicier read).


Ratings System

2-stars: Casual reading only, or interesting but not easily readable, or important but narrow interest material.

3-stars: Interesting, readable and ideas of some importance.

4-stars: Interesting, highly readable, and ideas of considerable importance.

5-stars: Interesting, highly readable, important material of high relevance to most people.

Book Bundles: Giving Notice and The Meritocracy Myth

In a previous post, I mentioned that I had a book bundle for further reading on income inequality and social mobility.

Today's book bundle is Giving Notice (2-stars) and The Meritocracy Myth (3-stars).

I mentioned The Meritocracy Myth in that previous post. I won't summarize the material in the books as there is an excellent article by the authors here.

Giving Notice is a 2-star book in my opinion as the book's treatment of the subject of diversity in the workplace is geared more towards senior managers at companies, human resource professionals and other makers of hiring decisions. It does not make easy or casual reading and its audience is far narrower than The Meritocracy Myth.

However, Giving Notice gives a good overview of the problems associated with diversity in the workplace, the tokenism that many companies adopt in place of true support of diversity, and the possible promises and pitfalls of striving for a more even, equal working environment in companies. Certainly, it is a book worth reading by its target audience.

Giving Notice hence gives a practical context for the problems illuminated in The Meritocracy Myth, and points the way to making the corporate environment more friendly to those who are not necessarily cut from the same cloth as present-day decision-makers. It however, does not focus on the social realities or implications of meritocracy and the lack of diversity in today's society.


Ratings System

2-stars: Casual reading only, or interesting but not easily readable, or important but narrow interest material.

3-stars: Interesting, readable and ideas of some importance.

4-stars: Interesting, highly readable, and ideas of considerable importance.

5-stars: Interesting, highly readable, important material of high relevance to most people.

Income Inequality and Social Mobility

The rich are different from you and me. - F. Scott Fitzgerald

Yes, they have more money. - Ernest Hemingway


Chua Mui Hoong had a column in the Straits Times today talking about the impact of income inequality on social mobiliy.

Now, I normally don't read her column (in fact I don't read most Straits Times columnists) as I consider her an unapologetic government shill (as are most other columnists), frequently playing the good cop foil to her sister's bad cop. Just about the only Straits Times columnist I consider worth reading is Zuraidah Ibrahim, but she writes very infrequently.

So why did I read her column? Because she talked about something that happens to be a pet topic of mine: income inequality and social mobility. It's a pet topic of mine because on principle, it's something that I feel society needs to address, and also, I personally happen to have felt its sting while growing up.

Chua Mui Hoong hit on many of the advantages that wealthier families confer onto their offspring: better schools, tuition , networks, parental involvement etc.

To this list I would add: preschool education (which Lee Wei Ling has talked about), affordability of professional childcare and domestic help, internship and work attachment opportunities, overseas immersion programs, extracurricular lessons (speech, writing, tennis, golf), professional networks (especially the local law and medicine fraternities), and cultural factors that include an English-speaking environment and cultivation of upper-class habits in comportment.

F. Scott Fitzgerald was certainly right. The rich live in different houses, drive different cars, go to different schools, work different jobs (or in different ways) and eat different food. They are also less subject to the vagaries of fate, with their wealth acting as a safety net.

Income inequality (and more broadly, inequality of opportunity) is an anti-driver of social mobility. Why should we care? Leaving outside the desire for a more egalitarian society, we should care because this has serious implications on the meritocracy that Singapore prides itself so much on. Singapore risks stratification into an elitist society if we do not recognize that some of the successful people that we have cultivated owe their success not only to their own effort, but that their success may in fact be a reflection of their privileged circumstances.

Here's a quote from McNamee and Miller Jr, authors of The Meritocracy Myth:

It is generally acknowledged that a pure meritocracy is probably impossible to achieve. What is less generally acknowledged is that such a system may not be entirely desirable. The limits and dangers of a system operating purely on the basis of merit were dramatically portrayed in The Rise of the Meritocracy (1961), a novel by British sociologist Michael Young. Young envisioned a society in which those at the top of the system ruled autocratically with a sense of righteous entitlement while those at the bottom of the system were incapable of protecting themselves against the abuses leveled against them from the merit elite above. Instead of a fair and enlightened society, the meritocracy became cruel and ruthless.

More practically, Singapore risks ossification if it places meritocracy on too high of a pedestal. If all the successful people who run a country's institutions, companies and organs of state have the same backgrounds, attended the same schools and universities and have the same perspectives and opinions, how will we guard against the dangers of groupthink? With such a circumscribed 'gene pool' of talent, how can we adapt and compete in an increasingly competitive world? Even the scholarship system, meant to inject talent wherever it may be found, seems to be broken in this regard, since it injects only more of the same kinds of talent.

In a later post, I will recommend a book bundle for further reading on this.

Car Counting and the Merc Index

Lately, I’ve been reviving an old habit of mine. It’s actually quite a dorky and eccentric habit. In fact, I’m almost embarrassed to talk about it.

While waiting for the bus at the bus stop (any bus stop), I count the cars on the road. Specifically, I count the number of Mercedes Benzes on the road, and express that as a ratio of the total number of cars I see on the road.

I acquired the habit while a student at National Junior College about 10 years ago. Each morning, I would make my way to the bus stop at about six in the morning to take bus number 74. I live in the Dover area close to Anglo Chinese School (Independent), so I would see literally an endless stream of cars on Dover Road at that time in the morning. The morning school rush hour would see parents bringing their kids to the numerous schools in the area: Fairfield Primary and Secondary, Anglo Chinese Secondary and Junior College, and further on, New Town Secondary. [As an aside, there are even more schools in this area if you consider institutions of higher learning, like Singapore Polytechnic, the Institute of Technical Education (Dover), and the National University of Singapore.]

A large proportion of the cars on the road can be accounted for by students from ACS(I). Let’s just say I know this from … personal experience. For those not familiar with ACS(I), it’s a premier private (we say independent) school in Singapore with a cachet similar to that of Andover in Massachusetts, though nowhere as illustrious and certainly not with such exorbitant tuition. But it would be fair to say that many students attending ACS(I) come from very privileged family backgrounds. Again, I can attest to this from … personal experience.

Needless to say, many of the cars that the ACS(I) kids sit in are luxury European makes. I picked up the habit of counting the number of Mercedes Benzes on the road as a proxy indicator of the number of luxury cars on Dover Road at that time in the morning. Why the Mercedes Benz, and not the BMW, Lexus or any other luxury make? Two reasons, the first is that the Mercedes Benz is quite possibly the most popular luxury make of car in Singapore, which makes it a good proxy indicator for luxury cars in general. The second reason is more prosaic: at six in the morning when it’s still dark, the sticking up in the air, three point star-in-a-circle insignia of the Mercedes Benz is by far the easiest car insignia to spot.

Expressing the number of Mercedes Benzes as a proportion of the total number of passenger cars on the road (I exclude buses, taxis and goods vehicles) gives what I call the Merc Index. Personally, I like to think of the Merc Index as a yardstick for the concentration of wealth of the population that traverses a road at a given time and/or day.

So what was the Merc Index for Dover Road at six on a weekday morning about 10 years ago? If memory serves, an amazing one in every seven cars on average was a Mercedes Benz. I can assure you, the Merc Index on Dover Road is nowhere near that figure outside of the daily school morning rush hour. In fact, again if I recall correctly, surprisingly, Orchard Road 10 years ago (and probably now too) yielded a much lower Merc Index than one in seven. This can probably be ascribed to the sheer amount of traffic on Orchard Road at any one point in time.

I have no clue what the Merc Indices are on Dover Road and Orchard Road anymore. Mostly because I don’t commute often now that I walk to work. But since I’ve revived my little habit, perhaps it’s time to check out the Merc Index again on the roads where I still do wait for buses.

Chef's choice

The Sunday Times on 29 June 2008 had a cover article on its life section on “Chef’s Choice”. It basically talked about how the popularization of the celebrity chef has given the profession more cachet, and how more people in Singapore are taking up the profession of chef, whether as mid-career professionals or as young people just starting out.

As admirable as pursuing one’s dreams may be, everyone who aspires to be a celebrity chef should really take note of what the local celebrity chefs in the article did say at the end:

Chefs may earn more respect today, but their long working hours haven’t changed. It is a tiring job and many cooks come to me full of dreams, hoping to be Singapore’s next star chef without knowing what they are getting into. (Sam Leong, corporate chef and director of kitchens of the Tung Lok group of restaurants)

As a chef, you’ll always be holding pots and pans on Christmas Eve and New Year’s Eve while everyone else is holding hands with his loved ones. So to be a chef, you need to have a passion and dedication to the craft that is so strong, it will see you through these tough moments. (Justin Quek, who runs three famous restaurants in Shanghai – Le Platane, Fountain and Villa du Lac)

It's been said that three careers that rank low in lifetime earnings relative to the large outlay in time, effort and expense are the chef, the PhD scientist and the architect (debatable). For the chef, this article may be relevant.

But some would say that if being a chef is a dream, money shouldn’t figure in the person’s choice of profession.

I would add that the chef, like many professions that allow for creative self expression (authors, actors, musicians etc.) is subject to what are called superstar, winner-take-all or black swan effects. The chapter of Freakonomics that deals with drug runners and kingpins is relevant. So is the phenomenon of real estate agents, insurance agents or high-level multilevel marketers who pull in vast amounts of income compared to the median pay of their profession. Like these other professions, it just so happens that the most visible chefs also happen to be most successful Michelin-starred ones. The ‘silent graveyard’ contains the legions of chefs slaving over a hot stove for low pay, just as it contains the legions of waiters in Los Angeles who call themselves ‘actors’.

I wonder how many celebrity chefs would actually be happy to see their kids follow in their footsteps. This was one of the supporting themes in Eat Drink Man Woman.

Quite separately, the phenomenon of the burned-out investment banker, lawyer or business executive leaving their soul-sucking job in pursuit of cooking, baking, wine or cheese making is so prevalent that it’s almost become a cliché. Cedele’s founder is another good example.

What is less talked about is that it might be precisely because these ex-bankers and lawyers have the financial wherewithal that they have decided to venture into a new career that is not normally considered lucrative or desirable.

The importance of family money also cannot be overstated. The Sunday Times article cited the example of one Janice Wong, a 25-year old pastry chef who decided to take up baking after graduating with a degree in economics, as one of the new wave of talented chefs. My comment is that having an ex-banker father sponsoring your patisserie course at Le Cordon Bleu in Paris, and bankrolling your new restaurant is NOT the typical way that a chef’s career begins! The restaurant may be a “joint investment”, but I’m guessing that the capital came from only one person. As I understand it, most chefs labor for years before opening their own restaurant.

As far as owning and running your own restaurant goes, I suspect that the situation may be a lot less sanguine than most people think. The restaurant business is a notoriously difficult business to invest in: margins are thin, running and start-up costs are high, and demand is fickle. Indeed, demand for restaurant dining tends to be both price and income elastic. It can be said that the blossoming fine dining scene here in Singapore may be as much a reflection of the state of the economy as the burgeoning demand for a greater and better variety of dining options. When the next economic downturn occurs, we may see a flurry of restaurant closures.

The two-income trap

Several years ago, I read a book entitled The Two-Income Trap. While the book focused on the financial situation of two-income American households, the basic ideas behind the book are still applicable to the modern Singapore nuclear family. In fact, given that the Singapore two-income family is more prevalent today than ever before, it can be argued that the perils of the two-income trap are more relevant now than when the book was published.

The idea behind the two-income trap is simple. Decades ago, when the nuclear family was composed of a working father and a stay-at-home mother, most families subsisted on a single income while still being able to afford a middle-class lifestyle. If Mom worked at all (usually part-time), her money was “pin-money”, to be spent on little luxuries like restaurant meals and weekend trips to the amusement park (recall the American context of the book). Certainly, the family didn’t depend on Mom’s income to get by. In the unfortunate event when the father was no longer able to be the prime breadwinner, due to death, disability or retrenchment, the mother could leave the home and get a job, and the family would still be able to struggle through.

Fast forward to today. Now, most families are two-income, with both parents working. Families today enjoy a higher standard of living than ever before, and pay for it with their dual incomes. In other words, most families need their dual income. When I say higher standard of living, I don’t mean frivolous luxuries like holiday trips to Europe or fine dining. Families in general are not spendthrifts; they spend large amounts of money, but on things that are considered vital or worth spending on. These include a good home, a car, domestic help, and childcare (remember Mom is working too). For the kids, there are the computers, private schools, extra lessons of every kind, savings for college tuition etc. Most people would agree that these expenses are justifiable, hence my remark that families need their dual income to pay for all these expenses.

In the Singapore context, it is getting increasingly difficult, if not impossible, for families to get by on a single income, especially if they aspire to a middle-class lifestyle. How will your kids get into a premier school unless you pay to buy a house and live in the same prestigious district? How are your kids going to compete if they don’t have the extra lessons and costly after-school programs? Are you going to squander your time or your kids’ time on house chores, when domestic help is available? Is your kid going work summer holidays to help with the household expenses, or are you going to pony up for those expensive overseas student immersion programs? The resume arms race starts ever earlier …

[As an aside, higher income families tend to pass on lasting cultural advantages to their kids that help them compete better: better education, healthcare, nutrition, free time, discipline and attitudes. The idea that meritocracy is unequivocally good needs to be qualified by the understanding that the playing field is inherently uneven. A high achiever's performance could simply be a reflection of their privileged circumstances. More in a future post.]

Although families with dual incomes enjoy standards of living higher than ever before, they are more vulnerable in the event that either spouse is unable to work. This is because the family that needs the dual income has no ‘spare capacity’, unlike decades ago when only one parent worked (and only one income was needed). Once one parent is unable to work, the two-income family immediately falls into a distressed situation. And it doesn’t take a genius to figure out that with both parents working, a two-income family has approximately twice the probability of falling into a distressed situation as a result of income loss, as compared to a single-income family.

An even sharper irony can be observed if we analyze the expenditure of the most responsible parents. Responsible parents want the best for their kids and as a result, are usually more willing to leverage on their finances for better homes, better schools, better everything. The sticking point is that expenses associated with these better things are recurring in nature. You can’t automatically lower your mortgage payment for instance. If you bought your house on the assumption that a dual-income makes the house affordable, the loss of one income immediately raises the specter of foreclosure.

Contrast that with a family that bought a smaller home and a smaller car, but habitually eats out and spends on ‘frivolous’ things like holidays to Europe. In the event of income loss, the family can immediately tighten its purse-strings by cutting back on these discretionary expenses. This family will have an easier time than the family that bought a bigger house, put their kids in private school, and depended heavily on domestic help and paid childcare, despite all these being “worthwhile” expenses.

The lessons and dangers of the two-income trap are still present today and are arguably even more relevant given the extinction of the working father, stay-at-home mother family model.

So how should families guard against the dangers of the two-income trap? Here are a few suggestions:

1. Earn two incomes, but make a conscious choice to live on only one or one and a half.

2. Limit your exposure to recurring expenses. Instead don’t feel guilty going out to nice restaurants and take relaxing holiday trips! These are precisely the things you can afford to cut back on when times get tough.

3. Save. A lot. And don’t touch it unless you really need to.

4. Understand the competitive environment we live in today, but don’t let the cost of competing overwhelm you. Be conservative with your finances. Having no safety net is worse than ‘missing out’ because a drastic life-changing event can seriously impact you and your family’s future forever.

5. Buy insurance, and make sure it’s the right kind. This includes mortgage, life, health, critical illness/disability, unemployment etc. And buy term, because you get the most protection for the fewest dollars. Yes, you don’t get it back unlike say whole life, but consider it protection money to keep the big bad black swan from your door.

Organic food in Singapore

I became interested in organic food after reading Michael Pollan’s two excellent books: The Omnivore’s Dilemma and In Defense of Food.

In an era when sustainability is a major issue, it’s become fashionable to talk about organic food. For the purpose of putting things in a more critical perspective, let’s mention some controversial issues concerning organic food. There are of course, issues associated with labeling organic food. Is USDA labeled organic food really organic food? Does the entry of big business into the organic food industry compromise the spirit of the organic food movement? See The Omnivore’s Dilemma for a more thorough discussion. There is a New Yorker article here. Organic food has ramifications on climate change as well. “Locavore” is a word that is found in the modern lexicon today. “Food miles” is another. But the intelligent eater will know that eating local isn’t necessarily better for the environment.

All of the above suggests that we should approach the topic of organic food carefully, with an open but critical mind. But this post isn’t about the issues surrounding organic food. If you’re interested in the wider issues concerning organic food and industrial food, and more broadly, the modern culture of food, reading the two books mentioned above is a good start.

This post is about the business of organic food in Singapore. Bear in mind that this is a blog, so this post is about my opinions and my perceptions. This isn’t necessarily the truth about the organic food situation in Singapore.

Let’s talk about cost first. Generally, organic food everywhere costs more (in dollars and cents, ignoring externalities) than ‘regular’ food. However, in many countries, organic food is generally still regarded principally as food. In the USA, outside of Whole Foods (which more closely resembles the situation in Singapore, as we shall see), organic food is associated with small farm cooperatives. It may cost more, but a family can still subscribe to a CSA (community-supported agriculture) program for a reasonable cost. Eating organic is largely about healthy living, sustainability and caring for the environment.

In contrast, in Singapore, it’s hard to escape the perception that organic food is gourmet food, and, as the luxury industry would call it, an aspirational product.

Why do I say this? Look at the major purveyors of organic food here. Singapore imports most of its food, and organic food retailers are no exception. But what retailers they are! Bunalun, Supernature, L'organic. Distributors of such artisanal brands like Duchy Originals; the food they sell is literally fit for royalty. Their websites are full of pretty pictures, what I like to call gastropr0n (pardon the leet). With prices to match. Unsurprising considering that the food is imported in small quantities by firms that have relatively high profit margins, and that market their products to the upper crust of Singapore society. How do I know that they market mostly to the highest income groups? These organic food stores in Singapore are located at some of the toniest addresses in town: Jalan Merah Saga and Chip Bee Gardens (Holland V.), Dempsey Village (so hip it hurts), and Orchard. And their customer base is composed mightily of expatriates on generous compensation packages. Admittedly, expatriates for the most part are also more well-informed on the benefits of eating organic than local Singaporeans.

The example of Supernature is particularly interesting. It was acquired by Christina Ong, proprietress of Club 21, a multi-label boutique and distributor of numerous luxury brands, owner of the uberluxurious chain of Como resorts, wife of tycoon Ong Beng Seng, and reportedly chummy with the fashion designer Donna Karan. If Supernature isn’t going to be revamped to match the other brands in Christina Ong’s stable, I would be very surprised.

Would I really be off the mark if I described organic food in Singapore as being marketed as an aspirational product?

There are alternatives of course (thankfully), for people genuinely interested in organic food for food’s sake. Bollywood Veggies and Greencircle come to mind. However, here we come to a separate problem. If we survey the complete range of organic food products available here, we see that it is difficult to go fully organic in Singapore, since the range of organic foods isn't as wide as most people would like. This includes raw foods as well as prepared foods. And the cost of going organic is prohibitively high. 

From my very casual and unscientific observations, it would appear that organic food in Singapore has come far, but still has a ways to go. But one thing of concern is that it seems to have taken on a highly aristocratic sheen, which is ironic considering its formerly more humble roots (not that that hasn't happened elsewhere as well). Will the situation in Singapore change for the better? Stay tuned.