Then, a realistic/cynical view of entrepreneurs
Are we expecting too much of Singaporeans?
Why a safe job is risky business for Singapore
23 Jul 2015
The young woman sitting across me was being interviewed to join my firm as a consultant. Well-travelled, highly qualified and poised, she spoke eloquently on why she wanted to join the firm - indigenous, small but growing.
Having gone through several stages of recruitment, we were finalising her appointment. She suddenly said she wanted a much higher compensation than the range discussed.
When prompted as to why, she replied that it was a great risk to work for a small local firm. I asked her to expand on her logic. She said her best option was to work for the civil service or a multinational company and that she was, in effect, doing the firm a favour by joining, and thus merited a market premium.
This attitude towards risk is disappointing individually, but troubling when we expand it to the national scale. It suggests that the young generation value the payoff for their education in terms of occupational safety. While at one level rational, such an attitude may help explain why small and medium-sized enterprises (SMEs) have great difficulty engaging the best talent. There is a deeper reasoning than a simple matter of market economics. It lies in the relative emphasis between creating value and accessing value.
In order to build successful local brands, our young people need to have the hunger to create value, rather than simply access it.
Creating value means taking risk. The entrepreneur takes business risk to start, drive and support his idea commercially. Employees of entrepreneurial businesses take employment risk to work for a fledgling firm.
This economic value is what growth is all about. It is of special significance when that risk is taken by local entrepreneurs and workers, because the economic value-add is created and captured locally - as are the skills, knowledge and experience gained.
Accessing value is about the exchange typified by the mindset of the young applicant. Here, she is perceiving that the civil service and multinational brands represent safe employment value - because there is job security, good compensation and the psychological benefit of being associated with a recognisable brand. She is choosing to access value rather than to create it.
However, when small businesses cannot access top talent, who prefer to seek "safe" employment, we cannot expect to create world-beating firms, generate many new ideas and restructure our economy to have more indigenous commercial success.
What Singapore needs are businesses built from the ground up which can have an enduring presence in both local and international markets. Such businesses should be founded on locally generated ideas, and should create quality jobs for our workers and stand the test of economic cycles.
This requires quality talent who are invested in the idea of building a Singapore brand. Such an entity is more than simply locally registered, but embodies the values and attributes associated with the brand that is Singapore - quality, excellence and integrity, disciplined, committed and results-focused. It should also mean an inclination towards risk-taking to create value.
Singapore must build a future where its own private-sector firms, other than government- linked corporations or GLCs, succeed and do so on a large scale.
CHANGES THAT WILL HELP BUILD LOCAL BRANDS
We must do this not just because continued over-dependence on MNCs is a systemic risk. Fifty years of progress in health, education and infrastructure must translate into something more than simply a bigger, grander civil service. Our people should show themselves capable of building successful brands in a range of industries.
What Singapore needs are businesses built from the ground up which can have an enduring presence in both local and international markets. Such businesses should be founded on locally generated ideas and should create quality jobs for our workers and stand the test of economic cycles. This requires quality talent who are invested in the idea of building a Singapore brand.
Several things need to change to ensure that we do. First, a shift in mindset. Our young people need to have the hunger to create value, rather than simply access it. We need to root out the negative mindset about risk-taking and what is local. Pride in Singapore should also mean pride in working for Singaporean firms and brands.
["One study suggests that home ownership dampens entrepreneurship. This seems intuitively obvious. Owning a home invariably means a mortgage, and a mortgage is a long-term financial commitment that requires the mortgagee to be able to pay the mortgage installments regularly."]Second, the civil service needs to right-size its demand for labour to avoid crowding out the private sector. Its labour footprint is some 10 per cent of the total resident labour force.
But it is particularly exaggerated when it comes to the top 10 per cent of graduates. The civil service targets graduates with good honours degrees. We should manage the distribution of labour so that the trade-off is not in terms of a talent-deprived private sector.
[Yes. See "The hidden costs of a well-paid Civil Service" section.
"Paying for talent in the civil service may prevent a lack of talent in the civil service, but there is no way to prevent an over accumulation of talent in the civil service.
How do we know if there is not enough talent in the private sector? Maybe the lack of innovation and entrepreneurs is an indicator?" ]
Third, risk-taking to create value means more than risking reputation; it means risking your money too. While the Government is generous in assistance to SMEs, there is an inadvertent danger it could be too generous. Entrepreneurs need to feel the blade of competition on their necks to catalyse their energies, talents and ideas to the maximum.
[See the other article below, where people take risks, because they feel "safe".]
Finally, creating value is by nature a risky business. We should, thus, not insulate ourselves from failure. Failure is a greater tutor than success. With success we know only what worked and we are biased towards sticking with it. That cannot last. Failure is a test of resilience, tells us how to improve to make something better and weeds out the poorer performers.
[That's nice. You are telling people to go and fail. In Singapore. Where Failure is a hanging offence? OK, I exaggerate. But it's figuratively true.]
The implications of such a perspective are not limited to individuals or firms, but extend to the economic level. When we next face an economic shock, the Government should refrain from trying to save every firm and every Singaporean job. Terrible as the effects of such a contraction would be, a greater tragedy would be to create a crutch mentality that weakens resilience and competitive drive.
SG50 is but a moment. Singapore at 100 is the next goal. To achieve it, we need great government, citizenry and firms. In all these instances, a mindset of risk-driven value creation is a requirement, not a luxury.
And, no, the young woman was not hired.
• The writer is the CEO of Future-Moves Group, a management consulting firm.
Entrepreneurs don’t have a special gene for risk—they come from families with money
"Genes probably matter ... but not much."
July 17, 2015
We’re in an era of the cult of the entrepreneur. We analyze the Tory Burches and Evan Spiegels of the world looking for a magic formula or set of personality traits that lead to success. Entrepreneurship is on the rise, and more students coming out of business schools are choosing startup life over Wall Street.
But what often gets lost in these conversations is that the most common shared trait among entrepreneurs is access to financial capital—family money, an inheritance, or a pedigree and connections that allow for access to financial stability. While it seems that entrepreneurs tend to have an admirable penchant for risk, it’s usually that access to money which allows them to take risks.
And this is a key advantage: When basic needs are met, it’s easier to be creative; when you know you have a safety net, you are more willing to take risks. “Many other researchers have replicated the finding that entrepreneurship is more about cash than dash,” University of Warwick professor Andrew Oswald tells Quartz. “Genes probably matter, as in most things in life, but not much.”
University of California, Berkeley economists Ross Levine and Rona Rubenstein analyzed the shared traits of entrepreneurs in a 2013 paper, and found that most were white, male, and highly educated. “If one does not have money in the form of a family with money, the chances of becoming an entrepreneur drop quite a bit,” Levine tells Quartz.
New research out this week from the National Bureau of Economic Research (paywall) looked at risk-taking in the stock market and found that environmental factors (not genetic) most influenced behavior, pointing to the fact that risk tolerance is conditioned over time (dispelling the myth of an elusive “entrepreneurship gene“).
Resilience is undoubtably a necessary trait for success; many notable entrepreneurs experienced success only after leading failed ventures. But the barrier to entry is very high.
For creative professions, starting a new venture is the ultimate privilege. Many startup founders do not take a salary for some time. The average cost to launch a startup is around $30,000, according to the Kauffman Foundation. Data from the Global Entrepreneurship Monitor show that more than 80% of funding for new businesses comes from personal savings and friends and family.
“Following your dreams is dangerous,” a 31-year-old woman who runs in social entrepreneurship circles in New York, and asked not to be named, told Quartz. “This whole bulk of the population is being seduced into thinking that they can just go out and pursue their dream anytime, but it’s not true.”
So while yes, there’s certainly a lot of hard work that goes into building something, there’s also a lot of privilege involved—a factor that is often underestimated.