25 May DPM Tharman Shanmugaratnam at the St Gallen Symposium – Takeaways for the Retail Investor
Deputy Prime Minister Tharman Shanmugaratnam spoke at the township of St Gallen in Switzerland in early May. He represented Singapore at the 45th edition of the St Gallen Symposium, an annual conference aimed at ‘fostering intergenerational and intercultural dialogue between decision makers of today and tomorrow’.
On stage, he sparred with Stephen Sackur, host of BBC talkshow programme HardTalk. Sackur was an experienced political pundit and a formidable interviewer; he is a tough opponent to be up against.
Over 45 minutes, they chatted about this economic miracle called Singapore. They spoke about democracy and freedom of press. They discussed briefly the passing of our founding Prime Minister, and whether his family will continue his political dynasty. They also mentioned the government spending and how Singapore takes a radically different stance on this compared with many other countries.
In coversation, DPM was firm but not pushy, concerned yet not flustered. I am impressed by his ability to engage and disengage. In the face of an antagonist spoiling for a fight, he has defended the Singapore system well.
There were many soundbites and enjoyable moments, including the part where DPM deftly deflected Sackur’s persistent badgering of Singapore’s lack of a safety net. He threw the ball back into Sackur’s court by bringing up the concept of a trampoline – and then eloquently explaining why by making it not so easy for people to stay out of work, but yet provide assistance for jobs seekers and home owners, it impacts positively on the culture in Singapore. The eventual outcome is a much more vibrant culture of ownership in the country.
50 Years of Growth and Prosperity
The most enlightening moment for me though was when Sackur referred to a poll that allowed the audience to vote on the spot. The question read –
After 50 years of growth and prosperity, Singapore will face the same structural challenges as the rest of the developed world.
To this, 71% of the audience actually disagreed. It was telling, because it goes to show how little people outside of Singapore actually understand us. It goes to show that people think we are this economic miracle blessed with incomparable advantages. It goes to show that people do not think we are on a level playing field with the rest of the developed nations, and that our challenges (if any at all) are unique and barely comparable to the ‘real’ ones that the entire world is facing.
When asked for his take, DPM was very quick to denounce it. He had this to say –
No, I don’t. I don’t at all. Very little of what Singapore does is invented in Singapore. Very little.
Our whole SOP (Standard Operating Procedures), whether it’s in Cabinet or Statutory Board or small public agencies, is “look at the rest of the world”. Try to get some ideas, some techniques, some methods, that have worked well and see how we can do it in Singapore, if possible, better.
Try to avoid the mistakes that have happened. So that’s an advantage of smallness, by the way – we never thought that we had it all in our minds. We never think today that we got it all worked out and this is a successful model and that’s it.
Humility, the willingness to learn and playing to our unique advantage
I am captivated by his response for a few reasons.
For one, there is a truckload of humility in that response. Singapore is a roaring success. We are an economic miracle, envied, studied and looked up to by many countries big and small. Few would argue with that. Yet, in saying what he just did, that Singapore’s success is the outcome of putting together and learning from the best out there, Tharman has graciously given credit to the world at large.
Secondly, what he is saying is that we have no secret sauce, no magic formula, no Harry Potter wand that we waved to get us from Point Zero to now. Rather, it is the willingness to learn, to invent, to avoid mistakes that has led to our success. I cannot agree more.
And finally, while we are severely constrained by natural resources and surrounded by somewhat easily agitated neighbours, being small is also the biggest advantage for us. Being small, we remain nimble. By understanding our situation, strength and limitations, we were able to achieve much more.
Important Lessons for Investors –
Tharman was speaking about Singapore and Singaporeans at large. In the same vein, I believe that very same worldview and outlook when applied to investing can yield an investor great success. Here are three takeaways distilled –
1. There is no secret sauce in investing.
There is no need to reinvent the wheel. Every brilliant idea that you would have thought of, someone else would have already done it before you. Every investing trading and investing strategy that could vaguely work has already been studied and dissected many times over. Everything is out in the open. There are no secrets in the investing world.
So, do not expect to get rich quick. If someone tells you they have stumbled on this deal that promises fifty percent returns in 8 months, alarm bells must start ringing. Every deal that sounds too good to be true is more probably NOT true.
2. Know your advantages.
As a retail investor, being small is an advantage. We have written about this many times and we cannot overemphasize it. Financial institutions and fund managers have an inherent problem – they find it difficult to effectively allocate the huge amount of capital at their disposal.
They are unable to buy or sell without moving markets. They are unable to buy into small cap stocks at all because the capital they have will overwhelm the entire stock. They end up buying into blue chip stocks that every other institutional investor is buying into. They end up locking in average returns.
Here is a quote by Warren Buffett that sums it all up.
If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.
Know your advantages and play to them well.
3. Be humble enough to learn.
As DPM mentioned, Singapore looked to the world to learn. We examined best practices, took what is suitable for us and made them better. The same goes for investing.
Investing success does not happen by chance. The best investors are also the best learners. Warren Buffett spends six hours every day reading thinking and learning every day. He learns all disciplines. We can never do as well as him if we do not learn as well as he does.
The Singapore story has been studied and discussed in many arenas. The lessons derived can be applied to many fields. It comes as no surprise that Singapore’s success can also serve as a blueprint to investment success!