Category: Blog

In an earlier post on Wisdom Nuggets, I have shown going against predictably irrational behavior of the majority fueled by covetousness, one may ironically get the very results of what everyone is pursuing.

A disciple of Christ is a radical disciple. He refuses to conform to the world.  Even encountering storms in life, he will continue to trust in the promises of God.

Likewise an entrepreneur is a non conformist. In his earnest pursuit of the best value or solution for a given problem, he may go against conventional wisdom of the day. He strongly believe in his cause and persevere till he proves the effectiveness of the value or solution he has discovered.

Allow me to share some personal examples.

Once I was trying to introduce a new digital read-out into a market where the German brand was the most established. Most of the technicians were trained using the German brand of digital read-out in schools or training institutes. Conventional wisdom was that nobody would change to buy another brand regardless of the price. The German digital readout was sold for $ 3500 and the cost of installing it onto the machine was separate and cost another $ 1000 for the brackets and installment labor. Buyers could only take a hire purchase loan of 90% of the cost of the digital readout and not the brackets and labor cost. I decided to offer through the largest distributor of the machines in consignment a total package price of $ 2500 including brackets and labor. That would be a saving of $ 2000 and the buyer only needed to pay deposit of 10% of the total package cost which would be $ 250 and the rest could be covered by the hire purchase loan. But for the German brand, the buyer would need to fork out $ 1350. Within 2 years, the digital readout I promoted overtook the German brand to become No 1 seller in the market.

Once, I even made semiconductor chips with my brand name ANK (Anthony And Kenny). Conventional wisdom was that factories around the world would never buy such a high tech product from unknown brand names and unheard-of manufacturers. Creative Technologies and Aztech were 2 local companies which supplied 90% of the world’s demand for telephony cards – sound card and 56k modem rolled into one. They produced 1.4 million and 0.3 million cards per month respectively. Once there was a shortage of 4 semiconductors chips and one signal relay and Creative got most of the allocation from the suppliers leaving Aztech without any allocation. I was approached and I managed to turn on a relatively unknown factory in Europe to make these components for me and labeled ANK. At that time, the whole production in China for the signal relay was only 10,000 units a month and I needed 300,000 a month. I went to turn on the factories in Ningbo to get me this volume production. I had no knowledge of the manufacturing technology but that did not deter me to work out with the Chinese factories to produce such a relay which was manufactured in Japan at that time only.

Once when I was trying to introduce a new brand of washing machines into the crowded market here. All the distributors refused to promote seeing no particular advantage against the more superior Japanese and European brands. And I could not afford any advertising budget for these distributors as well. Conventional wisdom was to sell new entry brands at extremely low cost. I went to look for a large direct retail shop bypassing the big distributors. At that time, most brands retailed for $ 600 to 700 so I positioned my brand at $ 650 instead of selling really cheap though my cost to the retail shop was $ 250. That gave the retailer a cool $ 400 profit unlike the established brands which the retailer would get only $ 50 and the promoter at the shop would only get $ 5 for each machine sold. I ensured that the shop gave $ 50 as commission to the promoter and the machine had to be sold with gifts costing another $ 150. To the consumers, they would perceive a very good deal when they saw the gifts of Philips appliances costing $ 300. The promoter was so motivated to promote my brand because she would get 10 times more commission than selling other brands. We moved so many washing machines more against one European brand who had advertised over TV at that time.

Once I took over a failed food court from Kopitiam, a local chain of food courts at Lucky Plaza in Orchard Road. I turned it around offering SGD 2 for all meals from the stalls I owned while renting cheaply to other stallholders selling less popular food items. I got a different crowd of office workers from other food courts serving mainly tourists. It was a hybrid model of owning some stalls and renting out the rest. This gave economy of scale for the self owned stalls for labor and purchasing. Such hybrid model also kept all stalls running. Soon we had the big Filipino weekend patronage.

A convocation speech in which I shared about entrepreneurship and extolling the virtue of applying the Pareto Principle to achieve contentment in life to the young graduands who were about to enter the next important phase of their lives.

Pro Chancellor or President
Graduands
Ladies and Gentlemen,

A very good afternoon to all of you.
First of all, I would like to thank Professor XXX and the University for this privilege and honour accorded me to give this convocation address.

I am delighted to be here to join you in this joyous occasion. I would like to congratulate you, the graduands, on your convocation. All your hard work has paid off today.

Congratulations !

Let us also recognize and thank all, especially your parents and lecturers, who have made sacrifices to help you in one way or another to achieve this important milestone.

A few of you may choose to continue your studies but many of you are about to enter this new phase of life which is the start of your career. I believe all of you have already given much thought about the possible direction to take.

Entrepreneurship is much encouraged today as the path to take and the benefits are well expounded and proven. Your training in this University has put you in good stead to be an entrepreneur in technical disciplines.

Allow me to share my personal journey to give you a head-start on this particular path and also to share one or two principles which have served me well all these years.

I realized early in my career that there is always opportunity to find an optimal cost effective and superior solution to a need, be it a product or service and make a profit in the process. Personally, I look at two approaches all the time.

One approach is to find a new superior product or service altogether, and the other is finding better value to offer in the entire value chain of making the product or providing the service.

For the former, it involves innovation of new products or services. For the latter, we know in every business organization, there is always these same necessary activity functions such as research and development, design, sales and marketing, production, customer service and distribution; and the entrepreneur can always strive to find better solution to enhance better performance in all these activity functions in the entire value chain of making the product or providing the service.

I believe everyone can have a shot at entrepreneurship by looking at these two approaches.

I will suggest working for a corporation for a start. With the experience gained in working in a particular activity function, it will be easier for you to search for superior performance in this particular activity function you are familiar with.

I tried the latter approach first by looking at the distribution activity function. Early in my career, I was employed in sales. After working several years in the sales and marketing function and with the experience gained, I was asking myself whether a local new company could provide better value add service in the distribution function for the foreign American or European enterprises willing to venture into Asia. Two or three decades ago, it was much easier just to be a pure distributor of American and European companies in Asia, but I preferred the company I intended to build in Asia would be part of a global partnership with foreign enterprise. I changed the simple distribution or agency model into a hybrid model of passing off the local company as a de-facto branch of the foreign enterprise in Asia. But in essence, it is still very much a locally majority or minority owned company.
The traits of an entrepreneur have been much discussed but there is one which I would like to stress here. And that is belief in the competitive edge or superior value one sees in the innovative product or service while others cannot. That is, the entrepreneur is a non-conformist.

When I was trying to promote my company as an one-stop provider of various products in one catalogue buying from various Japanese suppliers in the early 90s. The skeptics would discourage by telling me that the major customers would not be so dumb as not to buy directly from the Japanese suppliers. My belief was that the major customers would prefer to work with an one-stop supplier who could provide all products in one catalogue. It might seem to defy logic but it worked. I went on to build a global brand name in partnership with a foreign enterprise.

I have ever produced semiconductors and other electronic components under my own brand name without any capital investment in factory by outsourcing the manufacturing to foreign factories. Again, skeptics would say that no customer would buy semiconductor chips with unknown brand given the stringent qualification process. Again I proved them wrong.

For the former approach of innovation, one can look at licensing technologies from the universities here where there is a lot of research in various fields.

The world today is facing major problems in such areas as energy, environment and health care and we need innovative solutions in these fields. Our government has availed many opportunities in the form of grants to encourage both research and commercialization of ideas in these areas. That opens vast opportunities for all who wish to embark on this path of self employment. The jobs today are no longer “iron rice bowl” so to speak, and so entrepreneurship offers this opportunity of long term self employment as long as the enterprise built is a viable concern into the far future. One can also have the satisfaction of bringing tangible benefits to mankind.

Two years ago, I tried this innovation approach by licensing solar cell technology from a local university to make enhanced solar EVA films used in solar cells. I have yet to divest any equity in my firm with an initial paid up capital of $ 150,000 through a grant from Spring Singapore and a loan from a listed company . The firm now has commercially produced products just ready for adoption by the market.

There is one principle I would like to share which will serve you well into the future. Though we learned this principle in engineering, it could be applied to time management and even relationship. And that is the Pareto Principle or 80/20 rule.

It roughly states that 80% of the effects come from 20% of the causes. In business, 80% of the business will come from 20% of the customers. To try to increase a further 10% of the business from the majority of the balance 80% of the customers will expend a lot of your time and energy if every customer demands the same attention of your time and energy. And that is not very wise time management and your health and relationship will suffer as a result.

This principle should serve as a daily reminder to focus 80% of our time and energy on the 20% of our work that is really important. Don’t just work smart; but work smart on the right things.

You can also apply this principle to your personal finances. You will find 20% of the expense items make up 80% of your total monthly expenditure. It will be prudent management to trim the expenses of these 20% expense items. It is not wise to feel good just for a brief moment telling people that you stay in an expensive posh condominium or posh car if you are struggling and feeling the insecurity all the time about the mortgage or hire purchase. With the trimming of these big expense items, you will then have the extra to be generous in many other ways such as giving an allowance to your parents, or buying treats and gifts for your loved ones or those less fortunate. Remember Contentment, not Greed, will always bring you joy and peace in your lives.

I wish you success in your every endeavour. Thank you.

In the Bible, we read of how the judges and other heroes of faith gathered information, considered the possibilities, weighed the information, considered the trade-offs and opportunity costs, and then carefully made their decisions.

As we seek God’s kingdom and His righteousness first, many things will be given to us including wisdom which He will give generously when we ask. Matt 6:33; James 1:5.

Today, by the grace of God, I see some proven wisdom principles as the common grace of God and they are easily articulated and shared. I believe the Pareto Principle is one such wisdom principle which we will do well to adhere by doing first things first.

The Pareto Principle, also known as the 80–20 rule, states that approximately 80% of the effects come from 20% of the causes. Or more easily understood is that 20% of the causes produces 80% of the results.

The management consultant Joseph Duran popularized this principle and attributed it to an Italian economist Vilfredo Pareto.

This principle can be applied to many sciences and even many facets of life.

As a student, I studied only the 20% of the topics of each subject which are really important and true to form, 80% of the exam questions came from these 20% topics.

Later when I worked as a sales representative, I concentrated my sales effort on the 20% of the customer base which gave the company 80% of the sales and I consistently met or exceeded the job expectation.

Even in my marital relationship, I always remember to do those 20% most important stuff which will greatly please my spouse 80% of the time.

By doing the first things first, I will have sufficient time to perform most critical tasks without being overwhelmed or burned out.

I realized that I consistently met or exceeded the expectations through adhering to the Pareto Principle without having the pressure and consequent stress to excel to the very top.

When I graduated with second class honours (upper division), I was awarded one of the most prestigious postgraduate scholarship without being denied such opportunity by those who obtained first class honours.

When I started my career in sales, I did relatively well and by the age of 29, I was made the general manager of a branch office of a USD 1 billion Spanish conglomerate in Asia.

By adhering to the Pareto Principle for all tasks and decisions, we will have proper time management to perform most without the need to sacrifice other important facets of life.

You will notice that many will rush to buy their residential properties or cars during the good economic times and end up driving the prices exorbitantly high.

But when there is an economic recession, you will find prices so depressed and yet there is hardly any buyer.

There were 5 economic recessions in 1985, 1991, 1997, 2001 and 2008 in the last 25 years averaging one recession every 5 to 7 years. Should not one buy his first residential private property or car at the next downturn to take advantage of lower prices, saving more and taking a lower loan mortgage ?

I have seen this predictably irrational behavior for the last 25 years of many people buying their properties at the peak.

Perhaps they buy because of the confidence of holding on to jobs during good economic times. But the mortgage loans taken are usually of 25 to 30 years’ duration. They will still face the possibility of losing their jobs in the next downturn while the principal sum of their mortgage loan is relatively untouched because the first few years of mortgage installments go to paying interest.

I believe the main reason for such predictably irrational behavior is more of greed or covetousness  – the fear of losing out on good deals to others.

I started my career in 1985 and many of my peers were able to save enough to buy their first residential private property in 1994 after saving up the initial deposit of 20% or more. Most bought their first property between 1993 to 1996 at the height of the property boom taking a 25 year mortgage loan.

I decided to wait till the next downturn which happened in 1997. Because I waited out, while my peers would be paying on interest for their mortgage, I would be saving up more money.

So when the prices had gone down by 30 to 50% in 2001, I was able to purchase my residential property without taking any mortgage loan as I had saved up to 50% of the peak price in 1996.

While my peers continued to worry over their mortgage loan over the entire repayment period of 25 to 30 years, I have one less worry.

Should the private property prices stay high and I really miss the chance of owning a private residential property, I will not lose any sleep because I am more than content to have just a roof over my head in public housing.

Contentment indeed brings great gain while covetousness only bring anxiety as illustrated in the above example.