Despite being familiar with the names of the titans in private equity, I consistently revisit the stories that chronicle their professional lives: "Henry R. Kravis...is an American businessman, investor, and philanthropist." "Stephen Allen Schwarzman...is an American businessman, investor, and philanthropist." "Weijian Shan...is a Chinese economist, businessman, and author based in Hong Kong." One thing that is common in all the opening lines of their wiki pages is the word businessman. Good investors are businessmen. Good investors are inherently entrepreneurs. They either have owned businesses before, or have been placed in a position of making decisions, such as opening markets, launching new products, retrenching staff, etc, These decisions also have a direct and consequential impact on them. If the business does well, managers reap the profits and bonuses. If not, they get axed from their roles. How people deal with their successes and failures are often reveal more important attributes about their attitudes as investors rather than their curated abilities. Do they let success get to their heads? Do they become arrogant and conceited? When defeated, do they remain beaten? How do they pick themselves up? Without going through first-hand, the experience of a founder, it is nearly impossible for any good investor to genuinely feel what it is like to be on the other side of the table... This also includes fundraising, pitching and sourcing for customers, managing employees and payroll, engaging with competitors and other business people, and worrying about the day to day cash flows. Execution is everything. The turnaround of Continental Airlines was probably the hallmark transaction of TPG's founding days. The deal embodied more than just investing capital but also the hard work of returning the airline to profitability. In successfully doing so shot the private equity firm to 'stardom'. But had the transaction gone sideways, history would have been written very differently. I believed that Continental Airlines came back to life because of the folks driving the day-to-day leadership, management and execution, and not by simply throwing money at the company. Anyone who has founded and built a business appreciates what it means to be putting your money on the line. The notion of “every dollar of revenue counts” takes on a very different perspective for a business owner as compared to a passive investor in the side-seat, running a company using someone else's money. Much less so for employees (even managers in senior positions). But the majority of people take this for granted. Prudence is a virtue. I used to know of some junior investment bankers deliberately staying late in the office to claim dinner and transport allowances, even though they could have gone home earlier. While this amount wasn’t significant, it was the attitude that revealed (i) the ‘employee’ mindset and (ii) how one treats money. Per diems, transport and meal allowances are benefits rendered to employees who put in the extra hours, go the extra mile and work hard for the firm. These are absolutely necessary. However, the problem is with the few who either feel "entitled" or consistently find loopholes within the HR manual to exploit these benefits.. Any fund manager who doesn’t appreciate the value of thrift and prudence should not be managing capital - especially third party capital. So what if you have money? Some years back, I met a family-run manufacturing firm based in Southeast Asia on a potential deal. They brought in their freshly graduated kid into the meeting. He had basically near zero professional experience and showed little interest in furthering the ambitions of the company. The owners were also incredibly averse to the idea of bringing an external investor to the table because of many horror stories involving strict quarterly reporting requirements and the need to achieve ambitious sales and profit targets. I can totally feel for them. At the end of the day, if my business is raking 10 million in operating cash every year, why would I want to give it all up for 80 million and live with the pain of an external party harassing me over the next 5 years? I’d be much wiser and better off keeping the status quo for 8 years and achieving the same financial result (disregarding time value and opportunity costs). Although we eventually did not invest in them, I spent the rest of the meeting getting them acquainted with the workings and dynamics of the private equity and venture capital world. Raising a fund isn't everything. "Let's raise a fund leh...". Too many people today want to start a fund because it sounds glamorous to manage money. It’s just the wrong way to go. Some of the same folks I know see the buy-side as an omnipotent force in the investment world, top of the food chain. They crave for delusional respect and worship from the target companies they meet. But in reality, most of them are just employees at a very large firm. Henry Kravis from KKR says, "Don’t congratulate us when we buy a company. Any fool can buy a company.” I'd like to rephrase that to: "Don't congratulate us when we start a company. Any fool can start a company..." Much like the congratulatory notes by friends and colleagues when starting a new business, many people continue to give the thumbs up to those who announced that they have started their own fund (in good faith nevertheless). It offers a glimpse of hope and inspiration for those wanting to pursue the same track. But too few understand what they are really getting themselves into. Setting up and running a fund certainly does not represent the pinnacle of success in the business world. Having the right credentials and experience, an impressive business network, formulating a strategy of simply buying undervalued companies and saying that you'll sell them for a profit after 5 years - is too trivial and over-simplified. Aside from the corporate finance and investment banking skillsets of business valuation & deal structuring, you missed out on the complexity of human-to-human relationships and negotiations, effective (and efficient) deal sourcing and the many intricacies of fundraising that goes beyond just lining up an LP roadshow. And, did you think post-investment value creation is that easy? It's more operations and roll-up-the-sleeves kinda work, instead of the heroic corporate dramas that you read in your MBA and Harvard Business Review case studies. Pure ambition and skill sets are not good enough for getting into the fund management business without a well grounded mindset and right perspective.

Hey you lost your bet! He's still here!! - an unwitting stranger over drinks. For the want of money. The world was a very different place in 2006. We were about 2 years out from the SARS crisis, and it wasn't even considered a pandemic. I had completed my final exam papers, presented my engineering thesis and was comfortably placed in a French IT consulting firm, which at that point of time, was being subcontracted by Philips TV to develop a software prototype. The product was meant to be used for all of Philips' clients in the hospitality and healthcare sectors. But I left within 6 months into my role. My motivation for making that leap was driven by The fear of being stuck in an engineering job, working from 9am to 5pm everyday for the rest of my life, and Perhaps more importantly, the want of earning more money by being in banking. That was primarily how the world of corporate finance appealed to me. Fresh graduates bringing home $8,000 a month. No other career could offer that kind of salary, certainly not in the engineering world. But I was not lucky. My grades were less than mediocre and I had been in the 'wrong' field of study. I didn't even know what a Bloomberg terminal was, how to calculate a series of discounted cash flows, or the definition of enterprise value. I wasn't cut out for investment banking. I didn’t get my $8,000 per month dream job but I eventually managed to join the valuations team of an accounting firm. Trial by fire. I distinctly remembered my first day of work at KPMG. All eyes were on me as I walked to my desk. It was only much later in my career that one of my colleagues told me with a giggle: "We were all wondering why you - trained as an engineer - came here to steal our jobs." So, it was with a bit of dumb luck, a vacant analyst position created by the timely departures of a few junior staff, and sheer persistence that landed me into a corporate finance role. I had graduated a year later than all my engineering classmates, which made me two years older than the guys who graduated from accountancy and four years older than their female peers. In short, I was the uncle of all the analysts in the team. For the longest time, no one could understand why I had taken a 33% pay cut from my job in Philips to venture into the unknown from a zone of comfort and familiarity. Many times, I even found myself having to clarify where I worked at previously: "Not Phillip Capital the securities house - Philips, the electronics company..." I was incredibly scared during my first six months in my role. I had come from a working culture that involved going to an office in a tech-park five days a week, sitting in front of my desk writing code for long hours. Finance would be quite different. The closest I ever get to writing code was the Bloomberg functions within excel and perhaps some visual basic. Other than that, I was a fish out of water. I was so afraid that my line managers would deem me unsuitable for the job and ask me to leave. However, what they did do was make a bet that I would voluntarily leave within those six months. This incident was later unwittingly and awkwardly revealed by a stranger who crashed one of our team drinks. I remembered him saying: "Hey! You lost your bet. He's still here!!" It was just one of those things people in banking like to do. It sounds condescending and insensitive, but you pretty much got to have thick skin in order to survive. Investment banking isn't just about getting through the gruelling late nights and delivering on the number crunching. It was also about the harsh and toxic environment that one has to be prepared to put up with for many years to come. No shortcuts, no straight paths. Today, I get a lot of questions on how to break into a corporate finance career whenever I teach at the Singapore Management University. "I don't have any accounting or finance background, how do I get in?" Ironic as it seems, most of the people asking me these questions have better credentials and working knowledge about the field of investment banking than I had during my time. My attempt to learn about the workings of financial markets was through punting in stocks during the bull market, which peaked shortly in 2007 and went bust later towards the end of 2008. I dabbled into the markets not to make money, but more so to experience first-hand how it was like to invest, trade or punt. It sounds unusual given younger people today are more investment savvy and have even more access to investment and trading platforms. Unfortunately, I don't have a straight answer for how to get into an investment banking role. I guess the willingness to work hard beyond the stipulated 8 or 9 hours a day was definitely a plus, but beyond that, it had been challenging to also prove how you could get the job done eventually or the value you brought to the team. For most of my peers it was mostly due to the fact that they were familiar with navigating the culture, having done similar internships before. In my case, it was probably my posturing as the go-to-coffee-boy for all the work that no one wanted to do. Mostly, I attribute most of this to being at the right place, right time and meeting with the right people (天时地利人和). That said, everyone has a different trajectory. In 2006, I had found myself then in a somewhat employees' market in which banks had been actively poaching from the accounting firms, creating a vortex of hiring, and I had been lucky to get dragged into the process. Revisiting "the want of money" Bankers during those hey-days were also raking in deals (most notably from the many S-chip listings) and taking home multi-year bonuses. I recalled hearing someone from one of the local banks earning thirty six months of bonuses. Even if his base pay was mediocre, the absolute quantum still sounded crazy. At that point of time, it was even common for bankers who got less than a year's pay in bonuses to jump ship just because they felt they weren't compensated enough. What a crazy world. To contextualise this to a working person with an average pay, just imagine: Bankers typically earned in a year, the equivalent of what everyone else outside of investment banking makes in 3 to 4 years. It also implies that after working for 7 to 10 years in investment banking, you could possibly retire for the rest of your life. It makes everyone else's job look like a joke. And yet there are still those in the industry who continue to complain about working the long hours and being under-paid. Fast forward 10+ years on, the frenzy of hiring and huge bonus payouts have significantly subsided. But the brutality of the work environment probably hasn't changed. Many fresh graduates today continue to worship the altar of corporate finance, chasing the money and prestige of being accepted into the bulge brackets. It is important to realise that there are many careers out there which pay decently well (but may not pay as "fast and furious"), if you stick it out consistently. It is obscene that bankers are paid so much for the work they do compared to most other careers. Therefore easy for me to say "do whatever makes you happy" or "be open to other well deserving jobs" when I have personally gone through and benefited from the system. Investment banking offers no guarantees At the end of the day, everyone has to make peace with whatever career you have landed into. Many of my engineering-schooled friends are doing very well today, even having not gone into banking roles. Some are in sales, business development, entrepreneurs, etc. After all, not everyone who lands an investment banking career is guaranteed to make lots of money and the promise of working on exciting deals. Most of the day-to-day work in investment banking tends to be iterative (and sometimes even borderline mundane). These include stuff such as research, spreading numbers and window-dressing a company's profile. As a junior or mid-level banker, you'd be lucky to get involved in and be a spectator in deal negotiations. Be realistic, you won't get to be portrayed a hero or a rockstar deal-maker. This is not the movies. However, you will be paid well and most likely be a target of envy for most of your peers who are probably earning only a fraction of your salary. By the time you reach director or managing director level, chances are that you will feel the mighty burden of revenue targets and also deal with the complex politics that come as part of the job. Hopefully during this time, you stay grounded and haven't gotten too used to a lavish lifestyle that will put you in golden handcuffs for the rest of your life. More important than the prestige that comes with investment banking, you really have to love what you do. The dots really do connect backwards. It is not so much about simply earning the big bucks, but whether you also appreciate the dynamics of the job and find a way to sustain yourself in that line of work for an extended period of time. As I look back on my cover letter dated in 2006, I recall of how starry-eyed I was when I applied for a role in investment banking. I had been lucky, yet, at the same time, it also reminds me of how far along I had come. I had applied for the money, saved some, spent some, invested some and lost most of it. I'd gained knowledge of the subject matter, technical skills and the experience, including the network of people, intangible resources built over the years, and spat out by the system. But. No regrets.

TLDR version Discount rate is investor-driven. Every investor has different expectations on returns, which implies the discount rate is subject to bias. The CAPM model for deriving cost of equity is historical-looking and based on the perspective of a fully diversified investor. As such its relevance to the future and the target company must be taken with a pinch of salt. Don't neglect the importance of analyzing future cash flows when using the income approach. Discount rate isn't everything. Most analysts and associates that I know tend to get very caught up in the math and precision of calculating the discount rate when it comes to doing discounted cash flow valuation. I have a healthy respect for the work and research that has gone into developing the industry standard for the discount rate or WACC (weighted average cost of capital) - which is extensively used by most people in the world of finance. However, in reality, I don't see why any investor should dwell too much on the accuracy and precision of the discount rate - especially when it comes to valuing deals in emerging markets. Warren Buffet summarizes this aptly: "Volatility is not a measure of risk. And the problem is that the people who have written and taught about volatility -- or, I mean, taught about risk -- do not know how to measure risk. And the nice about beta, is that it's nice and mathematical, and wrong in terms of measuring risk. It's a measure of volatility, but past volatility does not determine the risk of investing." WACC as a discount rate It reflects returns expected by all the stakeholders in the business. Debt holders get their returns in the form of interest and principal, while equity holders (shareholders) get their returns through dividends or whenever they sell their shares in the company. The model behind quantifying risk and returns are incredibly correlated with share price movements as public markets provide the most visible and transparent form of valuation. The theory is that: The share price of a company generally moves in tandem with the overall market. The riskier the company, the more the prices deviate from the benchmark indices. Risk in this case is driven by the industry dynamics as well as the amount of debt the company holds. More debt means more risk and therefore more share price deviation. The beta in the capital asset pricing model tries to quantify this. There are a number of factors that go into the calculation of the beta: Choice of company and market benchmark to compute the data points Relevance of the company being selected for the comparison Sample duration (1 year or 5 years?) R-squared of the dataset Assuming that you can accurately triangulate the above datasets, the outcome of the analysis is still inherently based entirely on historical data, which we already know, cannot be used as an accurate basis for predicting the future. Comparison is the name of the game in valuation. The industry-standard for deriving the discount rate involves comparisons with market benchmarks such as government bond rates, indices and comparable companies. In layman terms, what this means is: "If I invest in a similar bond or financial instrument and get a X% return, why should I invest in you for the same?" The discount rate for companies are priced at a premium because they are perceived to have higher risk than a certain market benchmark. In most cases, this is pre-defined as the expected returns from putting capital to work in a mature and diversified financial market with the following attributes: Little or no history of defaults on sovereign bonds; Triple-A rated by credit agencies A stable political governance framework (a possibly contentious assumption under today's incumbent president) and; The existence of a highly liquid and transparent equity capital market. The price movements in the markets are also dominated by different investor profiles: Hong Kong has been traditionally seen as the capital markets gateway for companies with significant exposure to Greater China, while Singapore is noted for its position as a "safe haven" for wealthy asset managers hungry for yields, making the listing of real estate investment trusts ('REITS') hugely popular with the its exchange. Likewise, the companies listed on the ASX, TYO and KRX are also largely shaped by the their home country's trade and industry dynamics. The resulting beta calculated from each of these markets will be to a certain extent, driven by the largest companies listed on the respective exchanges. An appropriate benchmark for a mature market? Most firms continue to use the US market as the benchmark. Research states that this is approximately 5.23%. Is a "mature market" in Asia - one which has stable financial and geopolitical regime - be compared and likened to the US? Can we equitably also say that the returns for investing in a mature Asian market are also 5.23%? Take Hong Kong for example: It is a key and unarguably mature financial center in Asia, constantly perceived as a gateway to China. In the last couple of years, the city has also been caught in the epicentre of social unrests stemming largely from geopolitical factors. How does one marry the two to derive the equity risk premium in a market such as HK? Can we appropriately coin HK as a stable equity market? For a foreign business looking to enter Asia/China, would you use the mature market risk premium as the basis for your budgeting calculations? Risk is ultimately a game of probability and uncertainty, and not volatility. Uncertainties are driven by external factors such as geopolitical events; while internal factors refer to the company's business plan which drives the visibility of future cash flows. In a period of significant uncertainties, the application of the discount rate becomes less relevant. Additionally, every investor out there has different appetite for risk, and these are shaped by their degree of understanding and comfort levels in the business and the market it operates in. Every investor who receives a pitchbook of a company profile knows that the valuation number in the deck is whatever the banker wants to portray in order to win the mandate. The discount rate is irrelevant. A smart investor knows that validating the DCF valuation presented by the banker takes more than just a meeting but a deep dive into the operating drivers and free cash flows. Rather than spend time dissecting and defending the WACC, you are better off analyzing the company's underlying fundamentals. Most business meetings involving pricing comes down mostly to market multiples: P/E ratios, EBITDA multiples, EV/Sales. These ratios are intuitive, easily applied and comparable across geographies and businesses. It may not be rocket-science accurate but at least everyone sitting in the boardroom has sufficient understanding of the literature to make a decision. In some cases, valuation can also be totally irrational. Investors will acquire a business 'at all costs' to gain a foothold into the lucrative markets of Asia regardless of what the discount rate shows. It makes the WACC calculation sound like a bunch of pig latin but that's the reality of asset pricing, especially in emerging markets. There are still many merits to understanding a company's cost of capital (read also my article on DCF and LBO). Cost of capital is important in capital budgeting and knowing the limits of your borrowing capacity. Unless the most important stakeholder in the room (which most of the time happens to be your client) asks for a scientific breakdown of the WACC, you'll find that most of the time, the discussions around valuation are going to be on cash flows and market multiples.

For most part of our education and up to university, we have been conditioned to conform and succeed. We have been constantly told and guided on what it takes to be a “successful person” and the parameters that define it. These include many things including - wealth, the “right” career, status, family, kids, education, being well liked and well behaved, etc etc - the list goes on. These ideologies gets further reinforced when we see the numerous self accolades and congratulatory messages on the social media feeds of our peers. In reality, life does not always go according to plan. Not everyone becomes a top achiever in their field or cohort, not everyone can get an impeccable score for their tests and be perceived as the role model playing immaculately by the rulebook. It's hard to live a life without blemishes or bumps. But I think being a perfectionist that way can be detrimental. It is not about being able to relate to others who are also imperfect or making you seem more real as a person. It all comes down to survival. In vaccinations, a weakened virus is being introduced to the human body. This "jolts" and disrupts the normal functioning of the human body but also enables the immune system to “learn” and defend itself from similar future external threats. Darwin’s theory of evolution also illustrates that perfectionism, in the form of inbreeding and lack of genetic diversity also results in weaker offspring. The blemish in the pedigree lineage is what makes the each generation of organisms stronger. It is the imperfection that makes them stronger and increases their probability of survival. Being too perfect makes one vulnerable to shocks - the shock of losing a job, money, health, basically anything precious. The little disruptions that throw us off the conventional course of life can be discomforting and at times debilitating. But they help build up our defences, make us mentally stronger and conditions us to be better prepared for other nasty surprises in life. Therefore, nowadays, when I see successful people being portrayed in the media, I don't always look up to them as perfect role models for where they are now. In getting to where they are today, many of them may have crossed many boundaries and broken many rules before getting to where they are today. Not to be pessimistic but many start-ups end up as failed ventures by following the conventional path of growth. Never try to be the perfect persona of what the world wants you to be.

Some days I just sit here and have a beer. Not on my laptop or iPad. Just sitting here, watching people go by, unwinding and decluttering my mind. The process, prima facie, looks unproductive and frivolous but it soothes and calms me. It clears the thoughts in my head so that I am able to think and make better decisions especially in situations when I do not have the luxury of time to react. I acknowledge the irony of it with the beer glass in the picture.

So few investors / punters do due diligence on the companies they invest in. Many people jump too quickly into the bandwagon because they believe that the large and reputable investors have got it figured out. They think that if the big wigs are there, "something must be right" or they must have access to proprietary information that led to their decision. "They must see something in there that we don't" These funds have several hundred investments across hundreds of millions of dollars. If one investment goes south, they rely on the rest to keep the entire portfolio afloat. Are you diversified enough that way to take the risk? The next time you put your money into something, think again - is FOMO driving you? Are you absolutely sure about what you are getting yourself into?

About 10 years ago, people were laughing, criticising and maybe even booing at the older generation of politicians for attempting to connect with the younger 4G/5G population using social media. Today, our prime minister's Twitter account has nearly 800,000 followers. Likewise for some of our other politicians. Whether this has helped in influencing the elections, no one can really say, but certainly this has helped in enabling more voices from the public - for good or for bad. Besides, there is also a host of other factors influencing popularity and voting - personal interaction, perception from other media, etc. But this number is still outstanding on any level, whether in the government / public or private sector. Not every company out there has that ability to amass that many followers. And it shows the importance of managing public relations at the digital level. So when I hear the “campaigning vans” circling our estate these few days, I think: “This must be how elections” were done in the 1960s and 70s. There was no Internet, no TVs and the only way candidates could get word out was to announce themselves over the loud hailers and door knocking. The door knocking still happens today though - and nothing can replace the human touch. But today's election rallies go beyond the door knocks. We have Facebook live videos, Zoom 'townhall' webinars, Instagram stories, etc. I am not sure if the older generation resonates with this (probably why there is still door knocking and vans still patrol the streets). Quite a few of them I know are still pretty resistant to posting stuff online, doing internet banking and making online payments. Only time will tell whether or not these have been really effective, but for now, based on the viewership numbers and the real-time comments appearing during those live feeds, these digital initiatives seem to be the one thing in this year's election that is proving to be giving the social media saavy people an edge.

There’s nothing you should regret in life - all the good things that you have today are a result of everything that has happened. Consistency has a compounding effect. You usually don’t see the results until a very long time later. Never look down on anyone because of what they do. Complain less, stop victimising yourself and move on. General knowledge, financial literacy and personal health are ultimately your own responsibilities. When traveling, take the cheapest and happiest mode of transport available. Never kick someone when they are down. Learn to give and receive compliment and feedback. Don’t ever get cocky. Ego and wealth are like items on a balance sheet. Here today and possibly gone tomorrow. Being hands-on is the simplest and purest form of leadership. Find the courage to disagree. Own your mistakes. Run your own race. Don’t ever believe that you can second guess the stock market. Pay it forward by learning to teach and mentor younger people. It is not where you work that is your source of economic power - it is your health and attitude. The media is curated by people who are biased. Everyone has a bias. Be critical and discerning, don’t believe everything you read and hear. In this day and age, a healthy digital footprint is important. Anyone who tells you otherwise is smoking you. When someone says ‘just trust me’, you really should think twice. Invest in a tailored shirt, and a good suit. Don’t cheap out on ties and a good pair of shoes. Dressing well shows that you take your business seriously. Candidates with decorated CVs and impeccable credentials do not always make the best workers. Never believe someone who says that they are purely helping you out of goodwill and have nothing to profit or gain from doing so. Be a jack of all trades and a master of at least one or two. Even in the most helpless of situations, it is absolutely critical to have a healthy sense of optimism. Treat investors’ money as your own. A fantastic career not only enables you to pay your bills but also pushes your limits, builds character and helps you to grow as a person. Never compromise on quality. Focus on creating a great product rather than calibrate quality to price. Never limit yourself by the stereotypes placed on you by others. Bell curves and rankings are just part of a game played by people with their own agendas. Just because you lack the vintage of a good school or a “bulge bracket” doesn’t give you an excuse to underperform. Not everyone who is older than you is wiser than you. Wisdom is acquired through working on the day to day chores, not age. Contrary to conventional wisdom, people don’t really change that much. There is a difference between keeping still and not doing anything. Make sure you are on the right side. You can’t see where you are going if you keep covering your eyes on the way down a rollercoaster ride. Never allow social media to define your identity or create a false sense of security. Life is not measured in terms of likes and followers. Everyone is entitled to their point of view, but only the people with skin in the game get to make decisions. Most people who are looking for your opinion usually don’t want you to disagree with them. There is no such thing as ‘I have no choice’. You always have the right to decide. Age should never be used as an excuse for not being up to date or learning new stuff. Usually, no one is incompetent. Everyone is good at something. Some people are just placed in the wrong places at the wrong time. If you can’t get to keep your money, there is no point in proving that you are right.

I must have gotten myself in the "wrong" career 14 years ago. Last weekend, some guy called me on my mobile saying that he had gotten my contact from his friend who works at a bank. I don't know the banker but I reckoned it was passed on from one of my friends. So this person who called me operates his own business. Private company, SME, typical entrepreneur who founded, grew the business and now kind of stuck in a situation where he basically can't take his foot off the pedal. He had reached a bottleneck and was faced with the choice of either continuing to toil at his company for the rest of his life, or exit and cash out. "Why don't you hire your banker friend to find you an investor?" Apparently, his friend had felt that the deal was too small for the bank to warrant a proper M&A mandate, which is probably why he decided to called me. But the advice didn't stop there. His friend went on to recommend that he should not pay any fees for advisors who were helping him to find a buyer. "What should I do? I don't want to pay fees." I told him (through the phone) that he should hire someone, groom them to help him run the business and who could someday take over his role. I said that it wouldn't be immediate and will take some time, possibly 1-2 years. I also mentioned that he'd need to also invest time to train this person, but the upside is that he would be able to gradually take his foot off the pedal. "But then lidat it'll hit my bottom line and profits..." Good grief. You want someone to help you to do the work of finding investors but you don't want to pay them for their time. Not to forget the contacts acquired during the investor search process. You are also not willing to invest in your staff to help you with your business, yet still want to make decent profits by shaking leg? You think everything is free ah? It feels like boutique and smallish M&A shops were set up to work on deals that fall through the cracks of the large IBs - for free. The M&A fee model is broken. To understand and make sense of why this is happening, we must look back in time to the pre-2008 global financial crisis when financial advisors billed their clients based on an upfront fee, a monthly retainer followed by a completion / success fee, depending on the scope of mandate. This model was broken after 2008, when pure investment banks were rolled into less risky commercial banks as part of a global systemic de-risking process. The consolidation of the functions turned banks into a one-stop-shop for loans, leveraging proprietary industry networks and providing strategic advice for raising capital. They had started to market themselves this way, building the case for getting a foot in an M&A or IPO deal by offering loans to companies. In the post-GFC low interest rate era of 2009, this accelerated the entire process, resulting in the likes of Stanchart and HSBC emerging as the new kids on the block coming out from that crisis. Many of them even went one step further by working with the private banking side, managing the wealth of business owners, especially those who reaped a bounty from a recent sale of their business or cashed out some from an initial public offering of shares. It was a complete solution. Lend to these companies, help them to grow, acquire overseas or sell non-core businesses, find a strategic or financial investor, sell shares in the capital markets as part of an IPO and park the sale proceeds with wealth management. The banking model transformed and the larger, more established market players had figured an ingenious way of getting fees out from every single step in the process. In doing so, companies also figured they could stop paying retainer fees for sale processes (regardless of how complex the deal was) since they were already existing clients of the bank. And so, the no-retainer-success-fee-only trend just caught on. The advisory market in Asia is not only crowded but incredibly fragmented, in addition to waiving the retainers, banks started to outdo each other in a cutthroat competition of reducing their success fees. I don't blame companies for wanting to pay only success fees on M&A and capital raising deals because the large banks have been spoiling them over the last decade. The investor search process has also changed dramatically due to globalization and digitization. Most of the important work in a sale process is really about knowing where to look. Number crunching and beautiful marketing presentation decks just make the exercise look professional. Most sellers don't crave for that. Over the last 10+ years, a lot of people have been travelling across borders, discovering new markets and pools of capital overseas (not so much now due to the coronavirus). This makes it easier for both sellers and buyers across the globe to meet on their own terms. The availability of online investor databases and sensationalized media reporting has also led to sellers being more independent in their search of the right buyer. The process has gotten so dynamic that a lot of 'agents' with decent full time jobs also do "M&A work" on a part time basis, getting a cut of the fees in return. Is the pure-play M&A advisory still a good business to be in? We can all cry foul over companies not wanting to pay retainer fees, but in the most realistic sense, this is just a consolidation at play where only the bigger players with the full spectrum of banking solutions are able to be in the business. The revenue from commercial lending subsidizes the deal-advisory overheads. How will this evolve and change over the next 10 years? I don't really know. Will this be the status quo dominated by the larger incumbents? Will we see an onset of 'robo-like' advisors eventually eliminating the traditional financial advisor's role? Will companies be able to do book-building for IPO roadshows without the need to hire bankers?

The last few months have been colorful. From the 1MDB case, the downfall of Luckin Coffee, Hin Leong, and now Wirecard. Who dare says now that the lack of transparency and fraud only exists in emerging markets? Firms in mature economies are equally susceptible to financial misconduct, and this is even if a Big 4 firm signs off on the accounts. I've sat in a small part of an auditor's workflow many years back when I started my career in finance. It is not glamorous. But the partners and managers onsite make the entire process look and feel extremely professional. Don't get me wrong. I think audit is a decent job and an essential service for the proper functioning of all businesses globally. A lot of work goes behind organizing and presenting the 3 financial statements, and many shareholders and institutional investors often take this for granted when they download it off the company website to read or when they receive the hard copies in their mailbox. But that said, very few really know the work of an auditor or even how finance processes in companies work e.g. how an invoice is being processed and reports generated, how cash is being deposited into a bank account and the corresponding salaries and expenses paid out to employees and suppliers. Not everyone appreciates this - especially when you are an employee sitting comfortably behind a desk. As an employee, analyst or investor, you pick up the audited financial statements and you expect that the numbers to be "the Word". If the cash in bank line item on the balance sheet reads $100 million yesterday and the company isn't expecting a huge payment out to creditors today, you'd assume that there is really $100 million in the bank today. In reality, that $100 million is 'virtual' money. Unless you sight the bank accounts that contain the cash, there is no reasonable way to ascertain that this is correct. The same applies to trade receivables and inventories - have you tried walking into a manufacturing plant or warehouse to count and add up all the machines and stores? It's not so straightforward. I've counted machines on racks and also gone through the process of collating bank statements and validating the totals, ensuring that the total cash reconciles with the cash line item in the balance sheet. It's significantly under-appreciated and tedious. The rest of the world assumes that someone has gone and done this work. So whenever a fraud happens, the first thing investors blame are the auditors who sign off on the numbers. Auditors then turn to the company directors and say the disclosures aren't accurate and adequate. The whole exercise turns into a domino of a blame game, unfortunately. But that's how the world works and at the end of the day, while you can seek recourse for negligence, misconduct, etc, the damage has been done. Investors are the ones who have lost their monies. The head of the snake (possibly) goes to jail, and everyone else working across the value chain got paid, and that is the moral hazard here. Where does the blame game stop? In 2002, Enron's financial scandal resulted in the bankruptcy of long time accounting firm Arthur Andersen. While AA were the biggest casualty amongst third parties, many questioned whether or not those who played a part in advising Enron had a part to play in its downfall. "What accountability does it--or any consulting firm--have for the ideas and concepts it launches into a company? If in fact McKinsey should share the blame because of the ideas and concepts it launched into Enron, then why stop there? Perhaps you should also blame the brilliant professors at the business schools from which McKinsey recruits many of its consultants and who may have taught the same concepts to Enron executives." - Bloomberg One of the readers probably says it best: "As a longtime management consultant, I must take issue with your understanding of the management-consulting process. A company will frequently seek advice and then argue for the opposite conclusion. Or the company will partially implement your suggestions, often because it has sought advice from other professionals who provide conflicting advice. In addition, you ignore the political dimension. Frequently, the client has the right solution in-house, and the consultant merely resolves the internal conflict--with the added bonus that management doesn't have to take responsibility should things go awry." Consultants and auditors provide the appropriate check and balances required by every large organization. In good times, nobody cares. It is only when shit hits the fan that the relevant stakeholders come to light. Suddenly everyone wants to know the person who signed off on the books. So, consultants are effectively there to 'backstop' blame. If someone on the inside wants to siphon money out, these people should be really careful and not be afraid to ask the difficult questions, even if it costs them. But then again, it's hard to bite the hand that feeds you. If you owe the bank a million dollars, the bank owns you, if you owe the bank a billion dollars, you own the bank. Ditto for credit agencies and auditors. As cynical as it sounds, what this brutal cliche truth is: Be careful with your money. Most asset managers often invest using someone else's money. But that is never really the same as using your own money. Good market, you get more; bad market, you get less. Either way, at the end of the day, you still get paid. And since cash flow is the yardstick here, when an investment goes sideways, the guy who puts his money on the table ultimately gets the short end of the stick. When money talks, people will try to pull wool over your eye and show you only what they want you to see. No banker sells a lousy product, they call it a "high risk" investment (there's a reason why they named risky fixed income instruments junk bonds). It is catchy in the world of finance and somehow for some reason, investors like the idea of dabbling in a game of probability every now and then when the stakes are high. But risk is perception based, and everyone's idea of risk is fundamentally different. It is not only a function of one's appetite to invest, but also reflects access to all available information. To make it even more complex - it is also driven by individual interpretation of that information, even if you did have access to it. Based on this definition, any investment made by an unsophisticated investor is almost always deemed high risk, regardless of the quality of the underlying investment. My high school friend who used to work in fixed income used to tell me: Everyday we flip open the papers and read exactly the same stuff in the news, yet what you and I see and what others see is entirely different. If you put your money down on the table and lose it, you only have yourself to blame. That is the only rule of the game.

Since late last year, I had done numerous webinars. But none with a class size of 23 people. It was the largest I had ever done online. As much as I would have loved to do this class in person, safe distancing measures effectively means classroom lessons were not allowed. And I can understand why - after a full day's session to speaking, I could basically see the dried up stains left on the screens of my laptop and iPad - no joke. Imagine the intensity of the germ clouds overhanging within an enclosed space of 20-30 people. But I enjoyed it greatly, these virtual classroom lessons - You can actually learn a lot by doing webinars. After conducting numerous business and valuation classes on Zoom and hosting a couple of webinars, I grew accustomed to the feeling of speaking using the headset or earphones to a group of people I couldn't really see. Like most trainers, I am used to the traditional classroom setting with physical interaction and discussion. On Zoom, while there is still interactivity through the microphone or through the chat functions, I felt that the single most important element that was missing is spontaneity - the fun of making a random comment or remark and receive almost instantaneously, a knee jerk response from someone in class. And because the courses I conduct are largely hands-on, the difficulty level goes up a notch because if someone encounters a problem in their workings, it is more challenging to try and troubleshoot those for them as compared to just walking up to them in a classroom and doing it right there. I also hope that most of our participants were using two screens to stream the webinar - one for the presentation slides and the other for their spreadsheet workings. I can't imagine the struggle faced by those who are toggling between windows on a single laptop. But these two months had been an incredible learning process - not only on how to conduct a smooth online lecture, but also how to more effectively engage people over a video meeting. This involves constantly asking questions, shorter but more frequent coffee breaks, being comfortable in being able to laugh at oneself even though you may not be able to see everyone else's expressions, clarity of speech and many more. I'm on track to be a "Zoom master". While I can say that I'm getting the hang of doing this online, I sincerely hope that the offline workshops will return along with the easing of travel and movement restrictions.

In the early days of graduating, a lot of people were surprised why I went into banking from engineering. It was a huge move, and to a certain extent, looked suicidal as well given I had no prior knowledge to finance. I was far more handicapped than any fresh graduate today that was seeking entry into an investment bank. Today, after 14 years, no one saw this degree as an awkward handicap. In fact, most people that I meet today thought that the study of engineering gave me the necessary foundation to build my knowledge in the world of banking. I strongly believe so as well. Hard to imagine that I had went this far without receiving any formal education in accounting. And because of that, the way I look at financial statements is fundamentally very different. I understand most of the valuation theories but everything has to be very logical for me. Although I am admittedly a poor student when it came to grades, I credit a lot of the mindset that I have today a result of rigorous training and analytical skills acquired during those 4 years in engineering school. I chanced upon this video I took way back in 2003 (about 17 years now). It was a project in year 3 of engineering whereby students had to get into groups to build a remote controlled car literally from scratch. You were being graded on not only the basic functionality of your car i.e. whether it moves according to how you programmed the remote, but also any additional functionalities. As demonstrated in the below, we added a module that would automatically turn on the headlights of the car under low light, using a light sensor chip. The ironic part about the entire project was that: while we managed to program the direction pads correctly and even added some interesting features to the car, the live demonstration could only last no more than 5 minutes. The car ran on a single 9-Volt (6LR61) battery then. It was rechargeable, and every time we ran the tests and used up the cell, we had to go back to the lab to get it replaced. It costed $12 each time. To make matters worse, we added a finishing touch before the final evaluation, constructing the entire chassis using steel scrap bought from the streets at Sungei road, effectively doubling the weight of the car. Within 30 seconds from switching it up, it gave it all just to be able to move forward-left, forward-right, flash its headlights once and then the battery gave out. The weight of the car was just too much. I think we must have easily replaced 4 to 5 batteries that day. Engineers may not be the most commercial of people - not at first. But they try hard, learn fast and are resourceful. People give us too little credit for being practical people. When I started out my very first job (2 weeks after my last exam paper in the final year of university), I managed to snag a job working alongside the Chief Engineer at Philips Institutional TV. My main task at that point of time was to build a working prototype of how the software interface would look like on their TVs. As we were nearing completion, the Chief Engineer asked me, "Does it work?" and I replied, "Yes". And he would say, "We are engineers, if we say it work, it better work!". We passed the module eventually with a B+.

Google has allowed staff to stay home for the rest of the year. Facebook has also allowed staff to permanently work from home. Is it because the companies are adapting to a new modus operandi or is this a subtle exercise to start furloughing staff? Tech companies probably have the best advantage in being able to pivot into this work paradigm amidst the pandemic. Most companies are also going digital and some even have business continuity procedures in place. But a large part of what makes going to the office so meaningful are its perks - the experiential factors such as having a decent and professional business-front for clients (meng mian 门面), a place to facilitate employee welfare and thoughtful engagement. Besides, have you ever tried to troubleshoot a problem on the computer with someone else through the phone? The time it takes as compared to an in-person interaction is almost always lengthier and more frustrating. So in the near term, you can say goodbye to those sleeping pods, luxurious pantries and fridges lined with free snacks, drinks and sometimes beer. Clients, visitors and employees are not going to be able to experience that feeling of taking the escalator up to the 3rd floor at the very classy looking Marina One Towers and be greeted by the uniformed concierge. Flexi-work hours long overdue? For some time now, we have been talking about encouraging work-life-balance and flexible working arrangements beyond the "9-to-5" regime, especially given how inter-connected we are with using Whatsapp, Wechat and now increasingly, Zoom, Hangouts, Webex, Microsoft Meetings... the list goes on. It seems like the circuit-breaker and lockdowns resulting from the pandemic has compelled businesses to evaluate this more seriously - not from a working preference perspective but out of necessity, given the draconian rules around social distancing in some cities. I personally prefer the office setting - I enjoy my daily (and sometimes weekend) commute to the office using the subway (in Singapore) and the morning leisurely walks from Anfu Road (when in Shanghai). Before I ventured into my own business, part of the office experience included interactions with colleagues in other departments within the same building, some times we would even brush shoulders in lifts or hang out over lunch and coffee. The cityscape and its people energizes me. I feel more productive and focused whenever I am at the office, whether alone or with colleagues. I enjoy sitting with my cup of coffee and overlooking the view outside. Can we really afford to leave all of this behind? If so, does it also imply that we are willing to accept emptier malls and offices as part of a new way of life? When the dust has settled, there will be increasingly blurred lines between work and home. Face to face meet ups will never be eradicated, but flexible work arrangements will be a permanent thing. If any, video and communication technology accelerates breaking the ice in a first meeting by encouraging more upfront interaction, albeit digitally. Studies have also demonstrated that, as humans - at the very basic level - we yearn for tangible interaction because it gives us comfort and re-assurance. Lifestyles at home over the last 2 months have definitely also changed to adapt with the circuit breaker measures. Similarly, offices will also be increasingly "re-defined" beyond the traditional cubicle and four walls. We have seen this already happening with Small Office Home Office ("SOHO") setups and more recently, the increased popularity of co-working spaces. The office used to be a place that is defined by large executive rooms with full length glass windows, fixed sitting configurations and sometimes the iconic 'Bloomberg-styled' twin computer monitors at our desks. Office is also where the action takes place - small group discussions over coffee with colleagues, board meetings, team lunches, town halls and inter-department networking. Going back home is basically a retreat into the "untouchable" sanctuary of one's personal space. In the last 4-5 years, we had successfully blurred the boundaries between work and home, by allowing Whatsapp / WeChat to also invade our personal time. As more work-for-home policies are being implemented, not only have we been 24-7 digitally available, but now also deemed to be also physically available while at home. I am not saying this is necessarily a good or bad thing, but Such a paradigm shift in lifestyle will require employer and employee to exercise self-discipline and discretion to maintain or improve the levels of productivity previously seen in our traditional work environment. Work spaces will also gradually converge with residential and lifestyle spaces. And those who prefer not to work from home may also find themselves hanging out more frequently at cafes that have stable Wifi, a good working beverage like coffee and appropriate distancing measures in place. I agree that the reopening plans for the economy "will not be a return to life before COVID-19". But neither do I see us retreating entirely into the digital realm. Take a step back into memory lane and read the May Day rally speech by PM Lee in 2003: "Life will not be the same again" - 2003 May Day Rally Life was indeed not the same with additional precautions being taken, but we have certainly been through a similar situation and that did not deter us from going out. At some point of time, with appropriate flattening of the curve, more accurate testing and a stable infection rate, society will return back to normal.

It's exactly day 34 since the circuit breaker as I am writing this. Much of my daily life has been largely revolved around the four walls at the home and the view of the outside from my window. The streets are noticeably quieter, and the reality of the circuit breaker becomes even more obvious when you step out to buy food - Instead of the usual hustle and bustle of people sitting around, the counters of the Burger King outlet near my place is lined with bags of burgers and queues of delivery drivers and residents waiting to collect their orders. Instead of enjoying my meal at the outlet, I now have to deal with the mess I make at the table at home. I've also probably had more burgers than I should have in a week. But after 34 days at home, it's hard to have much variety (at least from my perspective). Live to eat or eat to live? So I missed the good old days where we ate out. Who doesn't. I like my Japanese noodles served hot in a bowl. I enjoy the ambience of the shop, the view of the chefs in the kitchen preparing my noodles and the staff 'yelling' occasionally as the orders are taken. The taste of ramen cannot be matched by the authenticity of eating it in Japan itself, but a lot of the shops in Singapore have done a good job of trying to replicate it. Unfortunately, this is not going to be possible, at least until June 1, maybe even longer? Who knows? Because part of having a good ramen is the dining experience, I had so far refrained from ordering any takeout until recently. With the number of COVID cases reported globally not abating in most parts of the world, there's always an overhanging doubt: will this eventually be a "new normal" in the way we eat? The whole eat-at-home experience also led me to realize that as introverted as you may be, dining - at the end of the day - is a very communal thing. Like it or not, without the company of good friends and/or family, eating is just eating. This is true not only for Asian civilizations but also many European cultures for example in Spain when the dinners last past midnight. Yes, dining can be considered a privilege, but unless society descends into anarchy or another pandemic decides to wipe out the bulk of our food supplies, humans still live to eat. Understanding this gives me a little bit of comfort that at some point of time, restaurants and food outlets will eventually come back to life once the pandemic has subsided. And I think the same applies with many other aspects of life and businesses as we previously knew it - air travel, tourism, conferences and meetings. Can Zoom and other virtual meetings replace the way companies transact with each other? Would you take a tour of the glaciers at the comfort of your computer without having to set foot on Greenland? Because the existence of the virus is effectively challenging the very innate want of human beings to go out, interact, trade, etc. At some point of time, I believe people will figure out how to make this happen - perhaps not so much by adapting businesses to the new normal - but by figuring out how we can both contain the virus, as well as, put in place new mechanisms / procedures that will enable all of us to step out and enjoy the sun again. PS: The takeout ramen was good.

Schrödinger's cat Schrödinger stated that if you place a cat and something that could kill the cat (a radioactive atom) in a box and sealed it, you would not know if the cat was dead or alive until you opened the box, so that until the box was opened, the cat was (in a sense) both "dead and alive". This is used to represent how scientific theory works. No one knows if any scientific theory is right or wrong until said theory can be tested and proved. In business valuation, the pricing estimates done by analysts can be thought of both right and wrong, until proven by the market via an actual transacted deal between a buyer and seller. Disclaimer: I've never had much luck with stocks, which is sometimes quite the irony. I had spent countless hours before formally entering my corporate finance career learning the technicalities and ropes of valuation in hopes of being able to price a company correctly. Even after that, I've spent even more time working on countless models, valuing and running scenario analyses for different companies. Yet, in my poor judgement and over-compensated experience in investment banking, I could never get the pricing of businesses right - at least 90% of the time. In one meeting, I clearly remembered showing a company profile to a client which clearly showed that its share price was trading at historical lows. We were pitching them as a potential acquisition target. Because of its share price (and on hindsight, possibly also the lack of sufficient earnings consensus data), the forward price-to-earnings multiple was so low that mathematically, it was a no-brainer that the acquisition - regardless of how it was funded - would be earnings accretive. Fortunately the client didn't buy them (both the company and the idea) and the stock went into administration / receivership less than a year later. And you thought bankers had all the brains in the finance world. Asset pricing is full of bias For publicly listed companies, so many factors go into the pricing of their stock. Bankers and analysts run their DCF models and communicate valuation to potential investors based on their house view of "realistic growth" - which is pretty much predicated on and driven by the calculated guesses of the target company's CEO and CFO, people whom we trust are in the best positions to comment on an appropriate growth of the business. There's nothing wrong with trusting their numbers, except that this is subject to both experience and motivational bias. Who is to say the numbers are wrong? "This country needs a vaccine and you are going to have it by end of the year" - says Trump in a CNBC article. So when someone in a position of power says something like this above, I wonder if the intelligent analysts around the world are going to factor in a scenario of a year-end vaccine in their models. Trust but verify If you were smarter or came from the industry, you might be able to validate information coming out from management. Otherwise, you're pretty much left to the mercy of the company's guidance and/or research data done by external parties. Those same data are being gathered by humans on the ground and put together in a systematic and presentable way to be sold at a fee to investment banks and advisory firms. The excel valuation model that you do is basically a output from a "black box" of mathematical functions based on a series of numbers backed by those research. You can run the financial model a hundred times over, but yet you'll never be able to predict and foresee if a business is really valued that much. Why? Beyond the spreadsheet The common approaches to valuation for a growth company i.e. the market and income methods - are based almost solely on a single or few data points - next year's and subsequent five years financial estimates. Those future estimates of cash flows often do not take into consideration other critical factors such as: Cash collected (or more importantly - uncollected) from customers: a commonly overlooked metric in due diligence, found under the detailed notes of trade receivables in the financial statements Quality of revenues: whether customers really continue to buy the company's products over the longer term (for e.g. Apple) Management integrity and fraud: which has come under much spotlight recently especially with a number of US-listed China stocks such as iQiyi, TAL and Luckin. Geopolitical shocks: as what we are experiencing now with COVID-19, US-China trade tensions, food security, North Korea, changes in political leadership in different countries, etc All these are compounded by the fact that you are projecting free cash flows over 5-7 years and then applying a "terminal value" to arrive at a valuation. If you do the math, this "terminal value" often takes up 60-70% of the total business value, which means: After pulling all nighters and sitting through detailed interviews sessions with the management on their 5 year plan, and doing extensive research on what drives the industry, you are basically throwing more than half your weight and work into two BIG woozy variables - the long term sustainable growth rate and the weighted average cost of capital. Apart from the need to have some basis for negotiating deals, I don't believe in the practical application of terminal value to estimate the price tag of a business. Information is the one big thing that drives the price of a stock. Any unsophisticated retail investor can price a stock even without a properly functioning financial model. If there is proprietary information on a company, not known to the public and is expected to positively impact its outlook, there is a window of opportunity for the investor to profit from it. I am not talking only about proprietary information not only in the form of "insider news" but also proprietary intelligence, analysis and field research. At the end of the day, it is essentially about data collection and scrubbing. The closer you are to the source, the more confident you become about the credibility of that information - this is information proximity bias. But it does not automatically imply correct-ness. Your belief in that information is personally shaped by your knowledge in the subject matter and the level of trust you (and only you) have in the source. Many punters and investors get their hands burnt by relying on market rumours without first doing their homework - both in the form of understanding the company and perhaps more importantly, validating the source of that information. Whenever I receive unsolicited stock rumours and tips nowadays, I tend to assume that this information is already stale i.e. If someone is telling me that this company worth shorting or taking a long position, there is a high chance that this person has already taken a position, and it is also likely that the person before has also done the same, so on and forth i.e. two to three degrees away. There are no free lunches. Perhaps more important than the integrity of information itself is to ask: What does this person stand to gain from sharing-revealing-publishing this piece of news? Movements in the share prices of companies are very difficult to predict and understand. Many stay-at-home traders and professionals alike use technical analysis such as charts and patterns to try and explain why share prices move in a certain way. Some even claim to be able to feel the market sentiment. This ideology in itself is very complex for me. Not only is it self-fulfilling on a certain level but also potentially dangerous because it could ultimately lead you to believe that your way of thinking, your ideology is correct. The thing is: No one can really predict how stock prices will move. It's 50-50 every day. It's either up or down. And those are the odds that you deal with every day. Beyond charts, patterns and fundamental analysis, the movement in share prices are also driven by huge chunks of shares being exchanged by big institutional players such as hedge funds and asset managers. For larger companies, sometimes a dedicated team can be staffed to perform "treasury operations" which simply means buying and selling its own shares in the market - a 'loose' way for a company to control its share price in order to prevent sudden spikes. The power of publicity. The news and media are also very important catalysts to a company's share price. This also includes analyst coverage and recommendations on a stock. Because the information is in public, any revelation in the business will often result in significant share price movements. Perhaps the most obvious examples of these are investor activism and short seller attacks on public companies. Your DCF models, charts and expert research just aren't going to cut it if the information doesn't get picked up by the media. At the end of the day, business valuation and trading equities are a very personal thing. Every one sitting behind the desktop sees the same information and the same world in very different ways. Their views are inevitably shaped by their backgrounds and experiences. Also, the first-hand information of one person is another person's second-hand information. Like it or not, the sentiments and confidence of both parties looking at that same piece of information, is going to be somewhat different. And as a result of that, their decisions to buy or not to buy are also based largely on their own analysis and best judgement.

A convertible bond ("CB") is like the multi-flavored ice-cream: It's not plain vanilla (pun intended). Modelling convertible debt in excel can be confusing. The accounting treatment considers both the CB as a debt as well as equity. Accounting for it as a debt uses the present value of all future coupons and principal assuming it's a plain vanilla debt. The difference between this future value and the CB issue price is basically the equity value in the CB. Consider this: A fast growing company is looking for additional funding to expand its business. There are a few options in the market but the owners prefer not to raise new equity because the value of the shares at this juncture are lower and they do not want to dilute the company too early on. One option is to borrow a simple loan from the bank, which will likely charge them an interest rate of say 12%: Alternatively, they could also raise this $1 million as a convertible bond i.e. maintaining that obligation to pay a fixed amount over a period of time while at the same time allowing those investors to enjoy some upside through converting the bond into equity at some point of time in the future. This equity element in the bond allows lenders to potentially gain from any increase in the company value in the future. At the same time, their downside is somewhat protected because they can always not convert and fall back on the fixed coupon payments. Because of the above mechanism, it only makes sense for the business owners to pay a lower coupon on the CB (otherwise they are better off just raising plain debt). Let's assume a CB with a coupon rate of 8%: To account for the value in the CB, we go back to our analogy of our multi-flavoured ice-cream: valuing the liability and equity components separately. Valuing the liability component in a CB We value the liability in a CB much like a plain vanilla bond i.e. using the 12% as the interest rate (also the discount rate) and calculate the present value (PV) based on the fixed income payments of 8%. In this example, the bond matures in 5 years. The value of the liability component in a convertible bond is calculated based on the present value of all fixed coupon payments from the CB, discounted by the interest rate of a plain vanilla debt. Value of liability = NPV(12% , coupon + principal repayment) Valuing equity in a CB There's no real way to value the future equity in the CB, hence, the value of equity here is the plug. Value of equity in a CB = CB principal - value of liability So the proforma balance sheet at the onset looks like this: Assuming none of the bonds get converted over the term of the bond, the accounting treatment for the liability component in the CB would look like this: Assuming a non-conversion event, the liability of the CB at maturity is basically issue price of the CB. For every successive year that the CB is not converted, the value of the liability component increases as it approaches maturity. This value of the liability component on the books is adjusted yearly based on the difference between the actual coupon paid and the 12% interest rate i.e. what the company would have owed the lenders based on issuing a 12% plain vanilla bond. Also, for every year that the CB does not convert, this results in sunk costs for the company i.e. the 12% coupon or the cost of debt - which hits the company's retained earnings: What happens when the CB get converted? Let's assume that the CB holder converts in year 3 before maturity. The liability component is extinguished and the company is free of debt. Next comes the treatment of equity on the books. (1) Firstly, the face value of the CB upon issuance is immediately swapped into share capital of the business. A straight swap of debt into equity. (2) Remember retained earnings does not change because it reflects the sunk costs of issuing the CB so it still takes into the interest accrued by the CB coupon in that year. (3) The share premium reflects the difference between the swapped value (or the issue price of the CB) and the outstanding value of the liability component in the year of conversion. Editable worksheet below:

Days like these make you think a lot about how adaptable humans can be. You can keep us at home and restrict our movements, but some way or another, we will find the means to make do with what we have and some times even improvise - like I've come to learn that you don't need to go to Yoshinoya for a beef bowl, you can easily make one at home with a gyudon packet from Donki. And instead of my usual cup of magic, my mornings are spent by the window with a butter cookies dipped with a strong dose of Nespresso. Surely productivity across companies must have gone down during the last two months. Not solely because people are confined to working from their homes and are distracted by other chores, but largely because most of everywhere else in the world has basically come to a standstill. It's hard to say which is which but I think one drives the other. Where do we go from here? I don't think we will stay this way for long. Peer-to-peer interaction is still very much the core of civilisation. I was watching a property webinar today on how the real estate market has basically weathered every known recession since 2000. One of the anecdotes that was shared was: Do car accidents deter people from driving on roads forever? No. People don't stop driving just because of one or a few accidents. Humans are adaptable. We invent traffic lights, implement anti-lock braking systems, we impose harsher penalties on errant traffic offenders and we educate the general public on road safety - but we certainly won't ban people from driving. If life throws us a curve ball, we adapt. If the virus takes away in-person meetings, we use Zoom. So we can't eat outdoors, we just call for food deliveries. Businesses will find a way to re-purpose themselves e.g. makers of luxury goods will make masks; airlines will continue to operate by transporting cargo and private car drivers will do step up to fill any additional demand for food deliveries during this period. Doctors around the world continue to test and treat patients everyday. So maybe the optimism in markets these days isn't so much about whether stocks have 'bottomed out' or if scientists around the world are on track to find a cure for the virus. There is just too much we can learn about these pathogens. They evolve and even if we suppress them today, who knows what lies in store for the next few decades. But for now, the world looks hinged on the confidence of our survivability. Such is the adaptability of human beings. And in days like these where people are dying by the thousands everyday from the virus, rather than be a sourpuss, sometimes all we need is just a little optimism.

Day 4 of Singapore's so -coined "circuit breaker". This is how my re-designed work space looks like. My daily routine has totally been disrupted. I used to frequent the cafe that's near my place around 8-9am in the morning. I would sit there to start the day reading news, emails and top stories from the night before. Depending on the morning schedule, I could sit there for hours right up till lunch. These days I spend the entire mornings at home. I think this is a very trying period for many people. These are very uncertain times. Sure, I've been through economic uncertainties - the global financial crisis in 2008 which saw 100+ years-old Lehman vanish, the Eurozone crisis in 2011 and the oil supply glut in 2015. These crises were mainly driven by financial markets. People were nervous, some lost jobs and there was a lot of jitters in the office at times. So back then as an employee, I just sat tight, kept my head down and did my work. It was tough and everyone knew bonuses would be bad, salary increments would be crimped. But this time it was different for me. This is possibly the very first time I am experiencing a worldwide financial crisis and pandemic as an employer / entrepreneur. I worry not only about my own cash flows, but also payrolls, business expenses and also how the world will return to normalcy in 6 months, a year, maybe more? I keep wondering how this pandemic will change the way we do business, how it will affect cross border business travel and many others. And maybe for the first time, I truly understand how the sole proprietors out there and the marginally paid front line workers who live month by month are feeling. That sense less of helpless-ness and uncertainty that looms. Just last week, I overheard a young chap on the bus sitting behind me talking: I was supposed to have gotten that restaurant job... They were reviewing my salary but after the circuit-breaker announcement on Friday afternoon, they came back and told me they not hiring anymore. My wife also just lost her job last month, so I just need to find something to do for this month, maybe food delivery or something... The cash crunch is real for many. It's also creating a lot of tension for people. After I alighted the bus, I could hear another random person on the street arguing with someone over the phone. Fortunately the band aid here is that the government is giving discretionary payouts for low income families. I personally don't think it will be enough but I also believe that they are trying their best. This one month of circuit-breaking will be a big financial set back for many people and businesses, even with increased food delivery measures for F&B operators. It'll also be a game changer for the world in terms of how individuals will manage themselves and businesses will interact with each other. To be continued.

In one meeting someone asked the CFO about revenue growth. He looked at the guy and said 'Revenue is an ego game. We could boost revenue tomorrow if we wanted. We run this company for gross profit.' - Twitter Got me thinking about how companies are reporting their sales order book, price and sell their products. One company has certainly taken this literally. Of course, Luckin Coffee isn't the only firm in history to have done this. Just not so long ago (about 1 year), the media widely publicised Luckin Coffee has being one of the upcoming competitors that is likely to give Starbucks a run for its money, especially in China. This was further sensationalised with the listing thereafter in May 2019. I don't vouch for the quality of LK's coffee but after Xiaomi's IPO, the idea of selling low cost + decent quality merchandize suddenly became a very possible and scalable business model for a lot of aspiring entrepreneurs. Since products were going to be dirt cheap, in order for this to work, you practically need to sell helluva-lot of merchandize. And in the age of data digitization, you don't want to only rely on solely on offline sales through brick and mortar stores. You call in the calvary - the army of bots, data analytic tools, artificial intelligence and all the mumbo jumbo of the tech world. It was all the rage. For a moment, the epiphany was that LK had successfully leveraged China's leading AI and big data technology to drive its sales and any company that didn't incorporate data analytics in its growth strategy was considered part of the older generation of companies. At one point of time, the word on the street was blockchain (it might still be today). Today and who knows for the next 5 years, word on the street will be data, robotics, AI. But big data and the complex systems that churn the numbers have made due diligence even more challenging. Because of the vast amounts of data, making a decisions around these becomes somewhat like relying on a black box. For portfolio fund managers, not only do you just rely on the information given to you, you pass that information into complex models and these black boxes which you may not fully comprehend, and ultimately make that decision to invest. Caveat emptor and god help you if you have no warranties and indemnities. But all of machine error stems from human error. The people who deliver the numbers and build the black box are humans. Human subject to fatigue, bias and greed. The relentless pursuit for sales is manifested as greed in different ways: controversial related party transactions, customer kick-backs, fabricating sales figures, etc. All for greed and personal gain. As LK explodes, many fragments of this starts to fall apart. The founders had apparently invested in other financial products with margins from the banks. Margins which were pledged with LK shares. HNWI could get leverage as high as 100x. This means, for every $1 million deposited, the banks basically allow you to invest in $100 million worth of financial products - bonds, gold, derivative contracts, equities, etc. If those products go to sh%t or the value of your collaterals drop, you either put in more money or surrender your collaterals to the bank. Either the bankers had spurred the founders to get more leverage due to the rising share prices or the founders get gotten greedy and wanted more money for themselves. Was the COO manipulated by the founders to fabricate sales? What really motivated him to do that? Only time will reveal the outcome of those investigations. With most of the founders' shares gone today and the dislocation of interest alignment, can investors get any assurance that the business will run normally after this saga? The ecosystem of banking and financial products continue to amaze me - that greed, in particular the greed for money and prestige can really change a person. Any investment built on fabricated figures and over-leverage will implode eventually. Starbucks didn't become famous overnight. It takes years of pure hard work and consistency to build a legitimate brand from scratch. This should be a wake-up call for both investors and start-ups who still believe that they can change the world in 1-2 years and make a quick buck.

"Cruise liners are basically floating hotels. I think quite a number of them will be bankrupt soon." Creativity and innovation are priced on the assumption that there is healthy underlying demand from the end user. In 2014-15, liftboats became increasingly popular with many boat builders and offshore oil diggers. Apparently, digging for petroleum requires you to send more than a couple of boats out to sea - rigs, tugging barges, work and accommodation barges. The liftboat combines a few of these functionalities, allowing you to just send one vessel out, thereby saving costs. Some of the larger offshore companies had ordered these vessels, paying for as much as $600 million. As the resources in shallow waters depleted, companies started to send their vessels further out to sea. And to make sure that it remained commercial to drill for oil, they had to dig deeper and longer, requiring the use of more sophisticated rigs such as drill-ships, some of which cost as much as $1 billion to build. So you can understand that when prices of oil tumbled below $50, everyone across the value chain - from builders, charterers to explorers - were scared sh*tless. If you end up with a $1 billion piece of metal and oil prices hovering at around $40-50 a barrel - would you stay put and lose money or drill and lose money? Can you re-purpose a drill-ship for a different consumer market? A number of these once glorified companies actually went out of business or got acquired by other operators. It's not so different in today's circumstances. With most of automotive manufacturing out of commission, car manufacturers such as Ford and GM had started to re-purpose their plants to build respirators / ventilators. Air travel has also basically come to a standstill because no one is traveling - for business or for leisure. But when it comes to the last mile delivery - food, groceries and basic supplies - airlines can quite possibly convert their fleet to transport supplies and cargo. Although tourist arrivals have taken a hit, hotels can be used to ease some of the capacity constraints faced by hospitals. But a cruise-liner is basically a floating hotel. You can try re-purpose the vessels to transport cargo but it'll take too much work. We already have plenty of dry bulk vessels for that. In addition, a lot of these cruise companies based in the US don't seem to be part of Trump's stimulus package as they hire a lot of foreign workers and aren't technically incorporated in the US. Some industries are better positioned that others to pivot their resources. The current situation is really a test of a company's ability to effectively re-purpose itself, essentially - to innovate or die.

With cities going into lockdown mode, it is starting to feel like governments of the world are putting economies into a temporal cryostat. So here's what I think could be a possible storyboard for the rest of the year. Stage 1: Pandemic virus hits, people fall sick and die. 1Q 2020 is effectively a washout. While healthcare systems around the world are dealing with the impact of the virus, government suspends international travels. Airlines, cruises, hotels and tourism sectors are hit. the whole of 1Q 2020 is basically a sh#tshow. Lockdowns. Home quarantine measures are put in place with some countries closing down mass gatherings and public gatherings. People go out less and therefore spend less, reducing domestic consumption. As large companies suffer, smaller companies face similar issues in terms of cash payments and some will inevitably go out of business. Throwing money into the system to fight fire. Governments have started to introduce monetary stimulus packages, except that this time unlike the 2008 financial crisis, money doesn't solve the problem because money doesn't heal people. Tax breaks and incentives only benefit companies that are profitable - the smaller mom and pop businesses that support domestic consumption gain nothing from this. With lockdowns, physical distancing and the extent of the virus, the general public is starting to lose confidence that things will revert back to the good old days. It's gonna be a game of who's the last man standing. As we enter into the third month of the pandemic, some businesses will have recorded close to zilch revenues while cash continues to burn through with fixed operating overheads. Some enhancements to the fiscal stimulus package such as discretionary cash payouts will help some companies in the short run but there will not be enough to go around for everyone. Then comes the layoffs. With reduced capacity, companies are forced out of businesses, jobs are lost and overall consumer spending suffer as disposable incomes drop. This compounds the already existing problems caused by the virus. Economic recovery will be protracted because (i) a cure / vaccine on the virus has yet to be found; (ii) The lift on travel bans will be progressive and take some time; (iii) Life will never be the same again - there will be additional costs of doing businesses such as heightened business continuity procedures and increased sanitisation costs. Companies will need time to gradually adapt to this 'new normal'; (iv) We have now also become aware of how vulnerable we can be to an 'invisible enemy' that we still don't really know much about. Because of that, we are also unsure if there could be a similar 'relapse' taking place in the future. Unlike trade wars and armed conflict which can be negotiated and prevented, there is unfortunately no way to prepare or defend against this apart from maintaining / enforcing personal hygiene - and more importantly, executing this in a coordinated fashion on a global scale. Global social infrastructure comes under pressure. Studies have shown that social relationships have both short and long term effects on health and society as a whole. Prolonged periods from staying at home and/or being out of a job puts the psychological well-being of people at risk: The stress of losing income, the lack of interaction with friends and co-workers, and in many cases, feeling disgruntled with the inadequacy of elderly healthcare needs - will create tremendous emotional burden for people. This recession is no longer just a liquidity crunch like in the 2008. This impacts not only jobs in financial services but the employment on a wider scale. In China, where it was said to be ground zero for the pandemic, default and late payment on consumer loans have just started. If that is any precedent, we are likely to see a similar trend of defaults happening in other economies starting as soon as Jun 2020. And if people can't keep the lights on at home, they are more likely to take to the streets. Government financings first, then comes capital markets. The stimulus packages from governments around the world will be the first of many financings to come. The longer it takes for spending to return, the more cash companies burn. Some businesses will default on loans, request for extensions and some will even tap the capital markets for equity capital - quite similar to the wave of rights issues undertaken by many large corporates after the 2008 financial crisis. What the government giveth, the people must return. A large gaping hole in the budget will form especially with some countries already starting to tap into their reserves. At some point of time, this has to be given back whether in the form of tax or government stakes in key industries. "I help you now, but you owe me one". The most important thing for the situation today to improve is for the global economy and trade has to pick up and return consumer spending back to its normal levels.

A 'Kodak moment' while taking a stroll along one of the back alleys in Tiong Bahru on the way to work.

The last many weeks were becoming to feel like the GFC days in 2007-2008. I distinctively remember crude trading at USD140+. Governments all over the world were raising interest rates and borrowing costs and yet share prices kept rising. I had just started my career not long in an accounting firm. It was a bull market on the run and even I could feel it in the office as waves after waves of my colleagues 'jumped ship' to the investment banks. Then it just happened very quickly - oil prices collapsed to $36, Lehman Brothers went under and there was even talks of some insurance companies being 'too big to fail'. I remember the emptiness in the streets in Raffles Place and recently it is becoming to feel that way again - except that this time, it seems that no amount of money put into the economy can 'save' the situation. The world needs a 'cure' and money does not seem to be the solution.

'Less is more - no intern has ever impressed me with knowledge coming into the internship. Many have pissed the entire team off by thinking they had knowledge coming into it. The most impressed I ever was with an intern was a kid who carried around a notebook and just wrote down everything that sounded strange. He then googled it after hours, and if it was still strange he'd ask what it meant. The most important "task" as an intern is identifying the comers at the analyst/associate level and having them like you. Each SA to full-time hire we convert is by asking that level who they liked the best.' - Wall Street Oasis Candidates these days try to impress too much. They bring in their arsenal of credentials, testimonials and references in a bid to be selected as that outstanding one. But so few realize that the most important trait that employers are looking for is “groom-ability” and the ability to just learn. At the junior level, firms are are not looking for heroes, they are looking for someone can be consistent with deliverables, and disciplined in doing the little things well. That said, I think trying to 'score' at interviews can be tough. On one hand, you are competing with others for the same role, and knowledge seems to be the benchmark. On the other hand, you are trying fit into the social fabric of the firm. At the end of the day, the most important thing to remember in any interview / conversation is to be genuine as a person and don't ever over-sell on your technicals and experience. A good banker is both good at numbers, communication and fitting in well.

No glam in the startup camp. Approximately 1 year ago, I met a friend over coffee at Starbucks to catch up. He knew that I had started out on my own in 2016. Amongst other things, he asked me, “how do you cope with the stress of cash flow (or the lack of)?”. “It takes a bit of time to condition yourself psychologically but after awhile you just get used to it.” On hindsight, I realised that this simple answer doesn’t say enough about what most founders have to go through on a day to day basis. The media frequently sensationalizes entrepreneurs, start ups and new funds that are coming to the market. And a handful of friends and acquaintances that I’ve met at countless meetings and conferences often tell me: "Wow! So good, you must be doing well! Running your own business!” Don’t get me wrong, I am not a pessimist. I am at worst, a hard-core realist. I like to say, “If I can’t see a dotted line to the end goal, I probably won't do it”. This goes against the conventional wisdom in which most start-ups don't really follow a fixed trajectory in the development stage of their businesses. The model is constantly evolving and the reality is that many founders often do not end up at where they had initially set out to be - which may not necessarily be a bad thing. But running a business takes a lot of work. More than what you can imagine and think. You think working for a boss is tough? Go start a business, be your own boss, work for everyone - clients, suppliers, partners, employees, vendors, etc. Want to make a million bucks before 40? Climb the corporate ladder in an MNC or work in a large investment bank. Even if you don't get to the top, we still can live a very good life. A lot of people don't realise that just diligently being an employee allows you to cover your bills comfortably and very possibly, fund the purchase of your second property, pay for trips to Europe, Japan or any other vacation destination of your choice. Want to turn your life upside down? Go start a business. Burn a lot of cash. Meet nasty people. Open your eyes up to a whole new world. Bottom line, starting up isn't for everyone. On top of maintaining sanity, founders deal with the day to day chores of hiring, accounting, invoicing, designing websites, collaterals and many countless miscellaneous things. If you can afford to ignore the rapidly declining cash balance in the bank, it can be quite fun. You are literally building an enterprise from ground up. You get to decide on the corporate colors and fonts to use, the type of projects to take on, the types of products to sell, who you want to hire and/or work with. That said, you are also responsible for sales and overheads. Pain that does not go away. These days I wake up with a pain in my head that just does not go away. It is the nagging feeling of upcoming payments, bills, payroll, secretarial fees etc. It’s really a struggle sometimes - to keep the lights on not only at work, but also at home. Once you come to terms with this, you realise that all your Whining Griping Dissatisfaction around puny year end bonuses Annual leave days that you could not take Overtime hours spent in the office and; Countless weekends burned because of a working on a deal or RFP just don’t matter. They really don't matter. Rain, shine, bull market, bear market, pandemic or not, everyone who is employed in a full-time job gets a fixed pay-check at the end of the month. The smartest people in the world are not the entrepreneur 'heroes' portrayed in the news, but those who have managed to stay in their jobs for the last 10-20 years, drawing pay-check month after month, surviving through the ups and downs of the economic cycles. As Steve Schwarzman from Blackstone once said, “There are no brave old people in finance”. If you are doing well today, it is not because you had a billion dollar idea that can change the world, but because you were boring. You adapted well to the times and had a good handle of managing risk at every stage of your life and career. In the toughest of times. In the toughest of times like these, I remind myself of the various resources that one has. Experience. You can acquire specific experiences and memories, depending on how much money you have. Knowledge. You can get access to the pathways and platforms that offer knowledge. But there's no guarantee that it can be internalized. Health is a 'depreciating' asset. You can attempt to prolong this "asset life" but it'll catch up with you eventually. Also, there are always some parts of your biological system that cannot be replaced. Friends. You can acquire the means to make friends - at the workplace, meetings, gatherings and at school. But friends who have been around for many years and been through ups and downs together, cannot be substituted, especially those who have shared specific experiences and memories with you. Family and time. There is no way that you will ever get back family and time. After you lay them all out: money seems to be the one thing that can always be replaced - either immediately or at some point of time in the future. Not that it is a resource that is easy to acquire, but, money is just money. To acquire the rest of everything else, you either have to nurture, build and develop them progressively, or earn them through heart-felt experiences. Or, sometimes, you just gotta make the best of it while it lasts.

It doesn't look rational that Tesla's valuation could be more than double that of two large automotive manufacturers, overnight. As cool and sustainable as electric-powered cars sound, there is still a certain amount of runway before this eventually (if it does) go mainstream. In 2014, Nissan had initially targeted 1.5 million electric car sales by 2020. Today, total accumulated unit sales are just about 400,000. Even so, for electric vehicles to dominate the market, that would require a tectonic shift in the demand and supply of oil globally. Until the cartels figure a way to decouple from this economic dependency, vehicles powered by traditional energy sources will likely remain a core part of the automotive sector. Hybrids however are an interesting case. Investors are claiming that Tesla's revenue could possibly reach USD 1 trillion in 10 years - that's a really far horizon to forecast. And that's saying so much can happen in between...

No quarterly reporting is like streaming a 4K video in standard definition (SD) - it’ll look fine from afar but you won’t get the same clarity close-up. Investors and stock punters in Singapore may have less to look forward in terms of earnings results when the new rules that do away with quarterly reporting kicks in on 7 February. I am an advocate of quarterly reporting, even if regulators now do not set this as a hard mandate for listed companies. Dealing with the new asymmetry of information. Investors no longer have the privilege of observing seasonality in business cycles in certain fast-moving industries such as consumer and retail. This makes it potentially make it more difficult to gauge business performance, which could result in reliance on alternative sources of data including analyst research reports, stock discussion forums and market talk over kopi. The reliability and credibility of third party information sources will become more important than ever. “Are your quarterly financials reliable?“ With the new disclosure rules in effect, the half-year-on-half-year financial performance will gradually take precedence over the quarterly numbers. While managers will feel less pressure to show a report card every three months, these quarterly operational and financial indicators enables: Investors to react more quickly to any near-term volatility in the business cycle and make well-informed recommendations to the board; Management to allocate resources and budget more effectively as compared to half-yearly reporting. A longer window of time. Without quarterly reporting, companies now have more room to move around their order book and working capital over a 6-month window instead of the usual three months. Half yearly disclosures also give companies more room and time to sweep teething issues under the carpet that could have been addressed early on through the quarterly announcements. Material and sensitive information will also have a longer time to linger within company walls and increase the temptation for insider trading. It’s like streaming a 4K video in standard definition (SD) - it’ll look fine from afar but you won’t get the same clarity close-up. On the private side, this should have less impact since investors may continue to request for quarterly management accounts for due diligence. The impact on cost of capital and valuation. The basis for calculating cost of capital is predicated on risk. And risk is a function of uncertainty. For example, cost of debt is driven by viability of repayments. Financial institutions are more likely to offer more competitive rates for companies that demonstrate the ability to make quarterly repayments. More disclosures imply greater transparency and visibility which in turns reduces the risk profile of the business. For companies that continue to maintain timely updates on their earning results, there should be some valuation premium reflected through a lower cost of capital. Companies that keep their books clean and organized on a regular basis should also be valued higher on the basis of better corporate and financial governance. Overall, focus on the longer term. Shifting the focus off quarterly announcements will probably compel investors to take a longer term view on the company and discourage unhealthy speculation on quarterly results. The shift to half yearly reporting will likely encourage more businesses to go public and reduce the costs for some existing listed companies. But for those companies that have fundamental problems, this isn’t going to move the needle much.

After having observed various colleagues, clients and friends over the last 10+ years and watching how some of them have evolved, I realised some common traits in those who consistently fail to deliver in their personal and professional lives. Ego. People like to hear what they want to hear - most people don't like to be disagreed with. They like to hear the good things about them, and that their opinions are important and resonated by everyone. Very few will appreciate critical feedback even though what they are doing may be wrong. Remember this also the next time someone steps on your ego. Laziness or sloth. Taking for granted that someone else will do your work. This usually comes with the feeling of a sense of entitlement due to one's age, experience or perceived wisdom. Inertia. Knowing what needs to be done but yet procrastinating it to a later time and then attributing the inability to execute due to the lack of resources or time - especially for items that need the most critical attention. Narrow-mindedness. The world is changing and evolving everyday. And those who refuse to keep an open mind and embrace change will suffer under the limitations of its old paradigm. The change in mindset is a matter of crossing a thin line, and that makes all the difference. Sometimes all you need is a gentle nudge or push to see a whole new perspective. Personal delusion. To think and act under the belief that you are someone else. It's ok to have dreams and ambition but don't wear shoes that are too big for you or make promises that you can't deliver. Be real and comfortable in your skin. Let learning and the will to act be a way of life.

More than three years since I started out, I discovered a new-found respect for the many areas of businesses which are presumably oblivious to most people - back office functions, human resources, payroll, corporate communications, financial reporting, legal and compliance, sales and marketing and overall general management. In short: a lot of work goes into the creation of a business and even more goes into supporting it. I think all founders go through that same paradigm, though everyone experiences various aspects of the process differently i.e. some have more difficulty fundraising, looking for resources, developing leads and sales channels, etc. Cashflow. You have to be really ready to be comfortable with very little cash in your bank at some point of time. Everyone’s financial background is different, make sure you evaluate and prepare yours accordingly Do something everyday. When you find yourself at a loss, just keep moving - meet people, read stuff, pitch an idea. As long as you move, you’ll learn and achieve something. Shareholding: respect the money. When starting out, this is tough to quantify given everyone's level of experience, capabilities and financial backgrounds. The most ideal way to do this is to have everyone commit to an agreed amount into the company and split the shareholding pro-rata based on contributed capital. Even if one party had 20 years more experience over the other doesn't mean the more experienced party deserved a larger portion of the pie. Last drawn pay is irrelevant, only the economics and spirit of the equity injection matter. Take for instance the founding of Blackstone: Pete Peterson and Steve Schwarzman both put in $200,000 of their money and split the shareholding equal ways, even though Pete was held a more senior position in Lehman Brothers. Really have a shareholder agreement. Even a simple one is good, because everyone is committed (at least statutorily) to the business. Do up a budget. But don’t be overly conservative, especially when it comes to IT infrastructure and travel. Banking and money matters. Where bank and money matters are concerned, always use a joint signatory for check and balance. "Cheerleaders" are good but the will to execute is more important. It is important to differentiate real founders who are sacrificing money and opportunity costs against those who are simply thinking up of ideas and cheerleading. The founders' will to execute is important, sometimes even more important than ideas and certainly more important than cheerleading. Everyone in the boat must paddle. All co-founders must be individually strong. Each co-founder has to enter a business with strong technical competencies which are aligned with the core business, and ideally complementary to each other. Resolving disagreements. In pushing a point across or in any disagreement, no one should ever say “I don’t need to do this”. Co-founders may never agree on everything, but when the decision is made, everyone must fully go with the motion. Trust is important. More important than you think - there is trusting in a person's integrity but also trusting in a person's ability to deliver. Both are important. Trust through years of friendship should not cloud your judgement in trusting a person's execution or their ability to deliver. Change and growth. Be fully prepared that your idea and vision of your start up will evolve and change significantly along the way. This is mostly a good thing. Be aware that what you’ll end up with will definitely look different from what you set out to do. Share options. Dilute no more than 20% of the company (in my personal view). Then comes the how and when to give share options: Reward those who have contributed to top-line and growth of the business - customers are the blood of the business. You can follow these guidelines: (i) Contribution to the business top-line (revenue) (ii) Where revenue is irrelevant, evaluate based on overall execution support Never give away equity. Period. See point above on respecting the money. Human Resources. Talent identification, sourcing, acquisition and employee motivation post-hiring are ultimately key in growing and sustaining the business. As founders, always: (i) Lead by example, be hands-on and show the way (ii) Invest in your strongest staff: train them professionally but also develop them personally as individuals (iii) Hire for attitude over aptitude (iv) Always be upfront and honest in your communication All employees will leave the firm one day, but the social goodwill generated during their time at your firm will be intangible and will go a very long way in establishing both you and your company's reputation. Beautiful presentation decks do not win deals. Good ideas, actionable strategies and the executing the plan builds credibility and THAT IS WHAT WINS DEALS. Leverage good decision making to achieve multiple benefits. In making any decision, try to see if it can achieve multiple purposes. Don't undermine the importance of a healthy digital footprint. Anyone who tells you not to publish your background on LinkedIn is smoking you. In today’s digital age, a website, LinkedIn portal and a proper email account is almost tantamount to legitimacy. Corporate "mileage" or existence can also be a fairly strong indicator, register your company as early as possible. Stay positive and be comfortable with uncertainty. Complain less, do more. Be comfortable with uncertainty. There is always a possibility that an idea will not work, but if you fail, fail fast and pivot quickly to another strategy that works. Failure is an opportunity to learn. When you make a mistake, just get up and just move on. Otherwise, you may never grow as a person. Failure makes you a humble person, adversity builds character, and makes you a better person. Never victimize yourself. Our strengths and weaknesses are all shaped by our experiences and our will to do things. No one will bail you out from your self-pity and self-limitations. Be solution-oriented. Instead of close captioning the problem at hand, think of ways to solve the problem, then execute it. Make time for sanity, whatever the definition of sanity is to you - chilling over coffee, taking time to travel, spending time with family, etc. No one should work 24-7. At the end of the day even if you make it at the expense of the things that matter most to you, think about it: is it worth it? Everyone who is getting a fixed and regular pay check is fundamentally an employee. An employee’s mindset is different. Remember this always when you manage staff, work with partners, negotiate with clients and even raising funds from investors. You can learn a lot by working on the day-to-day mundane stuffs. You learn a lot when registering a business, making payments to mandatory employee provident funds, pay suppliers, write invoices and chase for payments. Trade receivables is a very real thing. Working capital and debt collection are some of the most important aspects of any business. Watch this very closely but don't spoil market, always pay your suppliers on time. Take responsibility for your decisions. Good or bad, you are always responsible for your own actions. Never look desperate. When fundraising or getting customers, never ever be desperate. Prospective investors and clients can smell desperation The world works in ways more complex than you can think. Don’t believe everything you see and read. Teamwork is everything. There are no heroes in starting up.