American hare, Asian tortoise

I’ve been meaning to get a drink from the cafe within the library for a while. It’s exam period, and all the seats were taken. But I finally got a chance to sit. I got myself a “Peach Dream”, a smoothie with peach flavour I think.

I quickly sat down at one of the tables that a lady graciously shared with me. Her friend soon returned with their drinks. I was just happily sipping my smoothie, watching a man on his laptop, one girl slumped on the table with her books, and listening to a mother reading a book to her daughter.

The two ladies at my table began talking.

“Did you know her son got 58 out of 60?”
“Really?”
“Her son is already so clever. But he’s still getting tuition.”
“But he’s so clever! He might get 50 even without tuition.”
“We don’t know if it’s because he has tuition, that’s why he got 58.”

That was a primary school science test. Hey I’m not eavesdropping. I just happen to overhear their overshared conversation.

Believing you can improve by putting in effort

There’s this study conducted dividing people on their perception on learning and intelligence. One group believed that intelligence is fixed, therefore if they don’t know something, they’re doomed to never learn how to do it properly. The other group believed that intelligence is malleable. If they put effort into learning, eventually they’ll get the hang of it.

The first group didn’t care what the answer was, only whether they’re correct or not. They didn’t care to learn how the answer came about. The second group cared more about why an answer was so.

When the 2 groups were tested again, the researchers found that the second group improved significantly. The first group didn’t do any better or worse.

I’m going to generalise here. Asians typically believe that if you put effort into something, you can improve. Be it maths, science, English, Chinese, whatever. That’s why here in Singapore, parents hire tuition teachers for their children, even if their children have phenomenal grades in school. (Also see PISA).

I didn’t have any tuition teachers after primary four (age 10). Not because I’m smart, but because my dad couldn’t afford it. Good thing I turned out alright…

Another general trait of Asians is that we save. Money that is. We’re brought up with the concept of saving money for a rainy day.

The hare and the tortoise

I read this book by former British Prime Minister Gordon Brown called Beyond the Crash. He brought up some concepts I’ve learnt about the global economy and politics.

America and Europe lead the world in terms of consumption. It’s worked so far because they also produced as much (as in exports). Their production brought in enough money for them to consume. They’ve raced ahead and amassed much wealth.

Like the hare, they’ve grown comfortable and stopped (more or less).

Globalisation allowed the other countries to come to the fore. The BRIC (Brazil, Russia, India, China), Indonesia, Philippines.

American (and European?) jobs flowed to other countries. First the Baby Boomer generation is slowly retiring, leaving a mass number of jobs for the smaller group of Generation X-ers who cannot fill them. Then globalisation killed those jobs, and the current Generation X-ers and Y-ers can’t find jobs.

The subprime housing situation created more turmoil. The recent bank crisis instilled fear and distrust. University tuition fees go up as people sought to get a Master’s degree in the tight job market. (Just for info, I’ve read there’s an “education bubble” going on).

America just averted a $14 trillion debt ceiling problem. Greece has a financial problem. Europe faces a sovereign debt problem. Their aging population doesn’t have enough people to take care of them, financially speaking (where do you think taxes go to?).

And the tortoises started to catch up.

Education

I’ve read an economist praising the education system of Singapore. I must admit, I was surprised. Then he (can’t remember whom or what book I was reading. Sorry…) pointed out that in America, teachers with average graduating scores are dumped to “second-rate” schools without training. In Singapore, the Ministry of Education chooses the best teachers, and provide them with training. I think it was 2 out of 10 applicants who get in. The Singapore government takes education very seriously.

Barack Obama has stated he’s taking America’s education seriously. As far as the future is concerned, I believe maths and science to be crucial. We’re going to need engineers, mathematicians, doctors, physicists, chemists, biologists and more to tackle the health care of our aging population, creating a sustainable Earth, and understand and make use of any future technologies.

Global commerce

Here’s something you should know. To get money, you have to sell something in exchange. I don’t care if it’s an apple, an iPad, television shows, movies, your body, real estate, knowledge (information). Even if it’s just a 250 by 250 pixel ad on your web page. You have to sell something.

America and Europe produced enough for domestic and international consumption. As a result, they grew. Then globalisation came. Their production dropped (because that production went to other countries as jobs). You produce less, but your consumption rate remain. You should see the problem, right? Then their domestic consumption even increased (think rampant credit card use).

Here’s the catch. China (seems to be the biggest blamee, though there are others) is exporting more stuff, and America (and Europe?) is buying. China buys up raw materials from other countries, manufactures products, and sells them.

What you should realise is that China has a small domestic consumption (remember Asians extol saving as a virtue, so we buy and consume less). Contrast that with China’s growing export business, you should see how China is growing in strength. But this depends on other countries buying their stuff *cough America cough*. China’s growth comes mainly from exports and China’s biggest worry is that people stop buying their exports.

The rebalancing

There was a time when the outsourcing/offshoring thing was a craze. Do you know how supply and demand works? As jobs went to India, China and Philippines because it’s cheaper, those jobs started becoming more expensive as the workers wanted better pay. It might still be cheaper to outsource/offshore, but it doesn’t always make a big financial impact to the bottom line.

You know this oil thing we need? It’s getting more expensive as it becomes scarcer. We need to find alternative energy solutions soon. See education above. Where are the people we need to solve this problem? (They aren’t motivated enough to learn, and they’re watching cat videos on YouTube).

You know what more expensive energy means? Transportation is going to get costlier. Getting a product to be manufactured in China, then assembled in Mexico, then shipped to America is going to be financially inadvisable.

You know what that means? Jobs are going to start flowing back (to wherever they came from).

You know what? There are millions of jobless young people who are willing to do those jobs.

But you need to be willing to train them. Specialisation cannot be your focus. Remember, these people just graduated from school. You won’t find a person who fits the job of a managerial post with an emphasis on information technology.

Get that graduate (who has a bundle of joyful energy) with the MBA. Train him/her on your business with information technology.

Get that programmer who did a bunch of software projects. Teach him/her about your special accounting software business.

Export more bits than atoms

I read that a Singapore minister (can’t remember who. You should know by now I have a terrible memory for these things…) who said that Singapore’s economic concern should still be to focus on manufacturing. I believe he’s referring to material goods.

I’m going to ask you a question. With the climate concern now, and that our landfills are starting to fill with our waste at a rate that’s slightly alarming, and that raw materials are getting costlier to shovel around, should you still export physical goods?

That’s still going to be a viable business. I mean, I still see people queuing up to buy the latest iPhone 4S, and texting on their perfectly working iPhone 4 (I still use an iPhone 3G, which Apple doesn’t even support anymore).

Remember the outsourcing/offshoring thing? There were 2 kinds of jobs: the physical creation of a product, and the intangible stuff. China does manufacturing. India does call centres.

As people become more aware of what they buy and consume, I see people having less material goods. The modern cell phone allows you to play games, organise your calendar, keep todo lists, take photos, capture videos, record audios, browse the Internet and make phone calls.

Even if that’s not the case, there’s a physical limit to how much you can export (and thus sell and thus make money). So sell your skills and knowledge. Teach people stuff. Offer something that’s not so easily replaceable by another person in another country.

Africa poised as untapped and trapped consumer base

Africa is like the poster child for a country in poverty. She has a large population but most of her people are struggling with where the next meal is coming from.

As China and India got more of their people out of poverty (due to globalisation in part), their people started buying stuff.

India is an interesting case. As her economy improved, so did her domestic consumption. In a sense, India is more “stable” than China in terms of growth.

The point is that Africa has a large population who most probably cannot and will not buy your products and services. They’re too busy dealing with AIDS, malaria and hunger. Not only that, it represents a huge number of people who cannot contribute to the world.

A human mind is a terrible thing to waste.

Finishing line

That was a lot to write.

So in case you skipped the whole shebang above, here’s the moral: Consume less (with more intelligence), raise education, and help other people.

The Dragon Bubble

I’ve been, uh, flipping through some books lately. As far as I understand it, they were written by economists, financial analysts and political journalists. And there was this general idea of the seemingly unstoppable growth of China crashing down.

Look, I’m just a mathematician and programmer. I don’t know much about statistics, or demographic studies, or sociology, or economics, or global financial analysis. I just pick up a book that looks interesting and start reading, ok?

UPDATE: Here are some of the books I, uh, flipped:

Here’s the gist of what I understood:

  • China’s massive growth hinges a lot on manufacturing and building real estate (commercial buildings, factories).
  • Manufacturing and building new buildings need lots of raw materials.
  • Countries providing steel, copper and other raw materials are riding on China’s growth.
  • China’s manufacturing and building works on the assumption that the infrastructure is needed for future expansion.
  • China doesn’t have a big enough domestic consumption for that infrastructure.
  • The recent global financial crisis has stunted, if not removed, other countries’ enthusiasm for overseas investment (say in China).
  • China is set to become the world’s largest manufacturer of things.
  • A monopoly of China being the largest manufacturer may not be in the interests of everyone. I’ve read of toxic plastic toys, deadly baby milk formula powders, and suicidal iPhone factory workers.
  • We may be following “Be liberal in our input, but be stringent in our output”, but China’s not. See China’s Internet censorship laws.
  • China is set to consume lots of energy, as her people get lifted from poverty. The “getting out of poverty” thing is good. It’s just that the world isn’t ready with more energy. It sounds unfair, as there are arguments that 1st World countries (in particular, America) enjoyed unbridled (and rampant) use of energy (coal, oil), yet other countries can’t (when it’s their “turn”). We need those alternative and affordable sources of energy, like yesterday.
  • China has bought (as well as other countries) lots of America’s debt, mainly in the form of Treasury bonds.

Please note that this isn’t a China bashing. And note that those authors are American (I think). They weren’t “attacking” China, so much as pointing out probable situations.

So as far as I understand it, China’s growth is fueled primarily by outside investors. It’s domestic consumption is marginal. Jobs are outsourced to China because it’s cheaper there. Manufacturing is done in China because it’s cheaper there, what with the infrastructure the Chinese government had encouraged into place, and the influx of raw materials due to other favourable conditions (such as being cheaper there. Have I mentioned that?).

Here’s a possible situation. America is arrested by her (unimaginably high and increasing) debt crisis, and curbs her consumerist behaviour with less imports (not just from China). Europe has her own debt crisis to deal with. Globally, everyone is affected, because (that I’ve read) 25% of the global economy is due to the exchange of US dollar. China starts to see less investments in manufacturing and building. Australia doesn’t have a strong demand from China for copper, and starts looking somewhere else to invest in. Whatever it is, China’s growth slows and eventually bursts.

Thus the Dragon Bubble.

So who rises? Apparently India and Russia. India, because her measures to lift her people out of poverty are somewhat more stable. People get educated, and get jobs (Is your call centre based in India? Is your development work augmented by, if not outsourced entirely to, Indian developers?). But India still has her old caste system firmly in place, and it will take some time for the growth to spread. But India also has a population just as large as China. And she speaks English.

And learn Mandarin (or Chinese)!. Just in case the Dragon manages to burst through its bubble and has claws in every country in the world. If you can’t speak the tongue of the Dragon, you can’t understand and talk with the Dragon. I’m fine, since I’m bilingual in English and Chinese (as well as C# and VB.NET *smile*).

What about Russia? It turns out that the reason is due to Russia’s possession of oil (lands). Western Siberia, I believe. Hey, I just flip through interesting-looking books.

A couple of definitions to continue with a more light-hearted story. Offshoring is when your company has an office in another country, and your company tasks that office with work. That office is still under your company, perhaps as a wholly owned subsidiary. Outsourcing is when your company tasks an outside company with work. The outside company is involved with your company only so far as being paid is concerned.

Let me tell you a short story. In a previous employment, I had to work with an offshore office in China. That offshore office belonged to a wholly owned subsidiary of my employer, and the subsidiary specialised in IT work. The point was that it’s cheaper for the Chinese there to do certain work than hiring, say, me to do it.

In hindsight, my previous employer entered the offshore/outsource game late. The balance sheet looked great in the short term, but as time went by, and difficulties in coordinating development work increased, the cost savings started to be less prominent.

Hey I understand what you may be going through, or seeing around you. Jobs flying out of your country to “cheaper” countries such as China, India and Philippines. So to make the process easier for you, understand this: If a task can be systematised such that anyone can do it, that task will be systematised so that anyone can do it. If your job consists of checklists doable by paying someone else cheaper, you don’t have that job anymore. Worse, if a task can be automated by computer software, consider it gone.

The offshore team assigned to my team was great. The programmers there did well, once you explained the business requirements and the programming requirements enough to them. But I felt my colleagues here (in Singapore) can explain things too far. One of them went so far as to write the actual SQL statement for use in the code. I felt that was unduly unnecessary.

The more interesting part of the story happened to a colleague’s team. There was a Chinese candidate slated for work in a week’s time. The candidate was a fresh graduate and was hired and assigned to my colleague’s team. The offshore office even sent the candidate’s resume to us. We spent about half an hour marvelling and commenting at the resume written in Chinese, because we’ve never seen one not in English.

One day before the candidate was to report for work, my colleague received notice from the offshore office that the candidate had quit. What? The candidate quit before even starting work? Apparently, a particular university had accepted the candidate, and the candidate decided to pursue a Master’s degree. I don’t know whether to laugh or be outraged.

I intended to write this as a pithy Seth Godin-like post, but apparently I failed. Utterly. I decided not to redact what I’ve written.