Quora Answer: What Do You Think of Using Gut Feel to Invest in Startups?

The following is my answer to a Quora question: “At the end of the day, I rely on my gut and feeling to invest in startups.  What do you think of that?” 

Gut feelings is not a sustainable way to approach investing.  This is akin to treating investments and finances as a lottery, as opposed to a process of due diligence and strategic consideration.  You may get lucky, but this is not likely to be a recipe for sustained success.

Quora Answer: Should Afghanistan Join the Eurasian Economic Union?

The following is my answer to a Quora question: “Should Afghanistan join the Eurasian Economic Union?”

Afghanistan is a failed state.  They do not even have a settled government.  They are not in any condition to participate in any regional or international groups, let alone join new ones.  The current government is struggling to gain international recognition, and their funds in foreign banks are frozen.  They need to sort those issues out, and iron out how they are going to rule in the face of a possible insurgency first. 

The Eurasian Economic Union is an economic union of former Soviet republics.  Afghanistan was never a Soviet republic.  The USSR did invade Afghanistan, overthrowing the rightful government, in December 1979.  Afghanistan joining the union would have political baggage, and the optics would not reflect on any Afghan government.  The idea is a non-starter.  A settled Afghan government would more likely look to join the Shanghai Cooperation Organisation, where they already have observer status.

Quora Answer: What are Some Tips to Get Funding for Your Startup?

The following is my answer to a Quora question: “What are some tips to get funding for your startup company?” 

First, you need to decide how much you need, and how much control you are willing to cede for that amount.  That is the basis in which you develop your deck.  You do not decide after you meet investors.  That is dangerous for you.  When people give money, they want something in return.  You need to know the value of your product and your company before giving up anything. 

Second, you need a story.  The story puts the numbers in context.  Your revenue projections are just figures drawn in the sand, moving as the wind blows.  You need a narrative for people to be emotively impacted, for them to commit.  Investors are still people, and they are as susceptible toa good story, if you are an excellent storyteller. 

Finally, do your homework and due diligence.  There are resources and networks to connect with potential funders and investors.  You need to consider their mandate, their appetite and their quantum so you do not waste time with the wrong people.  You also need to weed out the pretenders and the sharks.  Finding good investors is important.  They must share the same values.  They must have the same expectations on exit.  Otherwise, you may be looking at a messy court battle.

Quora Answer: Why Do Founders Often Fail as CEOs?

The following is my answer to a Quora question: “Why do founders often fail as CEOs?” 

You are a founder when you found a company, and seek funding.  That does not mean the founder knows management, or is a leader.  A chief executive, as the name states, is the leader of the management team.  Leadership and management are discrete skills, and they must be acquired.  Despite this, some people never seem to grasp it. 

Founders who fail to master the skills of management and leadership fail as management, let alone as CEO.  A great idea, and a promising company, can fail because of this deficit of leadership and failure in management.  Talented people are leaders in their field, and they need to be lead to a common purpose.  Stakeholders, investors, employees, internal and external customers, they all need a clear direction.  A lack of direction is fatal.  Either the company fails, or the founder might be ousted from executive management.

Quora Answer: Will Generational Wealth Ever be a Thing of the Past?

The following is my answer to a Quora question: “Will generational wealth ever be a thing of the past?” 

Why would it be?  Human civilisation was built on those that came before, and that includes material wealth.  We could argue that some people are born with an undue material advantage, but we do not choose the circumstances of our birth.  It does not matter so much where we start, but where we end.  The idea that we should remove generational wealth because it disadvantages someone is the philosophy of a society built on envy, not progress.

Quora Answer: What are Aspects of Due Diligence in Investment Funds?

The following is my answer to a Quora question: “What are the aspects of due diligence in investment funds?” 

There are two main aspects.  The first is the due diligence on the source of funds that come into the fund, and the second is the due diligence conducted on the investment targets.  The due diligence in the source of funds looks at the source of wealth and income of the entity, the capitalisation if applicable, any red flags in terms of legal encumbrances, and beneficial ownership, and suspicious transactions.  All investment committees and their compliance department have a comprehensive checklist.  The due diligence on the companies or projects involve the usual checks in the background of the company and the people involved, the projected revenue and return, any conflicts of interest, and legal encumbrances.  This also involves the analysts.

Quora Answer: Hypothetically, Can the US Defeat a Chinese Invasion of Taiwan?

The following is my answer to a Quora question: “Hypothetically, can the US beat China over Taiwan in a war scenario?” 

That really depends on what sort of war scenario you mean.  If the intent is to stop a Chinese invasion of Taiwan, the US will succeed easily.  The Taiwan Strait, which separates China from the renegade province is around 160 km wide.  The Taiwanese military is of uncertain morale and is thought to lack resilience, but China still needs to secure air and naval dominance to safely send over the invasion force.  That is not possible.  Taiwan’s military is well under 200,000 active personnel.  That means China would need around 300,000 troops just to secure a beachhead and breakout. 

You cannot plan to mobilise that many troops and assets quietly.  The American will know and the Taiwanese will know.  Assets will be moved into the region, and we are likely to see up to three carrier groups, including submarines.  The US already has troops and bases in Japan, South Korea and islands in the Pacific West.  The Americans also have assets to control the Straits of Malacca, where all the oil needed to feed the war effort is going to pass.  All parties know that the US does not need to defeat the Chinese military in its entirety to end the invasion.  They simply need to make it very expensive in terms of cost and casualties.  A major defeat would seriously dampen the legitimacy of the Communist leadership, and there will be domestic consequences. 

China need only wait, and Taiwan will eventually seek a merger.  Even if they were to successfully invade Taiwan, the cost of integrating the Taiwanese economy would be astronomical and crash China’s economy.  The Chinese are not stupid.

Quora Answer: How to Build a Portfolio Aligned with Carbon Neutrality Goals?

The following is my answer to a Quora question: “How could one invest in building a portfolio that is aligned with carbon neutrality goals?” 

Carbon neutrality is a state of net-zero carbon dioxide emissions.  If you truly want to balance out a portfolio, you need investments that are carbon negative, which is difficult.  Carbon neutrality is an ideal.  It is far from a reality.  While there is some effort to reduce carbon emissions, it is insufficient, and this is reflected in trying to build such a portfolio. 

Consider this, people would say they would invest in electrical vehicle companies such as Tesla.  That portfolio might do well, but it is far from carbon neutral.  The batteries require lithium, cobalt and other metals.  Mining is not even close to carbon neutral.  The disposal of those batteries is also an environmental problem.  This applies to renewable energy as well, since all that power collected must be stored somewhere – those same batteries. 

Carbon neutrality is more than simply building a portfolio.  It involves engagement with the people we invest in, and carbon reduction targets.  It involves influencing the development of the entire ecosystem in a pivot towards carbon neutrality, and an investment in carbon negative developments.  This is a process.

Quora Answer: If You Had to Live in a Tax Haven, Where Would You Live?

The following is my answer to a Quora question: “If you had to live in tax haven for good chunk of your life, and had to consider other factors like quality of living, good services and healthcare, where would you want to live?”

When we think of tax havens, countries such as Panama, Western Samoa, and the British Virgin Islands come to mind.  If you are wealthy enough that you want a tax haven to minimise your tax exposure, they are places you might consider putting your money.  They are not necessarily places you want to stay, unless you want to disengage from society.  Most of these tax havens are from the main throughfares of civilisation, and away from prying eyes and oversight.  That is why they are tax havens.  You want to hide your wealth, but you still want to enjoy life. 

What you are really thinking about is what is termed low-tax jurisdictions, which is a step up from tax havens.  These are cities or countries which are likely major financial centres.  They tend to have no capital gains tax, and low corporate taxes.  They would be places such as the US state of Delaware, Hong Kong, Singapore, Ireland, and the Baltic states.  Corporations do not base themselves in these place solely because of the low tax environment, although that is a major factor.  They are also easily accessible to hinterland markets.  Hong Kong is a gateway to China.  Ireland is part of the EU.  Singapore is the centre of Southeast Asia. 

In that respect, Singapore would be near the top of the list.  It is a global city.  It is a major travel hub.  And it has a high standard of living.  Life expectancy is among the highest in the world.  Healthcare is among the best.  Crime is low.  And there is enough entertainment in the city and the neighbourhood.

Quora Answer: What Will Singapore Do in a Global Food Crisis?

The following is my answer to a Quora question: “What will Singapore do if the global food crisis occurs and no country is able to export food because their government must prioritise domestic needs first?” 

Singapore is one of the countries that put a lot of effort and funding into securing our food security.  This is part of our preparation for climate change, which is projected to affect agricultural yields in key farming regions.  To that end, we have adopted what is essentially a two-pronged strategy. 

The first is to boost domestic agricultural production utilising technology.  Singapore is developing a domestic capability to grow many varieties vegetables through hydroponics and other means, in multi-storey factories with fill climate control.  We are also heavily invested in aquaculture, and other forms of farming such as domestic chicken egg production. 

The second is to secure supplies overseas by buying up farming land in countries which have a surplus, such as Australia, and parts of Africa.  The production is solely for Singapore’s consumption, and helps keep prices manageable and stave off food inflation. 

At the moment, we are far off from any form of global food crisis.  World produces enough food to feed several billion more people than there are on the planet.  We do not suffer from a lack of food.  Food shortages occur due to intentional scarcity to maintain prices, or because of supply chain issues.

Quora Answer: What Do You Think of Singapore’s Measures to Deal with the Surge in Covid-19 Cases?

The following is my answer to a Quora question: “What do you make of the Singapore government’s stringent measures in dealing with the recent surge in Covid cases?” 

To date, Singapore has had 254,000 cases of infection, resulting in 667 deaths.  Worldwide, the total number of cases is 258 million, resulting in 5.16 million deaths.  By any measure we look at this, from infections per capita, from actual mortality rates versus expected mortality, mortality percentage, Singapore has done well.  The Singapore government’s handling has worked, and we are opening up sooner than other nations. 

Anyone whining about having no social life in a time of pandemic, when millions have died, should grow up, and disabuse himself of that selfish entitlement complex.  What we have is something unprecedented, which has shut down the global economy.  The impact on healthcare will be felt from decades to come because people infected will likely have chronic issues long after they recovered from the initial infection.  Because of the morphic nature of the virus, and the number of daily transmissions globally, we will continue to see periods of surge, and it will take time before we get this under control.

Quora Answer: Do Hedge Fund Managers Make Investment Decisions, or Make Strategic Decisions?

The following is my answer to a Quora question: “Do hedge fund managers ever make investment decisions, or do they make more long-term strategic decisions?” 

It depends on the size of the fund.  Unless this is a boutique fund, of minimal size, where the fund owner and investment manager is the same person, fund managers are subject to oversight by an investment committee.  In fact, unless it is personal funds, this is a requirement.  The fund manager is supposed to manage the funds to achieve specific target.  In a very large fund, there will be many sub-funds, and there are fund managers for each fund.  Every fund focuses on a specific sector, geographic region, or is tailored to a specific investor need.  The fund manager makes decisions within the scope of the fund parameters.  This applies to hedge funds as well. 

Macro-decisions such as fund weightage, type of asset class, or even regional focus, are made before the fund is created, and any pivot away from this is beyond the authority of the fund manager alone.  This is a major strategic decision affecting the portfolio of an entire client base.  The investment committee is involved, and paperwork needs to be filed with the central bank in some cases.  Funds are not created in a vacuum.  Whether the fund is open or closed end, the type of investment horizon, the compensation structure – all this is decided at the very beginning.  The only major strategic decision is weightage.  Fund focus on specific areas or counters within the ambit of the fund are tactical decisions, not strategic.  They fall under the call of the fund manager.

Quora Answer: What Type of Inheritance Distribution Causes the Least Conflict among Heirs?

The following is my answer to a Quora question: “What type of inheritance distribution contract causes the least fighting among the children of the deceased?”

There are no guarantees that the heirs will not fight.  People have their own perspectives and entitlements.  What you should be concerned about is that the disbursement of the estate is unchallenged and according to your wishes.  In that vein, you can choose to use a will or if the estate is substantial enough, you could choose to set up a trust. 

A will is part of the probate process.  Wills should be prepared in advance, leave no ambiguity, and eliminate any uncertainty as to the mental state of the person preparing it.  It should be witnessed by someone, preferably an attorney, and it should be filed with a registrar of wills.  Wills should also be updated regularly to reflect developments in the estate, such as the acquisition of new property. 

Alternatively, if you have an estate large enough to be disbursed across several generations, or if you do not want your heirs to get all of the inheritance in one lump sum and waste it, you set up a trust.  A trust bypasses the probate process since it functions according to the letter of wishes created by the settlor, you, and managed by the trustees.

Quora Answer: What Should Startups Expect from Board Members?

The following is my answer to a Quora question: “What should startups reasonably expect from their board members?”

In a startup, the members of the board should ideally be more experienced than the founders, if the founders are new to business.  If the founders are themselves established in the industry prior to founding the company, then the board members should be of equivalent experience. 

Board memberships are given out for a reason.  These people must add value.  Either they have experience, access to funding, have a network, or bring something else to the table that would enhance the value of the company in preparation for exit.  In specific situations, people are offered membership of the board because they represent certain stakeholders or investors.  They are there to represent the parties to each other.

Quora Answer: What Should I Consider as a Beginning Investor?

The following is my answer to a Quora question: “What things should I think about as a beginning investor?” 

You should understand your risk profile, and look for asset classes to invest that are commensurate with that.  Even if you have a high risk profile, you should never invest in anything, especially complex derivatives, unless you know what you are doing.  As a beginning investor, you will not know what you are doing.  You need to consider your investment horizon, and the targets you want to achieve by then.  These calculations need to consider worst-case scenarios, and inflation.  You cannot be overly optimistic. 

Based on the above, you work at building your investment portfolio.  In general, you may consider putting 60% into equities, and 40% into debt instruments, such as bonds.  You should consider investing into index funds instead of individual counters to mitigate risk.  You should consider spreading your risk exposure by investing across industries and regions.  Depending on where you want to retire to or spend your funds, versus where you invest, you need to look at currency and political exposure as well. 

If all this seems overwhelming, and there is no blame if you do feel overwhelmed, then consider shopping around for a good financial services consultant.  Investing is a science and should be treated as such.  It is not a lottery.  This means looking at data and making projections, not looking for tips from people “in the know”.