The Post-Pandemic World Requires a New Type of Leadership

The lockdown and other social distancing measures have demonstrated a need for a need type of leadership, one that is increasingly multimodal, especially when we are now utilising hybrid work models.  A post-pandemic world is not going back to the way things were, because people have changed their habits.  People and companies have learned that it is possible to complete routine transactions from home, and coordinate across even countries.  This hybrid work style is here to stay, because there is little incentive to go back to what is was before. 

This means that effecting effective leadership in this new hybrid work model requires skills that are beyond traditional team leadership.  In addition to the skills that require direct management, leaders in this new paradigm must be able to coordinate, to management, to lead remotely.  There is a heavier emphasis on communication through the written word, and other forms of media. 

Tasks are of two main types.  One type of tasks involves independent work, often of a routine, clerical nature, such as administrative tasks, reports, correspondence, and analysis.  These are tasks that can be done virtually.  Even some aspects of coaching, and mentoring can be done online, and done effectively.  The  other type of tasks are the ones that involve a combination of experiences, an integration of different facts, a dialogue on goals and outcomes that involve the entire team.  Complex problem solving, inculcating a specific culture of values, and managing conflicts are best done physically, not virtually. 

Part of leadership now, is recognising which tasks belong to which area.  The following are specific types of tasks that would be better done physically, because they involve presence and nuance that cannot be replicated over a video call.  Perhaps, as society evolves, we will be able to perform more of these tasks virtually, but we should never discount the power of a physical meeting.  That human touch still has a place. 

The first is forming and maintaining collaborative relations, through networking, bonding, and connecting at a deeper level.  Trust and a shared understanding is better cultivated though shared experiences, such as a meal, or a bonding exercise.  The second is any form of shared learning to stimulate innovation, and knowledge integration.  People need a time and place to open up to each other in a non-threatening physical environment, and certain social activities facilitate this. The third is building a strong group identity and shared culture.  This is done through shared experiences and social activities with that goal in mind.  And the forth is built on the other three, which is to provide a vision, a shared purpose, and a sense of loyalty to the collective.  The foundation of this is in direct interaction.  The implications of these activities on new leadership models are profound and evolutionary.  What we have previously no longer suffices, and new methods of management and leadership must be developed. 

The first role is that of a multimodal coordinator.  This is the ability to manage the flow of work, the tracking of activities and tasks, and the integration of outcomes to a dynamic timeline.  Much of this is virtual, and there is an element of mentoring virtually.  The ability to think quickly, and act dynamically is important because a virtual work environment often involves coordinating across time zones.  This sort of leadership skill requires trust both ways since members are seldom physically in proximity.  The downside to this is that there is a danger that leader who are less than equipped fall into either micromanagement, or the extreme of losing control due to a perceived lack of interest in subordinates.  We are all familiar with the type of leaders who keep their team on an endless series of online meetings, going through report after report. 

The second role is that of an initiator, a sort of font of inspiration, stimulation, and innovation.  This is a cheerleading role, which involves building trusts across many vectors, and fostering an environment where members feel safe enough to share their thoughts and ideas, no matter how seemingly outlandish.  Somewhere in the realm of the ridiculous, may be the next great idea.  The challenge here is for the leader to not dominate the conversation, and allow others to grow into their role, including making mistakes. 

The third role is the traditional role of coaching and mentoring, with the added mandate of being able to do much of this virtually.  Whilst there is a focus on helping people achieve peak performance, it is important that they feel valued and trusted, which requires building their self-esteem and keeping them connected to the team.  The emphasis of this role is less on the logical aspect, and more in emotional intelligence, and understanding some of level of psychology.  People still need to feel connected and motivated, even across oceans. 

The final role is that of actually being a leader, a focus of the team to represent them when we negotiate, exercise influence, and build strategic relationships.  This is the ability to bring all the previous points to bear for a strategic goal, while making ground tactically, a roadmap to that goal.  It involves the ability to get all stakeholders involved, and committed; it involves convincing them that we represent their needs and interests; it involves the ability to advocate and cohere eloquently, both physically and virtually. 

Ultimately, the foundation of all this is built on legitimacy.  That legitimacy is only achieved when there is trust and  a sustained connection.  While we need to delegate tasks and manage expectations, the team still needs to feel empowered to exercise initiative, and trusted to keep to their end of the bargain.  Without that trust, all this falls apart into micromanagement hell or chaos.  Central to all this is the ability to communicate. 

These are skills that are replicable and scalable, meaning that when it is mastered at a lower level of management, it can be applied at a high level, and refined over time.  Leaders must recognise that the strength of their team depends on them empowering them, and supporting their growth.  We are looking at facilitation, the application of emotional intelligence, and motivational skills.  When they can do they, they will thrive and be effective managers in a post-pandemic world.

Toastmasters Virtual Meetings are a Competitive Advantage

In the last year, we hear, among Toastmasters, and people considering joining a Toastmasters club, that they hesitate to renew, or join the club, because meetings are online.  Some clubs are apologetic about this, and appeal to loyalty, altruism, or an appeal to emotion to get members involved.  This is ineffective.  That is now how people function.  We appeal to self-interest. 

We have to be cognisant, first and foremost, that the post-pandemic world has fundamentally changed the way we conduct business, the way we interact with each other, the way we connect.  Meetings are conducted across borders virtually, and that requires specific skills we may not feel necessary in a physical meeting.  There is a greater sense of intimacy in that distance when we are speaking on video.  The audience has an opportunity to see much of our facial expressions up close, and that affects how they react to the message. 

Toastmasters, as a programme, is effective in granting members constant opportunities to refine their presentation, their speeches, their interactions across the medium of virtual meetings.  It affords access to a diverse audience to familiarise ourselves with the intricacies of communication across cultural boundaries.  Those are benefits and advantages that cannot be understated in a post-pandemic economy.  It is a competitive advantage we cannot afford to disregard.

Being a Part of the Community

The following was my opening address at the AIA Toastmasters Club’s chapter meeting, on the 04^th February 2021. 

District and club officers, members, guests.  My fellow Toastmasters.  Welcome to AIA Toastmasters. 

Tonight, I am proud to state that AIA Toastmasters has 10 DCP.  The Distinguished Club Programme was established by Toastmasters International as a general measure of club success.  Each year the Distinguished Club Program recognises club achievements in education, membership growth, club leadership and club communication.  This measure is not the whole of what makes a club successful, but it does reflect the activities that required for success.  Since its inception, this club has always achieved 10 points. 

This achievement is a testament to the dedication of the Executive Committee, the work of the members, and the support of the wider Toastmasters community.  We are great because others have helped us to be great.  As such, it is incumbent upon us to give back, to elevate, to celebrate the successes of Toastmasters everywhere.  Greatness is not a fortress in the mountain.  Greatness is to walk among the community, to be part of it, and to celebrate it. 

I have always emphasises that for us, in District 80, we are only as strong as our weakest clubs.  That is why we emphasise, here at AIA Toastmasters, club visits by our members.  We send out our members to hold appointments in other clubs, to conduct workshops and programmes, to take up roles in the District at every level.  This is part of our education as Toastmasters. 

In that same vein, we have a tradition of inviting the best Toastmasters to take up appointments in our club so that we can also learn from them, and build on their example, an exchange of ideas and best practices so that we continue to inculcate that culture of excellence.  We must be generous with our knowledge, and humble in our learning.  That is what this club is about. 

Over to you, Toastmaster of the Day.

 

Behind the Curve

Singapore retail investors are a strange breed.  They will shy away from traditional funds, citing risk, or other excuses, but they will sink their money into all manner of counters based on herd mentality, and greed.  As long as someone promises a fantastic return, they put money in places they could never hope to see a return. 

The dichotomy of Singapore as a financial centre is that while the system is world class, Singaporean investors and entrepreneurs are behind the curve on investments, risk management, and tax exposure.  It is one thing to buy a financial product.  It is another thing, altogether, to be able to structure it as part of a portfolio. 

In this case, I am not a fan of such a crowdfunding platform because these platforms have no real fiduciary responsibility.  They are mere matchmakers.  The funds are not captured anywhere, such as in a trust structure.  This means defaults and failures in the process leave investors with no money, and no recourse.

Q1 2021 Market Outlook: Recovery, Opportunity, & the K-Recovery

This assessment was written in early February 2021 — delayed deliberately from the usual first-week-of-January publication to allow the dust to settle on two simultaneously significant developments: the fractious transfer of power in the United States following the January 6th Capitol events, and the initial rollout of COVID-19 vaccines that would determine the pace and character of the global economic recovery.  Both developments had clarified sufficiently by February to permit a considered view.

The American Recovery

The American economy entered 2021 with two tailwinds operating simultaneously: the vaccine rollout under the incoming Biden administration, and the prospect of a US$1.9 trillion stimulus package that the Congressional Budget Office’s own projections — which did not even assume the stimulus — already showed returning US GDP to pre-pandemic size by mid-2021.  Real GDP growth was 3.7% in 2021.  GDP averaged 2.6% over the following five years.  Unemployment fell to 5.3% in 2021 and approached 4% by 2024 to 2025.  Inflation is expected to reach 2% after 2023, which means the Federal Reserve was not expected to begin hiking rates until mid-2024 at the earliest.

The Republican Party’s reluctance to sanction the size of the stimulus package was noted but irrelevant.  With the Democrats controlling both Houses following the Georgia Senate runoff elections in January 2021, the legislative arithmetic made obstruction impossible.  The filibuster could not block appointments.  The legislative agenda would proceed.

The GameStop Opportunity

January 2021 produced one of the more entertaining spectacles in modern market history: retail investors on Reddit’s WallStreetBets forum coordinating a short squeeze on GameStop, AMC, and several other heavily shorted stocks, inflicting losses estimated at approximately US$19.75 billion on hedge funds that had built substantial short positions against them.  Melvin Capital — one of the primary targets of the short squeeze — required a US$2.75 billion emergency capital injection from Citadel and Point72 to avoid collapse.  The hedge fund manager, Gabriel Seth Plotkin, became, briefly, the most widely disliked man in American retail investing — which is a competitive category.

The consequence that mattered for most investors was not the GameStop drama itself but its collateral effect.  Hedge funds burned by the short squeeze liquidated positions elsewhere to cover losses and meet redemption requests.  Shares in fundamentally sound companies fell not because anything was wrong with those companies, but because a forced seller was selling regardless of price.  This created buying opportunities in assets whose price had moved for reasons entirely unrelated to their underlying value.  The investor with cash and the discipline to distinguish between a price movement caused by fundamental deterioration and one caused by a forced seller operating under distress found the January 2021 dislocation unusually productive.

East Asia: The Core Conviction

The primary investment thesis for Q1 2021 remained East Asia — specifically Greater China, Southeast Asia, and the associated technology and healthcare sectors.  Client holdings at the time had generated average annual growth of approximately 40% to 60% over the preceding year, despite market conditions that had tested every other portfolio construction approach.  This was not luck.  It was a structural position taken on the basis of identifiable tailwinds.

The World Bank’s data confirmed the thesis.  After a sharp slowdown to 0.9% in 2020 — the region’s worst performance in decades but still positive when every other major region contracted — East Asia and Pacific output was projected to expand 7.4% in 2021.  China was expected to lead, with GDP growth between 2% and 4% — below its historical potential but with significant upside from a manufacturing base that had weathered the trade war and resumed production ahead of any other major economy.

The K-recovery was the most important analytical framework for understanding where, within the region, capital should be directed.  A K-recovery describes an economy in which some sectors and some participants recover strongly while others continue to decline — the letter K capturing the divergence between the two trajectories after the initial shared shock.

Vietnam, Indonesia, and Singapore were positioned on the upward arm of the K.  Malaysia, Myanmar, and Thailand carried domestic political risk that placed them on the more uncertain arm.  South Korea and Japan would recover but more slowly, their export-dependent models requiring global demand normalisation that would take longer to materialise than the domestic consumption recovery in China and Southeast Asia.

China’s specific position deserved particular attention.  It had kept new infection rates down through 2020, resumed production earlier than any other major economy, and maintained its manufacturing competitiveness through the trade war — the US trade deficit with China having widened rather than narrowed despite the tariff escalation, as the American economy discovered that Chinese manufacturing capacity was not easily substitutable in the short term.

The Sectors

Technology funds represented the primary growth driver.  The pandemic had compressed years of digital adoption into months — e-commerce, cloud computing, remote working infrastructure, digital payments, and online entertainment had all experienced demand acceleration that would not fully reverse when physical restrictions lifted.  The consumer habits formed during the pandemic had demonstrated the kind of stickiness that makes structural thesis investments compelling.

Healthcare represented the secondary driver.  Demand for PPE and vaccines was immediate and quantifiable.  Longer-term, the pandemic had exposed chronic underinvestment in healthcare infrastructure across the region — creating both public and private investment demand that would sustain the sector well beyond the acute phase of the pandemic.

The Risks

The downside risks were identifiable and worth naming clearly rather than treating as remote possibilities.  Renewed COVID-19 outbreaks and delayed vaccine rollout represented the primary risk — particularly relevant for maritime Southeast Asia and Thailand, where elevated infection rates persisted into early 2021.  The young demographic profile of most Southeast Asian economies would ultimately work in favour of the recovery, reducing the mortality burden and allowing economic activity to resume more quickly than in older-population economies.

Financial stress amplified by elevated debt levels was the secondary risk — particularly in economies with petrobond maturities approaching, where the combination of low oil prices and high debt service requirements created cascading default risks.  Malaysia’s domestic political instability added a specific country risk layer that warranted caution on Malaysian-specific positions.  Neither risk category was sufficient to overturn the core thesis.  Both were near-term in character.  For investors with an extended horizon — the investment approach that the positions were structured around — the near-term risks represented noise rather than signal.

The Summary

The Q1 2021 outlook was constructive.  The American recovery was underway, the stimulus was coming, and the GameStop dislocation had created buying opportunities in fundamentally sound assets that had been sold for reasons unrelated to their quality.  East Asia was positioned to outperform, with China leading and Vietnam, Indonesia, and Singapore following on the K-recovery’s upper arm.  Technology and healthcare remained the sector convictions.

The investor who stayed the course through the January volatility, maintained their East Asian positioning, and recognised the GameStop-induced dislocation as an opportunity rather than a signal was well positioned for what the rest of 2021 delivered.  The S&P 500 returned approximately 28.7% in 2021.  The MSCI Asia ex-Japan Index returned approximately 2.3% — underperforming due to China’s regulatory crackdown in the second half of the year, which could not have been predicted from Q1 data.  The specific country and sector selections within the Asian positioning, therefore, mattered more than the regional thesis alone.

The lesson from that divergence — that a correct regional thesis requires correct country and sector selection to deliver the full return — is one that every market outlook should state explicitly rather than leaving the client to discover retrospectively.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

BlackRock Raps Top Glove Board

In an age of activist investors, companies must be seen to be ethical, responsible, and advocate sustainability.  Just as there is goodwill, there is also negative goodwill.  Negative goodwill, along with goodwill, are accounting concepts that undertake the challenge of quantifying the value of intangible assets.  This includes the company’s reputation, its patents, customer base, and licenses.  In the majority of acquisitions, transactions involve goodwill, where buyers pay a sum greater than the value of the selling company's tangible assets. But in rarer cases, negative goodwill occurs, where the value of the intangible assets must be recorded as a gain on the buyer's income statement.  These are considerations for investors such as BlackRock.

The Right Words; The Wrong Time

The rights things, said in the wrong time, is the wrong thing said.