Daring to Dream Big: Singapore's EDB

Today, we went to the National Museum of Singapore where we were given a guided tour of the Economic Development Board (EDB) exhibit (“50 years of economic development”) by the team that put on the exhibit. I would like to share some of the insightful stories that helped me better understand Singapore as a nation.

EDB is the strategy arm of the government. The first surprising point is that EDB is 50 years old whereas Singapore is only 46 years old so the EDB is older than the nation.

Embracing a nonconventional approach in the 1960’s, Singapore decided to work with the colonialists. Instead of tearing all ties after their independence, Singapore understood that their success lay in working with the colonists, selling to them. Singapore had the choice like many young nations of whether they produce what they need, or produce what creates economic activity. Influenced by the economic founder of modern Singapore Dr. Goh Keng Swee, they chose the latter, focusing on generating economic activities to create jobs, with some of their first products on exhibit at the museum such as the mosquito coils, hair wigs etc.

Despite Singapore’s humble roots (and the challenging early years that seems so far from reality today), Singapore happened to be located in one of the busiest locations of the world, and their open trading approach had immediate implications for the region. Singapore set upon a strategy to bring in investors and capital, developing Pioneer certificates to help facilitate the creation of foreign companies in Singapore.

Development Lesson #1: Singapore focused on the development of people, which is a lesson that can be applied to both advanced and developing economies.

Singapore continually asked, “How can we be relevant to the rest of the world?” This is a question central in development, one that must be re-visited frequently in long term planning.

Development Lesson #2: A question every country must continually ask is “How can we be relevant to the rest of the world?”

In the 1970’s, Singapore became relevant to the rest of the world by focusing on engineering and developing a workforce of skilled craftsmen.

“Daring to dream” beyond its humble roots and building an economy to generates jobs for its people, Singapore began building an electronics industry, serving as the manufacturer for Silicon Valley firms like Hewlett Packard. Many of the early graphing calculators were manufactured in Singapore, as were the Hewlett Packard printers. We learned the story of Renato Sirtori, Italian CEO of STMicroelectronics, who set up his company’s operations in Singapore 40 years ago. His story emblematic of the many foreigners who have made Singapore their home, as well as how the decision to do business in Singapore has transformed the nature of his company, now employing 40,000 staff in Singapore. We are reminded that today, unless a company exists solely to serve a domestic market, their presence in Asia is no longer debatable; and establishing headquarters in Singapore to serve the broader Asia market is similar to establishing a tech firm in Silicon Valley. However, Renato Sirtori was ahead of the curve, and his story reminds us of how forward thinking pioneers have transformed the nature of global enterprise.

By the 1990s, the foundation of what exists in Singapore today was largely built. However, the 1985 recession was a reminder that crisis can make a nation stronger.

Development Lesson #3: As Jack Welch (former CEO of GE) has said, sometimes you need to fix something that isn’t broken.

From a systems point of view, crises enable a country (or company) to renew and rewire to better adapt. Singapore’s response to the 1985 recession reveals lessons for many developing countries. It was a time where there was no financing for entrepreneurs; the manufacturing industry experienced a downward trend, and the Singapore workface was no longer cost competitive. HK, Taiwan and Korea were emerging threats.

Development Lesson #4: Beware of an overpaid workforce. Many countries strive for a highly paid labor force, equating quality of workforce with compensation. This can lead to an uncompetitive workforce.

Singapore embarked upon a wage constraint to make the workers competitive again, influenced by Philip Yeo, Chairman of EDB. Singapore embraced the twin engines of growth: manufacturing and electronics.

Development Lesson #5: The often misunderstood nature of the interconnected link between services and manufacturing leads many nations to shift out of manufacturing into services industry, resulting in disastrous results for the economy. Services require some manufacturing capacity, and this link must be better understood.

Singapore continued to ask, “How can we be relevant to the rest of the world,” this time shifting their definition of ROW from US/Europe/Japan to include the rest of Asia. Now, the rest of Asia had something that Singapore actually wanted. This change in strategy to be relevant to the rest of Asia has led to Singapore’s positioning today, where of the 38,000 businesses based in Singapore, 4,400 are Indian companies and 3,600 are Chinese.

There are several notable developments such as Singapore becoming the “Global Schoolhouse,” where many of the best international universities set up campuses in Singapore (such as INSEAD). Singapore invested heavily in IT, and this was particularly interesting because of the role government played in deploying cutting edge technology whereby the government offices were the first offices to pilot email. Singapore also developed R&D to further stimulate human capital. Singapore quickly realized that to be relevant it must build a Biomedical industry and pharmaceutical space, quite a task considering how capital intensive these industries tend to be. One key player mentioned in the exhibit was Ms. Yong Hwee Yee and her role in this development.

Some of the high value products developed in Singapore were Heart Valves from EarthSciences USA, non-reusable syringes, and Avastin anticancer drugs. The heart valves are quite interesting as they are manufactured by hand, exemplary of how an industry can offer a high paying alternative to a workforce with sowing capabilities. The non-reusable syringes concept developed by PATH USA, and supported by Gates Foundation, had extraordinary potential but limited market penetration, until they were commercialized for impact in Singapore. This concept of “commercializing for impact” and the role Singapore can play is a promising avenue for technologies developed for the developing world, many of which lack the commercial scale and distribution channels. A partnership between PATH, Gates Foundation, and EDB is just one example of the role Singapore can play going forward to serve as this engine for impact.

While many cite the tax regime, IP, and transparency as the reasons businesses set up Singapore, the recent surveys suggest that the most important factors have to do with Singapore being a desirable place to live. In fact, the most important criteria as to why foreigners come in flocks are that Singapore is a city where their children are safe and their spouses can find work. Singapore has one of the largest clusters of international schools in Asia. Singapore has invested in developing career opportunities for dual career marriages – one avenue of which has been to develop the non-profit sector employment opportunities. In general, EDB has developed a strategy to make Singapore a city that attracts talent, once again emphasizing their focus on PEOPLE, PEOPLE, and PEOPLE.

What is so striking about EDB’s strategy, certainly from an American perspective, is how similar it is to a company’s strategy, perhaps why Singapore is often referred to as Singapore Inc. In fact, its surprising how many of the lessons highlighted in this exhibit are straight takeaways from HBS cases: (i) People, People, and People; (ii) printers are not what make money, ink cartridges are the real profit.

80% of Singapore’s investors are repeat customers. EDB has expertly marketed its value proposition to investors and professionals all over the world, setting up a global sales force in 28 locations. These Global Ops teams develop expertly marketed messaging to bring in talent and business from all over the globe selling the product “Singapore” like the best of the Fortune 500 companies.

Development Lesson #6: It’s about selling, selling, selling (with a focus on developing a value proposition that attracts repeat customers)

Unlike Dilbert’s cartoon where the sales force must lie to get business, Singapore’s sale force has been able to “sell” the truth, of course expertly marketed and packaged, and because the product is good, they benefit from repeat customers.

For instance, we heard stories from the EDB team of how their sales force would pitch to international non-profits, selling Singapore as a transparent financial capital and ideal headquarters for non-profits seeking transparent capital markets. Singapore has quite adeptly marketed itself as the Asian capital for aid organizations, and if not headquarters for staff, a market for capital flows.

One may ask why Singapore aims to attract non-profits when Singapore is known more broadly as a moneymaking epicenter. Singapore hopes to attract capital, but it also seeks to diversify the employment opportunities available. Singapore understands that not everyone wants to be a banker or a lawyer, and that it must also offer opportunities for professionals to engage with philanthropy at different intervals of their career. What was not stated was how well this ties into one of the key selling point for foreign professionals, that their spouses can find work here. Perhaps international non-profits also offer the opportunity for dual career families to pursue their professional pursuits, as non-profits tend to provide job opportunities for child-rearing parents who seek balance in career in family and second careers for former executives and bankers seeking to leverage their private sector experience to give back. Non-profits also help build committed and engaged citizens for a more cohesive society: a social goal of Singapore.

Welcoming entities like IIX to Singapore certainly does just that – attracting talented professionals who have embarked upon their second career of “meaning,” the new generation of engaged professionals who seek to “do well and do good,” as well as the highly trained financial professionals (HNWIs, hedge funders, and bankers) influenced by the financial crisis to do more than focus on the bottom line or their own personal bank accounts.

Jurong Island off of Singapore hosts 100 petrochemical companies, resulting from the investment of SG $7bn and a strategy of reclaiming land; a process of creating new land from sea or riverbeds. Imagine the trust required as a foreign business to set up operations in a location, which when sold to you, was not land, but a location in the sea. Thus was borne the petrochemical industry.

Jurong Island 2.0 is now in the works, as Singapore embarks upon developing the world’s greenest island, with close to SG$7mn invested in clean technology. The value proposition is not scale but the development of systems, demonstrating to the world how to do this at the systems level.

Development Lesson #7: The core of Singapore’s success lies in its thorough strategic planning of systems and processes, where Singapore has been careful not to become a “slave of the system”

What seems interesting in Singapore’s approach to Jurong 2.0 is the concept of making the most of the limited resources at hand. Instead of building Jurong Island Part 2, Singapore has focused on how to more efficiently manage this “jigsaw puzzle,” thereby developing opportunities for companies to share resources such as water to reduce cost.

Certainly, Singapore has benefited from being small. Singapore’s size helps it to overcoming the challenges of interagency conflicts that so often thwart development. Singapore’s size and EDB’s strategic planning help to facilitate the collaboration of the government, companies and unions.
Singapore demonstrates that sometimes overcoming challenges is not simply brute force. Singapore consistently turns weaknesses into strengths. Case in point is the city’s approach to water, a resource that until recently made Singapore dependent upon its neighbors. In the past 5 years, Singapore has become the global leader in water resource technology, recently hosting a pre-eminent World Water conference, where billion dollar deals were constructed among participants. Singapore will be self-sufficient in water resources by 2061, and Singapore has developed a world-class technology to recycle water, that has been copied by its neighbors, especially China. It is that long term planning that makes such a strong impression, leading many of us to consider whether we have such a master plan for sustainability in our home countries. And if so, is it as clearly stated as water self-sufficiency by 2061?

The EDB exhibit closes with two presentations: a suborbital travel space plane concept that can transport passengers from Singapore to New York in under 2 hours, and a display of dreams and hopes for Singapore by today’s Singaporean youth. What is interesting about the suborbital travel space plane is the paradigm of design required from current air travel. This requires a shift from the traditional focus on performance (thin walls, compact space, offering passengers “just good enough”) to a focus on longevity. To make this commercial, this technology must focus on the most critical feature in the airline industry: safety. Thus, the design focus becomes providing a transport service that a normal person can withstand (i.e. no need to particularly health constraints or extensive training). A second consideration will be cost, making this affordable to tourists, as the current cost point was listed at $200K per trip.

As we move from glimpses of future innovations and obvious feelings of hope, we consider the challenges that Singapore faces today. Certainly one issue that is top of mind is the aging population, as Singapore is one of the most rapidly ageing populations in the world. One cannot take an MRT (subway) without seeing images of the elderly on posters, and the city’s campaign to reduce the social exclusion facing the elderly as well as the limited long-term care available. Singapore has a plan involving multiple initiatives: (i) increasing the % citizens pay into CPF (“pay as you go” schemes) to increase the savings fund; (ii) moving elderly into units closer to their families; (iii) making the housing facilities (HDBs) elderly friendly, equipping the buildings with wheelchair ramps and toilet rails; and (iv) increasing opportunities to engage the elderly in the workforce and their community (such as reducing the cost for companies to employ the elderly so that their compensation schemes can more accurately match their productivity). Singapore’s strategy to reduce costs for the elderly is quite ground breaking, especially since it is often this cost to cover the vulnerable populations that debilitates nations.

As we reflect upon the learning from Singapore that can be applicable to other nations, we consider the role an institution like EDB could play in other countries. Certainly there is no comparison entity in the US, where most of planning is local at the city and state level. We could consider our own governing bodies and political structures to better understand how to swiftly address our priority social and environmental issues. This suggests the power of crises and short-term shocks to adjust the system. Certainly, Singapore’s experience has a lot to offer, both in its successes and its failures, but most importantly in its ability to turn weaknesses into strengths, never sitting idle at the top, and continually asking how do we make ourselves relevant to the rest of the world.

The Big Question: Is there a tradeoff…

There is considerable debate in the social investing field about impact, and what makes an investment “social” This leads to the grand debate about whether or not there is a tradeoff between social and financial returns in impact investing.

ClearlySo published a report last week (http://www.clearlyso.com/) that highlights a critical distinction being made by investors regarding tradeoff. “Social investment also focuses on the balance and possible trade-off between social return and financial return. Another point of view is that all impact investment has a social component and therefore the distinction is false.”

Therefore, there is a group of investors who believe that there is a tradeoff: they seek financial returns, yet understand that any increase in focus on financial returns may reflect a sacrifice in mission, and a tradeoff in social impact. There is another camp of investors who believe there is no tradeoff: they may seek out an industry that is inherently social (such as healthcare or education) or environmental (such as clean technology), and then maximize financial returns in that industry. This latter approach seems to be the one taken of LeapFrog (insurance products to developing world), and RF Chandlers’ social venture fund.

Investors who believe there is no trade-off in social and financial returns, experience certain clarity in strategy. They pre-select industries that are inherently social, then solely maximize financial returns. These investors can operate using traditional investment methods, avoiding the confusion of management team of how to build a business to scale, whilst also maximizing social and environmental returns. Secondly, choosing certain sectors can further reduce “noise;” for instance, investing in education and healthcare may reduce some of the ethical dilemma’s prevalent in the financial services industry. The ethical dilemmas have been highlighted recently in India where a subset of institutions are debatably taking “unfair” advantage of the unregulated microfinance sector to earn profits off the back of the poor who are over-leveraging themselves. Third, these investors who believe in no tradeoff tend to choose to target the emerging poor, excluding the marginalized and destitute (who might be better served by traditional philanthropy and aid). Do those who believe in a tradeoff tend to focus on the marginalized and destitute?

RF Chandlers approach has been to run their investments like any for-profit business, not confusing management with a focus on social. The investment fund evaluates the industry, embarks upon it for the social value, incubates an idea, and brings in professional management with the ability to scale.

There is certainly a large role for social incubation in this space. My own impression, and certainly one shared by many, has led me to believe that the paint point is not the capital, but the capital absorption ability of enterprises (“the pipeline”). Two SOCAP conferences deep, and the message is the same: it tends to be the same capital chasing the same deals. The supply of “investable” deals has been limiting for investors, and represents a shortage that cannot be addressed by building out an innovative fund scheme or social capital markets. However, upon arrival in Asia, it is clear that the supply of social enterprises is indeed growing. And intermediaries such as incubators will have a very clear role to play to build out this pipeline.

Incubation in Singapore

What is the role for incubation in Singapore?

Stemming from a fascinating discussion with an American venture capitalist involved in incubation in Singapore, I learned about the 4 stools of Singapore’s growth model: Banking, Petroleum, Resorts, and Manufacturing.

As manufacturing declined (e.g., 80% of the world’s disk drives used to be from Singapore, and now that figure is close to zero), there was a need to shift the economy from skills based to knowledge based. One of the approaches embraced by the government has been building and developing incubators in Singapore.

The government has modeled the strategy after the approach in Israel, which has made Israel the second-best Silicon Valley. There are now 7 incubators in Singapore.

The X-MEN

Today, we went to visit Ikhlas, a social enterprise in Singapore. Ikhlas provides employment to X-convicts, endearingly calling them the X-MEN, helping them to rebuild their lives when they get out of prison. Ikhlas is a catering company that pays market-rate and cooks fresh food, supplying to childcares, elderly homes and juvenile centers. Understanding the social stigma held against X-convicts, the business model shifted from front end to back-end processes where the staff progress from cleaning to cooking and eventually to driving. For them, “driving is like getting an MBA,” says the founder.

Alfie, a Singaporean businessman, who understood life on the other side of the tracks, launched Ikhlas in 2004. Alfie shared with us that Ikhlas was borne out of desire to help his friends who couldn’t get a job after prison, and all too often returned to the “ship dock” where old environments all too often led to old habits and to reoffending.

Alfie shared with us his own story of how he emerged from his humble background, saying he got lucky “all because of football”. His love for listening to football games on BBC helped him learn English, his choice of tie for his interview and his witty personality landed him a job at a prestigious bank where he picked “colorful” markets to make investments such as Indonesia, India, Philippines, and where one fine day, he flipped a coin, made a bet on a Telecom company investment on the 2nd day of Chinese new year when no one else was working…all this helped Alfie land on the right side of the road. We note that he didn’t just land on the right side of the right, he has become a savvy business tycoon; but one who understands his roots, and might be more willing than most, to give others a second, third, fourth chance at life to achieve their potential.

As Alfie considered how to build job opportunities for the X-MEN, he went into food processing, an industry he refers to as “not rocket science,” but “bare, naked, and empty, and like any business must evolve.”

Stemming from the organization’s overriding belief that "every individual deserves a chance", the team shared with us the defining moment, which is when the X-MEN receive their first paycheck. “You can see with their faces that they are so happy that there are still places for them left in society.”

As a social change maker, Alfie asked us all to remember to challenge our own assumptions because what “you think will work or be good for people most likely is wrong.” One size fits all doesn’t work. His first assumption as he built Ikhlas was that the X-MEN would guard the job with their lives, but realized that there are so many distraction factors at play, and he had to revise the model to provide not just jobs, but training and guidance.

Only Buy Companies You Hate...says Dilbert

The Wall Street Journal published a truly pithy investment strategy piece this past week which made quite an impression.


http://online.wsj.com/article/SB10001424052748704025304575285000265955016.html

Dilbert cartoonist Scott Adams argues that you should invest in the companies that you hate the most. He says that moral bankruptcy is a great leading indicator of success (think BP), and the best companies (think Apple) can get you to "balance your wallet on the end of your nose and bark like a seal", as you purchase products that you utterly hate (think iPad2).

I found this advice most interesting especially in the context of what we are trying to do here at Impact Investment Exchange.

Let's first review Adam's financial advice...and then ponder our relevance...

"When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week...."

"I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers. I remember the day I learned that BP was using a submarine…with a web cam…a mile under the sea…to feed live video of their disaster to the world. My mind screamed "STOP TRYING TO MAKE ME LOVE YOU! MUST…THINK…OF DEAD BIRDS TO MAINTAIN ANGER!" The geeky side of me has a bit of a crush on them, but I still hate them for turning Florida into a dip stick."

Adams proceeds to lay out different investment methods to prove out his theory, and it goes something like this:

1. Technical Analysis
"... is like forecasting market moves with chicken droppings."

2. Investing in Well-Managed Companies
"The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish."

3. Track Record
There are two truths in investing: 1) Past performance is no indication of future performance, and 2) You need to consider a company's track record. And this is what we know, and these points are opposites. So any investment decision can be argued by selecting either point 1) or 2)...

4. Invest in Companies that You Love
Adams did this once, and went bankrupt, yet his financial advisor Wells Fargo did well for itself, and he hates Wells Fargo, so he suggests next time, why not just invest in Wells Fargo.

5. Do Your Own Research
Adams invested in the much loved WebVan (the credit and delivery grocery business concept), which is considered to be one of the largest dot-come flops in history.

.....So you may ask, how does impact investing fit into Dilbert's satire? Well, if traditional investors love companies with financial returns, and they hate companies that focus on social or environmental returns (distracting them from financial returns) namely social enterprises, then they hate social enterprises, and so they should invest in them....according to Dilbert.

But joking aside, if we do consider this line of reasoning, in a more serious manner, I think I would make a light reference to some of the research that suggests that increased investment in environmental and social governance actually increases performance for the company. Or we could look to HIP Index (a mega/large-cap equity portfolio that ranks S&P100 companies depending on their Human Impact + Profit performance) which has outperformed the S&P 100 since its inception...What would Dilbert have to say about that?

Lets end on one more investment tip from Dilbert.

"Recently I bought something called an iPhone. It drops calls so often that I no longer use it for audio conversations. It's too frustrating. And unlike my old BlackBerry days, I don't send e-mail on the iPhone because the on-screen keyboard is, as far as I can tell, an elaborate practical joke. The other day I was in the Apple Store, asking how to repair a defective Apple laptop, and decided, irrationally, that I needed to have Apple's new iPad. The smiling Apple employee said she would be willing to put me on a list so I could wait an indefinite amount of time to maybe someday have one. I instinctively put my wallet on my nose and started barking like a seal, thinking it might reduce the wait time, but they're so used to seeing that maneuver that it didn't help. My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs's black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I'll probably buy some shares."

My Top Ten

I went to a medical conference recently, and one of the speakers asked the audience to share leaders that they admired. From an audience of both men and women doctors, only male leaders were called out, and I found myself annoyed for not being able to bring to mind all my lady heroines.

So to a broader audience, I would like to share the women, of past and present, who inspire me.

1. Anne Frank 1929-1945
“Despite everything, I believe that people are really good at heart,” from our diary about the Holocaust, a book that challenged us to challenge assumptions about people and power.

2. Florence Nightingale 1820-1910
Known as the “lady with lamp,” Florence Nightingale was instrumental in changing the role and perception of the nursing profession. She has also been attributed as one of the first to practice evidence-based medicine.

3. Helen Keller 1880-1968
Helen became deaf and blind as an infant. Overcoming the frustration of losing both sight and hearing, she campaigned tirelessly on behalf of deaf and blind people.

4. Dorothea Dix 1882-1887
This was my first heroine in childhood, and I remember how I inspired I was, as a ten year old writing a book report on this woman. Dorothea Lynde Dix was a social reformer for the treatment of the mentally ill, completely changing the way mentally patients were treated through out Europe and the US.

5. Audrey Hepburn 1929-1993
Leading female actor of the 1950s and 60s, Audrey Hepburn defined feminine glamour and dignity, and was later voted as most beautiful women of the twentieth century. She committed her life post acting to humanitarian works.

6. Benazir Bhutto 1953-2007
Benazir Bhutto was the first female prime minister of a Muslim country. She helped to move Pakistan from a dictatorship to democracy in 1977. She focused on social reforms, in particular helping women and the poor. She was forced out of office on corruption charges; and assassinated two weeks before a general election in which she was a leading opposition candidate.

7. Susan B. Anthony 1820-1906
Susan Anthony campaigned against slavery and for the promotion of women’s and workers rights. She began campaigning within the temperance movement and played a pivotal role to introduce women’s suffrage in the Y.S..

8. Katharine Hepburn 1907-2003
I was named after Katharine Hepburn. An iconic actress of twentieth Century film, Katharine Hepburn helped redefine traditional views of women’s role in society through her acting and her lifestyle.

9. Amelia Earhart 1897-1937
Amelia Earhart was the first woman to fly across the Atlantic in 1928, just one year after the first ever crossing made by Charles Lindeburg.

10. Sheryl Sandberg
Known informally as one of three most influential people in Silicon Valley, Sheryl is the COO of facebook and one of my modern day heroines.

What’s in a name anyways?

I learned something very interesting this evening at dinner with my two lovely friends from Burma. These women are doctors who are training here in Singapore and then hope to set up private practices to serve their people, who have very limited access to medical care.

What I found so interesting was their practice of naming children, and how that impacts gender equality in their country.

When I asked whether it was considered more delightful to have a daughter or a son, both responded that little girls and boys are met with equal delight. When I inquired further as to why this may be so in a region where little boys tend to reign as the little princes, they said it was perhaps due to the lack of importance of a family name. Actually, children can be named one syllable if the parents desire. There is no family name, and so males do not have the honor and responsibility of passing on the family lineage. I said it was perhaps harder to keep track of families with no common thread, and they said, indeed it was, but that most families keep elaborate family trees.

As we ventured into religion, the topic became more animated, because in Buddhism, men are believed to be superior to women. For instance, my friends told me that they, as women, are forbidden from climbing to the highest steps on the temples. This became quite an interesting discussion...

Where is the alpha female?

Stemming from a discussion with Durreen about a recent women’s leadership meeting that she attended, I started to think more about the what role women can play to support other women.
McKinsey sponsors this Women Leadership conference where they bring together women professionals for a networking and management-training event. Now I consider myself an experienced “networker,” although I refer to it as “connector.”

I attended this McKinsey event in Stanford GSB, and one of the exercises at this event was to map out your mentors with various instructions. I had a page full of mentors, but realized that with very few exceptions, they were all men. If I were to do this exercise today, my map would look very different, with many female mentors on the list.

One of the insights from the women’s leadership meeting referenced by Durreen was that women don’t support one another. We can trace this back to our childhood recess activities where, in an overwhelming generalization, girls talk in small groups while boys play. What often happens is that on the first day of school (or work), the males take time to determine who is the alpha male, and once that is established, then everything is peaceful.

In the meantime, women do not determine who is the alpha female, they sit in small groups to discuss this, they examine the contenders, they pick their sides, there will be tremendous infighting, and they may end up with no leader to emerge from all of this activity. Meanwhile, the men are off to the races.

What needs to change is not necessarily the evolution of an alpha female commando, but what if we were to support each other more, and how might that happen, what are the constraints, and what might that look like….

It’s a different type of capital markets

The World’s First Stock Exchange was in Bruges, Belgium in the 14th century.

Since then the stock exchange has undergone transformational change and evolution. Having spent several years on Wall Street, I have my own personal impressions of the Wall Street exchange and the bank’s trading floors and capital markets. I experienced one version of it first hand.

It is particularly exciting for me to be returning to capital markets where businesses with social and environmental impact are invested in, given a valuation by global research firms, a rating or score card by ratings agencies, and even traded. It is a joy to help build an alternative capital markets where social and environmental companies are not viewed as inefficient business models.

Not so typical a start-up…

When you walk in, IIX looks like a typical Silicon Valley start-up, but’s it actually very different.

In just two weeks, I have seen the spectrum of people who come through our doors. IIX does have the ability to influence the policies and mindsets of governments, a staggering ability that we cannot imagine in the U.S. where we are paralyzed by so many differing opinions. Whilst this difference of opinions often leads to innovation, it also stunts the growth of movements. However, Asia may just be the region where social enterprise can truly take off to achieve scale. The big question is whether IIX’s approach to sustainable development might be able to influence governments, often governments led by a small group of elite, who seem open for guidance.

The Economic Development Board (EDB) of Singapore, the Singapore development agency, decided 20 years ago to make Singapore’s private banking system better than the Swiss banking system, and they seem to have achieved their goal. They have also very systematically made Singapore into a successful regional air transport hub. While not all of their initiatives have been so successful, they do make a commitment to be the best. They have now decided that being the Asian regional hub for the social sector would add to their core capabilities as a nation.

“If you pay peanuts, you get monkeys…”

The Founder of Modern Singapore, Lee Kuan Yew, famously said, “If you pay peanuts, you get monkeys,” meaning that only stupid people will work for you if you do not pay very much. Or in the words of HKS Jonah Evans, if you pay peanuts, you get unemployed grad students.

Well, sometimes when you inspire people to join you in something meaningful, peanuts are just fine.

“And, when you want something, all the universe conspires in helping you to achieve it.”
(The Alchemist by Paulo Coelho)

One woman’s vision becomes the battle cry of an army of volunteers

What is so incredible about IIX’s own founding history, is that it’s a story of how one innovator took a concept, got key partners on board, and got to this point of launching the first private placement platform in Asia dedicated to connecting social enterprises with impact investors...all in 2 years time.

IIX’s founder, Prof. Durreen Shahnaz, is a former investment banker and social entrepreneur from Bangladesh. Her brainchild, the creation of a capital marketplace for social good, comes from two decades of experience at Morgan Stanley and Grameen Bank, where market connectivity was lacking. Her experience founding and building OneNest, an online global wholesale marketplace for handmade goods, led her to realize a need for a marketplace where investors can play a role in helping to grow companies with a social and environmental mission. After selling OneNest, Durreen began teaching Social Innovation at LKY School at National University of Singapore, and it is at this time when one article written and one phone call later changed the course of her, and many other people’s, course in life. The Rockefeller Foundation came across Durreen’s editorial on the topic of social stock exchanges and became the first organization to support the creation of Asia’s first social stock exchange. This was two years ago.

Since the early days, the team has turned into an army of ex-i-bankers, ex-lawyers, ex-marketers, who have all traded in annual bonus for the possibility to creating something truly amazing; and it is that possibility that continues to attract top talent willing to work for peanuts...

Why Singapore?

The second question, I often get is “why Singapore”? I believe this question requires a much deeper understanding of how things work around here, so I hope to be able to answer this at a later point in time. I understand that the location for the IIX exchange has been of much debate, and considerable analysis was conducted to identify the most attractive location.

One compelling piece of information that I have learnt so far involves the desire and commitment of the Singapore government to make Singapore the hub for the social sector in Asia-Pacific. Operating with a U.S. mindset, this commitment of the government would not weigh in as heavily into decision-making, but in the local context where social enterprise really does require the support of the three legged stool (private sector, government, and citizens), the Singapore government’s strategic commitment to become the hub for the social sector in Asia as well as their powerful banking infrastructure makes a good sell.

What is a social stock exchange?

When I mention social stock exchange, I am often met with blank looks. Adding the term “social” to financial terms tends to cause some confusion in general. In terms of the vision held here at IIX, I tend to describe it as a traditional capital markets except that issuers (social enterprises) must meet social and environmental listing criteria to be on the exchange, and the investors tend to seek social and environmental returns in addition to financial returns (hence impact investors). In the IIX vision, it is a “stock exchange where impact investors can invest in and trade shares and bonds issued by social enterprises in a liquid and transparent environment”.

Actually, there have been a number of similar initiatives around the world to create social stock exchanges, such as the developments in Brazil (the Social and Environmental Stock Exchange, connected with the Bovespa Index), in South Africa (South African Social Investment Exchange), in the U.K. (London Social Stock Exchange), in the U.S. (Mission Markets), and in other cities. These range from the philanthropic exchanges in Brazil and South Africa where “investing” actually means donating to the more commercially oriented exchanges tailored to social enterprises. It will be interesting to learn more about the lessons learnt from these context-specific developments, especially from the social stock exchanges that have received considerable media buzz but have been slow to develop or scale.

Defining the lingo: what is impact investing?

Impact investing is defined as investments intended to create positive impact beyond financial return in the J.P Morgan Global Research Report (Impact Investment: An Emerging Asset Class, November 2010).

Impact investing is considered a subset of socially responsible investing, which historically, has meant the screening of investments to exclude what the investor perceives as “bad” such as cigarettes, gambling, etc. Impact investing may fit into this larger pool of “good” investments, but impact investors tend to take a more active role, purposefully placing capital in investments that are designed with intent to make a positive impact. The impact investor does not seek investments that may happen to have unintentional positive social consequences. The social and environmental impact is a core part of the social enterprise’s business strategy, and is how the business measures success.

In terms of returns, impact investments are expected to return at least nominal principal (meaning you invest $10K, you should at least get $10K back at end of term). And the expected returns range from attractive private equity-like financial returns of 20-25% (e.g., Ignia Fund in Latin America) to below market rates.

Defining the lingo: What is a social enterprise?

A social enterprise is defined by Wikipedia as “any for-profit or non-profit organization that applies capitalistic strategies to achieving philanthropic goals.” I tend to think about a social enterprise as an entity with a social and/or environmental mission coupled with a focus on financial sustainability. While traditional enterprises typically measure performance in profit and financial return, social enterprises focus on creating social good (perhaps via performance in profit and social return.)

Social enterprises fit into a larger umbrella of businesses with social responsibility (as most commercial businesses have social objectives), but social enterprises are distinct in that their social and/or environmental mission is central to what they do. So whether they are structured as mission-oriented for-profits or business-oriented not-for-profits, it is their mission and financial sustainability (and not their tax code) that distinguish them from non-profits with some earned income and businesses with social responsibility.

It is important to understand this distinction, in a world of confusing vocabulary, misaligned incentives and “spin” marketing, where the terms green and organic are tossed around like buy and sell on trading floors.

Launching Asia’s first Social Stock Exchange

This summer, I am privileged and thrilled to work with Impact Investment Exchange Asia (IIX), a start-up social enterprise based in Singapore. Only two years old, IIX has recently launched Asia’ first private placement platform for social enterprises this past March (known as Impact Partners), where impact investors are introduced to carefully screened social enterprise investment opportunities. And early next year, IIX will be launching Asia’s first Social Stock Exchange (known as Impact Exchange). IIX’s goal is to “create a liquid and transparent trading platform and an efficient capital raising platform for social enterprises in Asia" where investors will evaluate businesses in a new way, placing as much importance on the social and environmental impact of the enterprise as on its financial returns.

These two platforms, Impact Partners and Impact Exchange, will provide access to capital to social enterprises at varying stages of development, ranging from early stage companies accessing venture funding to mature companies seeking full-fledged public listings. The common thread, and the point that differentiates these platforms from traditional capital markets, is their emphasis on the social and/or environmental impact. To this end, these platforms are exclusive to “social enterprises” as investment opportunities.

As someone who has followed this space (meaning social enterprises and impact investing) quite intensely over the past few years, the development of a capital markets for social good strikes me as quite a meaningful achievement in the impact investing industry. This might just be the tipping point that will allow for social enterprises to truly take off and for the proven models to be scaled as part of a country’s sustainable development policies. This will certainly contribute to making Singapore a social enterprise hub in Asia.

Disclaimer and Setting Expectations

If you are interested in social enterprises, impact investing, start-ups, Asia, empowerment, leadership, and stories of unreasonable people committed to make the world a better place, then you may find this blog interesting.

I will explore the intersection of many different worlds that typically don’t intersect. At this emerging intersection where traditional finance meets non-profit, start-up meets government, Silicon Valley meets Dhaka, there is a new type of ecosystem being built to support the development of a capital markets for social good. At this intersection, I have found beauty in such contrasts, where in one conference room, the lady to my left may be a Goldman Sachs executive, to my right, an Indian market weaver, across the table, a member of the Singapore ministry.

This fellowship is made possible by the Women and Public Policy Program (WAPPP) at Harvard Kennedy School and the Roy Family Internship Program. Changing the world, one gender-focused internship at a time, the WAPPP has enabled a small group of us to go forth this summer to “tackle” some of the world’s most pressing social and environmental challenges. As part of my own work this summer with Impact Investment Exchange Asia (IIX), I will be identifying potential areas of influence where IIX can play a role in improving gender equality, whether it be by increasing the number of women entrepreneurs and managers at social enterprises, improving the measurement of gender-related impact metrics, or engaging more capital focused on gender issues.

And finally, I will also try to shed some light on my new home and our headquarters, a city called Singapore, which I have found to be quite a surprising intersection of many different worlds itself. Often referred to as a “benevolent dictatorship”, one might wonder whether Singapore might just be the ideal place to build a seemingly “benevolent capital markets”, a capital markets organized for the purpose of doing good.