After about 30 months as a Public Business owner, Director and Management of 8I Holdings Ltd, I thought it would be a good time to pen down my reflections thus far in this journey, particularly after conducting 2 AGMs (8I Holdings and Digimatic Group Ltd) last week. Perhaps from my sharing, it would provide some insights that will provide clarity on my thought process and add value to you.
Investors, Directors & Management
Many years ago, I started out as a Retail Investor, being a secondary school teacher then and investing into public listed companies. At that point in time, I am mostly looking at business and investing from the perspective of a retail investor.
Fast forward many years later, I am looking at business and investing more from a Business Owner, Director and Management point of view. And I realized that the many assumptions and opinions that I held previously is often incomplete in its understanding and context.
When I was a retail investor, because the directors and management are taking charge of the company and handling many day to day matters and making plenty of strategic and operational decisions, I would often be judgmental in my assessment of the many public listed companies that I had invested in. And I based it on (which is to be expected) my reading and understanding of the Annual Reports, announcements and obviously share prices of the companies.
Yet I also realized that it is quite important to clarify certain of my understanding with the management directly. Many a times, I will get a better understanding of the situation or issues involved and would clear some misgivings that I had with the management previously. So nowadays, I would remind myself to hold my “judgement” before communicating with the parties involved to get a more complete picture. I have been mistaken in my assessment before and I do not pretend that I will not make mistakes unless I have sought further clarifications.
This boils down to an intent to understand a situation better from a multiple angle and overall point of view. So if there are any concerns with any public (or private for that matter) companies, do your part to support their growth by reaching out to them. And yes, that applies too to my company, 8I Holdings and other companies that we have a substantial stake in such as Digimatic Group Ltd.
Send any feedback that you may have to firstname.lastname@example.org so that we can work on it and address the issue accordingly.
Valuations of Brick & Mortar and Technology Companies
Learning from the teachings of various Value Investors such as Warren Buffett and Charlie Munger is one of the greatest gift that I have received in my life thus far. Yet despite my efforts, I realise that I will always have more to learn.
For years, I have always wonder how technology companies (remember that for many years, Warren Buffett cannot justify that either) can justify the valuations that they have. And I recall in my much younger years that I couldn’t justify why people will pay the sort of “inflated prices” (then, now considered good deal!) even for properties in Singapore!
It was only at a later stage that I realised that the people who have invested in Technology companies had looked at business and investing not from a brick and mortar company point of view. Brick and mortar companies often must make sure that they turn in a profit first, backed by cash flows, before they can expand with relatively high capital expenditure.
Whereas for Technology companies, backed by the Potential of a much more scalable business, capital would often rush in to fund them, hoping that they will gain market traction and share so that they already have many potential “revenue streams” in place when they start their monetization strategy.
Come to think of it, I should have invested in Facebook, Google, Tencent and Apple at some point if not for my narrower understanding of investing back then. Looking at the current list of the top wealthiest tech tycoons (and relatively young ones to boot!) in the world, I think that exclusion is not to my benefit.
Public and Private Companies
There is also an inherent difference in running a private company versus a public company. Many business owners (and investors too) may not appreciate the difference even if they think they know it. Just because they have Knowledge doesn’t mean they have real-world Experience. I know because I used to be like that!
In my younger years, I will think to myself (and I would think for everyone! LOL) that everyone should be an entrepreneur. Yet at this juncture, after being through what I experienced, I would Not make that “recommendation” for most. Why? Because most people cannot and do not want to experiment and just do it and risk making mistakes. And even worse, the embarrassment that comes from the scrutiny from the public (and nowadays on social media) about the decisions made.
The additional financial, legal and corporate governance work necessary in the background of any public listed companies may not seem like much, but to a newly listed public business owner, it is likely to shift his/her focus and resources somewhat without him/her realizing it. And even then, it is a necessary part for a public company so he/she can only manage and get it done and also getting the business growing in a sustainable manner.
Add to the expectations from the investors for the directors and management to have growth, many boards and managements will go down the path of doing M&As. This is yet another area of development that may even seem Fun to the Outsider but the reality is plenty of negotiation, alignment, financial and legal due diligence work that is anything but.
So I am now much more tolerant of the decisions that Public business owners may make along the journey and appreciative of their corrective efforts. After all, I can truly appreciate the issues that comes from having to balance multiple angles and taking the best decision and course of action at that point in time.
Always someone with an Opposite view
I have also come to realized that in the world of duality that we lived in, there will almost always be an opposite viewpoint. Dividends, whether paid out or not from a company, get debated. Auditors, whether retained or changed, get questioned. Nothing inherently wrong with that so long as at the end of the day, the decision ultimately taken is in the best interest of the company from the board and management point of view.
The reason why I said that is because the point of view from a spectator at the base of a mountain and from a hiker somewhere in the middle of the mountain climbing towards the peak is very different. And just as many of us in our leisurely moments may catch some sporting action (such as soccer) on TV/online, it is easy for us to criticize or made an assessment why a certain player did the action that he did. But if only we ourselves are not just a spectator but a player, we would realize the amount of effort and training that is required for the player on the field to gain and achieve and the speed of action on the field that require that split second decision making that may forces less than ideal decisions and actions.
Youth and Experience
In my younger days, I would make certain decisions and actions that (to the current me now) would be risky and foolish. In retrospect, it is almost always easy to see the risk. Yet, I have always been amazed at the creativity and energy of youth. But experience is something that can only be gained with the passage of time. The ideal would be having the benefit of experience with the energy of youth. But even that ideal takes time!
Investing in the youth of today is the way forward for a prosperous future. Yet, the risk inherent in them is not going to be away just because we have done our assessment. But the least that we can do is to give our utmost support and counsel when needed and give them the space and encouragement for them to work towards their success.
After all, the survival of Singapore is ultimately dependent on Singaporeans. And if we do not give the young Singaporean companies the space and support to learn, grow and after many trials and errors, hopefully succeed, we will ultimately always be at the mercy of overseas corporations and countries.
Let’s us all grow united as One People, and become stronger as One Singapore!
Share if you like it. Inspire someone positively today.
Clive Tan Executive Director 8I Holdings