The Talent Myth

During the past decade, there was a belief that talents are important for the future of a business or a country. Common sense and practical experience were discarded in the "war for talent". Talent was richly rewarded at the expense of the ordinary workers. Here is an interesting story about a well known company that pursued this strategy to an extreme. It brings useful lessons of people who belief in this strategy.

Talent and fat bonuses

For the past decade, there was a prevailing thinking that talented people cerated wealth and should be remunerated handsomely with fat bonuses and share options.

There was no distinction between the type of wealth and how they were created. In many cases, the wealth was created on top of a big asset bubble in properties and shares. The "talents" in the property and financial sector earned huge remuneration and bonuses.

When the asset bubble burst, these are the sectors that had to be bailed out. But, the fat bonuses are kept by the so-called "wealth creators".

The sad fact is that we are now going back into another asset bubble, with the low interest rate and bailout using taxpayer's funds. This will not be sustainable, and the world is likely to face another financial crisis - unless the asset bubbles can be reined in. But, that would be very difficult, given the low interest rate in the world today. In the meantime, the business leaders will continue to take the fat bonuses.

Tan Kin Lian

A good settlement mediated by FIDREC

An investor told me that the FIDREC mediator was able to get the financial institution to buy back 50% of the Lehman mini-bonds at full value (less interest received). He retained the remaining 50% of the investment.

In my view, this settlement is fair and is in accordance with my suggestion that both parties (i.e. the distributor and the investor) should share the loss equally. Actually, the investor suffered a larger loss as the capital sum had been invested for a few years without any return.

Anyway, the investor was glad to receive this settlement and thanked me for advising him to go to FIDREC. I hope that the other financial institutions would make a similar offer to their investors.

Tan Kin Lian

Financial sector is too big and unproductive

Several top economists have commented that the financial sector has grown to be too big. They do not create any value, in terms of actual production of goods and services to improve the quality of life. They are a drain on the productive economy and take away the best brains in recent years. They create bubbles and led to the collapse of the financial system.

I agree with these views. You can watch a video of the speeches given by these top economists in the academic section of Temasek Review.

Dangers of Big Banks

Read this article.

Paul Volcker on Financial Innovation

Speaking to a group of senior finance executives, as reported in The Wall Street Journal on Monday, Mr. Volcker made his point even more forcefully. There is no benefit to running our financial system in its current fashion, with high risks (for society) and high returns (for top bankers). Most of financial innovation, in his view, is not just worthless to society – it is downright dangerous to our broader economic health.

Temasek review reported on my views about MM Lee's remarks

"Read this article in Temasek Review.  I have posted a comment as follows:

Dear Editor of Temasek Review

You article does fairly report my view and the comments in my blog, but your headline is too strong and inappropriate. It is not in my character to condemn anyone, big or small. I only wish to express my own views. I hope that your readers will not be too distracted by this inappropriate headline.
Tan Kin Lian