Generation 40s – 四十世代

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Why do Hong Kong tycoons hold on to their wealth while Westerners give back so much?

CommentInsight & Opinion

Michael Chugani says the Teresa Cheng scandal has led him to question why Hong Kong’s ultra rich prefer to keep their wealth, unlike their counterparts in the West. A conversation with the city’s third-wealthiest man shows there are exceptions

Who would have thought that embattled justice secretary Teresa Cheng Yeuk-wah’s illegal structures would reawaken public anger at how Hong Kong’s rich live?

We know from Cheng’s upscale homes that she is wealthy but nowhere near our tycoons who belong to a class of their own. Once admired for their rags-to-riches stories, they are now mocked by many Hongkongers.

Our tycoons have amassed immense wealth but what always strikes me is how they cling on to it, passing it down to their children instead of giving it back to society. America’s super rich have amassed even greater wealth. The difference is that most have pledged to give it away. Amazon’s Jeff Bezos, now the world’s richest man, even asked Twitter followers for philanthropy ideas.

Why are the top donors in The Giving Pledge, started by Warren Buffett and Bill Gates, all Westerners? Surely that should shame Asians. I have long wanted to ask an actual Hong Kong tycoon upfront why Asians pocket their wealth while Westerners give much of it back to society.

When property and casino magnate Lui Che-woo of K Wah Group obliged, I wondered if I would get straight answers. But that’s exactly what I got over a lunch of takeaway fishball noodles with Hong Kong’s third-richest man.

A huge cultural difference steeped in politics and tradition is why Gates can give away his billions with his children’s blessing while Hong Kong’s tycoons keep their fortunes in the family. Western parents ask their children to make their own way when they come of age but Chinese parents don’t ever want their children to leave home.

That reminded me of how accustomed ordinary Hongkongers are to seeing the offspring of the rich fight over the family fortune. I don’t know if cultural differences will dissipate enough for our tycoons to become like Gates or Buffett but my sit-down with the 88-year-old Lui was like a breath of fresh air.

He pressed the point that he started with little, made a lot, and now wants to give back to the world that enriched him, quoting the Chinese saying that you gain more by giving than receiving. He reminded me of my time in Seattle seeing Gates speak so passionately about easing world hunger and disease.

Instead of dividing his vast fortune among his children, Lui has his own version of a giving pledge – the nearly HK$20 billion Lui Che Woo Foundation through which he does his philanthropy work. His offspring run different businesses and channel profits to top up the foundation.

The HK$4 billion LUI Che Woo Prize has a different mission – handing out HK$60 million a year to winners who have helped advance world civilisation in different ways. It’s relatively new compared to the Nobel Prize or Shaw Prize but is the most generous in prize money.

When you have nearly two hours with a property tycoon who likes to talk about giving, it’s not easy to switch subjects.

Property prices in Hong Kong show no signs of dropping. Photo: EPABut I needed to hear from a property tycoon if home prices in Hong Kong – the world’s highest – will ever ease. He gave me a straight answer. With the mainland’s 1.4 billion population and the growth of the Greater Bay Area, there’s so much money coming in that it’s hard for prices to drop.

I never thought I would hear a property tycoon say the rush to build nano flats is unhealthy but Lui did. Homes have to be at least 300-400 square feet for healthy living. And he was brutally frank about Hong Kong’s disillusioned youth. They already have a lot compared to his own past when a dim sum meal was like a banquet.

You may say I’m a dreamer but maybe one day our other tycoons will also talk more about giving than taking. Maybe one day they’ll say nano flats are a no-no. And maybe one day, they’ll set up Hong Kong’s very own giving pledge.

Michael Chugani is a Hong Kong journalist and TV show host

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Cold calling in Hong Kong is so out of control, it makes you contemplate murder

South China Morning Post
CommentInsight & Opinion

Yonden Lhatoo is perplexed by the government’s reluctance to crack down on telemarketers, despite the public nuisance they cause

I don’t know if people remember any more, but it used to be the most annoying thing in the world to be “rickrolled” – clicking on a hyperlink online, only to be directed to a music video of British pop singer Rick Astley’s 1980s hit, Never Gonna Give You Up.

At least there was an element of humour in being pranked like that, but there’s nothing funny about receiving cold calls from telemarketers in this city, a scourge that sits well above being rickrolled in the global rankings of extreme irritants that make you want to strangle someone. I mean, what could be more infuriating than answering your phone while in the middle of something important, only to find some telemarketer on the other end of the line hawking products you’re least interested in.

It’s been a problem in Hong Kong for many years, but seems to be getting worse these days. I have a couple of apps on my phone to block nuisance calls, but the telemarketers bypass them with fiendish nonchalance.

Last week, while awaiting a call I could not afford to miss, I was ambushed by a saleswoman on the other end of the line and found myself swearing at her in utter frustration. She swore right back and hung up, leaving me to fleetingly contemplate murder.

But my personal experience pales next to that of a family whose allergy to telemarketers was shared online by a doctor. According to his Facebook post, a seriously injured car-accident victim required urgent surgery, but hospital staff seeking his wife’s consent had to make 18 calls to her before she picked up the phone. The caller ID number started with a “3”, leading her to believe it was the usual junk call that such prefixes have conditioned us to watch out for.

The incident has caused enough public concern to squeeze another commitment out of commerce minister Greg So Kam-leung to launch a public consultation on fixing the problem.

So, by the way, is the minister who has pretty much turned a deaf ear to the noise all these years, but was upset when the poor old privacy commissioner took the initiative to conduct a survey in 2014 that found nine out of 10 Hongkongers were bothered by unsolicited calls.

So complained that he had not been consulted, and questioned the validity of the study, although his own bureau a couple of years later found in a survey that 96 per cent of Hongkongers considered such calls a nuisance. And he still wants to “consult” the public first.

The fact is, Hong Kong already has a “do not call” register, and the millions of harassed citizens who have added their phone numbers to the list are protected by law from commercial electronic messages, including voice recordings. But person-to-person telemarketing calls are exempted.

And even if the register were to be expanded to cover cold calls, it would not filter out offshore callers. Having said that, it’s still made a difference in the US and Singapore, so why not here.

The government’s reluctance to take firm action stems from the prospect of an estimated 28,000 telemarketers losing their jobs. But at last count, 30 per cent of these jobs were outsourced to the mainland. The woman who swore back at me had a strong mainland accent, suggesting some office or shack across the border.

It’s a tough call, no doubt, but it’s hard to summon up any sympathy for people whose chosen profession centres on driving the rest of us nuts. The companies they work for should know that cold calls are no longer a cost-effective way of doing business.

I’m talking to you, lady with the potty mouth, and you, Mr Minister. Act now, or may the ghost of Rick Astley haunt you forever with the volume turned up to 11.

Yonden Lhatoo is the chief news editor at the Post

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From VW to HSBC, there’s a simple reason why so many CEOs fail to spot rogue behaviour

South China Morning Post

Stephen Vines

Information overload is making us oblivious to what’s often in plain sight

In the wake of practically every corporate or political crisis two questions are asked: First, was the person at the top aware of the problem and second, if so, what did they do about it?

The person at the top is key because there was a time when the “buck stops here” principal was thought to prevail. In other words someone was prepared to assume ultimate responsibility.

Nowadays the great panjandrums who run the world’s biggest companies get visibly agitated when asked to explain why things occurred on their watch. A case in point was the response of Stuart Gulliver, HSBC’s chief, when he was hauled before a British parliamentary committee looking into the banking crisis. Gulliver argued that he could not be held responsible for everything that went on in his bank: “Can I know what everyone of 257,000 people is doing?” he asked, concluding, “Cleary I can’t”.

More specifically questions were asked about whether Martin Winterkorn, the former Chief Executive of Volkswagen, was aware of an email dated May 24 2014, that specified “irregularities” with US emissions tests for two VW diesel vehicles. This memo was part of what VW described as Winterkorn’s “extensive weekend email”; one of the reasons proffered for why he may have overlooked it. Other internal documents, that subsequently came to light, suggest that VW went to some efforts to cover its tracks as the vehicle testing scandal mushroomed.

Responsibility is being dodged because those at the top insist they are suffering from information overload. This affects everyone, as the days are long gone when information distribution was more restricted and far lower in volume, consisting mainly of phone calls, possibly faxes and telegrams and big piles of documents. We are now bombarded by emails and other electronic messaging which, in theory, is more convenient and efficient but in practise may be producing a volume of information that is too vast to absorb.

There is a thin line between what those at the top need to know and what they are capable of knowing. However and understandably those at the top rarely get the benefit of the doubt when the brown stuff hits the fan and questions are asked about why nothing was done on the basis of previous information.

Why, for example did the Belgium authorities seemingly ignore specific warnings from Turkey about the terrorists responsible for the recent Brussels airport and subway atrocities? Did US President George W Bush read the 2001 security briefing warning about Osama Bin Laden’s determination to launch a direct attack on the American homeland, an attack realised in the 9/11 events?

It is always easier with hindsight to pontificate on what should or should not have been done. But, in this case, for example, was the Central Intelligence Agency warning sufficiently specific to provide a basis for action?

And what happens when more junior officials deliberately withhold information from their bosses? Tidjane Thiam, the relatively new broom at the top of Credit Suisse, says that staff in his bank’s market’s division deliberately withheld information about risky bets. No doubt his anger is genuine but there are questions to be asked about whether more probing questions should have been asked by the bank.

In almost all instances of vital information not being acted on in a timely fashion there is evidence that the information was sitting there waiting to be read but either as a result of incompetence, arrogance or straightforward neglect that information lay dormant.

The excuse of information overload is plausible but it seems to be part of that dreaded syndrome where people complain of being too busy to do this or that. The reality is not that they are busy but incapable of organising and prioritising their work. It may be a bit of a cliché but, in my experience, it sure as hell is the case that if you want to get something done, ask a genuinely busy person to do it.

There are many excuses for ignoring information or failing to take account of it but most of them come down to poor organisation. Just because we all suffer from information overload does not mean throwing up your hands and declaring, “I give up”.

On the contrary this proliferation of information is useful but will only be valuable to those who succeed in sorting out their priorities.

Sometimes there are good reasons why the person at the top is not informed of some vital matter but the health of all organisations rests on the idea that the buck stops somewhere. Life is not fair, so there will inevitably be a degree of unfairness when bosses are compelled to fall on their swords for events beyond their control. Yet fall they must because information overload is no excuse for ducking responsibility.

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Why is rent seeking so bad for competition, growth and freedom?

South China Morning Post
Business›Global Economy

Richard Wong

Rent seeking is one of the core pillars of the study of political economy. Its use in economics is negative and denotes detrimental political and economic activity. Why is that so?

Under most circumstances, the owners of an input of production — land, labour, machines, and capital — will only be able to earn a normal profit (as opposed to a high profit) because competition in the market place will equalise their returns.

The only way for owners of an input of production to extract additional profit would be to cartelise and monopolise. The most effective way to do this is to lobby government to set up regulatory and legal barriers to market entry.

The process of lobbying government is a political process. Economists call such lobbying “rent seeking” because the objective is to secure economic rents that are higher than the normal profits obtainable by competing in the economic market place.

In the economic market, competition drives down costs and promotes innovation, because both incumbents in the market and newcomers can constantly challenge successful firms and individuals.

In the political “market,” the purpose of competition is often to secure government authority to limit market entry by newcomers so as to earn higher returns through cartelization.

The political competition that underpins this rent seeking creates not only a less competitive economy, but a more divided society and a less inclusive polity that curtails freedom.

Industries that are heavily regulated by government, where business has to constantly work closely with government, are much more prone to rent seeking. Building, construction, development, transportation, mining, energy, communications, and so on are often characterised by a high degree of government regulation.

Rent seeking is also more pervasive in less market-oriented economies because the government allocates a large share of the resources (or inputs of production) in society. Societies with big governments and planned economies have more rent-seeking activities and are less efficient and innovative.

China’s high economic growth rates in the past three and a half decades have been the result of curtailing rent seeking through reforms that limit the reach of government and expanding market competition, in contrast with the previous period.

A profoundly devastating issue in rent seeking is the dissipation of economic rent into the rest of the economy. This happens when individuals and businesses commit resources to lobbying government officials and politicians in order to secure higher rent seeking profits.

Such resources can take many forms – hiring lobbyists, launching an advertising campaign to influence public opinion, funding writers and opinion makers to drum up public support, organizing protestors or advocates, and so on – day to day politicking.

These resources cut into the higher economic rents to be gained if the lobbying is successful. There may also be competitors spending on their own rent seeking, as well as parties who lobby to prevent the creation of any such economic rents.

Spending on rent seeking efforts transfers income rather than creates income. The hired lobbyists, advertisers, writers, etcetera could have spent their time and effort in other more productive activities.

Professors Kevin Murphy, Andrei Shleifer, and Robert Vishny showed that the most devastating aspect of rent seeking behavior is that it creates incentives for individuals to choose careers specialising in rent seeking work.

Using enrolment in law studies as a proxy for rent seeking work, and enrolment in engineering studies as a proxy for entrepreneurial work, and applying that to a sample of 55 countries during 1970-85, they found higher enrolments of law students were associated with lower growth rates, while higher enrolments of engineering students were associated with higher growth rates.

One argument in favour of democracies is that in an open society, everyone can lobby government – the idea being that political competition could achieve a dynamic shifting balance of interests to limit excessive rent seeking. But in practise, few countries attain this balance.

If 100 businesses conspire to raise the price of a product by US$1 and one million customers each buy one unit of the product, then each business will earn US$10,000 but each customer will lose only US$1. The incentive for the 100 businesses to become organised and lobby government will be much larger than the incentive of one million customers to organize and mount a counter-lobby.

Furthermore the cost of organising 100 businesses is much smaller than organising one million customers.

Rent seeking harms economic growth by reducing competition and innovation. It leads to the wasteful use of valuable resources and talents in unproductive activities and invariably redistributes resources from large unorganised populations to small organised groups.

Rent seeking is not only bad for economic growth because most rents are ultimately dissipated, but it also produces divided societies and non-inclusive polities.