Young, gifted and blocked

IMG_6715

Korea needs fewer wage slaves and more entrepreneurs

EARLIER this year Humax, a maker of digital set-top boxes based in Seoul, announced that its annual revenues had exceeded 1 trillion won ($865m) for the first time. For South Korea, this is something of a milestone. Humax is a classic start-up, founded in 1989 after a chat between engineering students in a bar. Alas, scandalously few Korean start-ups grow this big.

The Korean economy is dominated by the chaebol, huge conglomerates with tentacles in every stew. The biggest, Samsung, accounts for around a fifth of the country’s exports. Although the chaebol have played a vital role in South Korea’s development, they also suck up credit and obstruct the rise of start-ups. “Everyone knows you don’t compete with the chaebol” is a commonly heard refrain.

Parents of bright young Koreans typically steer them into steady careers in the chaebol, the government or the professions. As in Japan, being a salaryman (or woman) is far more respectable than running one’s own firm. “In Korea, stability is everything,” says one such parent.

Widespread youth unemployment is changing that calculation, however. An impressive 58% of Koreans aged 25-34 have attended university, but 346,000 graduates are currently out of work, up from 268,000 two years ago. Some become entrepreneurs out of necessity: almost 30,000 young South Koreans say they want to launch their own companies, one survey found. And according to the government, the number of “one-man creative enterprises” in the country has risen by 15% in the past year, to 235,000.

Young entrepreneurs often favour tech fields such as social media or gaming, where the only barrier to entry is the power of your imagination. Challenging the chaebol at, say, shipbuilding, might be trickier. The previous wave of young entrepreneurs—a result of the first internet boom, and the unemployment that followed the 1997-98 Asian financial crisis—threw up fizzy firms such as NHN, the operator of Naver (the “Korean Google”), and NCsoft, a maker of multiplayer online role-playing games. Each was once tiny but now belongs to the trillion-won club.

These new entrepreneurs are being joined by a growing band of foreigners, including ethnic Koreans from Western countries. Californian Koreans see no stigma in starting your own business. And they see South Korea, where the economy grew by 6.2% last year, as a land of opportunity compared with sluggish America. The country issues about 35,000 investor visas a year, mostly to small-scale entrepreneurs. The Seoul Metropolitan Government’s Global Centre has recently been swamped by expats seeking to attend its classes on Korean business procedures and regulations.

The city has also launched a “Youth 1,000 CEO Project”, to provide young entrepreneurs with free office space and grants of up to 1m won per month. South Korea’s President Lee Myung-bak grumbles that Korea has no Mark Zuckerberg (the baby-faced founder of Facebook).

The problem, though, is not young Koreans, who are both bright and energetic. Nor is it business-throttling regulations: South Korea does better on that score than Japan or Taiwan, says the World Bank. The real obstacle to enterprise is a society that urges its best young minds to aim low.

Source: http://www.economist.com/node/18682342?fsrc=scn/fb/wl/ar/younggiftedandblocked

This article struck a chord with me. It reminded me of a course I took not long ago with Professor Baak. Perhaps, it might be interesting to let the readers know that the topic of the course was about the Korean economy. Professor Baak was likable, enthusiastic about teaching and has a quirk to impart his life knowledge to the listeners in class. Mostly, he would always advised us to find prestigious jobs to secure a stable future. Just like in the article, Professor Baak viewed the world through his cultural lenses: The need for a stable job to provide for the family.

Professor Baak was himself a product of recession, a phd student looking forward to his first job when the Asian Financial crisis struck and he needed to move from his homeland Korea to Japan to secure a teaching position. From there, he moved from a smaller Japanese university to a larger and more prestigious Waseda University. Undeniably, he was influenced the Korean and Japanese culture that securing a job is more important than paving into the unknown.

If he mentioned this to me several years ago, I would have agreed wholeheartedly with him. I am sure my parents would have agreed as well. But since coming to the States, I was amazed by the drive that the culture here has in cultivating independence and freedom. Not surprisingly, I found myself increasingly rejecting the notion that having a cushy comfortable position is the most important goal in life. Over time, I found myself increasingly accepting to the notion of doing what I am passionate about, and not following the mold that others has set aside for me.

Also, I feared for the future that is me when I returned back to Malaysia. The culture back home (or at least my environment) is suffocating where the society dictates that the best minds will seek the highest paying employment. Few ever break the mold and seek out their own ventures. Even in Malaysia, the stigma holds that being a salaryman is more respectable than a business owner. I saw Korean classmates, smart and caliber, heading back to Korea to take entry positions in the chaebols. However, none of them ever mentioned about returning home to start their own enterprise. (The classmates I surveyed are those who are raised in Korea and not the Californian Koreans mentioned in the article.) Not that I condemn seeking positions in these companies, I understand how alluring these positions are especially for entry level grads like me.

When Professor Baak talked about in class, he mentioned previously that he taught a heir of a zaibatsu (Japanese version of the chaebol) whom he has no idea of his background until that student asked for a recommendation letter from him. In class, Professor Baak seemed happy and in awe when talking about the young man, possibly thinking about that man’s bright future who might inherit the helm of the zaibatsu leadership. Yet, I kept on wondering, why didn’t he take pride in dreaming of starting his own zaibatsu instead.

p.s. I’m aware that I might have to eat my words in the future and this post might bite me.

Competitive Strategy Game: Week 8, 9 & 10

IMG_6758

(Washington DC) Home to American policies’ decision making

Almost a month had passed by since this game ended. My memory of the thought process that went into making the decisions is a little hazy by now. After Week 10 results are announced, the cost for each tram was finally revealed to others. We looked back at how the costs affected the entry decision of each team: which cost that truly matters and how some teams managed to bluff their way to immense profit despite having higher costs structure than the other teams.

I will summarized the collective action of our team into the following thoughts:

  • By this time, our team is quite profitable and (in hindsight, we grew complacent). We do not know the profits that other teams are having or the range that participants in previous games had achieved. Steps were taken to make sure that such information was not freely transferred between the participants. Hence, this show the benefit of market research, it gave further insight into the market and competitors to allow better decision making. We stick to our initial markets, not foraying into any new markets considering the short remaining periods left.
  • As our capacities are expiring, we decided not to renew them because the depreciation for earlier periods are not worth the initial investment gains. We saw our market share in each market dropping as another firm increased its capacity and began undercutting the rest. That impudent fool! I was a bit slighted because the new entry disturbed the market power and reduced the dividends that we had been enjoying. In retaliation, we did not pick a fight with the new entry. Instead we conceded our market share and raise prices continuously to keep our revenue steady. Now, I understood how those big firms felt when uprising new startups began digging into their own market share.
  • Because we are flushed with cash by now, I made suggestions to enter another market, but perhaps because of my weak argument and my own belief that investing this late who do us not much better, we decided to sit on our cash and wait for the remaining period to expire.

Results:

  • The results was announced and turns out, there a twist to this game. Turns out that in order to achieve the highest profit, the winners had been consistently invested in one market. That was the key behind gaining immense profit in this game. I learnt that this is comparable to the real world, why some companies grew to multinational level while others remained mom and pop stores. The answer was in the different markets that each company invested in. To rub salt into the wounds, this aforementioned market was not originally that appealing to us but it was also the market that I had recommended to enter earlier.
  • My team was in the third place out of the rest of the teams. As consolation, the professor mentioned that my team was the most profitable team who has never invested in the aforementioned market. The first place team gained roughly almost 8 million, second place had 5 million while we earned 4.6 million over the initial investment of 1 million. The teams after us barely break beyond 1.5 million threshold. Our team has the smarts to extract the most surplus out of our markets but not enough to identify the most promising growth market. In addition, the professor even put up quotes that we had written in our reports: “Those who don’t take risk don’t drink champagne!”
  • Ironically, the first place team had rather high cost in the profitable market and managed to overcame this by producing beyond their capacity. They are willing to incurred additional cost just to sell more goods. I had been considering this tactic before and practiced in our markets but their was done at a much grandeur scale.  In the end, they revealed that they had done the calculations and concluded that they would be profitable enough to justify for the additional expenses. Indeed, they took a calculated gamble and it paid off. I even joked that the team deserved the first place because they had two mathematicians in their team while we only had one: me. I observed that the teams that had great returns all had a few members with mathematical background like me. This reinforced my belief that good decisions should be made with good data support. The top teams are able to made it this far because they could calculate the returns from their investment in aiding them to make investment decisions.

Still, this was an interesting competition and I learnt a lot about making decisions here. Making decisions appears easy on book but it is different in real life. There is often much more at stake with the decisions made in real life. A key reminder for myself is to always prepare beforehand and speak up.

Graduation

IMG_1940

(Ann Arbor, Michigan) Big Stadium – The Michigan Difference

For today, goodbye.

For tomorrow, good luck.

And forever, Go Blue!

I had been slow updating about my life recently. It was not the lack of content, rather the lack of willingness to sit down and start typing it out. Also, another tidbit to add here. I am officially a graduate of the Class of 2011, majoring in Actuarial Mathematics and Economics. With my International Studies major dropped, I decided to graduate a year earlier than intended almost impulsively. I had mulled over this decision within the past two months and was still indecisive until the last moment.

With that, my summer plans had suddenly gone awry because I did not take into account that next Fall, I do not have university to go back to. Hence, I am currently a job seeker and if you have any recommendations, do let me know. Time to get out of the college bubble and start supporting myself. This summer, I decided to forgo part of my extensive vacation, opting for a quick post graduation trip with my parents instead. I will use the remaining time to figure out my plans for the future, brush up on more technical knowledge (with learning new programming language in mind, recommendations please), and perhaps set up some passive income for sustenance.

I will update future post with my Strategy game ‘s results.