2009-04-10 Robert Kuok’s notes on the past sixty years
Tan Sri Robert Kuok Hock Nien (born 6 October 1923, in Johor Bahru, Johor), is an influential Malaysian Chinese businessman. According to Forbes his net worth is estimated to be around $10 billion on May 2008, making him the richest person in Southeast Asia. He is media shy and discreet; most of his businesses are privately held by him or his family. Apart from a multitude of enterprises in Malaysia, his companies have investments in many countries throughout Asia. His business interests range from sugarcane plantations (Perlis Plantations Bhd), sugar refinery, flour milling, animal feed, oil and mining to finance, hotels, properties, trading and freight and publishing.
Robert Kuok Hock Nien’s notes on the past sixty years (on the occasion of Kuok Group’s 60th Anniversary 10 April 2009)
1. My brothers and I owe our upbringing completely to Mother. She was steeped in Ru-Jiao – the teachings of Confucius, Mencius, Laozi and other Chinese sages. Ru-Jiao teaches the correct behaviour for a human being on his life on earth. Mother gently, and sometimes strongly, drummed into the minds of her three boys the values of honesty, of never cheating, lying, stealing or envying other people their material wealth or physical attributes.
2. Father died on the night of 25th December 1948 without leaving a will. Following the Japanese surrender, he had re-registered the firm as a sole proprietorship. We went to court to get an appointment as managers, permitting us to continue to manage Tong Seng & Co. The judge said that as there were two widows, the firm and the estate should be wound up.
3. We decided to establish Kuok Brothers Limited. In mid-January 1949, five of us met at a small roundtable in our home in Johore Bahru. Present were my mother, Cousin Number Five Hock Chin, Cousin Number Twelve Hock Seng, my brother Hock Khee nicknamed Philip (a.k.a. Cousin Number Seventeen), and myself (a.k.a. Cousin Number Twenty). We sat down and Mother said, “Nien, would you like to start?” I said, “Fine, yes, I will start.” To cut a long story short, we got started, and commenced business from a little shophouse in Johore Bharu on 1 April 1949.
4. As a young man, I thought there was no substitute for hard work and thinking up good, honest business plans and, without respite, pushing them along. There will always be business on earth. Be humble; be straight; don’t be crooked; don’t take advantage of people. To be a successful businessman, I think you really need to brush all your senses every morning, just as you brush your teeth. I coined the phrase “honing your senses” in business: your vision, hearing, sense of smell, touch and taste. All these senses come in very useful.
5. Mother was the captain of our ship. She saw and sensed everything, but being a wise person she didn’t interfere. Yet she was the background influence, the glue that bound the Group together. She taught my cousins and my brothers and me never to be greedy, and that in making money one could practise high morality. She stressed that whenever the firm does well it should make donations to the charities operating in our societies. She always kept us focused on the big picture in business. For example: avoid businesses that bring harm, destruction or grief to people. This includes trades like gambling, drugs, arms sales, loan-sharking and prostitution.
6. We started as little fish swimming in a bathtub. From there we went to a lake and now we are in the open seas. Today our businesses cover many industries and our operations are worldwide but this would not have been possible without the vision of the founding members, the dedicated contribution and loyalty of our colleagues and employees, and very importantly, the strong moral principles espoused by my mother.
7. When I hire staff, I look for honest, hardworking, intelligent people. When I look candidates in the eye, they must appear very honest to me. I do not look for MBAs or exceptional students. You may hire a brilliant man, summa cum laude, first-class honours, but if his mind is not a fair one or if he has a warped attitude in life, does brilliance really matter?
8. Among the first employees were Lau Teo Chin (Ee Wor), Kwok Chin Luang (Ee Luang), Othman Samad (Kadir) and an Indian accountant called Joachim who was a devout Roman Catholic and who travelled in every day from Singapore where he lived.
9. I would like on this special occasion to pay tribute to them and in particular to those who were with us in the early days; many of whom are no longer here. I have already mentioned Lau Teo Chin (Ee Wor) and Kwok Chin Luang (Ee Luang) and Othman Samad (Kadir), there are others like Lean Chye Huat, who is not here today due to failing eyesight, and Yusuf Sharif who passed away in his home country India about one and a half years ago and the late Lee Siew Wah, and others who all gave solid and unstinting support and devotion to the Company. It saddens me that in those early difficult years these pioneers did not enjoy significant and substantial rewards but such is the order of things and a most unfortunate aspect of capitalism. However through our Group and employee Foundations, today we are able to help their descendants whenever there is a need to.
10. I have learnt that the success of a company must depend on the unity of all its employees. We are all in the same boat rowing against the current and tide and every able person must pull the oars to move the boat forward. Also, we must relentlessly endeavour to maintain and practise the values of integrity and honesty, eschew and reject greed and arrogance.
11. A few words of caution to all businessmen and business women. I recall the Chinese saying: shibai nai chenggong zhi mu (failure is the mother of success). But in the last thirty years of my business life, I have come to the conclusion that the reverse phrase is even truer of today’s world: chenggong nai shibai zhi mu. Success often breeds failure, because it makes you arrogant, complacent and, therefore, lower your guard.
12. The way forward for this world is through capitalism. Even China has come to realise it. But it’s equally true that capitalism, if allowed to snowball along unchecked, can in many ways become destructive. Capitalism needs to be inspected under a magnifying glass once a day, a super-magnifying glass once a week, and put through the cleaning machine once a month.
For capitalism to work, man needs the elements of ambition and greed to drive him. But where does ambition end and greed take over? That’s why I say that capitalism, if left to its own devices, will snowball along, roll down the hill and cause a lot of damage. So, a sound capitalist system requires very strongly led, enlightened, wise governments. That means politician-statesmen who are willing to sacrifice their lives for the sake of their people. And I don’t mean politicians who are there for fame, glory and to line their pockets.
13. To my mind the two great challenges facing China are the restoration of education in morals and the establishment of a rule of law. You must begin from the root up, imbuing and infusing moral lessons and morality into youth, both at home and from kindergarten and primary school upward through university. Every Chinese needs to accept the principle of rule of law. You have to train upright judges and lawyers to uphold the legal system.
14. Wealth should be used for two main purposes. One: for the generation of greater wealth; in other words, you continue to invest, creating prosperity and jobs in the country. Two: part of your wealth should be applied to the betterment of mankind, either by acts of pure philanthropy or by investment in research and development along the frontiers of science, space, health care and so forth.
Learning message: Words of wisdom from successful enterpreneurs like Robert Kuok are most valuable and must be digested slowly.
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Cheers! Sandra. R.
Thanks, Sandra
The Obama administration is expected today to propose a reorganisation of the way we regulate financial markets. I am not an advocate of too much regulation. Having gone too far in deregulating – which contributed to the current crisis – we must resist the temptation to go too far in the opposite direction. While markets are imperfect, regulators are even more so. Not only are they human, they are also bureaucratic and subject to political influences, therefore regulations should be kept to a minimum.
Three principles should guide reform. First, since markets are bubble-prone, regulators must accept responsibility for preventing bubbles from growing too big. Alan Greenspan, the former chairman of the Federal Reserve, and others have expressly refused that responsibility. If markets cannot recognise bubbles, they argued, neither can regulators. They were right and yet the authorities must accept the assignment, even knowing that they are bound to be wrong. They will, however, have the benefit of feedback from the markets so they can and must continually re-calibrate to correct their mistakes.
Second, to control asset bubbles it is not enough to control the money supply; we must also control the availability of credit. This cannot be done with monetary tools alone – we must also use credit controls such as margin requirements and minimum capital requirements. Currently these tend to be fixed irrespective of the market’s mood. Part of the authorities’ job is to counteract these moods. Margin and minimum capital requirements should be adjusted to suit market conditions. Regulators should vary the loan-to-value ratio on commercial and residential mortgages for risk-weighting purposes to forestall real estate bubbles.
Third, we must reconceptualise the meaning of market risk. The efficient market hypothesis postulates that markets tend towards equilibrium and deviations occur in a random fashion; moreover, markets are supposed to function without any discontinuity in the sequence of prices. Under these conditions market risks can be equated with the risks affecting individual market participants. As long as they manage their risks properly, regulators ought to be happy.
But the efficient market hypothesis is unrealistic. Markets are subject to imbalances that individual participants may ignore if they think they can liquidate their positions. Regulators cannot ignore these imbalances. If too many participants are on the same side, positions cannot be liquidated without causing a discontinuity or, worse, a collapse. In that case the authorities may have to come to the rescue. That means that there is systemic risk in the market in addition to the risks most market participants perceived prior to the crisis.
The securitisation of mortgages added a new dimension of systemic risk. Financial engineers claimed they were reducing risks through geographic diversification: in fact they were increasing them by creating an agency problem. The agents were more interested in maximising fee income than in protecting the interests of bondholders. That is the verity that was ignored by regulators and market participants alike.
To avert a repetition, the agents must have “skin in the game” but the five per cent proposed by the administration is more symbolic than substantive. I would consider ten per cent as the minimum requirement. To allow for possible discontinuities in markets securities held by banks should carry a higher risk rating than they do under the Basel Accords. Banks should pay for the implicit guarantee they enjoy by using less leverage and accepting restrictions on how they invest depositors’ money; they should not be allowed to speculate for their own account with other people’s money.
It is probably impractical to separate investment banking from commercial banking as the US did with the Glass Steagull Act of 1933. But there has to be an internal firewall that separates proprietary trading from commercial banking. Proprietary trading ought to be financed out of a bank’s own capital. If a bank is too big to fail, regulators must go even further to protect its capital from undue risk. They must regulate the compensation packages of proprietary traders so that risks and rewards are properly aligned. This may push proprietary trading out of banks into hedge funds. That is where it properly belongs. Hedge funds and other large investors must also be closely monitored to ensure that they do not build up dangerous imbalances.
Finally, I have strong views on the regulation of derivatives. The prevailing opinion is that they ought to be traded on regulated exchanges. That is not enough. The issuance and trading of derivatives ought to be as strictly regulated as stocks. Regulators ought to insist that derivatives be homogenous, standardised and transparent.
Custom made derivatives only serve to improve the profit margin of the financial engineers designing them. In fact, some derivatives ought not to be traded at all. I have in mind credit default swaps. Consider the recent bankruptcy of AbitibiBowater and thatof General Motors. In both cases, some bondholders owned CDS and stood to gain more by bankruptcy than by reorganisation. It is like buying life insurance on someone else’s life and owning a licence to kill him. CDS are instruments of destruction that ought to be outlawed
Nicely written posts..Robert Kuok is one of my many role models..
I had just bought the book Money Secret and was keen to read up more on Tan Sri Robert. I decided to come to this site and i got lucky. I hope that i would be able to attend the seminar one day.