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The Man Behind The Hong Kong Miracle

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Three cheers for Hong Kong, that tiny chunk of Southeast Asian rock. For the twentieth consecutive year, theIndex of Economic Freedom—compiled by The Wall Street Journal and the Heritage Foundation—ranks Hong Kong (HK) as the freest economy in the world.

Though part of mainland China since the British ceded it in 1997, HK is governed locally on a daily basis. So far, the Chinese have remained reasonably faithful to their promise to leave the HK economy alone. What makes it so free is music to the ears of everyone who loves liberty:  Relatively little corruption. An efficient and independent judiciary. Respect for the rule of law and property rights. An uncomplicated tax system with low rates on both individuals and business and an overall tax burden that’s a mere 14 percent of GDP (half the U.S. rate). No taxes on capital gains or interest income or even on earnings from outside of HK. No sales tax or VAT either. A very light regulatory touch. No government budget deficit and almost nonexistent public debt. Oh, and don’t forget its average tariff rate of near zero. That’s right—zero!

This latest ranking in the WSJ/Heritage report confirms what Canada’s Fraser Institute found in its latestEconomic Freedom of the World Index, which also ranked HK as the world’s freest. The World Bank rates the “ease of doing business” in HK as just about the best on the planet.

To say that an economy is “the freest” is to say that it’s “the most capitalist.” Capitalism is what happens when you leave peaceful people alone. It doesn’t require some elaborate and artificial, Rube Goldberg contrivance cooked up by tenured central planners in their insular ivory towers. But if we are to believe the critics of capitalism, HK must also be a veritable Hell’s Kitchen of greed, poverty, exploitation and despair.

Not so. Not even close.

Maybe this is why socialists don’t like to talk about Hong Kong: It’s not only the freest economy, it’s also one of the richest. Its per capita income, at 264 percent of the world’s average, has more than doubled in the past 15 years. People don’t flee from HK; they flock to it. At the close of World War II, the population numbered 750,000. Today it’s nearly ten times that, at 7.1 million.

Positive Non-Interventionism

The news that the HK economy is once again rated the world’s freest is an occasion to celebrate the one man most responsible for this perennial achievement. The name of Sir John James Cowperthwaite (1915–2006) should forever occupy top shelf in the pantheon of great libertarians. Some of us just write about libertarian ideas. This guy actually made them public policy for millions of citizens.

The late Milton Friedman explained in a 1997 tribute to Cowperthwaite how remarkable his economic legacy is: “Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country.”

A Scot by birth, Cowperthwaite attended Merchiston Castle School in Edinburgh and then studied classics atSt Andrews University and at Christ’s College at Cambridge. He served in the British Colonial Administrative Service in HK during the early 1940s. After the war he was asked to come up with plans for the government to boost economic growth. To his credit, he had his eyes open and noticed that the economy was already recovering quite nicely without government direction. So while the mother country lurched in a socialist direction at home under Clement Attlee, Cowperthwaite became an advocate of what he called “positive non-interventionism” in HK. Later as the colony’s Financial Secretary from 1961 to 1971, he personally administered it.

“Over a wide field of our economy it is still the better course to rely on the nineteenth century’s ‘hidden hand’ than to thrust clumsy bureaucratic fingers into its sensitive mechanism,” Cowperthwaite declared in 1962. “In particular, we cannot afford to damage its mainspring, freedom of competitive enterprise.” He didn’t like protectionism or subsidies even for new, so-called “infant” industries: “An infant industry, if coddled, tends to remain an infant industry and never grows up or expands.” He believed firmly that “in the long run, the aggregate of the decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is likely to do less harm than the centralized decisions of a Government; and certainly the harm is likely to be counteracted faster.”

Ever since the days of John Maynard Keynes, economics has been cursed by the notion that human action should be distilled into numbers, which then become a “pretense to knowledge” for central planner types. In many collegiate economics courses, it’s hard to tell where the math leaves off and the actual economics begins. To Cowperthwaite, the planner’s quest for statistics was anathema. So he refused to compile them. When Friedman asked him in 1963 about the “paucity of statistics,” Cowperthwaite answered, “If I let them compute those statistics, they’ll want to use them for planning.”

If that sounds quaintly backward or archaic, let me remind you that the biggest economic flops of the past century were both centrally planned and infatuated with numbers. Whole ministries were devoted to their compilation because even lousy numbers gave the planners the illusion of control. But not in Hong Kong!

Statistics, no matter how accurate or voluminous, are no substitute for sound principles. Powered by an abundance of the latter under Cowperthwaite, the HK economy soared during his tenure.  Writing in the November 2008 issue of The Freeman, Andrew P. Morriss noted that in his decade as financial secretary, “real wages rose by 50 percent and the portion of the population in acute poverty fell from 50 to 15 percent.” It’s hard to argue with success. After Cowperthwaite’s retirement in 1971, less principled successors dabbled in social welfare spending but they financed it through land sales, not increased taxation. Tax rates to this day are right where the old man left them.

Post Script on the Mont Pelerin Society

In September 2014, the Mont Pelerin Society—the prestigious international organization of economists, intellectuals, and businesspeople committed to a free society—will hold its next general meeting in Hong Kong. Sir John was for many years a member of the Society. As one myself, I hope to raise a glass there in his honor. We must never forget the man who proved in Hong Kong that free enterprise is good theory for many reasons, not the least of which is that, in contrast to socialism, it actually works in practice.

written by Lawrence Reed of the Foundation of Economic Education. See more.

Entrepreneurship

Women on Top in Tech – Tara Velis, Growth Hacker and Digital Innovation Strategist

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

I am talking to Tara Velis, Growth Hacker and freelance Digital Innovation Strategist. Tara was selected and recognized by TheNextWeb.com as one of the 500 most talented young people in the Dutch digital scene during the 2017 TNW edition. Tara is known for her creative, entrepreneurial spirit, which she is using to her advantage in leading the change in SMEs and corporates around the globe.

What makes you do what you do?

I tend to see life as a big, complex puzzle. Because of my curious nature, I am in constant development, looking for new angles and new approaches to business problems. Innovation through technology is exploring ideas and pushing boundaries. The most radical technological advances have not come from linear improvements within one area of expertise. Instead, they arise from the combination of seemingly disparate inventions. This is, in fact, the core of innovation. I love going beyond conventional thinking practices. Mashing up different thoughts and components, connecting the dots, and transforming that into something useful to businesses.

How did you rise in the industry you are in?

I consistently chose to follow my curiosity, which has led me to where I am today. If you want to succeed in the digital industry, you need to have a growth mindset. Seen the fact that the industry is evolving in an astoundingly quick rate, it’s crucial to stay current with the trends and forces in order to spot business opportunities. I believe taking responsibility for your own learning and development is key to success.

Why did you take on the role of Digital Innovation Strategist?

The reason for this is twofold. On the one hand, I got frustrated with businesses operating in the exact same way they did a couple of decades ago. Right now we are in the midst of a technology revolution, and the latest possibilities and limitations of cutting-edge technologies are evolving every single day. This means that companies need to stay current and act lean if they want to survive. On a more personal level, I noticed that I felt the need to use my creativity and problem-solving skills to their maximum capacity. In transforming businesses at scale, I change the rules of the game. I love breaking out of traditional, old-fashioned patterns by nurturing innovative ideas. This involves design thinking, extensive collaboration and feedback, the implementation of various strategies and tactics, validated learning, and so on. I get a lot of energy from my work because it is aligned with my personal interests.

Do you have a mentor that you look up to in your industries?

Yes, I look up to Drew Boyd. He is a global leader in creativity and innovation. He taught me how to evaluate ideas in order to select the best ones to proceed with. This is crucial because otherwise,you run the risk of ideas creating the criteria for you because of various biases and unrelated factors. He also taught me a great deal on facilitation of creativity workshops.

How would you describe your leadership style?

I tend to have the characteristics of a transformational leader. People have told me that my enthusiasm and positive energy is motivating and even inspiring to them. Even though I take these comments as a huge compliment, I am not sure how I feel about referring to myself as a leader. To me, it still has a somewhat negative connotation. I guess I associate the concept with being a boss who’s throwing around commands. But if a leader means listening to others and igniting intrinsic motivation in people, then yes, I guess I’m a charismatic leader.

Do you consciously or unconsciously support diversity and why?

Yes, one hundred percent. I believe that creativity and innovation flourish when a highly diverse group of people bounces ideas off each other. Diversity in terms of function, gender,and culture is extremely valuable, especially in the ideation phase of a project, as it can help to see more possibilities and come up with better ideas.

Do you have any advice for others?

Yes, I have some pieces of advice I’d like to share.
First of all: Develop self-awareness. You can do so by actively seeking feedback from the people around you. This will help you understand how others see you, align your intentions with your actions, and eventually enhance your communication- and leadership skills.

Surround yourself with knowledgeable and inspiring people. They might be able to support you in reaching your goals, and help you grow both personally and professionally.

Ask “why?” a couple of times. This simple and powerful method is useful for getting to the core of a problem or challenge. Make sure to often remind yourself and your team of the outcome of this exercise to have a clear sense of direction and focus.

Data is your friend. Whether it’s extensive quantitative market research or a sufficient amount of in-depth consumer interviews (or both!), your data levels all arguments. However, always be aware of biases and limitations of research.

Say “Yes, and…” instead of “No”. Don’t be an idea killer. Forget about the feasibility and budget, at least in the ideation phase. Instead, encourage your team to generate ideas without restrictions. You can compromise certain aspects later.

Prioritization is key. There is just no way you can execute all your ideas, and, quite frankly, there is no point in trying to do so. Identify the high potential ideas and start executing those first.

Encourage rapid prototyping. Don’t wait too long to experiment, launch, and iterate your product or service. Fail fast and fail often. Adopt an Agile mindset.

If you’d like to get in touch with Tara Velis, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/taravelis/

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Callum Connects

Marek Danyluk, CEO of Space Ventures

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Marek Danyluk has a talent for assessing the competencies of management teams for other businesses and pulling together exceptional teams for his own businesses!

What’s your story?
I am the CEO of a venture capital business, Space Ventures, which invests in seed and pre-series A businesses. I also own and run Space Executive, a recruitment business focused on senior to executive hires across sales, marketing, finance, legal and change.

My career started as a trainee underwriter in the Lloyds market but quickly moved into recruitment where I set-up my first business in 2002. The business grew to around 100 people. I moved to Asia in 2009 as a board member of a multinational recruitment business with the mandate to help them scale their Asian entities, which helped contribute to their sale this year, in 2017.

My main talent is assessing the competencies of management teams as well as building high performing recruitment boutiques and putting together exceptional management teams for my own businesses.

What excites you most about your industry?
Building the business is very much about attracting the best talent and being able to build a culture which people find invigorating and unique. It’s an exciting proposition to be able to define a culture in that regard and salespeople are a fun bunch, so when you get it right it’s tremendous.

From a VC point of view there is just so much happening. South East Asia is a melting pot of innovation so the ideas and quality of people you have exposure to, is truly phenomenal. The exposure in the VC has taken me away from a career in recruitment. Doing something completely different has given me a new level of focus.

What’s your connection to Asia?
Whilst I came here with work, both my boys were born in Singapore and to them this very much is home. That said, my father in law spent many years in the East so coming and settling here was met with a good degree of support and familiarity.


Favourite city in Asia for business and why?
Possibly Hong Kong. It’s the closest I’ve been to working in London. Whilst there are massive Asian influences people will work with you on the basis you are good at what you do and work hard. I find that approach very honest and straightforward.

What’s the best piece of advice you ever received?
“Always treat people well on the way up!”

Who inspires you?
I like reading about people who have excelled in business such as Jack Ma, James Kahn, Phil Knight, Sir Richard Branson, Elon Musk, all have great stories to tell and they are all inspirational. No-one has inspired me more than my parents and they are well aware as to why…

What have you just learnt recently that blew you away?
Pretty much any technology innovation blows me away.

If you had your time again, what would you do differently?
Whilst it is important not to have regrets I do continually wake up thinking I’m still doing my A’ Levels. So, I’d have probably tried a little harder in 6th form.

How do you unwind?
I like the odd glass of red wine and watching sport

Favourite Asian destination for relaxation? Why?
Japan skiing. I love skiing and Japanese food and it’s a time when I can really enjoy time with the wife and kids. I recently tried the Margaret River which was divine, although not technically Asia.

Everyone in business should read this book:
Barbarians at the Gate

Shameless plug for your business:
Space Executive is the fastest growing recruitment business in Singapore focused on the mid to senior market across legal, compliance, finance, sales and marketing and change and transformation. Multi-award winning with exceptional growth plans into Hong Kong and London this year, and the US, Japan and Europe by the end of 2022. We are building a truly global brand.

Space Ventures is interested in any businesses that require capital or management and financial guidance or any or all of the above. We have, to date, invested in on-line training, food and beverages, peer to peer lending platforms, credit scoring as well as other tech and fintech start-ups. We are always interested in hearing about potential deals.

How can people connect with you?
[email protected]

Twitter handle?
@Spaceexecutive

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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