On Pocket Money

It was the 90’s. When I was a kid, my parents would give me pocket money. A small sum to manage for expenses at school, and things were good. Sometimes I would run out due to a spike in purchases for the week, and i would let my parents know. At some point my pocket money increased some, because things cost more in high school. I learned to save and manage my finances within these bounds.

I don’t know how things were where you grew up, but it seems to be a fairly normal thing in Singapore. Children would receive a stipend for their expenses, and if they needed more they would usually ask for it. Some kids from poorer families may not even get an allowance, and those from well off families may have serious money. The big spenders amongst us would try to find work during school breaks so they could buy the next branded wallet, handbag or game unit. For others, parents have seen fit to reward good academic performance with overseas trips and expensive toys.

This phenomenon is what I term the Pocket Money Society: a place where the upbringing of children has taught them that in order to have money to spend, they need look for a regular source of income to pay for it (usually employment). Money comes more or less regularly, and optimizing one’s expenditure is the key to being able to afford greater things. Exceptional performance is often rewarded with greater payouts, so it is something to look forward to. It is a consumerist, materialistic upbringing that implies the importance of the regular paycheck, whatever size that paycheck may be.

Of Mindsets

The thought of the implications of a pocket money society stemmed from casual conversations with peers about entrepreneurship: many seem convinced they have amazing ideas that can potentially become awesome businesses, yet precious few of my social circle would attempt to implement their ideas and become entrepreneurs themselves. Of those who do, a number seem intent on focusing on the local market (unusual, considering that Singapore has an extensively globalized economy).

There is a great reluctance to face the possibility of falling behind others, characterized by the concept of Kiasuism, a colloquial Singlish term that translates to “afraid of losing”. It pertains to a mindset that fears losing out (a.k.a. FOMO) both in terms of falling behind one’s peers and of missing out in general. It is frequently paired with its cousin Kiasi (Afraid of dying/failing). Combined, it leads to a very risk averse mainstream culture that has a strong affinity for the sure win enterprise. Knowing this, I had to dig deeper.

A Lack Of Unconventional Tendencies

Singapore is an exceptionally well run city. It is in fact one of the wealthiest per capita and boasts an extraordinary number of global 1%’ers. Over 105000 to be precise. Considering the current population of 5.54 million, that’s one millionnaire for every 52 people on this island. Compared to the USA’s approximately one millionnaire for every 20 people, that’s actually pretty good.

However, there still remains a good bit of reluctance amongst Singaporeans to go into business, with a remarkably low rate even when compared to the region. Considering the relative affluence of Singaporeans, this seems somewhat unusual. After all, it is the affluent who are best equipped to bootstrap a new business.

Yet, it is an inescapable fact that business is risky. Globally, a minority go into business for themselves, and that is within expectations. Except in Singapore, that minority is exceedingly small. Upon asking friends who aspire to start businesses, the replies I typically get are that they are waiting to build up the funds, that enterprise is risky, etc.

This puzzled me, because the stakes are always lower the younger one is: if one blows the entirety of one’s $20 pocket money savings trying to run a lemonade stand, that’s a 100% loss yet is usually not ruinous in the long run. Conversely, a mere 50% loss on a million dollars capital in a failed business venture is pretty hard to recover from.

It was then that I realized that the overriding concern was of losing out, and especially of missing out on the prestige of having a well-paid career. This leads to a rather unusual situation where likely entrepreneurs come from those who have nothing to lose and those who are well off yet wish to prove themselves capable of self-made wealth. Those in the middle would rather stick to the comfort of a regular job, and attempt to grow one’s wealth through savings and investments.

Parents As Employers

The similarity of the pocket money culture in Singapore to that of employment is striking: As one grows in seniority, one generally expects one’s income to increase through pay raises (akin to getting more pocket money as one goes through the education phases), get promotions and bonuses (rewards for good performance at school) and overall save up from one’s paycheck to allow for consumption of goods (saving pocket money to buy toys and devices). Overall, this is a comfortable remuneration system that provides a more or less consistent income.

Unfortunately, that same comfort also encourages the sort of complacency that encourages one to work hard to retain one’s income stream, but not exactly at one’s full productivity because the marginal gains from productivity do not directly reflect in gains in one’s income. In fact, being observed to be an exceptionally productive employee is generally a disadvantage, as the resultant increase in workload generally exceeds income gains.

I would contrast this with another popular alternative to the pocket money system: the chores based compensation. In this approach, children are given small amounts of money for completing chores at home. Tidied your room? Here’s your money. Made your bed? Here’s some change. This direct feedback system encourages the kids to seek out ways to finance what they want, and places the responsibility squarely on their own shoulders.

Of course, there is an implicit assumption of financial privilege here: not all families are able to afford to just give out pocket money. And living in a place with a post-tax GINI coefficient of 0.410, that is a very real possibility. A common response to poverty is to go the well worn route of finding jobs (often disadvantaged by ones generally lower educational qualifications) and save what one can. Yet, in some, I see a strong drive to hustle and rise above one’s original station in life. I find such gumption heartening and humbling, and it begs some deep introspection regarding what the comparatively more privileged are doing with their good fortune.

And indeed the average person in Singapore is financially privileged. Amongst adults, the 50th percentile of global wealth ranks at around US$3000. With the median salary here approximating US$2730, individual Singaporeans earn nearly that much in a single month. Yet, this is something that contributes to Singapore being a victim of its own success: Given the comfort of regular work and low unemployment, there is little hunger that would drive one to aspire to someplace far above one’s station. Or even for those who have less ambitious aspirations, a lack of motivation to strike out on one’s own when easily-achieved stability is at stake.

What One Can Do

Conversations on the topic of this fondness for stability tend to meander towards a question of what one can do about this. There are two main groups that are likely to be interested:

Parents – Teach those kids to find their own solutions to problems, help others, encourage experimentation and ultimately to fail young. From the greats I have seen and read about in this generation and those prior, a good many started their training from a tender age. It seems unlikely that Alexander the Great would have conquered great swathes of the known world at the time by his mid-20’s had he not been trained from young in the ways of warfare and kingship. The young tech billionaires of today did not emerge from a vacuum: their exposure to the workings of tech were nurtured from young, and they have persisted with single minded determination to make a difference in the world.

Independent adults – Want to break out of that comfortable conformist cocoon? Better late than pregnant. Innovation today has probably the lowest barrier to entry of pretty much any age in human history. There is ready access to information, educational courses going practically for free and stunningly low fixed capital costs for getting a tech or online business off the ground. That makes for a very forgiving place to land when one shoots for the stars and merely lands on the moon.

The first step, I think, would be to get out there, talk to people, learn about problems and ultimately build the knowledge base that helps one avoid the worst pitfalls of problem solving…then just go right in there and attempt to fix things. Get some bumps, learn. Do it all over again…