Tailor grads to drive innovation

By Bernard Lee, The Straits Times, 14 Apr 2012

SINGAPORE'S bid to develop an innovative economy has started off relatively well with its research and development (R&D) platform to lure top talent to its shores. But the long-term sustainability of any innovative economy cannot rely on importing foreign principal investigators. Nor can an entire innovation-driven economy be built on the shoulders of a few genius-level innovators.

What is needed is the development of entrepreneurship and human capital across the board. Local institutions of higher learning play a critical role here, and must do more to address the lack of human capital in these areas.

I would like to offer some observations from my experience running and recruiting local talent for a start-up based in Singapore, benchmarked against my previous experience spearheading recruitment of PhDs worldwide at a top global asset manager. Both organisations recruit talent well-versed in quantitative finance for financial trading platforms.

At the Singapore R&D start-up facility, we attract several hundred job applicants from all local as well as global universities at all levels across a variety of disciplines. A typical job applicant will try to convince us during a first interview why we should hire him or her because of some ground-breaking research on certain computerised stock selection algorithms.

What is the evidence that this proposed trading algorithm works in real-world markets? Among local graduates, the typical answer would be: 'Because my professor said so.'

In response, we often ask: 'Has anyone actually traded on your proposed strategy? If it is that promising, why does your professor tell you about the idea instead of running it himself or herself? And, if you are so confident that this strategy will work, why are you not asking for profit-sharing in lieu of a base salary?'

My view on the shortcomings among graduates of local universities:

First, their knowledge is not always relevant to real-world needs. We often meet students who are given very impressive training for a few steps in the chain of knowledge, but with significant gaps in other areas of the chain.

I have found that graduates here can be very good in replicating research publications without much need for industry collaboration, leading to the question of whether the education system incentivises academics to focus on only the pieces that are interesting to them.

Second, regurgitation versus problem solving: The local system is heavily biased towards getting good grades in examinations, which can often be achieved by regurgitating certain pre-packaged solutions to well-defined problems. By contrast, learning to solve real-world problems requires constant experimentation, and therefore failure. This may also partially explain the higher-than-average level of plagiarism in Asia and the generally low level of original R&D outputs.

Third, the fear of failure. Apple's experience is that for every 10 great ideas, three of them get built and only one makes it to the market. Accordingly, accepting failure is the norm in the world of innovation. On the other hand, some local universities breed a culture of entitlement for those who manage to pass certain unreasonably difficult examinations on knowledge that may or may not be relevant. It is far from obvious that dealing with failure positively is part of the learning experience in local programmes.

Fourth, dealing with constructive criticism. The real world is tough. To get a taste of it, one only needs to visit a typical technology review website. Great products made by great companies receive undeservingly harsh criticism all the time. One key skill among successful companies is to translate the 2 per cent to 3 per cent of constructive criticism into improved features on their products. It is also far from obvious that developing the emotional maturity to deal with constructive criticism is part of the learning experience at local programmes.

Fifth, failing to see the big picture. We often interview applicants who are far more interested in impressing us with the difficult examinations that they have passed, instead of understanding the big picture of how their skills and body of knowledge can work together to help us solve a practical client problem.

If students are keen to learn practical, industry-relevant skills but are not doing so in their courses, then there is a simple Singapore-style solution based on performance indicators - let the teachers be paid based on a percentage of the tuition fee receipts. Over time, courses that are not offering industry-relevant training will be 'phased out' based on market demand and supply.

The United States educational system is probably the closest to being a market-driven system. The top 5 per cent of its universities - mostly well-funded, private universities including those in the Ivy League - are the envy of the world. The real problem lies in the bottom 10 per cent, where the lack of quality control results in graduates who often do not have any credible skills suitable for their potential employment.

The US economy is sufficiently large that it can afford to 'fail' the bottom 10 per cent of potential talent. However, that is not the case in Singapore, so a simplistic migration to a market-driven system may cause more problems than it solves.

Norway's approach affords lessons for Singapore. Every summer, the Norwegian government arranges for a cohort of students to take on innovation-related internships at multiple locations around the world. We have hired Norwegian interns who performed like third-year analysts at typical investment banks. Many of them went on to internships back home during their regular school terms.

Local universities can do more to encourage the take-up of postgraduate programmes. In particular, local universities can be encouraged to design programmes that are industry-relevant, such as by allowing students to work on industry- relevant research problems during their final-year projects.

While an innovative economy often requires a highly educated pool of human capital, the reality in Singapore is that postgraduate studies are considered optional by many local graduates. Unless some of these programmes are obvious 'tickets' to far better employment prospects, many students do not seem terribly keen to apply for local postgraduate programmes.

Any academic programme will eventually end if an insufficient number of students wish to enrol. Innovative companies are keen to help, because they too need hireable local employees instead of incurring the much higher costs of bringing in experts from overseas.

This is yet another 'chicken and egg' problem: Innovative businesses cannot afford to locate in a place without a credible pool of human capital.

But emerging postgraduate programmes cannot survive either if their graduates are not landing high value-added jobs.

Some practical solutions can be considered to develop a close nexus between academe and industry. Before launching any master's programmes, universities should consult potential hiring managers on the ideal set of skills that the graduates must acquire in order to fill hypothetical positions. That needs to go significantly deeper than any one-hour or two-hour discussions by typical advisory committee members who may no longer be hiring recent graduates directly.

If local academic and research institutions have no capacities to absorb all the PhDs that they are already producing, it is imperative for PhD advisers to encourage a portion of their PhD candidates to focus on industry-relevant research, which is standard practice in the US.

Otherwise, any newly minted PhDs may be too old for entry-level positions in the industry, while they don't stand a good chance in securing any academic and research positions locally. If this happens, over time, local PhD programmes risk being viewed as bad career choices by qualified applicants.

Whether in teaching undergraduates or in planning postgraduate programmes, more effort to engage and understand the needs of innovation-driven industries can help Singapore entrench its position as a talent hub for innovation-driven companies.

The writer is founder and chief executive of HedgeSPA and a research fellow at the International Trading Institute at the Singapore Management University.