Up Close and Personal with Datuk Seri Panglima Andrew Sheng

DATUK Seri Panglima Andrew Sheng wears many hats. But over and above all the accolades and man-made positions, he is probably first and foremost a teacher. He has a way of making one think. One could sit for hours venturing onto new mental horizons with him.

“I am not there to give them (his students) information, but to teach them how to think. When I write my columns for The Star, or for any other publications, I don’t write it for the sake of gaining popularity.”

In that sense, his students – and that is not limited to those in the classroom – are very fortunate.

On his most exciting assignment, Sheng, a movie-buff, paused.

“In my starry-eyed way, when I met Hong Kong actress Dodo Cheng, I asked which was her best movie. Her answer: the next one.

“I was stumped. I thought about it and yes, she is right. If you say that your best experience is a high point, you may already be satisfied with a peak.”

Sheng seems to come from very hardy stock.

Born of refugee parents from China, Sheng grew up in what was then British North Borneo, now Sabah. Despite having come a long way growing up in a sleepy town of only 10,000 where a ship from Singapore brought in the ice-cream supply weekly, he continues to find pleasure in his roots. He enjoys his Chinese ceramics, but he also finds much pleasure in the tribal ikat.

Sheng lives in Penang today, but spends much of his time in Beijing and other countries. He has lived a number of years abroad and was at one time with the World Bank (1989-1993), working with former Harvard president Larry Summers, now the highly influential director of President Barack Obama’s National Economic Council, Stan Fischer, now Bank of Israel governor and Nobel Laureate economist Joe Stiglitz. Together with Tim Geithner, now Barack Obama’s Treasury Secretary, they shared the agony and drama of economic crises that brought countries and their governments down.

He enjoys his work thoroughly; that comes across evidently.

“Joie de vivre, it means the joy of living. When you enjoy what you do, you can do it very fast. It is a pleasure, not a pain,” he says.

The changes that engulf the world today have found a perfect audience in him. “It is exciting because there is a major shift away from west to east, north to south, top to bottom. People are listening to what the blogs are saying, although a lot of them are just indications or (agents of) dissatisfaction.

“It is frightening because nobody can predict what is going to happen tomorrow.” Until today, the world does not know the extent of the Dubai fallout. We are only seeing events unfolding, with a lot more drama, velocity and ferocity. Crises are happening more frequently and the scale of the risks are getting larger.

Sheng’s analogy: “It is like going up on an escalator, only to drop like an elevator.”

While other economists think this is yet another crisis like any other, he thinks this one is special; a once in-a-lifetime thing.

We have events like the 1998 LCTM (long-term capital management) crisis. In September 2008, there was the fall of Lehman Brothers which resulted in market movements which were 26 standard deviation (a statistical measurement) from the mean.

“We are seeing events which are supposed to happen once in 400 to 1,000 years, hitting us twice within a very short span. Clearly, the present risk management models could not capture all this, which makes it very difficult for us to understand, comprehand and react accordingly.

“It is like generals fighting a war of the future with yesterday’s weapons. It is a systemic issue. This means our standard theories and models and way of behaviour have to change drastically.”

Sheng grew up at a time when Malaysia was prospering. He left for England in 1965 to study economics at the University of Bristol and to train as a chartered accountant in London with Arthur Andersen & Co. He returned in 1972 to join Bank Negara Malaysia. He subsequently became a regulator of banks and the first serious crisis he was involved in was the 1986 deposit-taking cooperatives that led to a run on banks. Three years later, he joined the World Bank for a sabbatical to do a study of bank failures in the developing world.

When he came back in mid-90s, he went to Tropicana Golf & Country Resort, then a growing upper-class development in Petaling Jaya.

“I saw white houses with Roman columns and I remembered the TV series Dallas and JR Ewing. It seems like every Malaysian wanted a house like that. But can we live the standard of living of Americans? Can we use our credit cards and spend unfettered? We have to live within our means. The crisis we are in today is based on extensive leverage. The various stimulus packages around the world may have soothed the pain, but they have not solved the real part of extensive leverage.” Sheng does not accumulate real estate.

Man are like lemmings, a small mouse-like animal that live in the northern hemisphere and move in large numbers. They have a herd mentality and sometimes they follow their leader over cliffs. In the same way, the collective behaviour of a crowd can sometimes lead to madness.

“Values system counts. If you are driven by money, you become what Oscar Wilde says – one who knows the best price of everything but the value of nothing. Every person must have his own moral compass to guide him. You must have your own personal values,” he says.

The power of the masses can also exert serious implications on the environment, and ultimately the economy. It is this understanding that makes one much more cautious and humble within one’s environment.

Sheng says he has reached a stage in his life where he wants to pass on what he has learned to the next generation and hopefully, they will be able to make a better world.

While his wife plays a principal role – “she is a real soul mate” – he is thankful for the education he had, teachers at primary and secondary school which opened up the horizons for him.

“I never realised until 30 years later that my teachers were the best in the world. I had the finest English headmasters and teachers, one holds a Harvard MBA and others who graduated from Cambridge. From a young age, I had a standard of education that probably could not be replaced today.”

Research has shown a student in a class gets 15% to 20% of what the teacher says. If he is shown how to do it, he will probably get 40% to 50% of it. But if he were to do it himself, he gets 80%. He learns the rest of it when he makes a mistake.

“So life is journey. You can teach all you want but if the student does not get it, he will never get it. He has to go through the pain and the mistakes before he really learns. In that sense, a crisis is a great teacher, but a frightening one.”

Note: Sheng recently launched his book From Asian to Global Financial Crisis, published by Cambridge