Featured in the Media – Page 23 – Asia School of Business

As Malaysia stands at the crossroads of an evolving economic landscape, the intricacies of pension systems and retirement planning have never been more critical. The conventional “pay-as-you-go” system, a staple in many countries, is facing challenges that make it seemingly unsustainable. Financed by the working population through taxation or government debt issuance, the cost burden of this system is exacerbated by demographic shifts, especially in a nation with a top-heavy population pyramid. In the Malaysian context, the challenges of a “pay-as-you-go” system are pronounced.

One academic estimate places the cost at more than RM40 billion per annum just to provide a basic wage of RM2,700 per month up to the 70th percentile of retirees. The economic strain is evident. The question that arises is clear: How can Malaysia navigate these challenges and create a sustainable retirement ecosystem? A viable alternative lies in the concept of a self-funded, pseudo-government-guaranteed public pension or social security savings fund — an approach successfully implemented by Malaysia’s Employees Provident Fund (EPF) and Singapore’s Central Provident Fund (CPF).

These self-funded pension plans operate on a co-contribution model, where both employees and employers contribute to the scheme. Individual ownership of accounts ensures a sense of responsibility, while a government guarantee sets a floor for returns, preventing them from falling below a specified level. In both Malaysia and Singapore’s case, the legislated minimum is 2.5% per annum in dividend or interest income respectively. While EPF employs a liability-driven investing (LDI) scheme, CPF follows an asset-liability management (ALM) approach. The nuanced differences in investment strategies highlight the need for continuous refinement and adaptation.

For example, ensuring a balance between risk and return in the LDI scheme becomes paramount, particularly in the context of globally interconnected financial and capital markets. Whereas in the case of CPF, all proceeds raised from the Special Singapore Government Securities (SSGS) issued to CPF from member subscriptions as part of the ALM scheme are handed over to GIC to manage in a total returns context. Singapore’s CPF, often lauded as a successful model and hailed by the Mercer CFA Institute Global Pension Index as the best in Asia, presents specific elements that could be seamlessly adapted for Malaysia’s retirement savings framework.

CPF LIFE, Singapore’s life annuity scheme for retirees upon retirement, offers a compelling income-in-retirement blueprint for Malaysia’s EPF. The automatic conversion of a Singapore retiree’s self-funded accumulated sum at the point of retirement into a lifelong steady income stream mirrors the functionality of traditional pension systems. Another noteworthy feature is the CPF/HDB Lease Buyback Scheme, allowing retired homeowners to monetise home equity into a lifelong retirement income stream. The success of these government-backed retirement initiatives lies in both their low-cost and subsidised nature, thus making them sufficient and efficient for retirees.

Market-based pricing checks emerge as a critical component in designing a robust retirement system. Platforms like ImmediateAnnuities.com in the US (previously known as Annuity Shopper Buyer’s Guide), where insurers bid for retirees’ annuity business, provide insights into the market pricing for annuities under free market competition. Access to such auctions, and the resulting price discovery and information, allows Malaysia to establish a market-based pricing mechanism for annuities, hence aligning premiums and payouts with market realities.

Safeguarding the integrity of individual pension contributions and preventing political interference is also imperative. While Malaysia’s retirement savings system is sound, the challenge lies in protecting against unforeseen events. Learning from global counterparts and adopting measures to fortify the system can ensure its resilience. The role of reverse mortgages in unlocking home equity for retirement, as was recently introduced in Malaysia by Cagamas, is noteworthy. However, integrating and pooling the reverse mortgage programme with the EPF savings scheme, akin to Singapore’s CPF Lease BuyBack programme, can potentially pool risks more efficiently and hence enhance payout rates.

Effective risk pooling becomes the linchpin for maximising the risk-return benefits of such schemes, ultimately securing more robust retirement income for Malaysians. Healthcare costs in retirement represent a significant concern globally, and Malaysia can take proactive steps to integrate healthcare coverage into its retirement savings framework. Creating a separate tax-advantaged Medisave account within EPF can cover insurance premiums for healthcare costs, with surpluses available for co-payments or enhanced private care.

The proposal for a goals-oriented approach to publicly mandated retirement savings offers a paradigm shift. By aligning investment strategies with the individual’s needs for retirement, Malaysia can create a more dynamic and personalised approach to members’ retirement savings. Relying solely on a balanced lifecycle fund in your EPF Account 1, which is the account that allows you to withdraw eligible funds to invest in mutual funds and unit trusts, might not suffice, especially in the face of market downturns, as witnessed during the 2008 global financial crisis.

As the conversation expands to encompass the recent developments in the Malaysian retirement planning dialogue, including the Flexible EPF, a nuanced perspective is crucial. While flexibility is akin to a financial option and holds intrinsic value, the impact of such flexibility, as seen in the multiple special withdrawals during the Covid-19 pandemic, and the attendant depletion in members’ retirement account values, necessitates careful consideration. Balancing flexibility with the long-term sustainability of retirement savings is paramount.

Private pension schemes emerge as a promising avenue, offering a self-funded and privately managed alternative. Countries like Malaysia, Singapore and the US have successfully implemented supplemental retirement schemes, which provide tax benefits and the potential to invest in diversified and cost-efficient products. The advantages of private pension schemes over pay-as-you-go systems become apparent with the passage of time. The latter offers individuals more control over their retirement savings and portfolios.

In conclusion, the future of Malaysia’s retirement conundrum lies in comprehensive reform. Drawing inspiration from successful models, integrating innovative approaches and prioritising individual needs can reshape the retirement landscape. Malaysia has the opportunity to create a sustainable, flexible and goal-oriented retirement system that meets the diverse needs of its citizens. The time is ripe for a transformation that ensures financial security and dignity for retirees in the years to come. To enable that, an EPF-led advisory panel on retirement should be set up to evaluate the best way forward for Malaysia’s retirement savings system, such that the principles of adequacy, sustainability and integrity are assured.

Originally published by The Edge.

Isu berkaitan rakyat tanpa warganegara sebenarnya wujud di hampir setiap negeri di negara ini dan banyak memorandum diserahkan oleh pelbagai pihak termasuk pertubuhan bukan kerajaan (NGO) kepada Kementerian Dalam Negeri (KDN) untuk meminta satu keputusan jelas bagi menangani isu yang mendapat perhatian masyarakat dunia. Malah ia pernah tular di media sosial apabila media lur negara memainkan isu ini di Sabah sekali gus memberi tamparan hebat di Malaysia.

Read the full article HERE.
Originally published by Utusan Malaysia.

During Startup Week Malaysia 2023 last week, we had the opportunity to sit in and engage with various industry stakeholders to learn more about the nation’s startup landscape. This included insights on how to curate a good brand story, the harsh realities of managing a large global team, and funding advice from 1337 Ventures’ CEO, Bikesh Lakhmichand.

All of which we’ll be sharing with you soon in coming articles. But aside from such talks and workshops, we also attended Startup Week Malaysia’s Marketplace which was held at Asia School of Business. There, we got to meet a mix of established and budding startups, 12 of which caught our eye. Here’s who they are.

1. Tanoti

Tanoti, which means weave in Sanskrit, was established back in 2012. As the name suggests, the brand is dedicated towards the preservation of weaving, particularly songket weaving. A social enterprise based in Kuching, Tanoti houses young ladies from the local Penan community and fosters their weaving skills. This provides them with more opportunities to earn a viable income.

But aside from songket, the brand has expanded their products beyond just textiles. There’s also homemade food like kasturi lime jam and engkabang butter. At the marketplace, though, we saw handmade rattan weaved bags and hats, mengkuang hand fans, and rattan-weaved felt Christmas ornaments.

Where to buy: You can visit them at Tanoti House in Kuching or purchase from their website here.
Contact: +608-223 9277

2. FirstSeed

Made for children aged 5 to 17, FirstSeed is a marketplace for kidpreneurs to promote their products and services in real-world environments. Instead of classes, children are taught on-the-job experience in a kid-friendly environment. The platform’s founder explained that FirstSeed is meant to be a stepping stone for kidpreneurs.

Specifically, it’s to help with discovering their interests and transitioning to more mature online marketplaces. At the marketplace we visited, we were introduced to two of their students’ businesses, namely ACTors and Simple Meals.

Where to buy: You can check out the brand’s SeedMart website here.
Contact: +6017-228 6778

3. Showwcase

Started by a Malaysian, Showwcase is a community platform for software developers, by software developers. Noticing the struggles of finding a viable networking space for those in this niche, Rong Liew (co-founder) decided to create his own. Aside from being a community platform, though, Showwcase also doubles as a global tech job portal. During one of his sessions as a panel speaker, Liew shared that the brand allows companies to hire developers around the world.

Where to find: You can check out the website here to connect with software developers.
Contact: team@showwcase.com

4. Snackright

One of the few F&B startups that we came across, Snackright was started by a couple who liked snacking. But not at the cost of their health. As such, they came up with their own brand serving healthy treats like nuts, dried fruits, and crackers. The twist is that they don’t sacrifice taste in the process.

You can find packets of their nuts in flavours like chili lime and Korean BBQ, whereas their rice multigrain crackers are made to taste like tom yum and teriyaki. Currently, there’s a Christmas Magical Party Box on sale at RM55, where you can get 10 mini packets of their bestsellers.

Where to buy: You can check out the online website here to purchase their snacks.
Contact: +6012-976 7917

5. Infinite Minds Academy

A school for special needs people, Infinite Minds Academy conducts digital tech programmes for upskilling. The goal is to help these individuals sustain themselves economically by obtaining the necessary digital tech skills. According to their website, their students are mainly those with autism, Asperger’s syndrome, dyslexia, Down syndrome, slow learners, ADHD, cerebral palsy, and those who are deaf and mute.

To showcase the talents of their students, the social enterprise sells a variety of products designed by them at the marketplace under a brand called Beamworks. At the bazaar, we saw their prayer mats, coasters, reusable tote bags, and calendar cards for 2024.

Where to find: You can check out the catalogue here to purchase their designs.
Contact: hellobeamworks@gmail.com

6. Matt Made Studios

A newcomer to the entrepreneurial scene, Matt Made Studios is a new venture offering personalised paper crafts. Once a videographer, the brand’s founder launched the business to shed light on paper crafting in Malaysia. As of now, Matt Made Studios is still in their infancy and undergoing daily R&D.

But some of the current offerings that you can already find are popup cards and kirigami (a variation of origami). An example of the latter is the Spotify Christmas cards. If you’d like something more unique, the brand also takes customised orders. For this, a 50% deposit is required to confirm the booking.

Where to buy: You can purchase from the website here.
Contact: mattmadestudios@gmail.com

7. Seven Tea One

Established in 2016,Seven Tea One is another local social enterprise that’s committed to helping persons with disabilities. The brand focuses on equipping disabled teens with basic employment skills, including data recording, calculations, and organisation. Along with that, teens are taught living skills such as communication, teamwork, and decision-making.

While speaking to us, the founder shared that they’ll be moving from Setia Alam to Kapar. This is so that Seven Tea One can be closer to the community and make a bigger positive impact on their lives. For now, the brand largely creates F&B products with the help of their beneficiaries.

Where to buy: You can check out the website here to purchase their products.
Contact: +6016-238 5060 / +603-308 29211

8. carching

“Turning your KM to RM”, that’s the slogan of carching. You’ve probably seen some of their services while out and about. But if not, carching is a platform that allows car owners to earn cash by driving. Launched last year, the startup wraps users’ cars with partnering campaign advertisements. Upon signing up with carching, you’re basically a brand ambassador and can choose your preferred campaigns. On a monthly basis, users of carching can earn up to RM500. But do note that you’ll need to hit a minimum travel distance in order to qualify for the payout.

Where to find: You can check out the website here to find out more about its services.
Contact: 321go@carching.co

9. Vive

Started in 2015, Vive is a local bean-to-bar chocolatier that can be found in various partnering stores around Peninsular Malaysia. According to their LinkedIn page, the brand collaborates with chocolate farmers that practice organic and sustainable methods to plant the cacao trees. This ensures that the cacao beans harvested are of good quality. Currently, you can find a range of Vive’s products, such as cacao nibs, dark chocolate bars, cacao husk tea, and pure cocoa powder.

Where to buy: You can visit them at Vive’s physical store in Seri Kembangan or purchase their cocoa-related products from the website here.
Contact: +6013-488 4191

10. Jerry

Created by the team behind Colony, Jerry is a budget-friendly, self-service coworking space brand. At the time of writing, they’re open in eight locations around the Klang Valley. Customers can opt to book their own private workspace for as short as one day for RM30 with their Day Pass. And if you like the consistency of being in one place, there’s also the option of a Monthly Pass for RM610. But if you prefer somewhere in between, there’s a flexible Prepaid Pass where you can choose any six days for RM150. So you’re able to reschedule your booking at no extra cost.

Where to find: You can check out all its locations and its details here.
Contact: +6012-241 7828

Highlighting up-and-coming businesses

Aside from the 10 businesses above, we also came across two other local brands that are still in the early stages.

MyRehat is a local accommodation platform that connects travellers with homeowners who act as professional hosts. On the other hand, Swap.A.Gas provides customers like housewives with “explosion-proof” cooking gas canisters.

All in all, we’re excited to see how all of these businesses will grow in the future and possibly innovate their respective business landscapes. So we’ll definitely be keeping an eye on them.

Separately, for the social enterprises that are interested in showcasing their brands, ASB will actually be hosting a monthly Social Impact Marketplace. We don’t have much information on this yet as it’s a new initiative, but its social media page should release more details soon.

Originally published by Vulcan Post.

A group of Malaysian independent smallholders obtaining the RSPO Independent Smallholder (ISH) Standard Certification have commemorated their sustainability journey in the book, “The Road to Certified Sustainable Palm Oil: A Sustainability Journey from the Fields of Johor”, which was launched at the recently concluded RSPO Annual Roundtable on Sustainable Palm Oil (RT2023) in Jakarta, Indonesia. The book details the sustainability journey developed by the Center for Sustainable Small-owners (CSS) at the Asia School of Business (ASB) in Kuala Lumpur to facilitate the RSPO Certification of 407 independent smallholders under the Procter & Gamble (P&G) Smallholder Programme.

In August 2021, the programme successfully saw the certification of the inaugural group of 101 independent smallholders in Malaysia, awarded to Pertubuhan Tani Niaga Lestari Negeri Johor (PERTANIAGA) as Group Manager. The book describes in detail the flow of activities mapped to RSPO ISH Standard requirements, and provides guidance on developing documentation and training curriculum to support the journey towards achieving or facilitating certification. P&G Chemical’s Sustainability Director Francis Wiederkehr shared, “The P&G Smallholder Programme, which started in 2019, aims to act as a force for good to enable our smallholders to progress in their sustainable farming journey, gain recognition and achieve RSPO Certification.”

Within four years since the Smallholder Programme began, P&G partnered with independent smallholders to help them establish PERTANIAGA as their own independent smallholder association in 2021. To date, the programme has supported and guided 407 ISHs towards achieving RSPO’s ISH certification. In 2023, the programme introduced an initiative creating awareness on Sustainable and Good Agricultural Practices (GAP) and has trained over 1,000 smallholders to date. Another 400 PERTANIAGA members who are part of the programme are expected to be RSPO Certified in 2024.

Guntur Cahyo Prabowo, RSPO Head of Smallholder Program (Global), remarked, “This book pays tribute to smallholders’ inspiring journey towards certification and sustainability. Certified against the RSPO’s rigorous ISH Standard, smallholders protect, conserve and enhance ecosystems and the environment by ensuring that oil palm production is sustainable. They are integral to our overall quest to achieve greater levels of sustainability within the sector.” As of September 2023, over 35,000 independent smallholder farmers have been certified under the RSPO ISH Standard, covering a certified production area of 100,078 hectares across 7 countries.

CSS Director, Dr. Asad Ata said, “Being certified helps smallholder farmers become aware about sustainability as a shared responsibility, while increasing the marketability of their produce. It also allows them to benefit from RSPO premiums, of which our group of certified independent smallholder farmers from the districts of Batu Pahat and Pontian in Johor, have collectively received over US$42,000 in 2021 and 2022.”

Wiederkehr added, “With the sharing of our combined experiences in this smallholder journey in Johor, P&G-CSS hopes to inspire other companies and industry stakeholders to pursue certification initiatives for ISHs. While challenging, they are greatly rewarding in terms of creating a positive and hopefully long-term impact.” Access the eBook “Road to Certified Sustainable Palm Oil: A Sustainability Journey from the Fields of Johor” by clicking here.

Originally published by RSPO.

KUALA LUMPUR: A concept paper on integrating government services in a single digital platform will be presented at the coming National Economic Action Council (NEAC) meeting in December, says Rafizi Ramli. The Economy Minister said the GovTech concept paper was a critical step towards integrating technology into government processes, illustrating the commitment to digital transformation and modernisation of the public sector.

“The ministry, the Malaysian Administrative Modernisation and Management Planning Unit (Mampu) and related government agencies are currently finalising the first concept paper on GovTech. “This will pave the way forward for the use of GovTech by the government,” he told a press conference at Asia School of Business here yesterday.

Read the full article HERE.
Originally published by The Star.

In the recently-published National Energy Transition Roadmap (NETR), Malaysia has affirmed the role of natural gas in its main transition fuel towards net-zero. With this green light, the Malaysian energy sector appears to have hit the accelerator, with national electricity company Tenaga Nasional Bhd (TNB) announcing 5,700 MW of combined-cycle gas turbine upgrading until 2039 and signing a memorandum of understanding (MoU) with national petroleum company Petronas to explore carbon capture and storage (CCS). The choice of natural gas can be seen as a “safe” approach because it involves mature technologies in which Malaysia has extensive experience.

However, a pathway that increases investment in natural gas may be very costly in the long run and could lead to Malaysia missing out on the benefits that new renewable energy generation and storage technologies might bring. When calculated over their project lifetime, the investment and operating costs associated with natural gas power generation are higher than renewable energy alternatives. Based on Malaysian projects, natural gas costs 35 sen per kWh, which is higher than solar (20-27 sen), biomass (28 sen), and biogas (25 sen).

Natural gas is also more expensive than coal and requires a carbon tax of at least RM200 per tonne of CO2-equivalent emissions to be economically competitive. However, additional carbon taxes would make natural gas even less cost-competitive in comparison to low-carbon renewable energy. If CCS is to be adopted at scale, the government’s own NETR Phase Two document suggests that carbon pricing of at least RM400 (US$85) per tonne is necessary for it to become commercially viable for natural gas-fired electricity generation. Aside from high natural gas prices and carbon taxes, Malaysia has depleting natural gas reserves, with only around 15 to 40 years of production capacity left.

The NETR recognises the erosion of energy security but does not propose a concrete strategy to mitigate this problem. The large number of countries choosing natural gas as a transition fuel suggests that Malaysia will face increasing competition to secure its energy supply. In fact, experts from Japan’s Mitsui & Co, a leading global energy trader, see demand for LNG outstripping supply. As Malaysia’s own oil and gas reserves dwindle, the fiscal capacity required to subsidise fossil fuels also diminishes.

Revenue from oil and gas exports is currently used to hedge the domestic economy against international energy price fluctuations, costing RM28 billion in 2022, or 12 per cent of gross domestic product. Without income from oil and gas exports, Malaysia cannot afford such expensive subsidies. Although the choice of natural gas may seem safe, it carries serious risks for the Malaysian economy and energy security. If natural gas and carbon emission prices rise significantly, Malaysia could end up with notably higher energy costs than its neighbors, eroding its economic competitiveness.

Underinvestment in low-carbon renewable energy could also harm the manufacturing sector, which is closely intertwined with global supply chains that demand affordable and low-carbon energy. While low-carbon energy technologies such as renewable energy, biofuels, large-scale energy storage, hydrogen, and nuclear energy also pose challenges. Malaysia’s substantial bet on natural gas seems unlikely to pay off in the medium to long term and may turn out to be an expensive detour on its path towards net-zero.

*Ganesha Pillai is a senior research associate and Dr Pieter E. Stek is a postdoctoral researcher at the Asia School of Business’ Centre of Technology, Strategy and Sustainability in Kuala Lumpur.

Originally published by New Straits Times.
Photo source: fotoBERNAMA (2023)

Guest: Dr. Joseph Cherian, Practice Professor of Finance, Asia School of Business

As an ageing nation, Malaysia is becoming old before it becomes rich. How should we revamp the national retirement savings system to provide a better umbrella for old age? We discuss this as well as global investment trends with Dr. Joseph Cherian, Practice Professor of Finance with the Asia School of Business. He is also the author of a recently published compilation of essays, “Track to the Future: Investment, Finance and Lessons for the New Economy.”

Listen to the full interview below.

Originally published by BFM.

The proposed Employees Provident Fund (EPF) Flexible Account could spell trouble for Malaysia’s pension system as it contributes to reduced savings of members over time, reflected by post-pandemic numbers, says experts. Asia School of Business practice professor of finance Joseph Cherian told Business Today that it appears that the proposed EPF Flexible Account aims to grant members more flexibility in accessing their accounts at any given time.

During the tabling of Budget 2024 on Oct 13, Prime Minister Datuk Seri Anwar Ibrahim announced that flexible EPF accounts would be introduced where contributors could access them at any time. He said the EPF accounts of contributors would also be restructured to empower the savings of retirees. Cherian said flexibility, in the form of special withdrawals allowed during the height of the pandemic, has resulted in the reduced EPF savings across the board.

“The government estimates that around RM145 billion of retirement savings was withdrawn by 8.1 million members, resulting in a 50 percent reduction in the post-pandemic median savings of members compared to its pre-pandemic level. “Indeed, median savings decreased from RM16,600 in 2019 to RM8,100 in 2022,” he said.

Center for Market Education chief executive officer Carmelo Ferlito – Photo from LinkedIn

Center for Market Education (CME) co-chief executive officer Carmelo Ferlito agrees with Cherian that a flexible account could depletes contributor’s median saving in the long run, especially if it doesn’t involved additional contributions. “I tend to agree with the judgement, in particular if the new mechanism is not based on additional contributions. People may always have some sort of emergency to use their savings,” he said.

Ferlito reiterates the proposed flexible EPF will be applied to existing contribution, Malaysia’s future savings is at risk, especially as the saving capacity is already pretty low for the country. “I would wait for the mechanism to be announced before advancing a comprehensive judgement. The priority should be the long-term financial stability of households,” he said.

Meanwhile, economist Tan Sri Ramon Navaratnam added the current EPF system is good but it could be refined and improved to be made more pragmatic. Last week, Deputy Finance Minister I Datuk Seri Ahmad Maslan said the government is finalising details on the withdrawal access to the proposed EPF Flexible Account and said there will be no withdrawal access from EPF accounts like previously. The current EPF savings scheme structure for members under the age of 55 consists of Account 1 and Account 2, with a percentage rate of 70% and 30%, respectively.

Originally published by Business Today.

THE world is changing in more ways than one and all this is putting into question the reliance of the larger community on the existing education system. Citing developments in the “new world”, such as the rise of artificial intelligence (AI), Asia School of Business (ASB) chief executive officer, president and dean Sanjay Sarma warned that what students learn in the classroom may be outdated by the time they complete their studies.

“We have to change. There’s a way to rethink education in that when you get your degree, it’s intermingled with work and actual hands-on activity. “It’s called action learning. You don’t just learn – you go act on your learning, then you come back and learn some more,” he said. Likening the setup of most college curricula to a train ride, Sanjay pointed out that if students jump off the train, they are off and can’t hop back on.

“Action learning is the movement we need – this applies not just to college, but also to school and the future of the workplace,” he said. Speaking at the second of the four-part ASB Learning@Work Leadership Summit Series titled “Human Learning in the Age of Machine Learning” in Kuala Lumpur on Sept 13, he said the world is confronting a great job migration, brought on by technological advancements.

Learning is the oxygen of the new economy. A young person might need to quickly learn about hydrogen as a brand new technology, a middle-aged person cybersecurity, and an older person some new technologies. “The problem with our approach to learning is it’s going to take us four years to get from where we are to where we need to be,” he said, alluding to the duration of most bachelor’s programmes.

He added that even one-year master’s programmes have a very high opportunity cost.“Your job may change by the time you go back, your industry may change, your company may vanish or be acquired. We’ve seen all of this. We have to rethink our education system,” he stressed.

Amid climate change, technological innovations and shifts in the working world, he said one needs “speedboats and motorboats”, and not “cruise ships”, to cover the skills gaps. “If suddenly someone needs to learn cybersecurity, they’re not going to go back to college for a year; it’s not going to happen,” he said.

He also noted the emergence of digital nomads, where work and nationality are decoupled, and gig economy, as among the reasons why the education system needs to keep up with the changing times.“The half-life of the degree is plummeting. Young people graduating from college are going from gig to gig, not caring about which company they work for or about their careers.

“Your degree, which is a proxy, ceases to matter – it may matter to your first and second jobs, but when the third gig comes, what matters is how many stars you got for your previous gig. “It doesn’t matter that you went to the Massachusetts Institute of Technology (MIT) or an unknown college – if you delivered the software and got a few stars, you are better than the kid from the MIT who didn’t do well in the last gig,” he said.

He also drew attention to the duration of each lesson which, he said, violates the principles of cognitive science. “Every classroom is based on a half-an-hour, or 45- to 90-minute lecture. It turns out that after 10 minutes, the hippocampus, which is the switchboard of the brain, gets tired. What happens is you get in the mode of listening but not learning,” he said.

For the education system to address all this, Sanjay highlighted the importance of credentialing, other than action learning. “It’s a degree that is constituted of credentials where you don’t have proxy exams but exams that really test authentic skills, where you can hop on, hop off, and work while doing so – this is the movement we are starting,” he said. He also emphasised the need for quartenary education, which is the fourth stage of learning after primary, secondary and tertiary education.

“It is the duty of education institutions to provide quartenary education. “To create a quartenary education movement is going to take societal will, institutional commitment and corporate engagement – companies and professionals have to learn to work in a new way,” he said.

“This is the movement that Malaysia is uniquely positioned to start. You have over 30 million people, you’re on the threshold of becoming a high-income country, and you have a diversity of jobs, a very advanced economy and quite a forward-looking society,” he added.

‘New type of university’

*MIT Director of Digital leaning and collaboration Philpp Schmidt.*

TO design a new university, online learning and hybrid models are two components that universities can integrate into their building blocks. Pointing to a shift in student attitudes towards these modalities of instruction (see infographic), Axim Collaborative chief technology officer Philipp Schmidt said this is the right moment to think about a new type of university.

Axim Collaborative is a United States-based non-profit organisation founded by the MIT and Harvard to address systemic equity gaps in higher education. Citing data collected in the US, he posited that the shift in attitudes has happened with students but not the instructors yet. “We’re seeing an acceleration of people who are adopting technology get more optimistic about its use, and start using it more and moving further ahead – the fact that students are so far ahead of their instructors and administrators is something to keep in mind,” he told the ASB Summit via a video call.

Another development he highlighted is the growing interest in a flexible model of education among learners. In the US alone, he said, there are 25 million people in the market who are interested in this model. “Much of the education system still looks like the old model. Implicit in this old model is that when you’re done with education, you have now learned everything you ever need to be a successful professional in whatever career you are in.

“But the reality looks different now,” he said. Referencing Accenture’s 2021 study on learner mindsets, which presented six learner segments, Schmidt said four of them can be considered lifetime learners. “These learners will want to learn at different moments in their lives, and will come in and out of education,” he asserted. Education institutions, he said, are however relatively slow to adapt to the flexible model of education.

Cautioning that change can be extremely quick, he added that new, innovative institutions can move into leadership roles in the span of 10 years that looked very different before, while other institutions that have not moved all that much are grappling with how to innovate and change.

Online versus hybrid

Massive open online courses (MOOCs), he said, have fundamentally changed perceptions of online education. “Ten to 15 years ago, online education was considered a second-best option. Today, it’s more considered an option for highly skilled, highly motivated professionals to use to advance faster in their careers,” he said, adding that MOOCs have reached 220 million learners with offerings from 950 universities around the world.

Online learning, however, does not work on everyone or every course, he pointed out. “It largely doesn’t work for students who may need a little more help, and that includes students coming in to university because they haven’t had a lot of time learning how to learn,” he added.

Hybrid models, he said, are much more successful. “They make it easier to do active learning and project work, and spend time in a room critiquing each other’s projects – some of those things that are really easy to do in person but hard to do well online,” he offered.

Credentialing

To support this kind of learning pathway, Schmidt said the credential system needs to do a better job. “Traditional credentials in higher education don’t tell much about what students know and can do, yet the bachelor’s degree is by far the most important credential for accessing the job market, especially in the US,” he said. This, he added, is leading to degree inflation, which is a real issue not just for the learners, but also for the employers.

While things are starting to shift, with 14 states in the US eliminating the bachelor’s degree requirements and adopting skills-based hiring, he said hiring practices haven’t caught up yet. “One of the reasons is that our credentials don’t tell enough of the skills and competencies of the individuals,” he explained. Credential designs such as open batches can be used to address this.

“You could learn things in a variety of spaces and if you get a badge for things you learn in these environments, you could put those things in a ‘backpack’ or ‘wallet’. “If you apply for a job, you could select the badges you want to share with the recipient. The badges will contain digital information about what you learned, the projects you worked on, and some comments from other students who had worked with you, so there’s a merging of data,” he said. “Over 75 million badges have been created, so there’s been real interest in this,” he added.

Talent-building strategies/Forging better pathways for learners

“Here’s my proposal for three things we need to do for better pathways for talent: First, vastly cheaper and more flexible learning. We need agile, customisable, flexible, iterative learning. It’d be great if we could rearrange and re-permute it, and if we recognise that many learners benefit from episodic deep dive into learning and interweaving that with real-world experience.

Second, thinking carefully about how we interleave online and traditional learning with direct, lived, tangible experience, projects and teamwork. MOOCs and online learning are not the be-all and end-all. We can adopt the notion of gemba, which means that a place where things happen should be the focus of managers – but it should also be the focus of learners who want to enter the industry. We can’t just do that through MOOCs.

The other idea, Genchi Genbutsu, which is related to it, means if you’re wondering about something, go to the place and observe. Doing so can fuel some ideation rather than walking in and judging the problem or trying to solve it right off the bat. There is a role for not only action learning, but also research, in which you acknowledge you’re a participant in the system and draw valid research findings out of it. It’s an invaluable tool for learning.

The new form of learning should think about how to intertwine these. Third, credentialing learning but also helping our students recognise what they have learned, especially from action learning and other forms of hands-on learning. Students very quickly incorporate what they learn. It gets to be second nature, and you do the thing without knowing you are doing it. That’s expertise, but when you’re learning, leading or managing, you need to be good at enrolling others or bringing others along.

You need to be able to not only solve the problem, but also frame what you did, bring others into the conversation and most importantly, disseminate insights in the ways that others can follow and make their own.” – ASB Summit speaker Anjali Sastry, who is MIT Abdul Latif Jameel World Education Lab faculty director and MIT Open Learning associate dean

Mini-interventions for the disadvantaged

“Talent building does not begin after they graduate. Thinking about the lifelong journey of a potential worker is very useful in this case. One thing that is under-highlighted is how Covid-19 set people behind, in particular those who are completely under-resourced relative to us. A lot of these problems are structural, meaning things we cannot fix by giving them one-time intervention.

We might be able to fix lack of devices but we cannot fix issues such as access to the Internet and security concerns. We can’t control everything on the list, but the idea is that there are some things we can control and doing mini-interventions can make a huge difference in these people’s lives. A social mobility study by Harvard economist Raj Chetty found that networking or mixing together poor kids and rich kids improved outcomes significantly for poor kids, and also for rich kids.

The mechanism is through networking – that opens up economic opportunities, and the goal is to get everyone up the ladder, and not leave anyone behind. Exposure matters. In an ASB study we conducted, a lot of the 16-year-olds we surveyed who wanted to be accountants said it’s because one of the Big Four accounting firms once paid them a visit and exposed them to accounting.

These small touchpoints make a huge difference. In a situation where there are not many options, even a small option makes a huge difference. In all of our roles, be it in government or the private sector, we have a small but key role to play in helping us build the new workforce for the future. A lot of AI tools can help immensely. I had a study for the undocumented population which found that training people how to access gig economy is a lifesaver.

Another example is microcredentials. Children who cannot access formal education or afford private schooling can take microcredentials and get something that is recognised globally. There are tech innovations but they should not increase inequality – we should all be better off.” – ASB Summit speaker Melati Nungsari, who is ASB associate professor of economics, Asean Research Center director (ARC) and Rapid Youth Success Entrepreneurship (RYSE) director

Originally published by The Star.

Some people tend to romanticize how the likes of Bill Gates, Mark Zuckerberg or Steve Jobs became billionaires even if they had dropped out of college. But these are unique cases that won’t magically come true for just anyone who dreams to be a business tycoon, says Massachusetts Institute of Technology (MIT) professor and technopreneur Sanjay Sarma.

“We [instead] have to romanticize the hard work that goes into more measurable, more consistent more predictable success,” Sarma, president and dean of the Asia School of Business (ASB) and professor of mechanical engineering at MIT Sloan School of Management, says in an interview with Inquirer. “Bill Gates didn’t drop out of [just any] college—he dropped out of Harvard. He got into Harvard to begin with,” Sarma stresses. “Mark Zuckerberg created Facebook and it took off.

That’s a matter of his talent, but also luck.” “But most success is neither unicorn nor genius. It is based on hard work and knowledge.” Most of the success stories in Silicon Valley aren’t about college dropouts who had brilliant ideas that turned them into billionaires, he says. Mostly they are people with engineering or business degrees who worked hard, went into a series of trials and errors, learned from them and developed new skills and ideas along the way.

“That’s how it works: it’s 99 percent perspiration, one percent inspiration,” he points out. Creating an environment of knowledge is the key, he says. The reason why all the startups in the United States come from Silicon Valley, Boston and Austin is because these are the areas with great universities.

Having said that, the professor believes that a crisis in education stares humanity in the face. He reckons that the existing system hasn’t kept up with the complex challenges that individuals, companies and countries need to overcome, whether it’s geopolitics, artificial intelligence (AI), cybersecurity or business sustainability.

Generational challenges

“I really believe that we are facing generational challenges, and we need to create generational talent. And the education system has not kept up,” Sarma explains. If there’s something that could keep him wide awake all night—but he says he’s able to sleep soundly—it’s the existential threat from such a “crisis in education.” Existing educational systems are “old-fashioned” and not necessarily connected to what people need to learn, like AI, he says.

“I don’t think they have evolved. So that’s a big problem, not just universities but primary, secondary, tertiary education. Also, if you’re working in a company, and you’re 35 years old and you have two kids, you can’t just go to university and get a degree. It’s impossible. So we need a quaternary system,” he says, referring to the fourth stage of educational level that follows an undergraduate degree.

Sarma isn’t just taking words out of the textbook. He is an educator and also an entrepreneur. He was one of the founders of the Auto-ID Center at MIT, which, along with partners and its spinoff EPCglobal, developed the technical concepts and standards of the modern RFID.

Between 2004 and 2006, he took a leave of absence from MIT to establish software company OATSystems, which was acquired by Checkpoint Systems in 2008. He has served on the boards of various companies. Before leading ASB, he had also helped establish the Singapore University of Technology and Design.

Where to start?

The COVID-19 lockdowns would have been a great opportunity to make systemic changes to education. But since then, the world has gone back to memorization, to teachers giving lectures in classrooms and back to an “ex Where to start? am culture,” he laments. “What does passing an exam have to do with being able to be a good negotiator, being able to be a good business person?

The exam is a proxy of something. It’s not just necessarily a measure of the actual skill,” he says. Education must be based on a skills development approach, he adds. For him, the best way would be to usher in reforms is at the working world, where there’s no fixed system. He suggests developing a quaternary education system and working it backwards.

“Once [there is the quaternary] education system, you infuse tertiary education with some of those principles and then over time, it will bleed into secondary,” he says. “Meanwhile, we need to start with the other end, which is elementary or primary education. And there we need to bring in more like Montessori principles, which are less about exams and more about critical thinking, being creative and things like that.”

“So we have to start at both ends but you can’t start in the middle because the systems are too set. I’m not going to tell a 16-year-old who’s coming up with an important exam that the exam is useless, because they have to deal with it. The parents have to deal with it,” he says. At the other extreme end is the quaternary education via hybrid education. “That is more sort of like going to the gym to stay fit, except you’re staying fit for your job.” “Transformative” ASB is one of the institutions pitching to fill in the gap.

Based in Kuala Lumpur, ASB was established in 2015 by Bank Negara Malaysia in collaboration with MIT. It thus carries an element of MIT thinking and curriculum behind it, he says. ASB aspires to be a “premier business school that develops transformative and principled leaders who will contribute to the advancement of the emerging world, particularly in Asia.”

Sarma proudly cites ASB’s “great set of faculty”, including MIT professors and alumni. Former professors included no less than the Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. ASB, he says, is very research-focused, with its researchers interested in both theoretical and applied learning. “We believe very much in the MIT principle of action learning — students do action while they’re doing their degrees and they go to companies and so on,”

Sarma says. Thinking about the future of work and learning is also something central to ASB’s strategy and philosophy, he says.“I don’t particularly believe in purely online education, although I know that space very well,” he says, adding that the strategy is to offer hybrid classes. Teaching can be scaled up through a combination of videos, automatic and AI-based assessment as well as in-person coaching, he says.

AI and the workplace

AI is going to change the way business is run, benefiting both consumers and businesses, Sarma says. “But AI is also risky because AI can make mistakes. This AI has liability issues. If you use AI and you make a mistake, there could be a lawsuit,” he says, citing the lawsuit slapped against Tesla in relation to self-driving cars. “It’s a complex field and you have to thread the needle.

All this takes critical thinking, analysis,” he says. “That’s why learning education becomes very important. It’s often said that education is the oxygen of the new economy. Meanwhile, the professor says innovation is not just technology. It could be in marketing, business process or financial management. First, companies must come to the realization that they should innovate.

Furthermore, he says companies need to have the people and the ecosystem of talent to implement these, as what can be seen in innovation hubs from Silicon Valley to Boston to Bangalore. Finally, he says companies must be able to attract talent and empower them. Many companies fail in these metrics, he says.

“They don’t look forward. They assume, because they’re doing well, the future is not a threat. They don’t have the talent ecosystems, and even if they have a talent ecosystem, they can’t attract and retain talent. They don’t grow talent necessarily. You need the cutting-edge, creative people who think outside the box, and they don’t have that. So the companies that fail on all three are in trouble.”

Originally published by Business Enquirer.

Category: Featured in the Media