Popularised by Warren Buffett, the idea of business moats is simply some kind of persistence or stickiness in demand that businesses have, which can keep them going. Basically it is really anything that helps to reduce competition to a business. This is important in the real world though we tend to celebrate competition in economics. Business moats are actually necessary for innovation, and avoiding a race to the bottom.
Moats are largely about maintenance of a profit margin. The stronger the moat, the higher the margin would be but having a moat itself makes a lot of difference. In fact, we tend to worry in economics about moats because we think it creates high margins. That’s not always true. You could have low margins as a moat itself – because being able to keep your costs low would keep competitors at bay. The point of moats is more about the persistence of the margin.
The most significant problem with competition is that you are in a dynamic environment that keeps you on your toes. Now you may think that is a good thing. But if we keep having to compete with competitors who are just diverting your customers easily through one-off gimmicks and popping up in different places, dislodging your margins here and there, it is not going to make a significant dent in your profits, but it certainly takes up your attention and ability to consider longer-term growth and innovation.
It is such long-term thinking that a business moat creates, which can support the maturing of a system. Yes, other institutional factors contribute to the growth and development of markets. But pure ‘perfect competition’ in the manner it is traditionally thought isn’t one of them. Many developed countries and markets have that sort of dynamism and competition. Just go to a weekday market in a mid-sized town in Africa. But that in itself does not produce the sort of progress that capitalism is touted to produce.
What underlies the success of market capitalism is ultimately the ability not just to accumulate capital but to be freed of that savage competition to engage in more medium to long-term strategic competition. And that is enabled by business moats.
I realise I’ve never written on artificial intelligence. GenAI swept the world quite a bit over the past 2 years and of course, the consciousness of it in the market since ChatGPT was made available for public use had driven Nvidia’s stocks up insanely.
I had realised that since I’ve got a collection of writings in the public domain from since 2009, it would not be hard for me to train an LLM to be able to almost think and write like me at least to the extent of views, ideas and information I have expressed.
The truth is I’ve somehow avoided using AI to do my work; rather, I’ve been using it more to gather and synthesize information, help me identify blindspots and figure out perspectives I might have missed. I know that what we have observed in the publicly available tools is just displaying a fraction of their potential and capability but I feel that ultimately, we are still hitting back at the same constraints that holds us back as humans. Resource.
AI continues to suck up computing power, materials and energy in order to work. This is almost silly to the extent that we are feeding machines copious amount of energy in order to produce output that pale in comparison with a human being. ‘Biological energy’ so to speak, is far superior and we already have the human brain that allows all of us to perform at a far higher and more meaningful level. Of course there are lots of ethical and safety issues confronting us as we develop AI further, and I’m not decided whether we should necessarily stop the developments – all I can say is that we are getting distracted by AI.
We are embarking on an almost insane hype in the market for AI while ignoring the greater problem that confronts mankind today – climate change. And we ignore it at our peril. AI, like the many other engineered geopolitical crises, are chipping away at our attention, energies and resources to deal with the things that matters much more.
I really believe we can do so much better with the struggles and challenges in this world if we had not been distracted by these things. I have no doubt AI is going to be important and influential, but along with a lot of other innovations that have radically changed our lives, it may only serve to exacerbate problems that are still not well appreciated by us, while taking away resources to solve the problems that are apparent today.
Having worked in consulting across cultures, I have begun to recognise some cultural behaviours when buying consulting across different countries and the attitudes towards consultants. Having advisors is nothing new; the monarchs of ancient times have had advisors to support them for as long as they existed. These advisors offered more than just advice, insights or knowledge that leaders did not possess (or did not think they possessed).
They offered assurances when it was scarce. Soothsaying, contrary to what people might think, actually means telling the truth; with ‘sooth’ being an old English term that meant truth, as opposed to ‘soothe’, which means to calm. And the advisors also provided perspectives that during times of wiser monarchs, could contradict the conventional wisdom or call out the folly of the leaders.
So if we distil it down to the value that consultants provide today:
Knowledge of what may not be known to the client: this is when consultants are selling their expertise, and familiarity with a topic area that clients are not familiar with
Assurance of a particular course of action, decision, or information: this is when the client needs something verified, checked, validated and confirmed. The confidence and conviction of the advisor matter here as well, compared to those who hide behind jargon and ‘expert lingo’.
Sparing partner or challenger to ideas: consultants can be valued in bringing new perspectives, especially an outside-in view of things thereby co-creating more valuable solutions or decisions with the client.
I begin to recognise that Asian firms especially with rather paternalistic leadership tend not to use consultants the way the West use them. So for example, when it comes to knowledge, the Western clients may appreciate specific subject matter expertise that comes through years of experience and in-depth research. In contrast, Eastern clients may value knowledge of implicit/unwritten local rules and norms rather than expertise in a more technical subject. The more institutionalisable the knowledge set is, the less likely an Eastern client would appreciate it as worth paying for.
Western clients see assurances from consultants as important while Eastern clients prefer to take the risks of not having check through things by themselves. This might have something to do with the way trust is formed. In Asian societies where getting things verified can be read as a sign of mistrust, it is challenging to value such independent checks and perspectives. The very deed of using independent validation can almost be an insult.
Finally, when it comes to having a sparing partner, the typical harmony-loving, and conflict-avoidant Asian culture would really struggle with the idea of paying someone to challenge you. In fact, leaders might instead assert the power of their wealth/influence over people so that they would not be questioned.
In this sense, Asian cultures tend towards getting advisors who can provide knowledge that is undocumented and unavailable in the public domain, and are often independent individuals with the specific gifts of being able to reveal ‘truth’ to the client. They also prefer that the knowledge advisors gain about the client cannot be easily disseminated. And as far as possible, they only care about knowledge that cannot be institutionalised.
This means that it is incredibly challenging for most professional, western-chain consultants to survive solely from serving a pool of Asian clients. If anything, they usually have to ‘survive’ off the big multi-nationals who are growing into new, and perhaps opaque markets, or needing more capacity support. In other words, consulting has grown out of an increasingly international market, yet not overly uncertain because surely some stability is necessary for consultants to be deemed to have accumulated enough lessons and experience to share.
Random musings as I continue to build up my knowledge and capability of managing a consulting practice.
These days I more often talk about biofuels and bioenergy than hydrogen. Mostly because I believe that bioenergy is the best scaffolding that is available in the market for commercializing hydrogen for renewable fuel use massively.
I moderated a panel at AlterCOP 29 last year, where I help to spark some discussions about what hydrogen is good for and what could help hydrogen be a solution for decarbonisation, if at all.
There hasn’t been too much changes in fundamentals since we had that discussion but we know that a lot of bad news about hydrogen have plagued the industry since the start of this year.
Most recently, McPhy, the electrolyser manufacturer liquidated with most assets taken over by John Cockerill. One of the chief issues is that the industry has grown so much on the back of anticipated and realised policies without improving its commercial case over the same period of time.
As a result, the solution continues to be commercially challenging and expectations of handouts from government have reduced the drive to improve commercial case.
It’s been a while since I’ve written and since coming back from a SAF conference last week, the challenges faced by the entire ecosystem continues to weigh on my mind. The most obvious challenge in the fact that producers (energy companies or feedstock suppliers venturing into SAF production) and users (airlines) diverge sharply on their views of what is a price that the market can exist and perpetuate at.
To me, this is a symptom of underlying issues including the fact that SAF mandates are crudely determined with a volumetric blend, and that more often than not, the mandates could just force all airports to try and adopt SAF as opposed to starting with some key nodes and rolling out to the minor airports. Or the mandates could just be fulfilled by airlines at the level of their fleets. Or in the case of domestic carriers and flights, all of the flights for that year of reporting. This allows airlines to meet the mandates flexibly. And the market can then optimise for the logistics of delivery as well.
Another issue with the volumetric blending mandates is that typically there’s a threshold of emissions reduction that the fuel must meet to be considered SAF, and the users will purchase just the cheapest one available. That means that producers are not incentivised to produce any fuel better than the mandated threshold. This throws up questions: whether you could blend a bit of A1 Jet fuel into a SAF with much lower carbon intensity than the threshold and then call it ‘neat SAF’? Tricky. And controversial.
At the end of the day, what are regulators and the economy trying to achieve? Decarbonisation. Is aviation important enough for policymakers to focus their attention? Yes and no. Yes because it is hard-to-abate and if no regulations are in place, they will just keep going and spew more carbon into the air. But no because ultimately, aviation emissions are only 2.5% of the global emissions. The proportion will surely grow as the rest of the economy decarbonises; so most of the approach now essentially is to throttle that aviation emissions growth.
Will throttling aviation emissions growth destroy aviation demand? Surely without a doubt. Should we do that only in places where there’s substitutes which are low-carbon (such as trains and electric transportation)? Perhaps. For individual government and agencies making decisions, ultimately, aviation is really not a huge area compared to most other carbon-emitting industries. There’s perception that aviation will have higher willingness-to-pay but I don’t think that should necessarily be the excuse to push the emissions reduction on them.
Again, those are just my opinions and musings for the week.
One of the first things that people tend to ask or wonder when they hear about the gospel of Christ is: if all people’s sins are always forgiven, then won’t they keep sinning? In the letter to Romans, Paul actually asked that same question himself to make explicit why such thinking has no place in Christianity:
What shall we say then? Shall we continue in sin that grace may abound? Certainly not! How shall we who died to sin live any longer in it? Or do you not know that as many of us as were baptized into Christ Jesus were baptized into His death? Therefore we were buried with Him through baptism into death, that just as Christ was raised from the dead by the glory of the Father, even so we also should walk in newness of life. – Romans 6:1-4 (NKJV)
I already dissected these verses in a previous post, and so I want to address a bit more how hiding these verses in our hearts allows us to apply the verses to some of the inner conversations we might be having with ourselves.
Many churches today emphasize the grace of God without highlighting that the grace exists because of the need for justice. And so one of the challenges for many Christians today is that when reminded of their sins or continued sinning, they are quick to say ‘am I under the law?’ – essentially implying if one is to be held accountable for his sins, then Christ died in vain for him. That is an extremely convoluted understanding of the gospel.
Paul makes it clear that the incredible grace of God suggests that one who has truly accepted his/her salvation and has been saved from sins would not choose to live in sin. When we continue to live in sin, we are not identifying with the Christ who died on the cross for us. Paul doesn’t just stop there. He reminds us that identifying fully with Christ means that our sins died with Christ on the cross; but not just that, we gain a new life that is meant to be lived in this world, just as Christ was raised to live from the dead by God.
This is a powerful thought – because baptism in our minds tend to relate to some kind of new birth, the sense of being born again. But to be born again only works when the old self has died. Thinking of salvation as a license to sin is precisely the workings of the old self, not the new. So if the old self is not yet dead, there isn’t the born-again to speak of. As we Christian continues to struggle with sin and temptation, let the words of Paul from Romans 6:1-4 encourage us to tread forth in the newness of life.
I wrote this back during the period of 2025 Elections but did not post it. I put it up at this point just as a record of my thoughts.
Having gone through the general elections in 2025, there was a bit of reflection on how our faith plays a role in the manner we approach democracy and vote, especially when it comes to a world where, in the US, faith is increasingly politicised and used often as a means to gain political support. Gratefully, in Singapore, and also in Australia, the system pushes towards the center rather than polarising towards the extremes.
Nevertheless, as a Christian, it is essential to recognise the place of authorities from a faith perspective. And considering also how, as Christian voters, we approach the whole idea of elections. We have been called to submit to authorities of our land in Paul’s letters to the Romans – this was in the backdrop of authorities that were not democratically elected. So they probably had little respect for the people they ruled over – many of whom were foreigners who were their spoils of conquest.
And so when people go through the political route seeking to express and take action on their ideals, we could give them the benefit of the doubt and determine who best represents our voice. It is perfectly acceptable for two strong and devote Christians to come to different conclusions about who represents or aligns more with their political inclinations. What is important, is that the partisanship in politics do not contaminate or affect the unity of the church.
As a model for the society then, we ought to recognise and respect the democratic process as a means for us to determine as a society who will help to govern and what would be the priorities for the next term of government. If we allow the campaigns, the political lines or partisanship to poison the entire term of government, or worse, the rest of our lives, then we are probably missing the point.
I am a Singaporean. And one aspect about Singapore highlighted by many stories of its growth and early leaders is the notion of pragmatism. Yet I feel that this notion probably has been overplayed.
Pragmatism is used to suggest that the ends justify the means. Now within the context of school, it could mean that you can get your grades by rote memorisation as opposed to genuine learning. Or that you could simply find the right answer to copy than to solve a problem yourself on an assignment.
Same goes for the worker at work – just find the answer, don’t bother solving the problem. This may mean finding out how it was done before; or to figure out what others who had the same problem was doing. One could argue those are problem-solving heuristics. Maybe. But I call those “answer-finding”.
As a consultant, I cannot help but recall clients who are asking, “but have you done this same thing before with another client or somewhere else?” This is answer-finding, not problem-solving.
The Singapore today needs trail-blazers and problem-solvers; as it always had. But decades of overemphasizing pragmatism means we prefer to pay for answers than purchase problem-solving capacity. We desperately need to shift this culture and move towards real problem-solving than answer-finding.
Some interesting announcements and updates were coming out of Ecosperity last week. Most of them oriented around financing of the transition. This is an important topic considering that a lot of our existing economic system is locked into high carbon intensity systems because of financial incentives. Being able to change the incentives can help adoption of more emission-reduction measures.
Transition credits
Launched in 2023, a coalition of players were studying the use and deployment of transition credits. Verra also started working on a proper methodology to account for the carbon emission reductions from transition; and they launched it last week. Since the initial MAS announcement, the Acen Coal-fired power plant in the Philippines have become a candidate for a project that will issue transition credits in exchange for shortening the project’s tenure. And Mitsubishi also announced joining the team of firms taking a stake in the consortium that will generate the transition credits. The idea is that the consortium could then sell off the transition credits to players in Singapore who can then offset the carbon taxes; and there is hope to do the same for Japan.
I believe there is interest for these players to also participate in developing more renewable energy projects in the Philippines to help make up for the shortfall of power generation. After all, the article linked above quoted Rockerfeller Foundation that the shortfall will require “1,000MW of solar, 250MW of wind, and 1,000MW of battery energy storage”. Not sure if it comes as a surprise to all, but because of resource availability, solar and wind farms are not ‘always-on’. They only generate a fraction of their nameplate capacities most of the time, which means a lot more capacities must be built to produce the same amount of gross energy. Energy storage is needed to help time-shift the energy to when required.
WEF-GenZero aviation initiative
Launched as ‘Green Fuel Forward’ – it is a capacity-building initiative that is aimed at drawing in airlines, refiners, logistics companies, banks and others. I think the idea of building up capacity to deal with the entire SAF ecosystem is useful. Aviation decarbonisation over the next few decades disproportionately depends on SAF. It is good that the global aviation industry have more or less settled on this particular decarbonisation pathway and is developing various tools to be able to adopt it.
More than just using a different fuel, it involves getting customers to share in the higher cost of the fuel. How to do so is the issue; and all the airlines are afraid of the ticket pricing affecting their competitive position. Different approaches to distributing the emission reduction costs have been mooted: (1) some like the idea of a corporate decarbonisation programme where partners are gathered together and somehow agree to some formula to share the cost of the low-carbon fuel premium; (2) others think we could convert the emission reductions into some kind of credits to be sold to freighters or passengers who are on board those flights. Those methods involve using airlines as the market-maker for emissions reduction.
The customers of airlines especially the corporate players will need to determine their strategy when it comes to flight carbon emission abatement, as well as the budget they can allot to it. For now, corporate probably have some kind of trip budget – they might have to scale it down based on the SAF prices they are expecting. The airlines themselves will have to develop their own strategy of allocating the cost of SAF to passengers or corporate customers. And of course they can then issue or bundle the SAF-credits (SAF-C) accordingly.
As stated in the ST article on this initiative, each SAF-C means a reduction of 2.5-2.8 tonnes of carbon emissions. Assuming that each SAF-C is priced exactly equals to the premium that airlines pay for SAF above their conventional jet fuel, you’re looking at about US$1000-1,600 for each SAF-C. Now in comparison, a typical carbon credit (representing 1 tonne of carbon dioxide abatement) out in the market is selling at around US$3-4; or if it’s CORSIA-eligible, maybe US$20? So corporates are going to have quite some difficulty working out what is worth paying for SAF-C if you were supposing there was going to be some kind of market and price-discovery for those credits. Does it mean the airlines will have to pass on the rest of the cost shortfall to other customers? Then why do only the SAF-C buyers get to claim the reductions?
A lot of capacity-building will be needed and a proper vision for the workings of the ecosystem worked out.
Singapore government’s clean energy fund
There was yet another announcement about US$500m fund that Singapore government is going to deploy for green projects in the region, as part of the new ‘office’ that MAS is going to set up (named FAST-P). That’s actually going to be really interesting though the news was very scarce on details. I suppose they just wanted to announce some parameters they have decided during Ecosperity week while many other things are still being worked on.
We know there will be 3 pillars: (1) accelerating the energy transition away from fossil fuels to clean energy, (2) ramping up green investments, and (3) decarbonising emissions-intensive sectors like cement and steel production. I suppose the first pillar might relate to the transition credits mentioned earlier. The FAST-P office will probably be spending more efforts for (2) because that will be a lot more complex and require someone to drive or coordinate across different parties. It is not clear how (3) can be done when those sectors are likely the beneficiaries themselves either through energy efficiency investments or fuel/electricity substitution.
Having been involved in the set-up of Infrastructure Asia some 7 years ago, I am fully aware of how much effort behind the scenes just to get the resources together, not to mention the actual work of setting up the office. The work to be done by the office is really to identify the activities where it is worthwhile helping to reduce the riskiness of other financiers or funder. The metric would probably be more impact driven though for the sake of Singapore’s economy, it would be necessary to require anchoring some activities out of Singapore.
I think it’s really great to see how the various entities within the Singapore government or related organs (and I’m almost definitely stretching that by implying platforms like Genzero, which is part of Temasek, and some of those Singapore firms dealing in transition credits) are trying to tackle the issue of the transition, not just for Singapore but for the region.
Going beyond the energy system, there’s another important element to consider for Singapore as we are faced with a world in transition for the energy system. Singapore successfully built itself out to be a sort of energy hub even without domestic energy resources itself. In 2023, Singapore imported 145 Mtoe (million tonnes of oil equivalent) and exported 76 Mtoe. We basically re-exported more than what we consumed as a country for the entire year; and this is because we are largely importing petroleum products to be refined and then exported as more differentiated products. As an economy, Singapore earns the ‘cracking spreads’ from the refinery and drive the economy with that. Technically, it is the oil & gas companies running the refineries that earn that spread.
But more things happen after that, too. Because the refineries are left with a lot of heavy oils at the bottom of the barrel, we have lots of maritime fuels to spare, which coincides nicely with our large transhipment port facilities, together with our highly efficient port system that ensures a strong throughput. These advantages combine to allow Singapore to be the largest bunkering hub in the world. Bunkering refers to the refuelling of maritime fuel for the vessels calling at the port of Singapore. Storage terminals and other facilities will contribute to that.
With that scale, comes along a lot of other opportunities and economic activities that helps drive the economy. Vessels will call at the port to move the cargoes, which means that vessel services are required at the port. All sorts of cargo audit, verification services would be required. Engineering for vessel repair and overhaul could be added to the port city.
If we go back up stream to the refinery process, there are a lot of corresponding supply chain, derivative products that can all be based in Singapore, including some of the petrochemical production, wastewater treatment, waste oil recovery, centralised utilities services for the chemical plants. And it is not limited to manufacturing of course. There would have to be engineering firms, system integration firms, companies stocking up components for all of these plants including valves, flanges, and so on.
So while we can go on and on about the energy transition, when politicians and government think about their economies, there has to be some kind of rational and gradual shift rather than sudden evaporation of all of these activities. I don’t think we have clear solutions yet. For the past decade or so, government had left corporates to plan their own transitions, hoping to create friendly policies which will ‘help’ these corporates along their transition plan.
Now the issue is that the corporates tend to make big ambitious commitments when times are good only to realise they cannot be delivered as the resources they have is insufficient. Better yet, many of them set targets based on assumptions that simply does not hold in a low-carbon economy. So there is mostly empty talk, with no sticks or carrots to keep them in line. This is not just about discipline of executives and managers, but the ability of shareholders and other stakeholders to bear the costs of the changes necessary.
And then in 2020, Covid-19 struck and the government went full steam ahead with interventions, ushering an exceptional era where more expectations are piled on them to intervene directly and set regulations to push the world towards net zero. We all had hoped so through rounds and rounds of COP; but they really only started waking up a bit more during Covid-19. Yet the pandemic left us all weaker, with less resources to cope with the sustainability issues. When the funding and stimulus from the pandemic dries up, it seemed that a lot of plans for net zero had to take more of a backseat.
In Singapore we tried to ramp things up a bit more with the carbon taxes – despite how relaxed it actually is, there were still groans and moans – serious enough for the government to consider some kind of ‘rebates’. It seems to me that pricing carbon wasn’t really enough – just as setting up more tariffs was not going to cause manufacturing to magically re-shore back to America. There’s still a lot of coordination, capacity-building to do.
So let’s work together, and let’s devote some resources to consultants like my kind to help build that capacity and create that capability to moe into the next phase.
