Musings From The VCs

"Insights, Reflections, and Lessons from the Frontlines, Intermediates and Beginners in the Venture Capital World."

Category: Interns

  • Death and Taxes!

    Musings of an Intern

    26/02/25

    “There’s only two things certain in this life, death and taxes.” ~ Benjamin Franklin

    Everyday you inadvertently end up paying taxes from GST to Income Taxes to ERP. Have you ever stopped to consider its importance in our society? Well, in its simplest form taxes are a mandatory payment or charge by the various authorities to cover the costs of government activities. But how do governments determine this predisposed tax rate? Lets explore one such theory below.

    Laffer Curve

    First developed by American economist Arthur Laffer in 1974, this curve illustrates the relationship between tax rates and tax revenues collected by governments. The curve suggests that there is an optimal tax rate maximizing revenue and that both 0% and 100% tax rates will result in zero revenue. The curve aims to show that cutting tax rates could lead to increased total revenue due to increased work, output and employment.

    Fig 1. Laffer Curve maps tax against revenue, peaking where revenue declines, taxation is the average taxation rate from all sources.

    Well now lets look at a figure I made from comparing taxes as a portion of GDP revenue against the prevailing tax rate in 96 such countries. The low R2 value indicates that tax rates alone explain very little of the variation in tax revenue. Other factors, such as economic size, corporate profit levels, and tax enforcement efficiency, play significant roles.

    There are several other tax theories that economist look at to determine the optimal tax rate. Optimal Income Taxation (Mirrlees Model) , Optimal Commodity Taxation (Ramsey Rule), Capital Income Taxation (Chamley-Judd Result)  and many others. Singapore for example Singapore follows the Chamley-Judd Result which implies that having zero taxes on capital gains ensures long-term economic growth by encouraging capital accumulation and investment and maintain global competitiveness, especially as a financial hub and investment destination. 

    Looking further into Singapore, many multinationals’ corporations (MNCs) operate here and increases in income taxes could lead to wage pull inflation further increasing costs and drive many investors away. Singapore also has a narrow tax pool where the lower income and middle-income residents are hardly taxed, if any at all. Whilst Singapore has increased taxes in recent years, these changes could be taken with a pinch of salt and still allowed for increased in tax revenue without deterring employment and output levels. However, considering that Singapore is often considered a tax haven due to globally low taxes for OCED countries and the vast amount of rich individuals in Singapore where tax revenue is derived from, large increases could lead to very quick dip in the tax revenues. One could also say that Singapore offers vast opportunities and safety that would cause people to stay and given the nature of Singaporeans, its political stability and automated taxes collected, tax evasion would be low and wealthy individuals would remain rooted here.

    Well at the end of the day, these theories can only act as guidelines to nudge each country in the right direction. Economists actually have it hard as it is not easy to derive the actual impact differing tax rates will have on the economy. To apply these and other theories into practice, economists use numerical simulations and calibration methods through computational models to simulate the economy under different tax policies and by adjusting model parameters to match real-world data. However, the only possible way to investigate such changes would be to truly implement them.

    See you next time,
    S!

  • An Intern’s Predictions

    Musings of an Intern

    10/12/24

    Dear Diary,

    Markets are changing and it’s a scary time ahead… The world is full of uncertainty and volatility and I am not sure what to think of it. With the new US President elected, the abrupt martial law in South Korea, Japan ending its eight year period of negative interest rates and many more globally stimulating events.

    But it’s not all bad. Despite this volatility, there is a positive economic outlook and although growth may slow, growth is growth. Like I was reading on some of the new incoming policy changes in the US like increasing tariffs and tighter immigration. I really think they are set to affect imports and exports globally and hinder demand whilst increasing inflation. It may just become a heaty season for the prices in the products market. Hopefully though, Trump’s policies on lower taxes and deregulation could also cause a bull market as we have seen amongst cryptocurrencies and stocks since he has been elected into the office. I am really praying man, I am trying to 10x my money. ($cha-ching$)

    Although strategists have found it difficult to formulate future outlooks, many have hinted to average returns of around 10% growth in the stocks market in 2025, making it an average year for markets. Long term outlooks have been hopeful and profit margins are expected to rise as operational efficiencies have not been realized since the pandemic. With many offices still yet to return to work 5 days a week, growing innovation and technology, strategic layoffs, and, improving manpower efficiency, we could see a massive growth market. Earnings growth is also as such expected to widen out away from the “great seven” of the S&P 500 this year. So, this time around I am going to diversify and multiply and hope for the best.

    Price ratios are also at all time highs and these high valuations could cause the market to cool off and demand to see actual earnings potentials in the coming years if one were to expect parabolic growth of stocks. Regardless, with a strong momentum and easing of monetary policies by central banks and strong innovation in all fronts of R&D, let’s kick back, sip our cha, dip our biscuits and hope for the best. In the coming years we could be seeing generative AI blow up and develop in the market aggressively and push for cross border collaborations strengthening technology on all foregrounds and improving our daily lives. So my dearest diary, I am really quite excited for the new year.

  • A Day In The Intern’s Life

    Musings of an Intern

    2/12/24

    Dear Diary,

    T’was another tiring day at the office. Investment memorandums, due diligences and pitch decks one after another. Not every day is so nerve wracking. Don’t get me wrong, I don’t mind at all. I feel empowered, day after day, cracking my knuckles and diving into work, learning something new each day.

    The office is humming with the buzz of our morning conversations and the soft clatter of keyboards as we all feel awake from a fresh weekend of sleep. Our weekly Monday meeting is upcoming and I am looking forward to it. I get to show off my pristinely made pitch decks on a new topic I learnt that week from what might be my favourite book of all time, “Venture Deals, Third Edition” and also from my previous week’s worth of work.

    My stomachs growling though, maybe I should head for lunch. My mind is amiss from the new potential investment opportunity as I think of how I should tackle the work and come up with reports. Lunch is my favourite time of the day, often the boss man himself pops in and starts dropping jokes and asking questions. Here I ask away questions I have in the back of mind, hoping to get advice on life, careers and my future goals.

    It’s back to numbers crunching time and packing in those details on my report. Learning much on the job itself, it’s rather intriguing and yet stressful. Other days are also fun, with seminars, dinners, networking events and more. Intern life is rather new to me, a small introduction to what could be my future career. Seeing the work of my colleagues and friends, I feel motivated to improve and grow as a person and in my skills. My work has been quite fulfilling, seeing deals get made first hand and meeting successful entrepreneurs. All this got me thinking about my future and what I hope to accomplish as a person. Well simply put, I can’t wait for the future.

  • The Digital “Gold Rush”!

    Musings of an Intern

    28/11/24

    Dear Diary,

    I was up all night yesterday, mesmerized by all the various memecoins. Seriously….what is this “ChillGuy” token? Market Cap of 435 MILLION dollars with a equally large trading volume in the past 24 hours. What’s more is that in the past 5 days, the coin went up 266,000%. I could have been a millionaire, instead I was busy watching the new season of Outer Banks on Netflix.

    Like don’t get me wrong, I am not a complete newbie to all these digital coins. I have been dipping my fingers into some of these virtual pools and picking up some of them to keep for myself. These decentralised virtual assets have been wrecking a chaos on me though. From the Sam-Bankman Fried scandal causing the FTX crash to Chinese and American crypto “whales” that move markets in seconds. Price manipulations are occurring left and right, and I am the small fish left there to drown. Crypto is such a gamble, do I really want to take this risk…

    Cryptocurrencies and memecoins have also gained so much traction since the recent elections and there are overnight millionaires being made regularly. There is so much money to be earned in this ecosystem, billions upon billions are being poured in and I think despite the risks there is much to be gained.  I mean how is that in our reality the 7th largest cryptocurrency is a memecoin called DOGE. The community of memecoins is a volatile yet passionate one. Whilst Bitcoin or Ethereum, were created with an actual financial utility in mind, memecoins are made cheaply and often marketed and the communities are fostered in order to grow and manipulate its value.  The beloved DOGE coin for example is mentioned in high frequency by Elon Musk, the richest man of today, boosting its value tremendously. Other memecoins like “ChillGuy” or “Grumpy Cat” are simply a marketing wonder, tapping into the absurdity of the internet’s meme culture. Often times, it is an inside joke from Tik Tok or Reddit, and the more you’re in on it, the more likely you are to toss in a couple of bucks to see if it pays off. The meme economy is a real thing.

    So with all these thinking and going back and forth on this today, I have decided maybe I will gamble off my money sometimes but not much. I will skip a Starbucks drink here and there, maybe I will get lucky or maybe I will laugh at myself. Most importantly I will keep a balance, try not to get caught up in making a quick buck and stay in the loop. One of these nights I will hop on a discord call with my friends, grab some popcorn, open tabs for DexScreener, Reddit, Twitter, Phantom, and Telegram, while saying ” xxx to the MOONN!” But tonight, I will just get all snugly and watch my Outer Banks on Netflix.