Thread by @kevinakwok

Tweeted recently that I thought the 1MDB scandal in Malaysia was under-followed. To expand on that and to encourage more people to share private memos. Sharing email I sent some others on my notes on the topic and some adjacent thoughts

kwokchain.com/2018/11/20/1md…

Topic covered include

1) Secular shift and Maturation of Sovereign wealth funds.
If you take a step back from 1MDB crisis alone, and look at the movements we see by sovereign wealth funds over the last decade (Saudia Arabia with Softbank, Temasek's offices across world, etc)

We are seeing huge shifts in strategy by sovereign wealth funds. That in many ways are reminiscent of the evolution of endowments and foundations after the Swensen model. Would like to see more discussion should be had on this macro trend

2) Small man theory of history
It's disconcerting how much of Malaysia's shift towards China the last few years was purely due to Najib Rasak's attempts to cover up the scandal and stop US from continuing its investigation into the matter. Our political systems are so fragile

3) Competence and Efficiency. I used to worry world was too efficient for anyone growing up to be able to have an impact. Scandals like these are good reminder of how much misalignment, incompetence, and constraint are at highest levels of all industries, whether finance or govt

4) We’ve abstracted Finance so much we think it’s efficient. Even people who hate the finance industry often fall into trap of thinking it is hyper-efficient. This is because we've abstracted it so much. But there is so much waste, constraint, and corruption in it. that's the

opportunity we have of improving with software and new companies. And it's an incredibly important one

5) Economics of Dirty Money. The economics of moving dirty money are very different from normal economics. Most people's intuitions are off. All the matters is laundering it for example, not margins. And markets with price dispersion help so much (art, real estate, etc)

6) Money and Politics. The 1MDB scandal wasn't just about people trying to steal money. It's about power in politics. 1MDB was the equivalent of an unlimited Super PAC for Razak.

7) Burning the Commons and the Metastasization of Corruption. Corruption and burning the commons metastasize and harm those who refuse to. We still underweight the importance from a network standpoint of punishing those who burn the commons. And those who let it be burnt

8) Hostages to Fortune. It is hard enough to do work of real impact. It's a good to be reminded, that if you want to do it--it's imperative to not have a high surface area of exposure. Time and time again I'm reminded of this, and always surprised at how often people put the work

and teams they care about at risk so cavalierly.

9) The US is an Important Arbiter of Global Norms. Still struck by how much I often forget to appreciate the importance of the US in checking foreign governments for their own people via things like a free press, the FCPA, etc

10) Malaysia and the UMNO. Crazy to see the UMNO finally brought down after running Malaysia since it's independence

11) Common knowledge and hacking. We often forget the positive role hacking can have. Similar to the press, in bringing bad actions to common knowledge

12) These are not black swans. It may be nice to hope that scandals like this are freak occurrences by inordinately outlier villains. This would be naive. These scandals are much more common--but few ever get brought to light. We have much more work to do