From 20th to 22nd September, the F1 races will be back in town. And everytime this happens, we get bombarded with news about the immense benefits it brings. Hotel prices have tripled already, and there’s something of a track record: back in 2022 it was lauded for bringing in 300,000 tourists, and this supposedly results in job creation, global branding, road infrastructure improvement, etc. The local media, along with interested parties like the hoteliers, have an absolute fetish for screaming about how good it is for the country.
Is that reflective of the majority’s mindset? Perhaps. Maybe it’s true that most Singaporeans don’t mind increased traffic, or that we’re hosting races that many Singaporeans would struggle to afford to even watch. And there’s inevitably a group out there who see the concerts and tickets as enjoyable status symbols. But it’s equally plausible that Singaporeans who dislike it, or simply don’t care, just don’t make it in the news. Ask the reason, and it boils down to this: for most of us, the improvement to our lives is an abstraction.
It’s useful to take the F1 race as an example of how wider market events can end up being rather disconnected
Let’s say the F1 races, on a wider collective level, really do benefit the country. Why don’t we feel the effects?
For starters, there’s a concentration of benefits. Hoteliers obviously derive more benefit than, say, people renting out a room in their flat. Likewise, it tends to be the bigger and more prestigious companies that rake in higher revenue – so whilst it does mean jobs for events planners, for example, the money will likely go to the most established and well-connected amongst them; the average freelancer or tiny events firm is going to get diddly squat.
The same goes for all the benefits those tourists bring: the average person who can afford to fly here just for the race is, generally speaking, not poor. While some of those tourism dollars may trickle down to smaller businesses, most of it is going to end up with high-end hotels, restaurants, designer goods stores, etc.
So despite the “good for everybody” tag that our media likes to attach to the race, it’s really more an event to benefit a fairly select group.
Second, it’s revenue, not spending. The government benefits that you notice, happen with government spending. Things that increase the government’s revenue don’t benefit you as directly, except in the more abstract and long-term sense (e.g., the government may not have to raise taxes later, or they may have more to spend on projects further down the road).
It does make for some inflammatory optics, since it looks like the government is raking in huge amounts of dough, over something that just causes traffic jams for you. And you have to simply trust that, in the very long term, all of this will maybe work to your advantage.
If the F1 races involved much more spending though – such as you own the companies tasked with running the event, or if the government immediately channels the increased revenue into GST vouchers or something – then it would feel quite different.
When investing, keep this in mind when it comes to news about wider market movements and events
To draw a few parallels, there are likely times when you’ve heard the job market is terrible, but you’re doing great – or that the property market is booming, but you’re struggling to get a decent price on your home. This highlights an oversimplification we tend to have:
We forget wider market movements tend to have a disproportionate impact on a select group (concentration of benefits or drawbacks), even if it’s reported as if everyone’s affected.
Likewise, we tend to forget that an industry / government raking in money doesn’t mean it’s going to be raining cash. It’s entirely possible that companies or governments are seeing record profits, but still choosing to retain those – hence a lack of payouts or benefits. Think about that before rushing to buy stocks, or anticipating government handouts.
We should, quite frankly, be more excited about industries and governments going on a spending binge. That’s where we’re likely to add dollars to our pockets – and that can happen in good times as well as in bad (in fact for governments, the spending binge tends to increase at the worst times. Governments want to stimulate their economy in a crisis).
So the next time you’re about to react to news that “XYZ brings billions to an industry,” stop for a while. Rushing to buy into it may result in disappointment.
If you’ve got an investment idea that you think could work, but want additional clarity or someone to run the scenario more carefully, reach out to us on Single Digit Millionaire.
