Bucking the crowd
Santitarn Sathirathai accurately predicted a slump in Indonesia’s economy — when others were blind to the warning signs — by controlling for his biases.
In 2013, Santitarn Sathirathai, an economist at Credit Suisse, rang the alarm bell on Indonesia’s investment boom, saying a golden era was coming to an end and a slowdown in economic growth was brewing for Southeast Asia’s largest economy.
Some investors were sceptical and even dismissive, as the Indonesian economy was expanding strongly and most economists had an optimistic view of the nation with the largest Muslim population in the world.
In a report titled “The End of the Investment Boom”, Mr Santitarn noted that Indonesia’s economy was relying heavily on commodities and that depressed coal prices, a lack of additional monetary stimulus and rising business costs were likely to exact a toll on the country’s real investment.
He estimated that Indonesia’s GDP growth would be lower than earlier forecast by Credit Suisse and much lower than the consensus, while investment was set to register its softest growth since 2009. The forecast was soon vindicated as Indonesia faced a sharp drop in investment, and Mr Santitarn was awarded Consensus Economics’ Forecast Accuracy Award for the first time. He won the same award twice in the succeeding two years, also based on his forecasts for Indonesia’s economy.
“When you have a different view from the majority, especially when your view is negative, people are not happy about it, as they already believed and invested,” says Mr Santitarn, who is now head of economics for emerging Asia at Credit Suisse.
Unlike his father, Surakiart Sathirathai, a former deputy prime minister and foreign minister, Mr Santitarn — a 36-year-old Harvard graduate — steered clear of a political career path and chose to become an economist.
He attributes his success in his vocation to his curiosity about the financial sector, which stemmed from before he enrolled in university, tracking back to the Asian financial crisis in 1997.
“At that moment I didn’t understand what was happening, but suddenly everything collapsed, banks went bankrupt, some of my friends who were studying abroad had to drop out as they couldn’t afford tuition anymore,” Mr Santitarn says.
He was fascinated by how the financial sector can change people’s lives, and those thoughts inspired him to jump into the financial world.
“Many who were studying economics at that time were dumbfounded by the crisis, as knowledge in that community was inadequate, so I really wanted to understand what was happening in the financial sector,” he says.
I believe we should always have hope for the future. SANTITARN SATHIRATHAI HEAD OF ECONOMICS FOR EMERGING ASIA AT CREDIT SUISSE
Mr Santitarn decided to pursue a bachelor’s degree in economics at the London School of Economics. After graduation, he came back to Thailand and started his career as an economist at the Fiscal Policy Office, the Finance Ministry’s think-tank.
“By chance, I was assigned to do many projects related to the financial sector such as Asia Bonds, the Chiang Mai Initiative and the liberalisation of the Thai financial sector,” he says.
The job allowed him to work closely with banks, insurance firms and securities companies, provided in-depth knowledge of the financial sector and motivated him to apply for a master’s degree at Harvard University.
During a summer internship, he worked with world-renowned economist Joseph Stiglitz. The two met a couple of years before when Mr Stiglitz visited Thailand for a conference and Mr Santitarn impressed the professor by bringing one of his lesser-known books for an autograph.
“I brought him the book Towards a New Paradigm in Monetary Economics, which is not one of his best-sellers, and the book helped us break the ice. He said, ‘Let me know whenever you come to the US’, and that’s what I did,” Mr Santitarn recalls.
He and Mr Stiglitz worked on a paper related to the effectiveness of monetary policy in different environments, a text that was later used as the dissertation for Mr Santitarn’s master’s and doctoral degrees at Harvard University.
“I believe that if you want to excel in this field, you have to know all three aspects of the sector — as policymaker, academic and in the private sector — so my plan was to start working at financial companies, which was the only area where I did not have experience,” Mr Santitarn says.
After earning his doctorate, he spent months sending out resumes, finally snagging a job at Credit Suisse in Singapore as an associate economist of Southeast Asian economies.
His scope initially focused on the Thai economy before expanding to Vietnam, the Philippines and Indonesia.
“People think that to be good at forecasting, one has to be very confident,” Mr Santitarn says. “But for me it’s not entirely true; you need to have a lot of things, namely an understanding of psychology, business and the boom-bust cycles.”
He says that when people believe in something initially, they have a tendency to look for validating information and not for disproving data.
“The one common denominator in a number of financial crises and boom-bust cycles is that when people are exuberant or have an extreme view about something, whether good or bad, they always overlook important facts,” Mr Santitarn says.
He credits Philip E Tetlock’s book Super-forecasting for providing an important piece of advice: when forecasting, one should form two different views or scenarios that are the likeliest to happen.
This is a way to tone down one’s ego, which blinds us from focusing on the data with an open mind and admitting the possibility that we could be wrong, Mr Santitarn says.
“We have the ability to see the truth to some extent, not just for economics but also in life, but usually we are clouded with biases created by our own ego,” he says. “When serving as the head of a research unit, it’s like you’re managing a business where you have to source material, in this context data, to create a product through data analysis. And you also have to think about packaging, which is how you present it to your customers.”
As a forecaster, thinking about the future seems inevitable; but for a lot of people the future seems unpredictable and scary, with unimagined political and economic shifts and fast-changing technology.
Mr Santitarn says having two young children makes him think more about the future, not only about the economy, but also about technology and jobs, such as the future of economists.
“When you have kids, you start thinking what the world they grow up in will be like, what changes are likely to happen,” he says.
With the advent of artificial intelligence (AI), economists will have to cope with data and work with AI machines, learning skills such as data science and coding.
Also important will be non-cognitive skills that robots cannot perform, such as human relationships, leadership, management and understanding psychology.
“Humans have already gone through many industrial revolutions, and now many people are worried that robots will take over lots of jobs,” Mr Santitarn says. But history has shown that human imagination is limited only by what’s known or been seen, he says.
“I live in Singapore, a very small country where people are always afraid of becoming irrelevant, so we have a type of mindset where we always have to think about the future and how we will fit in the world,” Mr Santitarn says.
“These risks should be used in a constructive way to help motivate us to think of new and better things, not to be afraid, as I believe we should always have hope for the future.”