Monday, March 29, 2010

An analysis into the wealth of City Harvest Church

Update: I have updated this analysis with a new article in the aftermath of the Pastor's arrest. 

Although I am aware that City Harvest is one of the richest churches in Singapore, I am still shocked that it is rich enough to pay SGD310 million for a stake in Suntec City. Nevertheless, an entity which is able to amass such wealth is certainly worth studying. I was determined to understand the secrets to the church's wealth. 

I apologize upfront if the points raised give offense to loyal followers of City Harvest Church. Please regard this article as a business analysis of the factors that contribute to the wealth of City Harvest Church, not as an insinuation that the Church got rich through questionable means. The fact is that CHC is very rich and this makes for a fascinating academic exercise to examine its sources of wealth. Just treat it as a business case study. I have tried my best to stick to the facts. Please correct me if there are factual mistakes. However, if there are differences in opinions, please disagree with courtesy.

1. Clever packaging of Sunday services
The income of a church is dependent on the tithes collected (10% of income from church-members). Therefore, the earning power of a church is highly dependent on its ability to retain its existing church members and attract new ones. The larger the church membership, the greater its earnings. 

I watched a sample of CHC weekend service on its website.  Compared to the boring Sunday classes I attended as a kid, CHC church service was most refreshing (Watch "The 10 Laws Of The Harvest"). The beginning part resembles a rock concert with good singing and enthusiastic audience. It is an entertaining way to enjoy your Sunday mornings. Going to church becomes a weekly event to look forward to rather than a chore to attend to. 

With church services so well packaged for its customers, its customer retention rate and new customer acquisition figures should look good.

2. Extra revenue in the form of advertisements, sales of CDs
This church is unlike the other churches I know. It generates extra revenue through advertisements during its Sunday service(watch the videos). It sells audio CDs on its website. There is an online shopping cart for convenience to those who want to buy online. 

3. Efficient collection of tithes
Church-members can pay their tithe online via credit card, eNets or even Giro!! Once members started donating using Giro, the earnings quality of the church improves. Donation collected via Giro tend to be more stable.

With a globalised economy, people travel round the world a lot and may miss Sunday services. In the past, the churches will lose income when these members fail to turn up to pay their tithe. Now, with online payment, they can continue collecting the tithe even when the church-member is working overseas for an extended period of time. With Giro, the church can continue collecting tithes for a few more months even when the member leaves the church as people have a habit of forgetting what they pay on Giro.

4. 30-fold, 60-fold, 100-fold returns on your church donations
This is where the genius of CHC lies and the secret to its superior earning power. In fact, I have yet to encounter any public-listed company on SGX, HKSE, NYSE, Nasdaq that demonstrates better potential. 

The pastor preaches that God will give 30-fold, 60-fold, 100-fold returns on your tithe. But, you have to be generous in your donations first so that you will receive in harvest proportions. I guess that is the origin of the name City Harvest. Please watch the video "The 10 Laws Of The Harvest" yourself in its entirety and interpret for yourself. 

It is a message that cleverly uses an astute understanding of human nature to maximize profits. If I were a CHC member, I will be tempted to increase my tithe as much as possible. Not mincing my words, I am doing it out of pure greed. I do not think I will be alone. It is perfectly fine if members of CHC strongly disagree and thinks that I am not representative for most of them. After all, I can only speak for myself.

5. Quality of customers
With the 100-fold return message, the kind of church members attracted will be most conducive to profit-making. Money-minded people will be attracted to the church. These money-minded people tend to be ambitious and have a great desire to make lots of money. Millionaire minds have a higher chance to become rich. Hence, the quality of customers that CHC attracts are of the highest quality. The richer the church-member, the higher is the church's tithe per member.

Customer quality will be enhanced through the passage of time due to survivor bias. Suppose out of this pool of Millionaire-Mind Christians, 50% become satisfactorily rich and the remaining 50% still unsatisfactorily middle-class. The 50% who got rich will donate even more because they think their source of wealth comes from their donations. It is most unlikely they will cut back on their tithes  because they will be afraid God will punish them by cutting back the returns. If they are not afraid, the church will be there to warn them not to do so. The remaining 50% who did not get rich will be disillusioned and probably leave the church. The loss is of little significance to the church. These people are not rich and their tithes will not amount to much. 

Many Christians will be disgusted with the concept of using tithes to get rich. These people will probably leave the church after attending a few Sunday services. Again, the loss is of little significance to CHC. These people will not be highly profitable to the church even if they are rich because they are not going to tithe as much as the others who believe their tithes is the way to wealth. 

To the credit of the Pastor, I think he has devised a wonderful process of filtering out non-profitable customers and sucking in the lucrative ones. There is only so much physical space that a church can have to service its church-members. To maximize profits, the church has to ensure that each unit of space is used for servicing lucrative customers. 

6. Kill off competition

CHC has tremendous economic moat that kills off competition. In the video "The 10 Laws of The Harvest", the Pastor cited Law #5 "Your Seed must be planted in Good Ground" which is an effective weapon in killing off his competition - the smaller churches. Many Christians feel that they ought to donate to the needy, smaller churches rather than rich mega-churches like CHC. The Pastor's argument is that you do not get good returns like 100-fold in the small churches. You have to donate to mega-churches to maximize returns on your tithe because they have a track record (rich church members). In other words, the seed is not planted in good ground when you donate to the small churches. In his own words, "I don't always give to the neediest but to the ground that will give the greatest yield". To illustrate his point, he used an analogy on weak banks and strong banks. You do not deposit your money in a weak bank because it desperately needs fresh funds to survive. You deposit your money in a strong bank which invests your money wisely and yields good returns.

The church has an iron-grip on its members who believe its message. As illustrated previously, its customer base is of the highest quality. This is its track record. Existing church-members will definitely not move to another smaller, needier church with poorer track record. 
It has a very strong economic moat as it is very hard for its competitors to get its customers to switch over.

7. Providing a place where the rich can network

As the Pastor said, his church provides a good ground on which you can grow your riches. Rightly so, indeed. For property agents or insurance agents trying to hit their sales quota, City Harvest Church will be an ideal place to hunt for lucrative clients. This church concentrates several rich and money-minded people into a single location. The church offers a unique advantage to sell things. In a religious setting, people tend less to be on their guard and can be more easily persuaded to part with their money. 

Businessmen also like to network in places where there are rich and powerful people who will come in handy in future. The Pastor has done a good job in gathering such people in his church and it makes good sense to make use of this advantage by joining the church.

The rich will attract more rich and the gathering moss snowballs to provide an ever-rising pool of donation to the church. 

8. Preach what people like to hear. 

As a teenager, I was discouraged when I read Bible verses like Matthew 19:23-24 "I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God." and Matthew 6:24 "No one can serve two masters; for either he will hate the one and love the other, or he will be devoted to one and despise the other. You cannot serve God and wealth."

It seems like if I become rich, I will be condemned to hell. 

In the video "Rich God? Poor God?", the Pastor preaches that it is absolutely ok to be rich. Some prophets of God were very rich. (Abraham, David, Solomon)

There is nothing more musical to a money-minded person than to hear that God is on your side in your pursuit of money. The church-members who are more money-minded will love this and donate even more.

9. God pays for the returns, not the church. 

The church collects the money, but God pays for the returns. The church does not need to pay a single cent for the 30-fold, 60-fold, 100-fold returns on the donations.
This is as good as you do the work for me, but not only do I not pay you, I shall also collect your salary. You toil and sweat, but I shall eat your bread. God must surely be a miracle worker and people will pay handsomely for his service. I cannot think of a more advantageous economic position to be in to be able to collect money rendered by a miracle worker.

10. Social pressure to conform in church settings and ease of influence

If everyone around you donates, it is hard not to. When everyone else makes sacrifice, the one who does not will look like an outcast. There is tremendous pressure to conform in such a herd setting. 

11. Tremendous future earning power

Take a look at the congregation and you will notice the large number of young people. The income growth of young people is the fastest in the population. In the Pastor's words, "You may be poor today, but you will not be poor all your life". That is a long-term business plan in cultivating its customers.

Therefore, if CHC can be viewed as a growth stock, its prospects are very bright as its young customers will accelerate its earnings. 

12. Stable earnings in times of depression

Besides being a growth stock, CHC can also be viewed as a defensive and safe stock. People pray hardest when they fall in hard times. Strangely, some people have an urge to tithe when they are in financial troubles. 

In fact, in the video (The 10 Laws Of The Harvest), a couple came on stage. They talked about the dire straits they were in when they started out. Things change when God challenged them to GIVE themselves out of poverty (exact words from the speaker). Despite not having any money, they still pledged $250 to the building fund. In his own words again, "we often emptied our savings to give to the House of God knowing that this will be the answer to our financial problems". Hence, not only will the church earnings be stable in times of depression, it may even grow.

13. Using Prosperity as a theme to appeal to customers

The Pastor preaches Prosperity Gospel which revolves around money. His business genius lies in choosing this theme for his church. Money has universal appeal. Everyone worships money regardless of race, culture, age, gender, sexual orientation. In one fell swoop, he has enlarged his market to cover the entire world. It is much easier to convert people to your belief by dangling money and promising great prosperity. After all, who does not love money?

By enlarging his potential market catchment with a greater chance of increasing membership, more donations will flow in.

14. Tax benefits as church is registered as a charity

This creates a huge, unfair advantage compared to all other businesses. This is what landed CHC in controversy. Enough has been said.

If one day the Pastor switches to become a businessman, I will definitely consider investing in the company that he heads and founds.

If City Harvest Church is listed on the Singapore Stock Exchange, I will certainly buy it. It will be one stock that I am confident of hitting a return of 30-fold, 60-fold, 100-fold returns.

PS: People tend not to question critically when it comes to religion. A charming smooth talker can easily sway minds with his interpretation of the Bible. In the final analysis, Faith is about simply believing. You cannot approach it scientifically because there is no way to test religious theories using the scientific method. We will only know the real truth when judgment day comes. 

The danger is that there is no accountability on the part of the preacher on whether his teachings are true or not. Even he himself cannot be sure that his interpretations is 100% correct. Given human nature, the interpretations will tend to be self-serving. In fact, it is not only dangerous to the students but to the teacher as well. People will believe their own lies if it yields tempting benefits. That was how Wall Street drank its own Kool-Aid.

While I respect the Pastor for his business savvy, I cannot agree with his interpretations of the Bible. I pray for good health, peace and harmony for my family. Money-minded as I am, I am not comfortable with commercializing my relationship with God by asking for money. The Christian God that I know from my own reading of the Bible is not 财神爷. Of course, if God wants to drop money from heaven on me, I will be more than happy to embrace it.

Saturday, March 20, 2010

Keeping men from temptation

Through the ages all over the world regardless of race and religion, the phenomenon of wealthy men  keeping mistresses is so common that it has almost come to be accepted as a social norm.

Concerning the Jack Neo sex scandal, one of our MPs caused a furore with the following quote "Actually, a man who has good career development would find such scenarios unavoidable,” 
He later clarified that he was misquoted out of context by the media. The statement, while politically incorrect, contains a touch of realism. Much as I love my wife, I really cannot guarantee that I can stay faithful if a devilish stunning seductress were to throw herself onto my lap. However, if my present financial condition persists, I am confident of staying faithful. I am not successful enough to find such scenarios unavoidable. Hmm ... should I be sad or be glad?

It is a pity to have able men who can do a lot of social good be destroyed by sex scandals. I would like to make some suggestions to solve this problem. Don't take them too seriously, though.

  • Fine the mistress 

When men become rich, they start to think they are entitled to more. They start keeping mistresses like pets. Some even abuse their power and ask for sexual favors from their female employees. One way to keep these men from temptation is to make them so repulsive that no women would want to be near them regardless of how much money they offer. One effective way to do this is to fine the mistress. With such a law, there is no incentive for women to sell themselves to men whom they do not love. The opposite is true. It is in their interests to avoid such men. Make the fine so heavy that it will bankrupt the mistresses.

Some will cry "Unfair!! Why punish the victim?!!" The pragmatic approach to solving social problems is to place effectiveness over fairness. If someone can suggest a fairer but equally effective solution, I will be all ears.

Women who seduce to get rich will be out of business. It does not make sense for these gold-diggers to dig a hole in their own pockets. This policy will put a stop to all such gold-diggers. 

  • The fine is to be proportional to the man's wealth

If the fine is too little, the rich man can simply help the mistress pay the fine. The fine should be proportional to the man's wealth and substantial enough to deter him. More importantly, it should be large enough to bankrupt the mistress. In this way, the affair will not even have a chance to start because the mistress will not even want to think about it.

Even with such a law in place, adultery will still happen. Adultery has high social costs. By putting a fine to it, part of the social costs can be recovered in the form of government revenue which can be spent on social programs.

Saturday, March 13, 2010

An analysis on Singapore's Tigerwoods episode

Jack Neo's sexual escapades have engulfed the nation for more than 1 week (1, 2, 3, 4, 5). I am not here to judge him morally. Although I have never had a mistress, it is not because I am more morally upright but because my line of work devoids me of such opportunities. I am not rich, not attractive and there are few women in my industry.

Here is my hindsight analysis on the actions of the characters on this week's hottest script - the mistakes they made and how they could have handled it better.

Jack Neo

  • He held a supposedly "tell-all" press conference which ended up antagonizing the press. The so-called "tell-all" conference lasted only 3 minutes. He wasted the reporters' time and he shouted at them. Never antagonize the press if you have skeletons in the closet. Irritated reported will simply dig harder to uncover more skeletons out of the closet to get even. This was the same mistake made by TT Durai. If Durai had not the arrogance to put himself against SPH, he could have continued collecting his $600k annual salary. His past misdeeds would have still gone unnoticed and he will still be nationally revered like Jack Neo before this incident. If you are a public figure, always make friends with the press. Keep your cool no matter how angry they make you.
  • I do not know what Jack Neo exactly said to his good friend, Minister George Yeo, on the phone. After the phone call, BG Yeo called upon fellow Singaporeans to rally around Jack Neo and his family. Maybe Jack Neo painted a much better picture than the ugly truth. Hence, our esteemed Minister readily believed his friend, lent his stature to support someone unworthy and made a fool of himself.  When I make a mistake at work, I tell my boss the whole truth and take the blame fairly due to me. The worst thing is to ask your boss to support you and then hide facts from him. You risk embarrassing your boss who sticks his neck for you. In BG Yeo, Jack Neo has lost a good and powerful friend. 
  • Jack Neo should not have gotten his wife to speak out at the press conference. As he said himself in the conference, the mistake was his alone and his wife was uncomfortable dealing with the press. Then, why did he have to drag his wife along? When Tigerwoods made his public apology, the wife was in the audience. This is rightly so because men who cheat on their wives should apologize to their wives first and foremost, not the public. By dragging his wife in to accompany him in the apology, the public gets the impression that he is making use of her to gain sympathy from the press to discourage them from digging more skeletons out. On careful observation of the press conference video, one cannot help but suspect that the fainting was staged. When Jack Neo stood up to get ready to leave, the way he held his wife looked as if he already expected the wife to faint. 
Irene Kng (the wife)

The mistress was shocked by the calm reaction of the wife to her husband's cheating. Instead of making a din, her immediate reaction was to sit alongside Jack Neo in negotiations with the mistress to settle the issue. She behaved more like a businesswoman than a wife. She works for her husband as the finance manager of J-Team. Being a mother and wife as well as an employee, she had a duty to protect the husband's business which supports the family. On this score, she has done her duty well and deserves our respect.

If the business fails, both mother and father will lose their jobs. Because of the clean, wholesome image that Jack Neo has created through his movies, the scandal will certainly lose him fans. Like Tigerwoods, he has already lost some advertising income.

It is her choice to stand by her man and the public respects that. However, what cost her public support was her remarks that suggests that she was resigned to the fate that men cheat on their wives. It almost looks like she finds it acceptable and normal to have a cheating husband. Firstly, the remarks hurt the many indignant, highly educated women who divorced their cheating husbands. Secondly, they harm the interests of every married woman because this kind of attitude encourages men to fool around more. (What's the big deal, if I am exposed, society will readily forgive me). Thirdly, if such a man is not caught and the wife behaves like it is "ok", there will be more victims(123) along the way.

Before the scandal, Jack Neo brings in the money for the family. After the scandal, his income stream will inevitably be hit. Being less dependent on the husband, there is lesser incentive for the wife to stand by her man. In fact, the incentive to divorce the man is greater now. There is no need to spend on private investigators to dig up evidence for court. The press has already done a good job on that. Since cash flow is going to dry up, it is tempting to grab whatever assets is available now before it is spent or hidden away.

Jack Neo had better start treating his wife with more respect from now on.