I’m not going to give full overview of 1MDB scandal. It’s an ongoing scandal in which the former Prime Minister of Malaysia, Najib Razak funneled billions of dollars into a government run fund 1Malaysia Development Berhad (1MDB) informally headed by a fellow conspirator and financier, Jho Low. Together they stole hundreds of millions of dollars from the fund, used it to buy votes in Malaysia and to party in Hollywood and NYC, and decided government projects based on their personal interests. And in their efforts to cover it up and not be held accountable, tried to subvert Malaysia’s democracy and government, shifted the geopolitical direction of the country, and perhaps had a government prosecutor killed.
If you want to learn more about it you can read books like Billion Dollar Whale or articles in the WSJ, Sarawak Report, Economist, or others. This is current news story–so at this moment new developments are still coming out.
When covered in the US, it’s usually covered because of the salacious details of Jho Low’s partying in the US. This is noteworthy, but just one small part of a much more interesting peek into how things happen. Much more interested in getting a view into worlds of business and politics we rarely get–then salacious fodder that can fit in tabloids at the supermarket cashier.
Email memo below
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Some notes and adjacent thoughts on 1MDB
Secular shift and Maturation of Sovereign wealth funds. The 1MDB scandal involves Malaysia’s sovereign wealth fund as well as Abu Dhabi’s Mubadala, but we should zoom out to see the bigger picture. Across the world sovereign wealth funds are changing how they operate and we are starting to see its impact. From Saudi Arabia’s $45B investment in Softbank’s Vision Fund to Singapore’s vertically integrated approach with Temasek, with it’s hundreds of employees across 10+ offices around the globe. These aren’t isolated events. Sovereign wealth funds are undergoing the same transition that foundations and endowments went through three decades ago. As they seek returns they are pursuing exposure to alternative asset classes, with the added strategic imperatives of their country. Bringing their hundreds of billions of dollars to market, they are the underlying force driving significant shifts across many asset classes. And their investments will have future geopolitical importance too. Yet few are discussing this macro trend.
High net worth family funds are also undergoing this shift. In both of these cases, the transition is typically being led by individuals within informal power structures with little oversight. This means that we’re seeing high variance in the approaches and outcomes of each experiment. What sectors and deals these funds do can be highly subject to the personal beliefs and whims of a tiny handful of people and the advisors around them.
Small Man Theory of History. Historian’s use to debate the Great Man Theory of History, Thomas Carlyle’s theory that history was shaped by the so called Great men or women that through sheer force of will changed the world. While this has been largely discredited, perhaps we were looking at it the wrong way. Perhaps it is not the Great Man Theory that is true, but the Small Man Theory of History. That history can be shaped by the personal failings and whims of one person.