Singapore's benevolent dictatorship...

The government also closely guides the city-state's media. Singapore ranks 150th out of 180 countries in Reporters Without Borders' World Press Freedom index. Anything like the recent pro-democracy protests in Hong Kong wouldn't be allowed in Singapore.

To become one of the safest and cleanest countries in the world, Singapore has also had to put harsh laws in place.

It explicitly prohibits selling chewing gum. And vandalism in Singapore can get you caned. Many Americans likely remember the case of the American teenager in 1994 who was caned after being charged with vandalizing cars with spray paint in Singapore. President Bill Clinton intervened, and the teenager's sentence was reduced from six strokes of the cane to four.

Some drug offenses, including trafficking, can be punishable by death. Being charged with murder can also result in the death penalty.

Perhaps it's because Singaporeans lack some freedoms that, as a whole, they aren't happy. A Gallup poll conducted in 2011 showed that Singaporeans are the "least positive" people in the world (followed by Armenians and Iraqis).

"On the surface, everything works and is good. It's a nice place to live," one Singaporean told me. "But beneath the surface, not everyone is happy."

Another source of tension is that some Singaporeans don't like the increasing number of foreigners in their country. Singapore's economic growth has been fueled in part by foreign workers. As a result, foreigners as a percentage of the population have risen sharply − from 14% in 1990 to just more than a quarter in 2004... and 39% of the population today. Foreigners have accounted for most of the near doubling in the city-state's population over the past 25 years.

But with a birth rate well below replacement level, and a limited pool of those with the expertise needed to drive the city-state's economy, Singapore will have to continue to welcome foreigners if it's going to grow.

One Singaporean I spoke with who is white – there aren't many – told me he has been subjected to anti-foreigner heckling several times in recent years. "It doesn't bother me, but I'm sure it bothers foreigners, and it doesn't look good," he said.

The foreigner issue is complicated by race. Around three-quarters of Singaporeans are of Chinese descent, 13% are Malay (from Malaysia), 9% are Indian, and the rest are from elsewhere. The city-state has four official languages – Mandarin, Malay, Tamil (a major language in southern India), and English. Singapore is also a melting pot of religions, with Buddhism, Christianity, and Muslim the most prominent. One study based on 2010 data found that Singapore is one of the most religiously diverse countries in the world (the U.S. was in the middle of the pack).

Diversity isn't easy to manage in any country. But Singapore has been able to do a good job of it, in part, by creating a sense of national cohesion by ensuring that all Singaporeans learn English. The country's required military service also instills a sense of national identity.

But there are challenges under the surface. "People here have all sorts of issues with one another," one foreigner who has run his own business in Singapore over the past decade told me.

While I was in Singapore, a few taxi drivers didn't hesitate to tell me about the people from other countries they particularly disliked, in unflattering and racially charged terms.

In December 2013, during the first riots in more than 30 years in Singapore, hundreds of foreign workers took to the streets when a bus hit and killed an Indian migrant worker.

Singapore's wealth explosion has also created a class divide. The city-state has one of the highest levels of income inequality among developed countries. As much as 14% of the population lives in poverty.

For the very wealthy, Singapore's prices aren't an issue. For everyone else, though, Singapore is very expensive. A cost of living survey by consulting company Mercer found Singapore was the fourth most-expensive city in the world. A beer will set you back around $12. Private schools that charge $30,000 per year are not unusual. And real estate is stratospheric.

To counter high prices, Singapore has low income taxes, which top out at 20%. But once you factor in things like taxes on cars, tariffs on alcohol, and real estate taxes, it's clear that Singapore's total tax take is much, much higher.

All of these are reasons for people in Singapore to be unhappy. And unhappy people eventually want change.

Over time, the People's Action Party has seen its support fall in parliamentary elections – from 87% of the vote in 1968 to 60% of the vote in the last elections in 2011. The opposition won six out of 87 seats, which isn't much, but it's more than it ever had in the past. In early 2013, the People's Action Party lost a district by election by the widest margin in nearly 30 years.

The irony is that Singaporeans have seen massive change over the past two generations. But young people in Singapore have experienced only prosperity – not the hard climb to get there.

"The spoiled youth are a problem," one longtime resident in Singapore told me. "They're not as diligent as their parents, or as easily satisfied. A something-for-nothing generation may spell trouble, unless they wise up as they age."

And no one knows what will happen when Lee Kuan Yew – the country's guiding light these past 50 years – passes away. Lee Kuan Yew is 91, and he was recently admitted to the hospital for severe pneumonia.

His death may be a reason for Singaporeans to rethink the direction of their country.

But for the time being, things in Singapore are likely to stay the same. And despite its challenges, sentiment toward the city-state remains extremely positive.

The Singapore stock exchange (called the SGX) trades at a price-to-earnings (P/E) ratio of 13 – which is far from cheap. Emerging markets overall trade at an average P/E of 12. In short, investors have built in expectations of higher earnings into the market.