ISAMBARD

Around the world, governments are under increasing pressure from their unions, manufacturers and farmers to re-erect trade barriers and instruct government agencies to buy local. In times of economic crisis, that’s the worst possible thing to do. Buying imports enables others to buy your exports. In general, providing you live within your means, trade tends to balance out, and the more trade the merrier for everyone. You sell more of what you’re good at, and buy more of what others are good at. There’s possibly an argument to be made for temporary specific protectionism when you’re building a new industry which will be genuinely globally competitive once it has achieved scale and the barriers are removed; but generally, protectionism only transfers wealth from consumers and taxpayers to uncompetitive local suppliers. Whether it’s in response to calls for US highway builders to use US steel, the NZ Army to buy locally made wet-weather-gear, or British hospitals schools and prisons...

Here's an article I wrote for the Dominion Post newspaper in August 2001, but I think it's still relevant today. “Export or die!” We have heard that message so often - and for many companies, it is the right message. Getting the world to buy a New Zealand product or service is an important milestone for a developing business. Lots of successful exporters are needed for a healthy economy - but they are not enough. The world’s most successful companies do not just export globally - they operate globally. That means having sales, service, logistics, production and development operating around the world. Look at the world’s greatest companies. How many do things only at home to ship out to the rest of the world? I can only think of one - Boeing. The others made the leap from exporting to international operations. Our own Dairy Board/GlobalCo [ Fonterra ] has substantial and growing offshore development, procurement, manufacturing and logistics. More Kiwi companies need to recogn...

Along comes another public holiday, and with it, as in every year in recent memory, the perennial debate arises regarding shopping and other commercial activities on certain public holidays (assuming you’re in a part of the world where they are prohibited). The pro-restriction lobby always trots out the same pieties against crass commercialism and abuse of workers’ rights: it’s one day families can all rely on to get together, it’s a mark of respect to our religious and cultural heritage, it’s one day that sporting and cultural festival organisers can rely on (attracting crowds they otherwise wouldn’t get). That’s fine for those people who want to put aside those particular days for the things they want to do; but why should everyone else be captive to their demands, especially when the vast majority actually take no part in the special events on those holidays? I have a radical alternative which I reckon should appeal to nearly everyone (other than the would-be regulators of my life...

You’ll be aware of the strange phenomenon of the national skills shortage coexisting with high youth unemployment. It’s a problem across the developed world, driven partly by demographics and partly by economic activity. Industries across the spectrum are finding it difficult to attract skilled staff, and frequently the call is for ‘the government‘ to restrict entry into popular courses like law and accounting, and to increase the number of engineering or ICT graduates, plumbing apprenticeships or whatever. While governments have increased funding for technical subjects, it would take a very brave government to start directing who should do what courses, at what level. Who’s going to force your son or daughter to do a course that they don’t want to enter? Last time I checked, we don’t live in a dictatorship. In any case, government workforce planning never works, except either in very macro or micro situations. (By the way, the number of practicing lawyers and accountants in New Zeal...

Some years ago (in 1999, I think), I was invited to address the Royal Society in New Zealand on “The future of work”. I assumed that I’d been invited because of my profile as a tech company CEO, and that I was expected to espouse the vision of technology transforming work and the workplace. My co-presenter was noted New Zealand academic, Dr Norman Kingsbury. Norman’s advice to me was to “surprise them”. Unfortunately, I’ve lost my speech notes, but the gist of my presentation was something like this: The exploding ability to store, find, order, and connect information of all types will radically increase our use of knowledge and enable more innovation and new types of business; Technologies will merge, so that a successor to both the mobile phone and PC will become your primary means of accessing that vast pool of information and services (albeit linked to physically restrained appliances such as large displays, printers and high capacity communication links); The internet and the...

According to modern Welsh legend: Every time Wales wins the rugby grand slam, a pope dies, except for 1978 when Wales was really good, and two popes died.    The grand slam refers to beating all other teams in the annual Six Nations rugby competition (between England, France, Ireland, Scotland, Wales and, in recent years, Italy).  In 2008, a paper published in the British Medical Journal asserted that there was no statistical evidence for this.  Last week, however, researchers debunked the earlier study for ignoring Coptic popes  Apparently, if both Catholic and Coptic popes are included, there is indeed a very high correlation between Welsh rugby success and papal demise. Now, no-one really believes that any causal link actually exists; it is just a statistical coincidence.  But every day, we see impassioned advocacy for  all variety of causes using far flimsier evidence.  It's no better in business life or, indeed, family life.  We al...

Today's DominionPost featured an article by Tom Pullar-Strecker on technology firm 4RF [Communications] currently in receivership.  Pullar-Strecker cast aspersions on other technology firms, including my old company Deltec: . .. Telecommunications equipment manufacturers in the capital have failed to exude the Midas touch. Antenna-maker Deltec – New Zealand's "Supreme HiTech Award Winner" in 2000 – closed in 2002 with the loss of 30 jobs... Read in the context of the 4RF [Communications] receivership, this wrongly portrays Deltec's departure from the Wellington economy. Strictly speaking, it was Andrew Corporation's NZ R&D unit that closed.  Deltec was very successful, peaking at over 200 staff and contractors, with high growth and high profitability. That success attracted Andrew Corporation to acquire Deltec's operations and technology in 2001.  Andrew Corporation quickly transferred manufacturing overseas, but Deltec had pla...

Flashback: first published 29 May 2008 The French have a term usine à gaz or ‘gas factory‘, a metaphor for overly-complex bureaucratic mechanisms that are disproportionate to the problems they are supposed to solve. Ironically, the term seems highly descriptive of the ‘cap and trade’ carbon emissions regimes being proposed by governments in many countries. Every academic, economist, environmentalist, business leader and indeed politician with whom I’ve discussed this has said something along the lines that a carbon tax is the simplest and most effective way to penalise carbon emission, but that ‘cap and trade’ is the only way to get everyone on side. Even oil and coal executives seem to privately support a simple tax system. I assume they must exist, but I have yet to meet someone who actually thinks ‘cap and trade’ is a good way to reduce carbon emissions. It’s as if no-one in a national or international leadership role is prepared to be the first to say this is a stupid system ....

Governments around the world, including New Zealand, invest in education, infrastructure, civil institutions, etc. That's important and necessary, but it is not sufficient for national competitive advantage. Where are the massive untapped resources that New Zealand has in abundance; that, if developed, could lead to major new industries to rival our farm-based industries in scale. Answer: Zealandia , our continental shelf and the fifth largest exclusive economic zone in the world , bigger than Europe. Many people do not know that New Zealand is ranked amongst the highest of all nations in its potential value per capita of mineral resources . We are a resource-rich nation, but simply licensing others to utilise our resources will do little to build long-term national wealth and capability. We haven't seized the huge opportunity that our onshore and offshore continental shelf offers. Only a small part of our academic and scientific effort is focused on it. Other than some lim...

It seems like every country has organised some variant of a “Jobs Summit” where the great and the good are invited along to generate ideas for getting the economy back on track. Having attended a few such events over the years, I’ve learnt that they follow a predictable pattern. The day starts with coffee and chatter while everyone arrives. Following a welcome by the summit chairman (usually a business leader or noted academic), the top politician tells you gravely about the challenges ahead, the resolve of the government to meet them, and the importance of the advice you will be giving. You then hear various economic briefings and snappy thought-starter presentations (not too heavy, not too light) from respected figures. Next you divide into workgroups which focus onto specific themes. In the breakout room, the group hear another briefing related to their theme. A noted CEO, a mid-ranked minister, or a professional consultant facilitates a discussion to generate ideas, assess t...

Every country seems to have them - campaigns to buy goods made in-country. Buy British, Buy American, Buy Australian, Buy New Zealand Made. When asked in surveys, people often say, “I prefer to buy locally-made”, but they very rarely do so. That’s not surprising; people’s stated intentions are often self-deluding, but are used by agenda-pushers to justify all kinds of dubious initiatives. In reality, people usually buy the best value product for their needs and budget (by whatever idiosyncratic value criteria they choose). Country of origin is rarely an issue during the actual purchase, except sometimes as a positive or negative indicator of quality.  So the campaigns don’t achieve their goal. Even if they did achieve their goal, these campaigns are based on a economic fallacy - that buying locally-made goods is better for the country than buying imported goods. Take that argument to its logical conclusion. You’d grow all your own food, make all your own clothes, build you...

President Bush’s 2008 bail-out bill brought the almost-inevitable response from lawmakers - they tacked on extra controls in areas which had dubious links to the original problem. It seems to be a given, that once lawmakers and regulators start intervening in markets, they go too far. And the result is usually not what they intend. For example, Sarbanes-Oxley turned into a bureaucratic burden of huge cost and dubious merit. Clearly it didn’t prevent much misdoing, and only encouraged greater care by miscreants covering their tracks. It and similar regulatory burdens cost New York a large share of legitimate corporate activity, to London’s benefit. I predict that unintended consequences of similar or greater magnitude will come out of the add-ons to the bail-out bill. The US isn’t the only country subject to this problem. I’ve seen it in both the UK and NZ, too. For example, overly-prescriptive and restrictive employment regulation intended to protect workers has been one of the ...

Knut (or Canute) was told by his courtiers that he was so powerful, even the sea would obey him, which he was easily able to disprove, of course. Over the centuries, the story was mis-told to become that of a king who thought he was so so powerful that he could order the tide not to come in. Listening to a radio discussion on bioethics reminded me of the story of Knut. According to Professor Donald Evans, a leading academic bio-ethicist, the imminent advent of super-cheap personal genome mapping and DNA analysis could give rise to several undesirable possibilities, such as: Insurance companies offering cheaper health and life cover to people with lower risk DNA profiles, while those with higher risk profiles pay more or are not covered by insurance. Potential parents screening eggs, sperm and embryos for more desired traits. People establishing that their father is not their father (apparently several studies have found that 1 in 10 children were not fathered by their p...

There’s an old story about a city whose rulers, facing a local food shortage, put a price cap on carters’ charges to prevent profiteering on bringing in supplies from further afield. However, even though there was plenty of food in nearby areas, no-one fetched it because they couldn’t make money. The carters left town and the city starved. I mention this in the context of much media and political comment blaming speculators for the sharp increase in oil prices. We’re now hearing calls from some quarters for oil market derivative trading to be banned. The Spectator’s Trading Floor blog dismisses this idea as insane: All that would happen if it were implemented is that markets would move offshore: is that what anyone wants, that they be even less regulated than they are now? Economics writer Tim Harford made this point about commodity market players: … if the speculators are any good, they’ll stabilise the oil prices. Profitable speculators buy low (driving up the lows a ...

Economies change. The pattern and places of jobs shift. Voters demand politicians do something about it. Regional development programmes are often part of the political response, and many start to offer tax breaks, employment subsidies, building subsidies and so on. It sounds good, it looks like action, and (I’m being unfairly cynical here) no politician hangs around long enough to be accountable for the almost inevitable lack of success. It gets worse when you have regions in the same economy competing with similar programmes. It just escalates into an arms-race of who offers the biggest subsidies. Britain has a particularly bad case of regional subsidies. In a country full of property investors and businesses, it’s amazing that its seven regional economic development agencies built business parks, often in areas away from where business is or wants to be. Bangor, a small university town in remote north-west Wales, has got one. It’s been empty for years. To throw good taxpa...