Archive for the 'Global Macro Trends' Category

Global warming and you

Published April 29, 2009 Global Macro Trends , media 2 Comments

Here’s  excellent graphic from FiveThirtyEight via Treehugger and via New Zealand’s The visible hand showing data from a report from the the Yale Forestry and Environmental Studies School Climate Change project. It needs no explanation.

The project’s survey: “Climate Change on the the American Mind” is a lengthy and ponderous read, and is so queued in my reading list. It contained this graphic, which has the same (and a bit more) information as the inverted triangle above – It’s a chart that any consultant would love, and it is difficult to read and, well, boring.

The learning here is that each chart should deliver one message, and to focus the chart on that message alone. It’s too easy to get wrapped up in presenting everything sometimes, when taking out the key facts has much higher impact.

This chart is has great information  – however it really could have been drawn better. It says that 69% of Americans believe in Global Warming now, but more importantly that only 10% deny (to one extent or another) that it is happening and only 3% are extremely sure it is not happening.

(*Incidentally the FES school was until pretty recently called just the Forestry school. Also I did one course there so anything I say about them will clearly be biased. )

How to blog anonymously

Published March 28, 2009 Business , Global Macro Trends , Internet Business , Politics Leave a Comment
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As we progressively lose our freedoms on the internet, it was timely to have a read of some of the excellent material written by Harvard University’s Berkman Center for Internet and Society – it’s part of the Harvard Law School and has the delightful url of cyber.law.harvard.edu – as it was started from a seminar way back in 1994.

The Center’s Internet and Deomcracy blog has a recent post on “How to blog anonymously“, and explains why anonymous speech is important:

Like 18th century phampleteers (or even the writers of the Federalist papers), anonymous bloggers are empowered by their aliases to challenge taboos, censors and government power.

…The internet is the last bulwark against totalitarian control because of its fluid and democratic character. That is why anonymous blogging is so important. Difficult to trace or gag, it is the kind of speech most likely to impact an increasingly interconnected and web-dependent world.

However – it’s a dangerous game this blogging:

Of course, be extremely careful. Use these tools at your discretion. Reporters Without Borders has a comprehensive list of jailed cyber-dissidents.

The GlobalVoices site has the guide to blogging anonymously,which comes with a chilling caevet:

These directions do nothing to prevent you from being linked through other technical means, like keystroke logging (the installation of a program on your computer to record your keystrokes) or traditional surveillance (watching the screen of your computer using a camera or telescope). The truth is, most people get linked to their writing through non-technical means: they write something that leaves clues to their identity, or they share their identity with someone who turns out not to be trustworthy. I can’t help you on those fronts except to tell you to be careful and smart.

The bold part is important. The surveillance measures that are increasingly coming in are not that important to the either “criminals” or “freedom fighters”. Decent police work is much more effective at finding out about bad things happening, which is why societies should make sure their police, court systems and bureaucracies are corruption free and focused on the highest risks. New Zealand always scores very highly on these stakes.

Anyway – to cut a long story short, if you don’t want the ISP’s in NZ (or anywhere) to be able to see what you are doing, then use Tor, proxy servers, gmail and wordpress, writing your posts offline in say notepad and secure erasing everything along the way. You may not be really avoiding any real threat to your personal freedom in New Zealand, but you will be helping people that have real issues.

It’s a draconian move to go undercover, but there are some topics and writers which lend themselves to being anonymous. Consider though the words of GlobalVoices:

A final thought on anonymity: If you don’t really need to be anonymous, don’t be. If your name is associated with your words, people are likely to take your words seriously. But some people are going to need to be anonymous, and that’s why this guide exists. Just please don’t use these techniques unless you really need to.

The real estate market plunge

Published March 11, 2009 Global Macro Trends , Investing 5 Comments

Alex Tarrant over at Interest.co.nz had a couple of, well, interesting posts on the housing market in NZ.

There is a piece on the February housing statistics, which rose dramatically versus January, although the median price stayed down, and the number of days to sell was a record 62. Alex also looked at the REINZ commentaries over the last year, and to their credit REINZ has pretty much got it right each time.

So let’s look at the total year on year dollar transactions for the real estate market over the last year and a bit:(Red is older, green most recent)

REINZ

It’s been a pretty steady decline from October 2007, though February was an excellent month this year.

Let’s look at what is near and dear to the industry – estimated commissions. I’ve just used 3.5% as a wild guess – what’s important are the orders of magnitude. The fives months between September 08 and January 09 saw $182 million more less in commissions for the industry than the corresponding period a year earlier. $182 million pays for a lot of agents, and a lot of agents’ flash cars and investment properties.
REINZ, 3.5% commission estimated by me
Let’s also smooth out the effect of a lousy January and a great February – and apply the average of the two to them both. You can see that we are not really seeing a resurgence.
REINZ, my smoothing

Finally, as The Bank Manager notes in the comments on interest.co.nz, the February sales in 2009 were a huge drop from previous years. This chart is telling:

REINZ

Things are really not good for the real estate industry, nor for homeowners with large mortgages and uncertain jobs. Nice February statistics are a start, but is it a bounce or a dead cat bounce?

<update. Alistair from realestate.co.nz has introduced an excellent chart:
realestate.co.nz

This is really scary – it shows we still have quite a way to fall. Brace yourselves – and remember that these things tend to overshoot.>

Bad news for Cricket: Sponsor Standford is being investigated

Published February 16, 2009 Business , Global Macro Trends 2 Comments

Via the WSJ it appears that Stanford International is under investigation:

Stanford International Bank Ltd. of Antigua recently failed to provide some $16 million in funding to a small Florida telecommunications firm, while a small Alabama health-care firm said it was unable to complete a roughly $62 million merger after funding fell through. 

….The disclosures raise new questions about the activities of Stanford International Bank, part of a sprawling financial-services network controlled by Texas businessman R. Allen Stanford. As reported, the Federal Bureau of Investigation and securities regulators are examining the bank’s marketing of high-interest certificates of deposits through affiliates in Texas and elsewhere.

It doesn’t seem totally bad, but R Allen Stanford is a huge support of cricket in the West Indies, and it would be really sad to see that go away.

Lower the barriers to raise car ownership

Published February 9, 2009 Global Macro Trends , NZ Business 3 Comments
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New Zealand has the third highest car ownership per person in the world, the economist informs us. That’s amazing, especially as tiny Luxembourg tops the list. It’s especially amazing when you are standing at a rental car counter during summer and unable to get a car.

Luxembourg is only 80 x 30 kms, and while boasting the highest GDP per capita, the owners of those cars often live next door in Germany, France or Belgium – saving taxes. It’s essentially a statistical anomaly, so let’s leave it aside. 

Number two is Iceland, completely isolated like New Zealand, and with a small population. Perhaps there is something to living in rocky countries that are under-populated and geographically isolated?

Well no – next in the list is Italy, about the same size as New Zealand and with 54 million or so more people, but a similar topography.

So why?

  • Commenters said that there is an alternative source of statistics, but that doesn’t explain why NZ is high on this list
  • Commenters also said that for the USA SUVs are classified as “trucks” and not “cars” for the USA. Adding them back raises the USA up to first place. High GDP and low vehicle prices gets them there. 
  • New Zealand has relatively poor infrastructure and is very rural and hilly, and so we more often need cars for commuting or for shopping than higher density and more urban places. Auckland is spread out, Wellington is all hills and so it is tough to walk or cycle. Christchurch gets a pass here.
  • But most of all it has to be the lack of trade barriers.

New Zealand stands almost alone in that regard, and it means we avoid the equivalent of a large import tax that everyone else pays. 

In NZ, once the vehicle is inspected by customs and agricultural officials you drive the vehicle to a nearby testing station, get a warrant of fitness, pay your registration and GST and go. It’s simple, I’ve done it and it took about 20-30 minutes.

If you want to import a vehicle into, say, the USA or EU, then you need to get it approved by the authorities as being safe, conforming to standards and so forth. You also need to pay a confusing array of taxes, get it tested, registered for your jurisdiction and so on. I’ve tried to do this to the USA, and utterly failed at any price.

These rules and regulations are present in every major market, and yet seem to be different in each. As a result the cost of compliance is very high, and so imported cars are at a serious disadvantage to domestically produced cars.

And that’s the point – protection of a domestic car industry. Sadly that “protection” seems to have a negative impact – if higher car ownership numbers results from freer markets, then wouldn’t it be better for your domestic producers of all products for you to free your own market?  It’s a bit simplistic, but basic economics tells us that the more efficient the market is the better the result. It’s often contrary to political concerns, although those jobs in Detroit may have been kept if the US car companies had been properly exposed to the rest of the world’s cars earlier.

Iceland, Luxembourg and New Zealand have no domestic industry to protect, and Iceland and Luxembourg are both part of the EFTA – and so you can easily import or register  a car from anywhere else in the European free trade area. Meanwhile it is expensive to export your car from New Zealand (no-one will take them) and from Iceland (high used car sales taxes). 

So what would the impact be of global standardization of car certification? At the very least allowing people to import small volumes of cars easily would help identify gaps in the market. Better would be bilateral agreements between markets – accepting that the regulations in each jurisdiction are acceptable for the other and increasing sales of each other’s cars in each country. A Nobel prize was won by pointing this out – the EU cars are in demand in the USA and vice versa. 

Those USA SUVs are a nice case study. They were wildly popular because they were and still  are cheap, and they are cheap because they are regulated and taxed as light trucks and not cars. This does mean poorer safety standards, which is very bad, and yet people flocked to buy them as they perceived more car for the dollar.

And therein lies the rub. The health and safety standards in Europe differ from the safety standards in the USA and, in then there is California. Global manufacturers can adapt to each country, and create vehicles that conform to more than one standard. However a great start would be a single  standard between the EU, USA, Japan and Korea. Going forward that standard could be a rating (e.g. A,B,C on safety, 1,2,3 on environment), and given jurisdictions could select which rating they require or compliance.

Final Ferrit: The site idea and execution

Published January 24, 2009 Broadband , Global Macro Trends , Internet Business , NZ Business 4 Comments
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Part two of  a four part take on the end of Ferrit. We started with Market Space, and business economics and governance failure are next.

The idea of the Ferrit site

So while there was a space, the proposed way to address that space was flawed. The  problem was that the proffered solution didn’t offer anything of value to anybody.  The medium to large companies that Telecom identified had not moved their commerce online were not looking for a giant website to aggregate demand. They needed to open their own ecommerce websites backed up by their own fulfilment processes.

The problem was that for an aggregator site like Ferrit to work properly the retailers had to get their own websites in order, and once they had them in order there was no need for Ferrit.

To provide a feed of products they needed to be able to pass on SKU’s, details, photos and prices, along (importantly) inventory numbers through to Ferrit. They also needed some way to accept the sale online and fulfil the order. Once companies had all of this on place then building their own site was a formality. They could even use one of the many off the shelf and open source (read free)  eCommerce website solutions out there. Wellington’s Silverstripe offers a complete website CMS including ecommerce, while OSCommerce is a dedicated open source solution. Both are free.

The business model was fundamentally flawed. It relied on taking a commission from retailers for directing traffic to their sites. A large commission. The flaw was that the retailers can simply set up their own sites and buyers can easily find them using Google. (Indeed Ferrit’s usability issues made it harder rather than easier to buy things from particular stores.)

Finally there was the Telecom question. Why would any supplier want Telecom to be their ecommerce route to the internet? What compounds that question is the presence of Gen-i within Telecom’s ranks, so a company already doing this sort of work for clients  was ignored within Telecom.

The Weaknesses of the implemented Ferrit site
The weaknesses were manifold, and summarised threefold: Poor technology, poor usability, poor business model. Overall it was a model of what not to do.

The technology was apparently based on an off the shelf product that was substantially changed by the outsourced programming team. The impact of this is threefold: It’s expensive to purchase a system in this way, the changes to the system probably mean that upgrading is difficult to impossible and the time and costs taken to make changes are prohibitive. The slow and expensive development of the site are external evidence of this occurring.

Sadly there were and are plenty of alternative ways to develop a site like Ferrit,  ranging from open source solutions to simply starting from scratch using modern building blocks and tools.

The poor usability of Ferrit was legendary in the New Zealand web industry. It was so bad that it turned visitors away, and though it slowly improved over time the end result was still basically unusable. To dissect just how poor the usability was is an exercise best left to the individual, and I would rather point to Trade Me, Google and Apple sites to see just what a great website can be.

Meanwhile the execution was so poor that the information provided by Ferrit (price, availability) was often incorrect, leading to a collapse of any consumer trust in the site.

BHP Billiton SSM job loses – WA and NZ impact

Published January 21, 2009 Global Macro Trends 1 Comment

Nickel prices are very low, and so there are some big cuts just announced for BHP Billiton Stainless Steel Materials. As rumored the $2 Bn Ravensthorpe laterite plant is going to go flat, and about 2,100 jobs in total will go across Nickel West and Yabulu. A total of 6,000 will go from the entire BHP Billiton group, so Nickel is being hit hard proportionally.

That’s really sad. I was lucky enough to consult to the Kwinana Nickel Refinery as well as across  Stainless Steel Materials, and this will come hard. Don’t blame the talented people there however, it’s just that the industry is simply producing too much Nickel versus demand, and unless the supply is curtailed it spells doom for everybody.

The Ravensthorpe plant uses laterite based Nickel, which is in a more common yet much harder to process form. The plant creates MHP (mixed nickel cobalt hydroxide product), a high Nickel percentage green goop, and that is shipped in sealed containers to the Yabulu plant in Townsville. It uses a relatively new technology and was still ramping up, yet it seems just cannot make nickel cheaply enough versus the market prices.

The Yabulu plant was expanded as part of the overall Ravensthorpe capital project, with the MHP mixing in with the other sources of Nickel. The Yabulu plant, like any refinery, is a 24/7 operation, and reducing volume probably isn’t going to change the number of jobs much, but it will affect the volume of other inputs. Interestingly the BHP Billiton press release says that they will “complete a future options study” for Yabulu. This means one of three things – ramping it down, keeping it at old, pre-Ravensthorpe levels, or finding an aternative supply of Nickel. My take is that the answer will almost entirely be dictated by what happens to the Nickel price in the meantime, as well, of course,  on how well the team operates the plant.

The Ravensthorpe affected ex-BHP Billiton employees and contractors will be facing a very uncertain market – and there are 800 employees and 1000 contractors across Ravi as well as Yabulu and, crucially, head office in Perth. There are a lot of very talented people inside Nickel West and SSM and my heart goes out to them in these uncertain times.

Meanwhile mining at the the Mount Keith Operation, which is an impressively enormous hole in the ground in Western Australia, is being scaled back. They will slow mining and produce concentrate from existing stockpiles. That saves 100 employee and 200 contractor jobs in a market where truck drivers have been seeing incomes of $120,000 per year. That sort of  income is now completely unsustainable, and we can expect to see a huge follow-on effect in Western Australia.

The Mt Keith sourced ore is concentrated and then smelted in Kalgoorlie and refined at Kwinana, South of Perth. With the amount of concentrate staying the same we can expect that Kalgoorlie Nickel smelter and Kwinana Nickel Refinery will continue to produce at maximum rates, as the more you make the cheaper the unit cost. We can expect those sites to relentlessly continue to reduce unit costs.

The Impact
Overall the people that will go will more likely be the newer migrants to Western Australia. The mining industry has been fueling a serious boom, with housing, coffee and food prices reflecting a reality that simply wasn’t long term. I see this as yet another potential catalyst for a big popping noise to hit the region.

There are tens of thousands of New Zealanders in WA, and many of them are in the sort of occupations that will be the first to go, Where, oh where will they go to next?
Perhaps to those $22 per hour cleaning jobs in tourist towns like Broome, which employers have been struggling to fill. Those jobs won’t have to pay as much of course, as tourism demand will also dip and supply of employees will rise.

The knock on effects are obvious, and the results could be disastrous. It’s really not a good time to own a house in the Perth market – and I am glad I don’t. However as Nickel prices rise then Ravensthorpe will be able to ramp up again and Perth will come backas well. It may take a year, or many years.

Rio Tinto: Tiwai Point will be fine, but Kiwis will be affected

Published December 11, 2008 Business , Global Macro Trends , NZ Business Leave a Comment
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With 14,000 workers going from Rio Tinto, the folk at Tiwwai Point’s aluminium refinery are apparently nervous. They have “787 full time staff and 133 contractors” down there in the deep South, a bit under 1% of Rio’s total of 110,000 staff and contractors. So Rio is getting rid of 12.7% of it’s workers, which would imply 116 folk from Tiwai.

Tiwai workers will be safe

Actually those 14,000 are from capital projects that Rio Tinto is extracting itself from, with most (7,500) of them contractors. Steady state plants like Tiwai that don’t have immediate expansion plans should be ok. I’m assuming that they don’t have expansion plans as any expansion would need more electricity, which we cannot provide.

Rio may ask Tiwai for some reductions, but it’s really hard to reduce staff in an aluminium refinery – they require people to do certain tasks and it’s bad practice to skimp on that. I’d be really surprised if they were that inefficient and bloated that losing staff was worthwhile. If they were, then the staff that would go would be in the management ranks, not the people on the floor. It’s especially hard to see much headcount reduction given that Tiwai was making some of the purest Aluminium in the world in recent years, though I am not sure how they are going these days. Finally it’s contractors first when these things happen. 

Tiwai is a 24/7 operation – and you cannot shut down for a periods as the molten alumina and aluminium in the pots will freeze. That’s not pleasant – I’ve seen a kilometer long potline freeze in South Africa and it is a long and expensive task to recover from that. So the plant will stay running, and (almost) everyone will stay. 

One option could be a sale of the plant, but the new owners wouldn’t make material changes in the operation, or in the tax payments to the NZ Government.

WA Kiwis

But this is big news for the thousands of Kiwis that have emigrated to Western Australia to chase the big bucks. Less capital projects means less scaffolding (notoriously scaffolders are often Kiwis and often cowboys), less boilermaking, building, drilling, mining, driving and engineering. Above all it means that the crazy money being offered in WA will now slowly or quickly go away. That will mean many of those Kiwis will choose to come back home, adding to any unemployment woes we have. 

BHP Billiton looks on

One of the reasons that BHP Billiton withdrew from the offer to buy Rio is apparently the assumption that Rio will now have to sell off assets to survive. Looks like they were smart in that assumption

A foreshadow of the World’s geopolitical risk?

Published November 27, 2008 Business , Global Macro Trends Leave a Comment

Take a look at the car (below) in this article.

“You are looking at a nano-cosm of a foreshadow of the future of the world’s
geopolitical risk.

telegraph

That’s how a friend of mine characterizes the global situation right now. And I though I was bearish.

Oh – he works for the World Bank. (His opinions are his own however)

Are we in a deep hole that the entire world could fall into?

Published November 25, 2008 Global Macro Trends Leave a Comment

Jeff Garten, the Dean of Yale School of Management when I was there, and now a Professor of International Finance there, was quoted via a recent NYTimes Thomas Friedman oped:

“A great judgment has to be made now as to just how big and bad the situation is.. This is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far — despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets — the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?”

If it’s the latter, then we need a huge catalyst of confidence and capital to turn this thing around. Only the new president and his team, synchronizing with the world’s other big economies, can provide it.

“The biggest mistake Obama could make is thinking this problem is smaller than it is. On the other hand, there is far less danger in overestimating what will be necessary to solve it.”

Freidman is calling for Obama’s proposed Treasury Secretary Tim Geithner to be appointed immediately, to reduce uncertainty in the markets. Hew’s the second serious writer I’ve seen recently, after David Brooks, to wistfully call for Obama to start now and for Bush to step aside. (It cannot happen).

I can’t help think that New Zealand’s election happned after the USA’s, and we now have a functioning new Government. I also cannot help remember how disastrous the transiton from Muldoon to Lange was back in 1984, and how we in NZ learned from that lesson. A 2 1/2 month transition for the US is simply ludicrous, especially given that the old and new Presidents meet for an hour only. The transition between Clinton and Bush II was particularly galling, with years of good works tossed away. To Bush’s credit the news from the Bush II to Obama transition has been good to date.

Please don’t bail out GM

Published November 18, 2008 Global Macro Trends , Investing 1 Comment
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I have to agree with Greg Saunders, posting at Tom Tomorrow on this:

“When it comes to bailing out the auto industry, count me in the “let them starve” camp. The auto industry has been outsourcing American jobs for 25 years now with little regard for the devastated communities they’ve left in their wake (seriously, re-watch Roger & Me sometime). The big three have also used their lobbying might to oppose every environmental regulation in their sights. And on top of all of that, their cars suck. Bailing out the auto companies whose single-minded devotion to SUV’s made them blind to the hybrid revolution is like bailing out a record company that hasn’t had a hit since “The Macarena”. Screw them.

The US economy is brutal in its supposed simplicity. The market is the decider – good companies prosper and bad ones fail.

That means if you make shitty products then you can generally expect to eventually go out of business. 

Unless you are a US bank, airline or a car manufacturer it seems.

Unfortunately and blatantly (Ford and) GM ignored the portends, and continued to make gigantic gas guzzling, poorly constructed unsafe vehicles. They have spent years reaping the benefit of lax tax rules on those massive vehicles and now pretend to be blinded by the high oil prices and the disappearing demand from the post-bubbly economy. GM wants $25 billion, and 100,000 GM jobs and countless other jobs that are dependent on GM are at stake.

Shut the doors I say, shut the doors.

It’s time these companies (and those crappy US Airlines) were pushed into the incinerator. Out of the ashes we can expect to see one, five or even ten or twenty new, innovative and cool companies that form to fill the vacuum. We will all be richer for it.

Put them into Chapter 7 (that’s receivership where you shut the doors), chop them into pieces and sell the assets off division by division. Canny buyers will grab factories, brands and even those car loans and will operate them far more efficiently. The debt holders are in charge in a receivership situation, and this is one situation where some tough decisions should be made.

Wouldn’t it be great to see those GM brands independent again? Not just the crappy ones like Buick, Saturn and GM, but businesses like Cadillac, Chevrolet and Holden that have some following and legacy. Then there are relatively unspoiled brands like Saab, Opel and Daewoo. Imagine them all under independent ownership, scaled back and concentrating on selling quality vehicles. Imagine their suppliers in the same way.

Wouldn’t it be better for employees in the medium term to work for smaller, more dynamic, local and much more fun companies? There needs to be some pain now though, as it is just not sustainable to keep making Ladas when the economy doesn’t demand it.

Some of that $25 billion (or whatever) could go towards covering the disappearance of the pensions for former US based workers, while adding yet another nail in the coffin of private health care. 

The rest could go to creating smart incentives for the new companies to invest in clean technology would help guide them, while other startups would also emerge to provide the required parts.

The motorcycle industry a few years back figured out that it was really easy to design, manufacture and sell a much vaster range of faster and safer bikes. The technology seemed to just be there and so now a young company (like Triumph or KTM) can create a compelling yet eclectic range of vehicles. Even staid BMW got into the game and is now producing everything from race bikes to 400 enduros and of course beefy adventure and touring bikes.

US based Harley Davidson is also producing great bikes these days, which begs a final thought – what if Harley Davidson and KTM each took over one of GM’s brands? Wouldn’t they make great vehicles?

 

<update. Ford is selling down their stake in Mazda from 33 to 13% – and lose control, while, and GM sold down their final 3% stake in Suzuki. Actually they sold 17% of Suzuki just 2 years ago to pay for “restructuring costs” and GM has now had Hummer on the block for a month or three>

<upate 2: Chapter 11 can provide some teeth – Ch11 is the “do a big reorg and trade out” version of bankruptcy. Here’s Micheal Levine in the WSJ.

After 42 years of eroding U.S. market share (from 53% to 20%) and countless announcements of “change,” GM still has eight U.S. brands (Cadillac, Saab, Buick, Pontiac, GMC, Saturn, Chevrolet and Hummer). As for its more successful competitors, Toyota (19% market share) has three, and Honda (11%) has two.

GM has about 7,000 dealers. Toyota has fewer than 1,500. Honda has about 1,000

Federal law provides a way out of the web: reorganization under Chapter 11 of the bankruptcy code. If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM’s viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn’t be easy but, unlike trying to bail out GM as it is, it wouldn’t be impossible.

We are living longer

Published November 10, 2008 Global Macro Trends , Life , NZ Business , media 1 Comment

It seems that we now have a longer life expectancy – 82.2 for women and 78 for men, up 1 and 1.7 years

However there is still a substantial difference for Maori – with Maori newborns having life expectancy of 75.1 and 70.4 years.

This is a key metric for New Zealand, for any country or region, and for the world. Life expectancy is a function of overall wealth, income distribution, health care quality, environment quality and health and safety behaviour. To see the number rising is excellent, particulalry as it could be falling in the USA. They are at least slipping back down the rankings, a sign of a troubled health care system & rising obesity.

To see the gap between Maori and non-Maori (8.2 years now) is to see the difference in economic opportunities, health care, infant mortality and everything else. As a society we should continue commit to increasing lie expectancy and reducing the gap between our constituent groups.

Speaking of rankings – the latest figures see NZ rise from 23rd in the UN/ 32nd place in the list of Wikipedia entities to 11th place in the UN and 16th place in the Wikipedia list – Our overall average of 80.1 (assuming 50/50 m/f) would put us just above Italy and below Canada and the Cayman Islands. Of course every other country should also move upwards, so time will tell where we really lie.

Top of the Wikipedia list is Andorra with 83.52 and the only place in the world where male life expectancy is over 80.

Building a Strategy for New Zealand – some starters

Published November 5, 2008 Global Macro Trends , NZ Business , media 7 Comments
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Here are a few starter strategy phrases. They should give some flavour of the sorts of things that could make good goals. The idea is not to have a goal cover everything, but to address the key things that drive the big changes in the big numbers.

Let’s take life expectancy as an example. We want people to live longer, and we let’s say that reducing road accidents is the biggest easiest way for us to increase overall lifespans. Therefore a goal for 2020 could be:

- We have Zero Fatalities each year on our roads.

Which is already a goal for Sweden.

So – here are some other potential goals for 2020. The aim would be to have three to five only:

- Our average life expectancy is 85 (90?) years, for overall and for Maori & Pakeha (preventative care)

- New Zealand is Carbon Neutral (We’ve done more than our bit for global warming)

- Our GDP is 50% 25%? the size of Australia’s (we’ll need to be smarter and with more population to get there)

- Our tax system creates zero deadweight loss (100% tax efficiency)

- The Government spend is 30% 40%? of GDP (Efficient Government)

- 50% of people can speak 100 phrases in Maori, 29% speak more than 3 languages (Multiculturalism)

- The average income for Maori and women is within 5% of white males. (equity equality)

- New Zealand Government holds $100 billion more overseas assets than debts (fiscal responsibility)

Add some more….

{edited after some good comments below}

Building a Strategy for New Zealand – two approaches

Published November 5, 2008 Business , Global Macro Trends , NZ Business , media Leave a Comment
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Writing a strategy is relatively simple – anyone can do it. Of course there is a catch..

The hard bit is getting people to agree to a strategy, (and the really hard bit is to execute that strategy effectively.)

One good way to develop and gain agreement to a strategy is to gather the key players in the room, along with the right input documents. You should have already met with and walked through the approach and inputs with everyone in the room, and actually captured each persons initial ideas into the materials now on display. Then you facilitate a session whereby everyone gets a fair share of the floor and the group ends up with a plan that is simple, believable, ambitious and agreed. That can take a while, but there are plenty of tips and techniques to get there.

For a company the people in the room are the top leadership team. The strategy then gets pushed around and ratified by the board, and if the owners (shareholders) don’t approve then they can sell or start shareholder actions.

But who are the people in the room for a country? There are two ways to go.

The first is obvious. Political parties and leaders set out their strategy for the country, and we the people (or the shareholders if you will) vote for the approach that we prefer. Under NZ’s MMP the result is a mixed strategy reflecting (in theory) the views of a majority of New Zealanders. Indeed the way Government really operates (via Committees and the like) almost everybody can have a say in the short term tactics. If the Government changes their minds mid stream then we the people can resort to lobbying, leaving or ultimately civil unrest or revolution.

The other way to do this is to try to get representatives of everyone in a room. David Lange tried this in 1984 when he gathered all sorts post election. It helped but Labour seemed to have their own agenda regardless (thankfully).

More recently and topically Aussie PM Kevin Rudd hosted the Australia 2020 Summit earlier this year. They had over 1000 Australians spread over 10 discussion streams and two days. It was a failure.

Here are those “10 critical policy areas”:

  1. Productivity—including education, skills, training, science and innovation.
  2. Economy—including infrastructure and the digital economy.
  3. Sustainability and climate change.
  4. Rural Australia—focusing on industries and communities.
  5. Health and ageing.
  6. Communities and families.
  7. Indigenous Australia.
  8. Creative Australia—the arts, film and design.
  9. Australian governance, democracy and citizenship.
  10. Security and prosperity—including foreign affairs and trade.

Let’s start with the list itself, which is not Mutually Exclusive and Collectively Exhaustive. There are plenty of gaps and overlaps, and so the result was never going to be crisp. For example terrorism was apparently left out (no – really) and Talent was covered in at least two places.

Next there were complaints about bias in the selection of the people there – which means that many Australians never thought of the group as representing them.

Then the process seemed to not work very well. Actually it seemed to be downright disastrous for some of the groups. It was set up to fail, as the 10 groups of 100 were not homogeneous, were often not used to being “facilitated” and generally needed a lot more than 2 days to come to consensus. None of the groups really succeeded in coming up with one or two simple measurable and achievable goals – but often gave list upon list – resulting in about 100 ideas each, or 1000 ideas overall.

Read (no – skim) the final report and you can see the inadequacies of the process all over it. That final report is 399 pages long. I’m not kidding. Add another 6 pages of preface and title pages and you have a completely unreadable unwieldy pack of doorstop.

You can tell that some folks tried to crystallise some of the discussions into short statements each night, and you can also tell (especially for the Creatives and Rural types) that this often didn’t go down well.

But overall in consulting speak this was boiling the ocean – trying to analyse and solve for everything, rather than focusing on the stuff that really matters. It was all too much at once.

Australia lost out here. They could have emerged with 3 or so amazing big ideas that energised the nation. Instead they emerged with a laundry list. However, the Rudd Government did say it will respond to the list by the end of 2008, so we shall see what that looks like. They have a chance to come back with “Five Goals for 2020″ and sell them to the nation, and that could be a great thing, and something we could copy.

So is there anything we can use? Well, some of the stuff on the list isn’t bad, but some was atrocious:

“..three goals and ambitions:

  • maximising wealth, excellence and equity by driving up productivity to the leading  edge of developed countries
  • focusing on human capital through early childhood development, world-class education, skills formation and innovation
  • encouraging all Australians to realise their potential.

Fluffy and not really measurable.

On the Economy section the group:

“agreed that Australia should set national economic goals in which all Australians share, including full employment, low inflation (averaging between 2 and 3 per cent) and gross domestic product per capita in the top five countries in the world.

Nice – they have proposed goals that are (sort of) measurable and that we can copy. I wonder what happened to them post meeting?

Our aspiration is that by 2020 Australia is the world’s leading green and sustainable economy

Not bad, just add measures.

There’s more after the fold (and this is a short laundry list), but for now let’s just say that the Australia 2020 report makes interesting reading and good if verbose starter input for creating our own strategy:

Continue reading ‘Building a Strategy for New Zealand – two approaches’

Swan diving version two: We need a plan

Published November 4, 2008 Business , Global Macro Trends , NZ Business , media Leave a Comment
Tags: , ,

Version two of the Skilling/Weldon document Swan Dive or Belly Flop is now released. The document reflects a more considered response, based on more research and analysis, along with reader and blogger comments and, it seems, just more effort.

Good job.

I read through the rest of document, and made notes about what I liked, would change and what I flat out disagreed with. Overall it is substantially better than before, with only a little of the latter.

But I found that I struggled with the overall context – it all just seemed a bit small and showed a business bias.

I struggled with why we are proposing to do all of these things? Where will it get us?

For me, as I am sure for many, it comes down to the a feeling that Lloyd and the HRL Morrison folk are absolutely right – we cannot go much further without first defining some goals, a strategy, for New Zealand.

The authors did incorporate some of that HRL Morrison & Co. thinking on their desire for an overall goal for New Zealand – but have not come up with any proposed answers.

We need “Al Gore level” challenges not just on GDP, but also on Environment and other parts of our journey to Zero Harm, on developing and sustaining the greatest people around and on making sure that the country is run effectively, efficiently and fairly.

So rather than bore you with the line by line criticisms of the Swan Dive or Belly Flop (yet), I’ll have a go at a strategy. Back soon.

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