Personal favourites for 2012:
- The Lego men
- The jami army
- The Monopoly set (post GFC).

So what is it that drives this year-on-year leap in standards of creativity and innovation among fans? Off the top of my head:
- Competition – wanting to stand out in the crowd when everyone else is trying to do the same thing. This is huge.
- Brand – Wellington sevens now have an incredibly strong brand which organisers have nurtured. The punters buy into it.
- Learning – the power of observation. What worked last year (well, what’s remembered); what am I up against this year?
- Time – where do people get the time to do this stuff?
- Fun – big time.

And most of this happens while the fans are sober.

Finally I don’t think it’s about money. The above are more important.

Organisations should look at the Wellington sevens when they consider ways to increase their innovation and creativity.

One of his ideas is to make NZ a place “where talent wants to live”. James Cameron’s decision to move to the South Wairarapa I guess is a big endorsement of the idea.

Callaghan is deeply sceptical that our economic salvation will come from squeezing more out of current big ticket foreign exchange earners such as commodity agricultural products, natural resources and tourism.

Our wellbeing, he says rides on how well we can create a knowledge economy, one based on high earnings per worker. Callaghan’s well-worn example is that a McDonald’s worker produces US$9389 of value to the company; an Apple employee creates US$1.3 million.

So we need to create more jobs in ventures that generate high levels of wealth off relatively low levels of investment in raw materials, bricks and mortar and other increasingly scarce resources.

In the long run he’s right. But what happens in the meantime?

The trouble with knowledge-based businesses (in NZ at least) is that they take forever to reach a size that’ll register on the overall level of national wealth.

Fisher and Paykel Healthcare, which has been around since the old parent company entered the respiratory care market in 1971, is only just approaching $500m in revenue

Forty years to hit half a billion by one of the brightest stars on NZ’s business stage.

We haven’t got this much time to sit around and wait for the knowledge-based economy get some traction.

By the time it does, at our present rate of falling behind in wealth, we won’t be a place, where “talent wants to live”.

Talent will largely shun us for the same reason it shuns other Pacific paradises – the infrastructure is way too bad, the schools poor and healthcare good only if you can afford it.

To avoid this we need businesses that can generate more wealth if not now, in the next few years.

And that I’m afraid is more cows, mining, oil exploration, tourists…

How we do this is important because I think Callaghan’s idea of creating a country where “talent wants to live”, though very likely elitist, is a good way of figuring out ways through the maze of our economic choices.

Just ask: is it good for talent?

The assumption of many would be that mining ain’t. For sure our clean and green environment is a big talent drawcard, but we need more wealth to maintain that environment.
It’s the poorest countries that have the worst environmental records.

And supporting talent costs money, lots of money. It requires capital, R&D infrastructure, quality education facilities, real broadband…

Finally living in a “poor” country is a turn off.

This isn’t an argument to do nothing. Our natural resources are finite, and some shouldn’t be touched. But some could be if the benefits to NZ outweigh the costs.

We do need to be laying the groundwork for creating a knowledge economy by being clever about how we encourage talent to stay, and new talent to call NZ home.

Critical failure/commercial success.

How about the other way around: critical success/commercial failure? Try the NZ economy.

We’ve got another accolade from the experts – NZ has been declared the 6th most creative country on the planet. This award can now go on to the mantelpiece alongside top placings for ease of doing business, lack of corruption and protection for investors.

The creativity gong is just another jarring economic honour at odds with our real world wealth ranking of 32nd, like below the Bahamas, Slovenia and Cyprus, but ahead of Greece (just).

This is not to rubbish the idea that creativity,and all the other things we are good at, are not important when it comes to generating wealth, but as mentioned in my last post, something’s obviously missing.

The Global Creativity Index (GCI) is the work of the Martin Prosperity Institute, a think tank that looks at the role of non-economic factors in economic prosperity. The index measures:
- Technology savvyness
- Talent and
- Tolerance – openness to new ideas.

The numbers behind NZ’s 6th placing were: 19th in technology, and 5th and 4th respectively for talent and tolerance.

The Institute says its creativity study found “found great correlations between creativity and economic progress, human development and happiness…”

Our wealth, the Institute comments is “slightly lower than [our] GCI scores would seem to warrant”.

The GCI top 10 were:
Sweden
US
Finland
Denmark
Australia
NZ
Canada
Norway
Singapore
Netherlands

The Institute says the economic crisis has “brought us face-to-face with the fact that unbridled economic growth does not necessarily equal sustainable prosperity. Economists have been seeking fuller frameworks and better metrics with which to evaluate the underpinnings, as well as the path, to longer-run, more sustainable prosperity”.

It believes the GCI will help “shift the dialogue from a narrow focus on competitiveness and growth to a broader focus on creativity, prosperity and well-being”.

Check out my 18 December, 2011 post on the merger of the NZ Institute and the Business Roundtable on why the choice of lens (narrow or broad) is important in NZ.

Not so fast says Tony Smale of Forté Management in a MBA paper identifying the gap between our high inventiveness, but low conversion rate into profits and prosperity.

As opposed to the usual look at failures of government, laws and organisations (yawn) as culprits, Smale blames shortcomings in our national culture. Essentially our thinking and behaviour gets in the way of making the most of our many good business ideas. [See BigCake’s “About”]

Smale says the challenge of fixing this issue is exacerbated by migration.

Basically people leaving NZ have aspirational wealth objectives that NZ can’t fulfil; many of those coming the other way are more interested in lifestyle than wealth creation.

So (generalisation supported by anecdotal evidence) we’re shedding people we can’t afford to lose and replacing them people we’ve already got enough of.

Our wealth creation ability is being gradually watered down.

Anyway, back to Smale’s main point about national culture and its failings. It’s an impressive/depressing list:
- Self reliance and individualism
- Suspicion of specialists
- NZ-centric thinking
- The need for control
- Short termism
- Undervaluing relationships
- The tall poppy syndrome
- She’ll be right
- Making lifestyle the primary driver of being in business.

“In summary, our unique culture means that we Kiwis are very good at DIY “make and use” but not so good at “make and sell”.

Check out the culture tag for more on the above.

Much of this stuff is embedded in our national self image, so is not easy to change.

Self awareness and self improvement are perhaps the solutions. Acknowledge what we are not good at and then work on it.

Stop bullshitting ourselves.

HT – Tony Alexander for pointer to Smale’s paper.

Re 1) there are many seriously overweight people. The Health Waikato report Obesity, diabetes and fast food – the impact of marketing to children says about a quarter of our population.

Re 2) it’s no use, in an attempt to get these people to lose weight, telling them that they are killing themselves or making themselves ill – they know this already. There is no inverse relationship between weight and intelligence.

There are parallels here with smoking and also examples from battles with big tobacco on how to reduce our junk food intake.

The obese mostly don’t eat too much or exercise too little because of an information gap, though a lot of anti-obesity campaigning seems unaware of this. You don’t need a red traffic light to know a cake is not as good a choice as a stick of celery.

Three things determine your weight: human biology, what you eat and how much you exercise.

The current obesity epidemic is down to too much eating and too little exercise.

To be fair to health campaigners, they’re on to the second part of this equation – encouraging more exercise.

But the first part looks intractable. Put your money on McDonalds and Coca-Cola to win.

Rosenberg, in “Join the Club”, writes that the battle to cut teen smoking in the US had reached a similar juncture in 2000. “Teen smoking was rising and rising, impervious to governments’ best efforts to block it.”

Scaring teen smokers didn’t work.

But some states (notably California and Florida) managed to find ways to defeat the tobacco companies. They did this not by telling teens they were killing themselves (they knew this, but figured it would happen in some unreal distant future).

Instead the two states made the tobacco companies a target.

Rosenberg writes that Paul Keye, the advertising guru who designed a California anti-smoking campaign, believed the smoking epidemic happened because tobacco companies poured millions of dollar a day into encouraging people to smoke.

And tobacco companies were very clever in how they spent their advertising dollars and marketed their products.

The Health Waikato report makes the same argument about fast food and other junk foods. It says that in 2007, fast food companies spent $12.94 per person on advertising in New Zealand.

Keye “retriangulated” the argument. Instead of smoking being parents v children, teachers v pupils, healthy v risky argument, he made it tobacco companies v the rest. They made tobacco industrial complex a character – a deeply ugly, avaricious, unappealing one. By smoking, you were being their dupes.

Some of the ads resulting from this insight are brilliant.

One had a tobacco industry “spokesperson”, in a smoke-laden boardroom, saying we’ve got a multi-billion dollar problem. “We need more smokers.” They are dying out faster than we can replace them.

The campaign worked well on its target market, adults. Adult smoking plummeted; teens (usually are the ones that start smoking), not so much.

But better was to come.

Florida picked up on California’s lead, building on the idea of creating a conversation with teenagers.

It staged a Teen Tobacco Summit attended by teenagers. They were unimpressed with traditional anti-smoking ads, but outraged by corporate documents showing how tobacco companies targeted teenagers as “tomorrow’s cigarette business”.

The resulting ad campaign was dubbed “truth”.

So the kids (who were in charge of the creative side) again went after the tobacco companies with ads saying we’re smarter,faster and younger than you and we don’t like being manipulated and lied to.

They riffed Michael Moore. In one TV ad, teenagers went to Philip Morris’s HQ and asked to speak to the Marlboro Man. The security guard told them he was dead. He’d just died of lung cancer.

In another, a Lucky Strikes advertising account person was asked what was the lucky part of Lucky Strikes? The advertising person says “I really have no idea” to which the teen says (to laughter in the background) “Is it because I might live?”

These ads never said “Don’t smoke”.

In the decade to 2007, Florida’s high school smoking rate was halved, even though the teen-led campaign’s budget had been slashed in later years by Governor Jeb Bush.

You don’t need too much of an imagination to see parallels between the behaviour of the tobacco and junk and fast food industries. Profitability, or the case of tobacco business survival, drives them to find new and increasingly clever ways of selling more of their products to the detriment of the health of consumers.

Not saying tobacco and fast and junk foods are equally evil. Smoking should be consigned to being the habit of a loopy fringe; fast food just needs a more balanced place in our diets.

McDonalds and the rest are powerfully motivated, and armed, to prevent this from happening.

So to counter this, how about a campaign aimed at children to make eating fast food “dumb”.

Supersize that? “Are you referring to me or the food?”

The wages of New Zealand’s manufacturing workers have been ranked 18th highest of 34 countries surveyed in 2010 by the US Department of Labor’s Bureau of Labor Statistics.

In terms of total compensation, we come in 20th with Spain and Greece jumping ahead of us because of more generous overall compensation (pay plus things like health benefits and leave).

In dollar terms, the Kiwi manufacturing worker earned an average US$17.29 an hour, rising to $20.57 when all forms of compensation are included.

Best off were workers in Norway whose total hourly compensation was more than double their NZ counterparts – $57.33. Norway was followed by the suspects: Switzerland, Belgium, Denmark, Sweden, Germany, Finland…

Australia came in 10th.

Richard Florida says a simple statistical analysis of the stats shows manufacturing compensation “is closely related to productivity, global economic competitiveness and overall human development along with my own Global Creativity Index.

“And manufacturing compensation and wages are higher in nations with higher levels of education and where greater shares of the workforce are employed in knowledge, professional and creative jobs. In other words, manufacturing compensation and wages rise as nations become more post-industrial. Higher manufacturing compensation is also related to lower levels of inequality and higher levels of happiness.

“Manufacturing workers are paid the best in the most advanced nations, places that boast advanced safety nets, generous benefit systems and high productivity. Post-industrial economies might not have the most manufacturing jobs, but their workers are the best paid. Instead of adopting a low-road strategy of trying to reduce manufacturing costs and wages in order to compete with China or other emerging economies, the U.S. [ummm NZ] would be better off.”

So no surprises with the problem and the solution.

What looks surprising is how poorly Kiwi manufacturing workers fare in terms of total compensation – regular pay plus directly-paid benefits such as paid leave, bonuses, and pay in kind.

NZ manufacturing workers fare very poorly in the latter.

The Department of Labor comments the percentage of compensation that is directly-paid benefits tends to be higher in many European countries (due in large part to leave pay) and in Japan (where seasonal bonuses are a large portion of costs).

“Directly-paid benefits are a relatively smaller portion of costs in countries such as the United States, Australia, and Canada.

“The total benefits portion of compensation costs can be seen by combining social insurance with directly-paid benefits. Total benefits surpass 40 percent in 15 countries.”

In NZ it’s under 20%.

Doubtless some of this gap is due to the state taking on social insurance role employers assume in other countries, but it’s still a big gap.

[See www.theatlanticcities.com for Richard Florida's story]

The ‘merger’ is a public show of a marriage of equals, but usually it’s no such thing.

So who’s going to boss the Business Roundtable-New Zealand Institute think tank merger announced last week?

The answer matters a lot, as much for what it will signify as anything else.

Both organisations are run, and largely funded, by large businesses and business leaders.
But they have almost polar opposite views on what ails the NZ economy and how those ailments should be remedied.

I really don’t have any idea on who will win this battle of ideas, but which camp emerges victorious is important because when the two think tanks join forces in April next year, that’ll be it for NZ business think tanks. Just the one yet-to-be named organisation.

No competition of ideas here.

The media release announcing the merger tries to paper over the wide cracks in world views of the two organisations – “…[they] shared common missions…”, but the reality is they have very different ideas about how to fulfil that mission.

For BigCake, the Institute’s world view somehow clicked. The BRT? Not so much.

While the former has been willing to reach out as it sought to identify the country’s economic ailments and identify remedies, the BRT has too often been stuck in a sterile late 20th century rut. The Institute has been more alive to the realities and possibilities of the early 21st century.

Not that the BRT is dead wrong, but its instinct is to treat a patient only for a cold when the patient has in fact more serious, complicated and harder to treat illnesses.

To give you an idea of the differences, here’s a selection of key words from each organisation’s “About us” pieces.

BRT:
- “Its major concern is with the quality of New Zealand’s public institutions and policies…” (They talk in the third person).

- “It supports the concepts of individual responsibility and choice, competition, entrepreneurship and risk-taking as vital to achieving economic and social progress.”

NZI:
- “…[is] committed to generating ideas, debate and solutions that will improve economic prosperity, social well-being, environmental quality and environmental productivity.”

“[NZ’s] challenges won’t be met by recycling the same old solutions. We need new solutions and new ideas. We need a new generation of thinking.”

Hence the BRT’s current projects include: education reform (notably school choice), welfare reform, support for privatisation and regulatory reform.

The NZI’s include: improving social outcomes, global engagement, the weightless economy, innovation and climate change.

Chalk and cheese.

It could be argued the new organisation could carry doing all these pieces of work, but they flow from fundamentally different views of the world so it’s hard to see how it would work.

Who’s going to boss the kiss?

To admit to the existence of a middle position – grey, neutral or comfortable decrepitude – is too boring to contemplate, or at least unload on an audience.

But as far as the economy goes, no man’s land is where we’ve been stuck for as long as most remember and rationally you can’t really see this changing.

Not that NZ First leader Winston Peters for example sees it this way.

Winston says we’ve got “two prospects. One is a serious recovery to being the country we always could have been these last few decades, or our decline is permanent”.

If you think Winston shouldn’t be taken seriously, how about this from Michael Enright who co-authored Upgrading New Zealand’s Competitive Advantage back in the 1980s with Michael Porter.

“One scenario is that the world turns to New Zealand,” he said. “The traditional advantages: the strong government, the strong education, the business openness and friendliness all provides a strong base.

“The non-traditional advantages: the technical capabilities, the Kiwi ingenuity, the sustainability focus, the resource utilisation, the quality of life as a competitive advantage, those all become more important.

“Then the growing Asia-Pacific markets provide a ready outlet particularly because New Zealand is complementary, not directly competing with those economies.”

Sounds good, but alternatively:
“…distance still matters, size still matters, the not being quite as advanced in infrastructure matters and the non-traditional advantages are interesting, but they’re at the margins and insufficient to overcome the disadvantages.

“The growth in the Asia Pacific markets provides a huge opportunity, but only for capable Kiwis to get up and move there to Hong Kong and Singapore and Shanghai.

“The same IT technologies that linked New Zealand ever closely to the world create winner-take-all markets and… can’t the rest of the world use exactly those same avenues to absorb what’s good here and take it away?”

Ugly. But a more likely course – at least judging by history – is we’ll avoid both disaster and success.

Throughout the region exporting companies dominate the index – four of the top five; seven of the top 10.

However, in the top 10 two of the three non-exporters are Kiwi companies – Powershop (6th) and 2 Degrees (7th). Well done guys, but it’d be better if an exporter took your place.

Digging deeper into what must be acknowldged as being a strong Kiwi showing in the index, you have to go down to the fifth ranked NZ company – Xero (51) – to find an exporter.

For the sake of the wealth of the country, more fast growing exporters please.

For starters this is not true. It’s not as easy as foreign nationals buying land here, but it can be done.

But even if it was true, so what? It’s not access to Chinese land that we want. What we want, and have got in a greater amounts than any other Western country, is access to Chinese consumers, Chinese manufacturing expertise and Chinese international networks.

A bit of investment wouldn’t go amiss either.

Forget the land. But some people can’t.

Digging into the comments feed on Fran O’Sullivan’s NZ Herald piece on the success of the Synlait Milk’s “Chinese adventure” we unearth:
- “…until China makes its land available to foreign purchase then the answer is NO.” (11 likes)
- “China won’t sell their land to foreigners so putting the xenophobe tag on us makes me really angry. Or aren’t we allowed to get angry, either?” (14 likes)

A poll by the Fay consortium wanting to buy the Crafar farms found 81 % opposition to Chinese buying the Crafar farms, but 75% opposition to sales to Singaporean, Japanese, German and American investors. Sixty seven percent opposed sales to British investors and 54 % to Australian.

Assuming (probably unwisely) that racism is not a factor in these numbers, could it be that China is the outlier because of this mindless ‘we can’t, so neither can you’ attitude.