So how much is where we’re from to blame for our ‘slow sell nation’?
It’s fun, if not enlightening, to check out the different immigration paths of NZ and the US.
[This post is the 2nd in a series on the 'slow sell nation' - see part 1 Good makers, poor marketers]
In his book Outliers, Malcolm Gladwell talks of the power of cultural legacies. “It is only by asking where [successful people] are from that we can unravel the logic behind who succeeds and who doesn’t.”
And that can mean going back a long way.
Gladwell looks at the success of Jewish men in the tough, anti-Semitic environment of the New York law fraternity mid last century.
These often rough hard men, the sons of poor Eastern European immigrants, ended up running the city’s leading law firms and amassing billion dollar fortunes.
Unlike the Irish and Italians immigrants, who were in the main impoverished peasants and tenant farmers in the Old World, the Jews were people of the cities.
According to Gladwell 70% of Eastern European Jews who came through Ellis Island immigration centre in the 30 years before WWI had some kind of occupational skill or owned stores.
They arrived in the US at a time of opportunity, but they had the skills, including an understanding of commerce, an ability to sell and an inclination to work like crazy to take advantage of these opportunities.
Some made it rich in their own lifetime, but many families had to wait a generation for these virtues to pay off.
They’re traits that were also on the Pilgrim’s first ship, The Mayflower. The ship’s short manifest included tailors, a merchant, a doctor, printer and people of learning.
One of the early Pilgrims wanted to create a colony “as a city upon a hill”.
New England went on to become a centre of learning, commerce and trade.
So we come to New Zealand – who are our immigrants and what’s their cultural legacy?
Famously our dream was not “a city upon a hill” but to become “Britain’s farm”.
Wave after wave of immigration to this country was to fulfil this ideal. We had nothing comparable – at least till mid last century – to the commercial heritage of a Mayflower or Jewish Diaspora.
In the 1840s NZ Company agents enticed mechanics, gardeners and agricultural labourers from southern England and Scotland by offering free passage.
According to historian Jock Phillips:
“A third of the adult men were farm labourers, and another two-fifths were ‘mechanics’ – traditional rural craft workers such as builders or blacksmiths. These skilled rural folk looked to New Zealand to fulfil dreams of independence through land ownership. There were few industrial workers or even clerks.”
And after provincial governments took over attracting immigrants in the mid 1850s, agents were still instructed to go after agricultural labourers and builders.
My recollection of NZ history is that Maori quickly and easily shifted into European mercantilist mode and may have developed into a real commercial force if it wasn’t for having the stuffing knocked out of them in the land wars.
In the 1900s farm labourers were still in demand along with businesses wanting skilled workers, and middle-class families wanting domestic servants, says Phillips.
And so it was till WWII when “about 1,100 escapees from Hitler, mostly Jews, were accepted (many fewer on a per capita basis than the numbers taken in by the United States and Britain). Of those who came, many made distinguished contributions to cultural and business life”.
The change of focus continued with the 1947 immigrant assistance scheme which saw 100,000 come to NZ over the next 30 years, mostly city people with industrial skills.
BTW – my father, an agricultural worker, snuck in under this scheme.
The 1970s saw the start of an influx of unskilled Pacific Island immigrants. The other more recent significant shift away from serving “Britain’s farm” was the Asian immigrants of the 1990s who were, as Phillips says, educated and comparatively wealthy.
So (for the moment ignoring the recent past) that adds up to a powerful “cultural legacy” that’s not really in tune with the modern international market place that rewards commercial nous, skill in spotting business opportunities and salesmanship.
I think we are still working our way through this legacy (one of growers, not sellers), but the legacy of the more recent past offers hope.
Cyclist Lance Armstrong’s been on BigCake’s mind a bit lately.
Firstly watching him in the Tour of California. He’s no longer a force of nature clamped on to some carbon and two wheels, but you always look out for him in the same way you follow Michael Schumacher around the race track, Maradona in his final playing days or Carlos Spencer around the rugby field.
The shadow of greatness is hard to lose.
Then fellow US cyclist and former friend Floyd Landis revived allegations of Armstrong’s drug taking and then he crashed out of the tour.
Mastering the obvious, ESPN points out: “Safe to say, Lance has had better days.”
Like a bike crash, the drug cheat allegations are not new.
But what BigCake is mostly thinking about is Armstrong’s book It’s not about the bike spotted on the bookshelf while hunting for another book.
He’s always thought the title was a play on the old cyclist fixation on the bike – how much did it cost, what technology, the brand, how light, now rigid, does it look good? When ultimately it’s about the rider and the quality and quantity of the work he/she puts in.
And this sort of struck a chord around Budget time because it’s true of economies also.
Countries like Singapore have crap bikes, but have clever and focused riders who are willing to put in the hard yards.
New Zealand’s got a pretty slick bike, and though a bit old, it has features that are coming back into fashion. However the riders are a bit all over the shop in tactics and commitment.
Then as BigCake sat down to write the story, and think more about the book’s title, he saw another message:
• Material things ultimately don’t matter, even objects that you’ve spent so long on they’ve pretty much become an appendage to your body. Life is most important – your health, your family, friends and the people around you. The book of course concerns Armstrong’s successful battle with cancer, hence the book’s subtitle you don’t really notice “My journey back to life”.
Not incidentally, Armstrong “a kid with about four chips on his shoulder” saw bike riding as an escape from a troubled past and American suburbia. Doctor’s little helpers may have helped propel him along the way, and it is suggested into the cancer ward.
Like Armstrong, BigCake is a bit inclined to see everything as a race or competition, for example the world economic bike race for the title of world’s wealthiest nation…’New Zealand once again leading the world, rider and bike a taut supercharged machine.’
But then would we end up like Lance, awakening to the deeper message?
How you get there matters.
This ring a bell? “And even if many …now recognise what needs to be done to change direction, it still takes large amounts of courage, luck and strength to find a better path.”
The quote’s from Financial Times trade editor Alan Beattie’ book False economy – A surprising economic history of the world, (I’ve posted on this book before), and BigCake thinks it sums up the Government’s predicament with yesterday’s Budget.
Beattie was talking about a thing called “path dependence” where societies and economies can consciously or unconsciously head down the wrong route and “get stuck there”.
And it can be bloody hard to get out.
“…choices are conditioned on the decisions that others have made in the past.”
What’d be New Zealand’s “path dependence”? They don’t have to be bad. How about:
• Our geographical isolation
• British heritage
• A stroppy but insecure culture
• Laid back
• Can do attitude
• Egalitarian outlook.
On the economic front, maybe:
• Lack of ambition
• Short-term approach
• Stickability
• Optimism.
The above, and the powerful historical legacy of the easy commerce of being Britain’s farm, put this country on its current path. We’re now caught in the middle of wanting to be a 21st century economy and thinking like it’s still 1952.
These realities are the roadside barriers that push us in certain directions.
The decisions that got us to this point weren’t necessarily bad, but maybe wouldn’t have been taken if the politicians knew where they’d lead. Examples would have to be Muldoon’s axing of a compulsory super scheme in 1975 and the level playing field mantra of the 1990s.
There’d be others depending on your politics.
Anyway, a great example of how difficult it can be to reverse an obviously crap decision is the QWERTY keyboard. It’s rubbish layout, but it stuck because it got established and no one was bothered enough to push for an alternative.
As Beattie says, inertia has a lot to answer for.
Shifting from one system to another, he says requires co-ordination and a willingness to accept short-term losses in return for longer-term benefits.
And that really sums up the Key Government’s Budget calculation – ‘Can we survive some short-term political losses of doing what needs to be done to shift our economy onto a better footing, and do this on the promise (and uncertainty) of longer-term benefits for the economy’.
Ummm I think the answer they came up with was ‘a bit’. (A good bit in turned out). They showed traces of strength and courage which will put the country on a better path, but we’ve still pretty much got a QWERTY economy.
There’s always luck.
Richard Florida’s new book “The Great Reset” has a vision for a post Global Financial Crisis world based on a “fresh era of growth and prosperity”.
Florida (famous for The Rise of the Creative Class and the business empire built on the book) says this will offer “surprising opportunities for each of us”.
One of the early topics that interested BigCake was one he called “What future?”
Some of it can be seen in content around the need for a balanced view of where we’re at, and heading to, as a nation as opposed to narrow income-based measurements. Also around things like the need for more ambition, the clean and green future…
A concept that appealed was the “resilient economy”, expounded by Jamais Cascio, one of Foreign Policy magazine’s Top 100 Global Thinkers of 2009.
“Any economy that enabled the creation of institutions that were too big to fail —that is, whose failure would threaten to collapse the system,” Cascio says “could never be thought of as resilient. And, as the early 21st century rolled along, resilience is what mattered, in our environment, in our societies, and increasingly in our economics.”
I see the Fabians have also picked up on the idea.
Anyway, back to Mr Florida and his future vision.
In an interview with the Atlantic magazine, he says he tends to be an optimist. “If you look at past crises—like the one in the late 19th century and the one that came with the Great Depression—they tended to last about 20 years from beginning to end. But most importantly, these are periods of great technological innovation, and they’re periods in which our economic geography gets completely and massively shifted.”
Promoting his book on his Creative Class website, he says among the forces he sees behind the next lot of shifts will be:
• New consumption patterns and new assumptions about “ownership” that are less centered around houses and cars.
• New forms of infrastructure that speed the movement of people, goods and ideas. Broadband figures big time here.
• A radically altered and much denser economic landscape organized around megaregions that will drive the development of new industries, jobs and a whole new way of life.
You get some ideas of what all this might mean in the Atlantic interview where he says he thinks it’s a waste to spend money on building bigger roads. “But it would be worthwhile building smarter roads, pricing our roads effectively and making some smaller changes in building regulations and zoning codes”.
Regarding housing, he asks: “How are we going to grow if people are forced to spend the largest share of their income on this product that isn’t really contributing to economic growth? And how we shift to much more rental housing could be part of that conversation” He suggests homeowners are a “little bit more miserable than renters”.
And on an altered landscape, Florida asks: “Who would have thought 150 years ago, when more than 50 percent of Americans worked in or around the agricultural sector, that those people could be absorbed and have higher incomes and live more productive and prosperous lives in cities? I think the same kind of phenomenon holds true today. My hunch is we have enough knowledge to build denser cities and mega-regions while preserving more of our natural spaces and becoming a greener, more sustainable nation across the board.
“This can happen if we give it some thought. We just have to understand that our urban, our geographic pattern is what really sets the conditions for growth.”
BigCake doubts it’s that easy, but it does fit the ideas in yesterday’s post that we need to cast a wider net in our search for ways out of our economic rut.
That’s a Kiwi by the way. (The one on the right by KIWIdesign) Cultural legacies matter in a whole lot of ways, including in business.
I’ve been reading (belatedly) Malcolm Gladwell’s book Outliers which looks at the nature of success. In it Gladwell writes:
“Cultural legacies are powerful forces. They have deep roots and long lives. They persist generation after generation, virtually intact, even as the economic and social and demographic conditions that spawned them have vanished and they play such a role in directing attitudes and behaviour that we cannot make sense of our world without them.”
These legacies can be good and bad.
New Zealand does have some great ones that make doing business here, in some ways, easier than other countries. We’re mostly incorruptible, like to get on with the job, get stuck in etc.
Our non-conformity means we look at problems differently and we have a low PDI (power distance index – hat tip, Gladwell) which basically means we don’t take sh!t from authority figures.
But there’s also some bad stuff.
The Government’s Chief Science Advisor Peter Gluckman this week started a list:
• Our egalitarianism leads us to avoid a focus on intellectual activity
• The seduction of our misplaced national mythology – “number 8 fencing wire”, “punching above our weight”, “we think we are innovative”
And these, he suggests are hand me downs of the “post war period of protectionism and farming for Britain at a time when commodity was king and in that time we built up an almost untouchable pattern of high social spending so that shifting expenditure towards productive areas with long delays before return, such as RS&T, is difficult…”
This is the recent past. As Gladwell says, cultural legacies have deep roots (though as far as Pakeha in New Zealand are concerned that’s relative).
So have a look at who’s shaped our present-day economy:
• Whalers and sealers – tough, independent, adventurers and who probably mostly buggered off
• Maori – initially did well then got screwed
• Soldiers – in the mid 19th they were about 10 percent of our population. Anyway people who did as they were told
• Gold miners – same as sealers
• Farm workers from southern England – uneducated, hardworking, practical
• Irish – same as above but they could sing and dance.
NZ Trade and Enterprise last year commissioned a study on the impact on business of all this legacy stuff.
It’s basic finding was that Kiwis are “highly individualist, egalitarian, reserved, adventure and discovery seeking, and have a short time horizon”.
Hah, sounds like BigCake.
And the effect on our business culture of all this?
• We opt for leisure over work much more quickly than other countries – the bach, boat and BMW attitude of many of our small businesses. “Paradoxically, as a result of mediocre economic performance we find ourselves forced to work longer and longer hours just to stand still.”
• We have a Kiwi-centric view of the world. “That results in us being judged as being quite different to how we think about ourselves. We quickly resort to contracts and combined with thinking for our customers we can be seen as inflexible with a take it or leave it and she’ll be right attitude and more interested in the immediate transaction rather than building the long-term relationships favoured by many trading partners.
• DIY, including not delegating and holding ownership tight
• Tall poppy syndrome where we’re too scared to stick our head above the parapet (urrgh!)
• Self deprecation – we sometimes don’t realise the significance or importance of what we have just invented or made.
Given all this, and our distance from markets, we do pretty bloody well.
One of BigCake’s tired old questions: How come New Zealand has some of the best indicators of strong economic growth in the world (tops for protecting investors and lack of protectionism, 2nd ease of doing business, 3rd economic freedom) yet our results are so bad?
Following up on yesterday’s post about economists’ “stickman” view of the world, Harvard economist Dani Rodrik has helped make sense of this.
In an introduction to his book In Search of Prosperity, he starts off with more questions that challenge “stickman” economic orthodoxy.
• How has China managed to grow so rapidly despite the absence of fully edged private property rights?
• How did Indonesia manage to grow over a 30-year period despite weak institutions and highly distorted microeconomic policies?
• Why do the Philippines and Bolivia continue to stagnate despite a sharp improvement in their “fundamentals” since the 1980s?
The usual answer to BigCake’s question is that we haven’t gone far enough with the reforms of the 1980s and 90s and some of the best bits were eaten away during the last decade.
There are elements of truth to this, but the answer goes nowhere near explaining where we are now, and how we got here.
Rodrik tracks the problem back to the standard economic thinking.
He says the usual approach of economists when looking at a nation’s income levels is to look at :
• Resource endowments/accumulation (eg. labour, physical capital, human capital)
• Productivity (how these endowments are deployed).
He says you have to be careful interpreting this information because they are all tied up in each other (in geek speak endogenous).
I’m paraphrasing again here (so apologies to the prof. if I’ve got this wrong).
This, Rodrik says prevents us making meaningful interpretations of any isolated part of the growth equation.
“For example, observing that 80 percent of the growth is ‘accounted’ for by accumulation and the rest by productivity does not tell us that growth would have been necessarily 80 percent as high in the absence of technological change; perhaps in the absence of productivity change, the incentive to accumulate would have been much lower and the resulting capital deepening significantly less.”
“Indeed …the causality may well run backwards, from growth to accumulation and productivity instead of the other way around.”
So, he says it is best to think of accumulation and productivity change as close determinants of growth at best.
I’ll post soon on what Rodrik says are the things we should be looking at.
Following up the importance of education in a globalised world mentioned in a previous post (Globalisation helps find the cure for cancer…) here’s Richard Florida with an interesting question about education and entrepreneurship:
Why were Bill Gates, Steven Jobs and Michael Dell, he asks starting their businesses in their spare time in their garage or dorm? “Why isn’t the education system structured so that this kind of activity is the very goal?”
Talking about his latest book, The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity (out next month) Florida says:
“We’ve mythologized the histories of entrepreneurs such as [Bill] Gates or Steven Jobs or Michael Dell, constantly retelling the stories of these go-getters starting new businesses in their dorm rooms or garages in their spare time.
“Yet nobody ever asks the obvious question: Why were they doing those things in their spare time? Why isn’t the education system structured so that this kind of activity is the very goal?
“Humans have always essentially learned by doing.
BigCake: Kiwis have a good track record here. The majority of the big innovations in the agricultural sector have come from outside the formal education/research establishment.
Florida says: “The idea that school is the only, or even the main, source of education is a relatively recent development.
“We need to understand that classroom education is merely one phase of a continuous process of learning, discovery, and engagement that can occur anywhere and anytime.
“We need a learning system that fuels, rather than squelches, our collective creativity.”
BigCake is not sure where this post will take him, but he’s gone through the list of the top 500 billionaires in the 2010 Forbes billionaires rankings to see how small countries like New Zealand fare in terms of numbers and wealth of their most deep-pocketed citizens.
(There are actually 1000 people on the full Forbes list).
So…
• New Zealand (population 4.4 million) has two billionaires ranked in the top 500 – 144th and 307th
• Lebanon (4.2m): two – both ranked 374th
• Ireland (4.6m): one - 421st
• Norway (4.8m): one – 437th
• Israel (7.5 million): five – 109th, 277th, 287th, 463rd, 488th
• Switzerland (7.8m): two – 197th, 232nd
• Austria (8.4m) two – 189th, 307th
• Sweden (9.3m): six – 11th, 13th, 40th, 123rd, 316th, 488th
• Australia (22.2m): five – 208th, 316th, 400th, 437th, 488th
BigCake may be playing quick and dirty with these numbers, but a few things stand out:
1. New Zealand does okay (1 billionaire in top 500 list for every 2.2m people).
2. We do better than countries that are a lot richer than us in terms of total national wealth, for example Ireland, Norway, Switzerland and Austria.
3. We do better than Australia (1 billionaire per 4.4m people)
4. Meanwhile, Israel (1 per 1.5m) and Sweden (1 per 1.55m) are over achievers.
As I say, these numbers may ignore issues like total country wealth, the wealth of the individuals on the list, and others things I‘m probably not even aware of.
When I approached this exercise I thought New Zealand would do badly, at least worse than Australia.
We don’t have (Fonterra aside) any international scale businesses. There are no Microsofts, Berkshire Hathaways, Reliances, Mittals or Oracles that drove the wealth of Bill Gates, Warren Buffet and others at the top of the Forbes list.
If you look at our top 10 companies, there are:
• Four oil companies (all overseas owned)
• Two co-operatives
• One Australian-owned supermarket
• One company majority (76%) government owned (Air New Zealand)
• Two listed companies.
Some only have total assets of around $NZ1 billion. [Source: Deloittes Top 200]
It appears our our small market is career limiting for would-be billionaires.
If you look at where our two Forbes entries made their money, you’ll see it was overseas, Graeme Hart through his global packaging empire and Richard Chandler, who according to Forbes, made his fortune in Brazil, Japan, Russia and India.
BigCake also wonders, looking at the Israel and Sweden results, how big a role culture plays in wealth creation.
Resorting to google, he found this by Francis X. Hezel on the Micsem website:
“Why do some countries do very well, while others fail to develop, even when all the requisite economic factors seem to be in place?” Hezel asks.
And BigCake would also ask: Why do some countries do very well and others just ummm, do well?
Hezel says the usual explanation is the need for a stable political system, clear laws, no corruption, foreign investment and appropriate business procedures.
“There may be something to be said for this list, but it still doesn’t deal with the more fundamental issue of how culture impacts on development. Why do some ethnic groups do so well in business that they leave others in the dust…”
Gregory Clark in his book Farewell to Alms maintains the usual list of things needed for strong growth (laws that work etc) “were the necessary but not sufficient conditions for the economic take off Britain experienced when new sources of power were harnessed,” Hezel writes.
“They did, however, lead to the gradual development of precisely that set of deep cultural changes, especially a sense of competitiveness and a strong work ethic, that was required if sudden technological breakthroughs were have to have any real impact on the society.
[Looking at industrial mills] “it was people and the values they had absorbed over the years, not the power-driven mills or any other form of advanced technology, that had made the difference.”
Hezel was writing about differences between developed and under developed countries, but BigCake believes the same argument applies at the margins for developed countries.
Some peoples, and people, are just more competitive and have a stronger work ethic than others.
There’s probably not much that can be done about this.
What we can do something about is how we react to those among us who have these traits . Do we encourage and foster our would-be, and actual, billionaires?
Or, as BigCake suspects, is the tall poppy syndrome still going strong?
This is a tale of two countries that are neighbours, have British heritages and agrarian backgrounds.
One is rich and set to get richer, the other virtually static in the wealth stakes.
By 2025 the rich one will still be ahead.
Sound familiar?
Well actually I’m talking about Botswana and Sierra Leone.
Financial Times trade editor Alan Beattie, in his book False economy – A surprising economic history of the world, points out that countries with similar histories and natural endowments can perform very differently.
(I’ve blogged on this book a few times before. Book finished so think this is the last).
Beattie’s observation above is the bleeding obvious, but what is interesting is the why.
Forty years ago both Botswana and Sierra Leone were low productivity agrarian societies. Both had poor education levels, but lots of diamonds.
Today Sierra Leone is one of the poorest nations on earth; Botswana, in the last third of the 20th century, had one of the fastest growing economies in the world, faster than the US, South Korea or Taiwan.
According to Morrison and Co calculations, by 2025 Botswana will be ahead of New Zealand (assuming we continue our business as usual course) in the international wealth stakes (33rd to our 47th).
Beattie points out that, what at first sight looked like an economic millstone for Botswana, proved to be a crucial difference between the two countries.
Botswana’s diamonds were hard to get at while Sierra Leone’s were pretty much lying around. The former’s diamonds were extracted by international capital (diamond giant De Beers) while the latter’s were looted by gangs of armed thugs.
Anyone could get at get at Sierra Leone’s diamonds, while extracting Botswana’s required investment and a stable authority.
And that is basically what Botswana got, defying its own history and the history of other African countries.
As Beattie says, geography and history are not destiny.
“Africa has been dealt a poor hand, but for the most part it [Botswana excepted] could have played it a great deal better.”
How did Botswana pull this off? It was not because the country was “spectacularly lucky,” says Beattie but because it followed the right policies and had better politicians and political institutions.
How did it get these? Mostly it seems by having the right people in the right place at the right time.
The country’s first post-independence Government got a revenue sharing agreement with De Beers, set up a national fund for the distribution the diamond wealth and implemented a sensible national development programme.
Botswana’s first president Seretse Khama, was says Beattie “one of the few truly great leaders of post-independence Africa”.
Yeah, so leadership matters, but maybe it matters the most when the chips are really down.
New Zealand is not there yet. We’re suffering from a wasting disease rather than something imminently fatal.
Technological change made New Zealand a rich country.
We sometimes think that it was our natural resources – our fertile land and temperate climate allowing us to grow stuff more efficiently than anyone else – that took New Zealand to the top of the world wealth rankings.
But it was technology, mainly the introduction of steam-powered ships in the late 19th century.
All our meat and dairy products are not much use if you can’t get them to market.
Since the steam ship we’ve pretty much missed the boat on other technological and trade revolutions.
Financial Times trade editor Alan Beattie in his book False economy – A surprising economic history of the world, (I’ve blogged on this book twice before), says steam ships were game changing.
They were certainly game changing for a country like New Zealand, far from its markets.
“One of the most frustrating aspects of sea transport before steam power was not the time but the uncertainty. Wind power is weaker than steam but it is also far more variable,” Beattie says.
But nature was not the only variable. I found a New Zealand Yesteryears account of the five-month-long journey of the sailing ship Adamant from England to New Zealand which included ‘[wandering] erratically backwards and forwards across the heaving Atlantic at the whim of a drunken captain – a captain who was to drink himself to death before the voyage was over”.
The Adamant also ran aground off the coast of Brazil, encountered icebergs, ran short of provisions and faced mountainous seas and dead calms.
Beattie says steam-powered ships, along with the opening of the Suez Canal utterly changed the pattern of long-distance shipping. Costs and shipping time fell.
In the days of sail, New Zealand economy depended on gold and other extractive type ventures, wheat sales to Australia and wool.
Steam-powered ships, combined with the innovation of freezing meat and dairy produce, changed all that and gave New Zealand the opportunity to make the most of its natural resources.
So technology matters heaps.
