In some circles (umm okay government) equilibrium in NZ migration is seen as neutral or perhaps mildly positive thing for the economy – the skills we lose through the departure gates we make up for in the skills and international connections of new arrivals.
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.
In Playstation online shooter games, a “camper” is someone who doesn’t head out to find kills, they just wait for kills to come to them.
Among players they are widely ridiculed.
The passivity of the campers is a bit like the New Zealand economy, for example our:
- Lack of investment in international markets
- Transactional attitude to exporting
- Low levels of R&D.
Instinctively our industries and businesses like to sit and wait.
The opposite of camper countries are ones like China, Singapore and Korea. Old economies such as those in Europe have moved beyond a camper mentality because they’ve had to – they can’t afford to lie around and expect things to happen because they are no longer naturally blessed.
Non-camper countries rely heavily on human capital instead.
Not so much NZ, for the moment anyway.
We’ve basically fluked first world status thanks to enough economic opportunities (kills) randomly popping up in our sights; we haven’t gone on marches, launched invasions, set up ambushes or done anything particularly adventurous.
Our strategy is to lie in wait.
Fair dues though – when an opportunity has wandered into our line of fire, we’ve been particularly deadly.
We were gifted some of the best agricultural land around. On the back of this we developed one of the world’s most efficient farming systems.
We’re also sitting on unknown quantities of oil and precious minerals.
Our second bit of luck was being British. It’s hard to imagine any other imperial power being so benevolent to a nation on the other side of the world. And we milked that for all it was worth.
We didn’t invent frozen meat shipments, but we led the world in developing an industry around the technology.
Likewise with a bunch of dairy technologies that allowed New Zealand to become the world’s largest exporter of milk products.
And aerial top dressing was not a New Zealand first, but again we probably made more of it than any else.
The other big kill to wander into the Kiwi camper’s line of fire was war. World War I resulted in a horrendous loss of life, but the war years and the early 20s were a boom period for Kiwi farmers (till they came a cropper with huge debts).
Similarly World War II sparked a boom, as did the Korean War a decade later.
The most recent of the “strategic kills” above are aerial top dressing and the Korean War. Since then I guess tourism has wandered into our line of fire, but that’d be about it.
So camping has delivered us farming, extractive industries and tourism (which again has been clinically capitalised on). Sounds like we haven’t progressed much since the late 19th century.
As Sir Paul Callaghan says, we are poor (at least relative to countries we like to think ourselves the equal of) because we choose to be poor.
Time for a new strategy.
HT – Tom Booker aged 12
Sir Paul Callaghan speaking at Telecommunications Day 2011 last week indulged in some well directed myth busting – saying “some harsh things about the country I love”.
#1. We are an egalitarian society – in income disparity we actually rate very poorly.
#2. We are clean and green – too often we are not.
Sir Paul said something “we do incredibly well in New Zealand is egregious hypocrisy”.
We have protests about palm kernels used for dairy farming but “we kinda forget what we did as a country to our environment. We turned two thirds of our native forests into greenhouse gas…
“Were we wrong to do that? Well we would have had very little prosperity if we had not done so.
“We have to say that is a reasonable use of our resource.
“But I don’t think we have any moral high ground from which to tell other countries – particularly countries poorer than us – what right they have to use their resources.
“We didn’t plant palm oil trees, we planted grass and put a whole lot of animals on it and pumped out more greenhouse gas.”
How many workers does it take to mow a road-side grass verge?
Four. One to mow the grass and three to drive trucks with warning signs to alert approaching motorists.
For sure the driver of the tractor is at some risk on busy highways, but is the danger so high they need such heavy duty protection? Do motorists have such short memories they need three reminders to take care?
When was the last time a vehicle hit a someone mowing a roadside verge?
I’m no expert in the Health and Safety Act that apparently drives this type of behaviour, but the chairman of NZ Society for Risk Management, Geraint Bermingham says in a Dominion Post column (sorry can’t find the link) that the act’s “apparently rational ideas are being translated into what is rapidly becoming an attitude that we must not do anything unless it is ‘absolutely safe’ (even if it is questionable that such a state can exist).
“If we do not quickly treat our own shrinking view of risk taking, we are on the road to paralysis and with it, potential descent into economic decline.”
To fix this Bermingham says we need a “clear sighted view of the future and what we can achieve.
“This means having clear priorities and good planning while understanding the hazards and taking sensible and intelligent precautions.
He says this is not hard and perhaps could tap into “the attitudes that brought humans to these shores”.
We need to be “bolder and more long sighted when envisaging the future”.
Bermingham doesn’t mention the mining and oil exploration debates, but I reckon these comments apply here too. Among the masses there just doesn’t appear to be:
a) any clear priorities – the Green movement and the Government have laid out their polar opposite priorities, but what about the rest of us? Is there a willingness to to make some compromises, as we do in everyday life, between the ‘restrainers’ and ‘expanders’?
b) understanding of the risks – this looks to have been lost in the absolutist nature of the opposition. Exploration, which would give some sense of the value of the other side of ledger, wealth generation, can’t be countenanced by the risk mongers.
c) intelligent precautions – no consideration can be given to these because of b).
Bermingham says that managing risk “requires first a wish to strive for a greater future, and then foreseeing the challenges before boldly taking action.
“It is not about finding reason not to take action.”
The following quotes are both from today’s Sunday Star Times - they come from different fields but say much the same thing about the Kiwi psyche.
“Sometimes Kiwis are scared to say ‘we’re good’. You get a little embarrassed by it and I don’t know why. As a club we’ve accepted that being good is ok.” – Australian Andrej Lemanis, coach of Australian National Basketball League champions, the NZ Breakers.
“We’re such chokers man. We’ve got all the talent in the world, but when we are put in that final situation where you finally step up, we go ‘oh no, f**** that’.” – Jon Toogood, singer, songwriter Shihad.
It’s not particularly productive to beat ourselves up over endearing national traits like modesty and self-deprecation, but they come at a cost, for example an inability to win sports tournaments or seeing luctrative record contracts go west.
This also applies in global business where being a dinkum Kiwi can get in the way of closing business deals.
A NZ Trade and Enterprise report on Australian market perceptions of NZ exporters comments: “The problem is they don’t hear enough from us. New Zealand’s modesty, rather than Australia’s parochialism, is what is preventing us from getting more business in Australia.”
Reports from other markets make similar comments.
Losing our modesty would be a loss – it’s one of the things that make Kiwis stand out in the world and in the right place it is a desirable character trait.
One of the wrong places is the international market place – I’m including sports and music in here.
How do we fix this? One way is to have more successes and then to celebrate them.
And, hey, judging by the post-match joy of the Breakers and their fans, may be we’re getting the hang of celebrating.
Pattrick Smellie has written a great piece in today’s Dom Post – “Nobody wants energy makers as neighbours.” [Sorry no link available now]
Whether it be clean energy (wind, hydro and tidal) or dirty (oil and coal), many Kiwis are saying no.
Something has to give and most of the time, in these energy strapped times, it won’t be the energy makers.
At one level, this post is a bit ‘so what’.
A Kiwi guy, convicted of manslaughter in Tonga in connection with the deaths of 74 people in 2009’s Princess Ashika ferry sinking, is called a “failed NZ businessman”.
Actually, a Stuff story yesterday may have got that wrong. A 2009 Stuff backgrounder makes the man concerned, John Jonesse, look more like a failed salesman, not a businessman in the usual sense of the word – that is an owner or a senior executive.
Jonesse was head of the Shipping Corporation of Polynesia at the time of the sinking, but this role is probably not the source of the ‘failure’.
Also the earlier backgrounder doesn’t make it exactly clear how Jonesse failed, apart from an alleged mismatch between his talk and walk.
So the writer in yesterday’s story, Michael Field, was trying to ‘sex’ the story up – plain old business man or a ‘failed salesman’ was just too nondescript for the Princess Ashika calamity.
Yeah - so what?
Well, the level at which this matters is the writer’s reflexive grab into a journalist’s goodie bag of words and phrases that trigger deep emotions among readers.
“Failed businessman’ is an incredibly loaded term here in NZ. It carries connotations of borderline criminal behaviour, irresponsibility, carelessness and greed.
That’s not totally wrong, but it is wrong in nearly every circumstance.
Most times a business fails, none of the bad circumstances imagined in the Kiwi psyche is involved. [Some finance companies an obvious exception here] Mostly it’s poor planning, shonky internal systems, bad judgement, lack of business skills and sometimes just plain bad luck.
The business people involved are ordinary citizens with a dream, doing the best they can in the circumstances.
In 2009 liquidator appointments were running at 6382.
businesses who, without being too sanguine about it, consider losing money because of a failed client or customer to be a standard business risk.
You try to limit your risks but you are always going to win most, but lose some.
In fact more than a few failed businesses happen because they have been brought down by another failed business. They may have some responsibility for this by being too reliant on a single other business, but like most other failed businesses they don’t deserve being dumped with the pejorative label.
Anecdotally it’s different in the US. There business failure is regarded as scar tissue, almost a badge of honour, if the business person dusts themselves off, learns some lessons and gets back in the saddle.
In NZ not so much. Here business failure is regarded as slightly dodgy.
How much does this cost businesses and the economy? Dunno. Perhaps some good business people (and smarter because of their failure) call it quits after their business goes under because it’s not worth the aggro.
So it’s probably unhealthy. I reckon our economy and our business people would be better served if business failure was regarded as a building block towards business success.
But mostly the Kiwi attitude towards business failure is unfair.
One of the older BigCake themes – well relatively old in terms of this comparatively young blog – has been that there are missing ingredients in our recipe to grow our economic cake.
And mostly I think that these are to be found in the ‘soft’ stuff – our culture, our ambition – rather than the more tangible things like taxes, interest rates, size of government, the so-called formal institutional stuff, that get most attention.
How much tax we pay, how well the Reserve Bank orchestrates monetary policy and the efficiency our public sector are not going to make much real difference when it comes to growing our economic cake. As David Kirk says “…there’s just not enough leverage in that”.
I’d guess this is because we already do well by international standards in the ‘hard’ bits of the economy.
I’m slow off the mark when it comes to buying or reading books from the latest release sections of book stores– just finished Freakonomics (published 2005). Now reading The Return of the Economic Naturalist (2009).
Last year I finally got around to reading The Spirit Level (2009) and Outliers (2008).
In 2011 I vow to read a ‘new’ book.
Anyway one of the more interesting chapters in Freakonomics concerns children’s names – why would a parent call their child Shithead or Loser, which according to the authors has happened.
What chance have these children got in life? Funnily enough Loser did way better than his older brother Winner.
Whatever name is given, the authors say it is a signal of a parent’s expectation of success for their child. “The name isn’t likely to make a shard of difference.”
I’ve posted before on how actual tax rates may make little difference to economic growth rates. But what may make a difference is the expectation of economic success that drives a country to make decisions like lowering tax rates.
So like a parent choosing a child’s name, it may be that a country’s tax rate is important for the expectations underpinning it rather than the actual rate itself. The expectation, accompanied by the willingness to do stuff to meet that expectation – for example the hard political decision to cut tax rates – is the important thing.
As usual it’s not only about politicians. It’s everyone being willing to do their bit, such as saving rather spending, making sacrifices…
In the earlier post on taxes I noted we shouldn’t wet our pants over what tax cuts will achieve.
This was based on the fact that New Zealand already had a sh!t hot business tax system. In the World Bank’s Ease of Paying Taxes rankings, New Zealand comes in 9th in the world in “total tax burden” which measures, for small and medium-sized businesses:
• the number of payments
• time spent complying with tax laws
• the total tax rate – the different taxes and contributions (eg, labour, social and property taxes), payable after accounting for deductions and exemptions.
Looking at corporate tax rates around the world there’s mixed evidence for my idea that there’s a connection netween tax rates and economic growth expectations.
Contradicting this idea are, for example, the fast growing high-expectation economies of India and Brazil which have relatively high corporate rates of 34%. In the same camp are China and Korea which have average looking tax rates of 25 and 24% respectively.
Not to sure what to make of the US corporate rate of 40%.
But backing my idea are the economic slugs of Japan and Argentina which have 40 and 35% tax rates respectively.
Also there’s a raft of low-tax, fast-growth high-expectation economies like the Czech Republic (19%), Taiwan (17%) and Singapore (17%).
I guess all this just shows that tax isn’t everything.
I reckon that sometimes – like Loser – it’s more about having the courage, smarts, strength and luck to make the most of the hands we are given.
Today’s exactly one year since my first BigCake post.
One of my favourite themes has been Kiwi culture and how, if we want to become a wealthier nation, we need to acknowledge and deal to some of our cultural shortcomings.
Rod Oram was in this space way before me and in last Sunday’s Sunday Star Times (sorry I belatedly got around to reading it) he produced a column that’s a must read for anyone interested in NZ’s future prosperity.
Rod has obviously been maddened by our cultural attitudes that are in large chunks antithetical to business, growth and I guess our collective wellbeing.
He asks:“Will we get real?”
Ummm ‘No”. He says: “We are locked in a low growth trajectory thanks to misdiagnosing our challenges, misjudging our opportunities and poor execution of our few good ideas.
“These though are failures of character, not economics. We need a cultural revolution to help us build a business one.”
Read his five cures here.
I was pretty mad for a while too, but a year of BigCake has relaxed me a bit. In parts I think Rod is too pessimistic.
For example, I’m increasingly dubious about the merits of beating ourselves up because we can’t keep pace with Australia – in fact we’re probably not going backwards which is a bit of an achievement in today’s world.
And contrary to Rod’s viewpoint there’s a lot of slack in the primary sector available for growth.
Anyway, regular readers thanks for following BigCake for the past year. Keep the words of encouragement and comments coming.
There’s a dishearteningly large number (from my perspective) of very good blogs out there, so I’m flattered by your interest.
As someone famous said first, blogging is a humbling experience.
Yeah, but fun too.
Check out my first post – The rise of the Kiwi growth sceptic.