A US court has ruled that Google must hand over to Viacom its log of every person who has ever watched a video clip on YouTube. According to the BBC:

The log …. contains the log-in ID of users, the computer IP address (online identifier) and video file details. Viacom, which owns MTV and Paramount Pictures, has alleged that YouTube is guilty of massive copyright infringement. When it initiated legal action in March 2007 the firm said it had identified about 160,000 unauthorised clips of its programmes on the website, which had been viewed more than 1.5 billion times.

In general, I’m inclined towards Viacom’s side in the case, since Google will earn money from showing these clips, effectively getting a free ride on Viacom’s IP.  However, putting that to one side, this court ruling raises massive issues of personal privacy.  Why does the court or Viacom need to know who watched the clips?  Surely a simple count of video viewings would suffice, for the purposes of the claim?

The US Administration’s ever-greater surveillance and access powers (eg. copying your laptop files if you pass through US airport transit lounges) will be bolstered by this court ruling.  Yet the US risks losing a large part of the expanding global market for services delivered over the internet.  Already various governments insist that their records are only hosted and backed up “at home”.  Corporations and private citizens are likely to do so as well, if this intrusive trend continues.

Software-as-a-Service providers should consider how this might affect their architectures and delivery platforms. Separate data centres in every nation? What about multinational organisations? Tricky stuff to fix after the system goes live. Do you just give up on an international offering? Or will this stifle SaaS and the internet?

Maybe there’s an opportunity for offshore data centres in reputable countries where privacy is guaranteed, say on a similar level to the anti-money laundering  access which even Swiss banks have to concede.  You can’t go on fishing expeditions, you need justifiable cause to inspect the records, with privacy protected by the rule of law.

Or maybe the argument that “if you’ve done nothing to be ashamed of, you’ve got nothing to worry about” will mean most customers won’t worry about it, and this ever-increasing intrusion will just be accepted.

Meantime, here’s the #1 featured video on YouTube today.  Somehow it felt appropriate. Let’s hope it’s legal!

I didn’t post anything yesterday - I was revisiting Hadrian’s Wall and Housesteads Fort (well worth the visit for history buffs) and the wireless broadband coverage at my hostelry was non-existent.

The Romans ruled Britain for 400 years (well, most of it). Hadrian’s Wall wasn’t there just to keep the Picts out; it was a customs barrier, taxing trade. At Housesteads, the tour guide made a very interesting comment. Before the Romans took over, Britain was a moderately prosperous farming and mining  economy, but under the Romans the economy soared, thanks to infrastructure (Roman roads, safer water supply), trustworthy common currency, international trade with the rest of the empire, and the consistent and widespread rule of law. You’d think that 400 years of steady and consistent economic development would be incredibly robust, but no.   In the economic history of Britain, the Roman period was an anomaly.

When the Romans left, the economy nose-dived, as narrow local interests broke the country apart and raiders like the Norse, Saxons and Angles found easy pickings..  It took another 700 years before the economy regained its scale (thanks to wool and the Normans).

Hopefully, economic development in the modern world is more robust, built as it is on other  countries’ earlier development. But then, so was Britain’s in Roman times.

Here’s an eye-popping chart for you - country shares of global cement production/use, courtesy of The Oil Drum. Now my understanding is that while buildings (and Olympic venues) are obviously a significant element in demand, the bigger driver is new infrastructure.  Also note that India in 2nd place is also a stand-out, even though it’s a long way behind China. Bob the Builder is keeping himself busy!

NB. these figures do include export production but it is so tiny as to not alter the numbers materially.

I still reckon my carbon tax scheme is the simplest I’ve heard: a straight tax, with exports zero rated and imports fully rated, which avoids any issues of losing out to non-participating countries. So far, no takers, but let’s see if anyone can improve on it.

I applied the French derogatory term usine à gaz or ‘gas factory‘ to cap & trade carbon emission schemes. The FT’s Willem Buiter describes the assertion that Cap & Trade is more efficient than a straight carbon tax as baloney, while NZ’s Queen Bee begs the nation’s leaders “Let’s not shoot ourselves in the foot” with their proposed emissions trading regime. Queen Bee also pointed me to an article on the Wall St Journal :

… Republicans methodically dismantled the cost and complexity of “cap and trade,” which sounds harmless but would inflict collateral damage on the wider economy in lost GDP and higher prices up and down the energy chain. Conveniently, the Democrats would also bestow unto Congress (read: themselves) some $6.7 trillion in new tax revenues and carbon welfare handouts over the next four decades.

Ignoring the party politics, here’s a further thought. Politicians have dithered and dithered over this issue, and by going for complex (and unworkable) schemes they may have missed the bus, at least for now. The market mechanism (at least for oil) of scarcity = high prices = alternative technologies looks like it’s kicking in and doing a far simpler and more effective job than anything the politicians could have devised, except that the financial benefits will now flow offshore. Costs from Carbon C&T or Carbon Tax schemes will raise the price of energy and flow through into the wider economy (howevermuch politicians waffle that it won’t) and I will lay odds that the costs will not be fully offset by lower taxes elsewhere, but who’s going to be brave/mad enough to impose any carbon regime in this current oil price environment? (!)

More than 55 international economists, including 5 Nobel Laureates, have been working for two years to assess more than 50 solutions, provide an in-depth assessment of the costs and benefits of those solutions, and prioritize them to address some of the biggest challenges faced by the world. The project, known as the Copenhagen Consensus, has recently released its report. What are the problems to be addressed?

In alphabetical order:

• Air pollution
• Conflicts
• Disease
• Education
• Global warming
• Malnutrition and hunger
• Sanitation and water
• Subsidies and trade barriers
• Terrorism
• Women and development

To make the project plausible, the panel had a notional budget of US$75 billion to spend over 4 years. They selected 30 initiatives, ranked in order of effectiveness for the money spent. The summary of the recommended solutions (available online as a .pdf document download) makes for fascinating reading. There will be some very surprised faces in the major developed countries (or maybe not). The top ranked recommendation is supplying micro-nutrients to children in poor countries. This achieves a dramatic payback for a relatively small amount. Sounds very commendable. However, the second highest ranked recommendation is to implement the Doha trade liberalisation agenda - ie. free trade including agriculture will do more good in the world than every other initiative bar one.

The recommended projects and the proposed budget are all doable. We can only hope that they will be given serious consideration by those who decide such things.

I’ve just read a fascinating (for me at least) study commissioned by Britain’s Department of Innovation, Universities and Skills: the 2008 Value Added Scoreboard, which ranks the top 750 European companies. Value Added for this purpose is defined as sales less costs of bought-in goods and services. Alternatively you add employee costs to operating profit before interest, tax, depreciation, amortisation and impairment (EBITDA), which are all shown in European and UK company financial reports.

The results are very encouraging for the UK. About 23% of “added value” by Europe’s top 750 firms came from the UK’s top 175 companies. Germany was the next most productive country, making up 19.7% of the total, with France (18.5%) in third place. Royal Dutch Shell, BP, HSBC, Vodafone and the Royal Bank of Scotland were the UK’s top performers, Leading non-UK firms were DaimlerChrysler (2nd), French oil firm Total (3rd) and Russian energy group Gazprom (5th).

The online database allows you to also rank companies by several other productivity measures - again the Brits tend to dominate the cumulative results. Watch out for real estate, finance, mining, energy and utility firms (of course the UK is very strong in all these sectors). They are special cases and make comparison with other sectors difficult, but here are some eye-popping numbers:

• VA per employee: First place went to Spain’s Corporacion Financiera Alba with UKP14. 6 million each; imagine the pay and bonuses! In the real world, Porsche was the highest ranked manufacturer with UKP464k VA per employee.
• VA as a percentage of the cost of bought-in goods and services: In first place was French property firm Gecina at 3424%! In the real world, Porsche again led with 422% VA as a percentage of bought-in costs.

Of course, value-added as defined here is just one indicator, in effect a company’s contribution to the economy, so governments like it. Doing a lot of stuff in-house might give you a higher VA score, but doesn’t necessarily make you a better business, eg. from an investment perspective; you’d need to investigate the underlying numbers. But the VA scoreboard database looks like a useful research resource.

You can also download the database and play happily for hours, doing comparisons by sector or country, if that’s what turns you on. Tip: avoid including the UK 800 and the Europe 750 (which includes 175 UK firms) in the same search; you’ll pick up a lot of subsidiaries which might distort the results.

The prize for the most “something” headline so far this year must go to Max Keiser for his Huffington Post article (repeated in the title of this post). I just couldn’t find a word to describe it. Anyway, in case you haven’t guessed, it’s a rant against US investment banks:

Just before the crash of 1929 huge trusts operated by the largest banks on Wall Street were buying each other’s stock to try and delay the inevitable. It’s like the passengers of the Titanic trying to drink all the water in the ocean to avoid sinking.

And:

If a tree falls in the woods and nobody hears it fall, does that stop Goldman, or Merrill, or some other investment bank from collateralizing the perceived sound and selling it as a hedge against some statistical probability worked out by an autistic ‘quant’ on loan from Bellevue working on the proprietary trading desk?

Is that the sound of one hand clapping, or is that the sound I make when I learn these mirror images of nothing-backed-bonds are in my pension account courtesy of non-falling trees sold by Merrill to boost their stock option related bonuses?

This man deserves a prize for inventive invective.

You watch the TV news and someone is complaining yet again about how prices have gone up . It seems to be a staple item for a slow news day, anywhere. Britons, like Kiwis, Ozzies, Canadians and Americans, always doubt the official inflation figures. BBC News recently conducted a small study of three households whose principal shopper (the wife of course) all claimed that inflation was really 10-20% rather than the official UK figure of 3.4%. The official figure is an average, so you’d expect some variation at the individual household level. But to the shoppers’ surprise, their household inflation was only in the range 2-6%, even after recent price hikes in fuel, protein, etc..

Here are a few more of my UK factoids:

UK factoid No 4: Tesco, Britain’s leading supermarket, calculates that its average prices have fallen 30% in the last 10 years.

UK factoid No. 5: The proportion of UK household expenditure on food has dropped from about a third in the 1970s to about 15% today.

UK factoid No. 6: The average British woman is 4 cm taller and has an extra 16 cm round the waist, compared to 50 years ago, which indicates much greater food intake per person, and therefore an even greater price drop per calorie than the figures above.

And it’s not just food. The real price of just about everything has fallen - eg. food, clothes, cars, appliances, entertainment, communications, travel. The only major exception is housing. A lot of those savings have gone into bidding up house prices (for larger living spaces, second homes and investment). House prices confuse the issue. Most people already own a house, so they see rising house prices as a good thing - “I’m getting richer relative to the cost of stuff” - even if they have lived in the same place for decades and have no intention of selling up in the foreseeable future. Falling house prices are bad - “I’m getting poorer relative to the cost of stuff”.

So why, despite the contrary evidence, do people insist that inflation is higher than it is? Simply put, people forget benefit gains. They don’t notice gradual real price falls and they forget the big ones, even more so when they involve infrequent purchases. Those prices quickly become normalised. Conversely, they do notice price hikes. Most people really have no idea what inflation is and their ideas are screwed up anyway by housing market sentiment.

It’s important for businesses to understand this. Your customers will quickly forget those special deals you gave them, those extra services, your particular advantages for them. You need to remind them regularly, in the nicest possible way, of course. Remind them of your USP, your story, in newsletters, websites and presentations . Always show the full value of your quantity, term and payment discounts versus your standard price on your invoices.

Always remember - people forget.

Update: Ignore factoid 6, or rather my interpretation of it in this context.  I’m informed that calorific intake is actually slightly lower now, that the extra height is due to better prenatal and childhood health and that the extra girth is down to much less physical exercise.

Some years ago (in 1999, I think), I was invited to address the Royal Society in New Zealand on “The future of work”. I assumed that I’d been invited because of my profile as a tech company CEO, and that I was expected to espouse the vision of technology transforming work and the workplace. My co-presenter was noted New Zealand academic, Dr Norman Kingsbury. Norman’s advice to me was to “surprise them”. Unfortunately, I’ve lost my speech notes, but, if I recall correctly, the gist of my presentation introduction was:

• The exploding ability to store, find, order, and connect information of all types will radically increase our use of knowledge and enable more innovation and new types of business;
• Technologies will merge, so that a successor to both the mobile phone and PC will become your primary means of accessing that vast pool of information and services (albeit linked to physically restrained appliances such as displays, printers and high capacity communication links);
• The internet and the services available on it will eventually become so cost effective that few will bother with in-house facilities, other than access to those physical devices I mentioned.

This was standard fare, with everyone nodding as I reiterated points others had made on many occasions. However, my main theme was why people come together into teams, workplaces and cities to work. Fundamentally, it is to interact with each other and to gain access to services and goods. It is the bringing together of people in informal and formal regular physical contact that has enabled society to develop to where it is today. Workplaces, cities, and organisation such as companies are the means of doing that.

This led me into an attack on a myth popular at the time that cities were inefficient because of traffic, pollution, commuting time, etc.. Telecommuting and teleconferencing from smaller centres was seen as the great future for clerical and knowledge-based workers. It was a naive idea even then. Yes, there are and will be some who can work truly location-independently, but the vast majority will still be most effective in coming together in one place. I won’t reiterate the rest of the speech, which covered access to knowledge, goods, services and communities, but my conclusion was that work in the future will not be much different from work in the past. Tools would change; speed, reach, mobility and connectedness would all increase, giving companies and workers greater freedom of where/when/how to work; but fundamentally, most people would still come together in cities, organisations and workplaces.

This clearly wasn’t what the audience expected to hear, and some dismissed me as a Luddite. However, in nearly ten years, I’ve heard nothing to persuade me that I was wrong. On the contrary, I’m more convinced than ever:

• Companies are increasingly consolidating sites, campuses and offices into larger footplate buildings in fewer locations;
• Most phone calls, text messages and emails are between people within walking distance of each other. The second biggest category are between people within a short drive of each other (for social and business purposes).
• Rents and property prices in cities are still much higher than anywhere else (and have been less affected by the current property crunches in various countries). Most organisations and households clearly still choose to be located in cities.
• Contrary to popular belief, cities generate less carbon and other pollutants, and use less energy per capita than towns, villages and rural households. It’s only because cities concentrate such use that they seem worse.

We may become more mobile and connected, but workplaces and cities will still be our primary places to do work.

“… we’re moving back to a world of stuff, whether that’s vegetable oil or copper or zinc or cotton. Stuff that you can hold in your hand and drop on your foot.”

That’s a quote from an article in the LA Times last week. While that particular article looked at the renaissance of old-economy US commodity firms with the liberalisation and industrialisation of the BRICs (Brazil, Russia, India and China) et al, there’s another interpretation: that the world of stuff has always been the fundamental driver of the world’s economy, and that it’s reasserting its fundamental power over the worlds of finance and services.

I define the world of stuff in a pretty broad way: everything from food, water, materials, energy and manufactured goods through to electrons (power and communications) and those services directly associated with the delivery of stuff (e.g. shops, warehouses, transport networks, utility networks). Things get a bit vague when I start looking at films and bespoke software, but you’re a smart bunch; you can live with a bit of uncertainty. (OK, not the IT guys - never any good with shades of grey).

Although finance and services are essential elements of the world’s economy, and have been ever since their invention thousands of years ago (I’ll even classify politicians as part of the world of services), they are mostly facilitators of our ability to make, sell, buy and use stuff. Yes we do spend money and time on other things, such as education (arguably so we can achieve the means to get more stuff), entertainment, healthcare, etc., but those are afforded by someone somewhere producing stuff that others want. And when stuff isn’t being produced and purchased, the rest can go hang.

Those who look disdainfully at the world of stuff have a misguided sense of their own importance or self-righteousness. Civilised society owes its very existence to the world of stuff. Those in finance and services (including politicians) would do well to remember that connectedness.

PS. This isn’t an argument for every national or local economy to make manufacturing its cornerstone. The phrase “From each according to his ability, to each according to his need” springs to mind, but don’t mistake me for a Marxist. Each should do what it does best and buy what else it needs.

There’s an old story about a city whose rulers, facing a local food shortage, put a price cap on carters’ charges, to prevent profiteering. However, even though there was plenty of food in nearby areas, no-one fetched it because they couldn’t make money. The carters left town and the city starved.

I mention this in the context of much media and political comment blaming speculators for the sharp increase in oil prices. We’re now hearing calls from some quarters for oil market derivative trading to be banned. The Spectator’s Trading Floor blog dismisses this idea as insane:

All that would happen if it were implemented is that markets would move offshore: is that what anyone wants, that they be even less regulated than they are now?

Further, economics writer Tim Harford makes this point about commodity market players:

… if the speculators are any good, they’ll stabilise the oil prices. Profitable speculators buy low (driving up the lows a little) and sell high (moderating the highs)… If the speculators are incompetent, then they can exacerbate oil prices spikes - but we can take the modest consolation that they’ll wipe themselves out while doing it.

The answer to high oil prices doesn’t lie in oil-related regulation, subsidies or reduced duties. The answer lies in cost effective alternative fuels and technologies, coupled with smart and non-wasteful applications and processes. High oil prices make that more likely to happen; artificially restrained oil markets won’t.

Having been in the UK for just over a fortnight, I had thought to write a short post on similarities of current issues in Britain and New Zealand. However, Owld Grumbleton, who’s over here as well, has beaten me to it, so here’s his take:

1. The Labour-led governments are in trouble, after multiple terms in office.
2. House prices are stalling and predicted to fall, with owners of multiple highly-leveraged rental properties expected to be hardest hit .
3. The economy is faltering but not expected to go through the floor.
4. The retirement of the baby boomers is now starting to bite, with major gaps in most technical and managerial professions. Although the current downturn will alleviate the problem, it won’t help the solution as firms skimp on recruiting and developing young talent.
5. Violent crime, uncouth behaviour and increased alcohol consumption are constant features of news reports and general discussion.
6. School exam systems are still lambasted on all sides.
7. People expect lower taxes, but the government is proving stingy with minor reductions in this year’s budget.
8. Environmental awareness is growing, but government initiatives are often clumsy, inconsequential and fail to address the major issues.
9. City traffic is a nightmare.
10. The local wine industry is thriving. (Yes, you read that right.)

OG is more political than me, but it’s hard to dodge the similarities in attitudes to the incumbent governments. I’d add a few more similarities:

• There is heaps of cool stuff going on business-wise, if you look for it.
• Everyone’s screaming about petrol prices.
• The universities want more money (when did they not?)
• There’s really good food. wine, beer and cider, and and there’s really appalling food, wine, beer and cider.
• There’s increasing talk of protectionism, under the false flag of environmentalism.
• The countryside is beautiful.
• The cultural life is thriving.
• There are great people, nice people, naff people and scary people.
• The media tend to paint the picture darker than it really is.
• NZ sauvignon blanc and pinot noir rule their wine store/supermarket niches (pinot gris is starting to move up the ranks too).

Yesterday I wrote about the French term usine à gaz or ‘gas factory‘, a metaphor for overly-complex bureaucratic mechanisms that are disproportionate to the problems they are supposed to solve. Ironically, the term seems highly descriptive of the ‘cap and trade’ carbon emissions regimes being proposed by governments in many countries.

Every academic, economist, environmentalist, business leader and indeed politician with whom I’ve discussed this has said something along the lines that a carbon tax is the simplest and most effective way to penalise carbon emission, but that ‘cap and trade’ is the only way to get everyone on side. Even oil and coal executives seem to privately support a simple tax system. I assume they must exist, but I have yet to meet someone who actually thinks ‘cap and trade’ is a good way to reduce carbon emissions. It’s as if no-one in a national or international leadership role is prepared to be the first to say this is a stupid system.

What about the countries that don’t impose a carbon tax? Won’t that just see jobs and carbon pollution exported to them? I’d argue that countries that won’t impose a carbon tax are even less likely to impose a complicated bureaucratic system like ‘cap and trade’.

The most neutral system for countries that want to discourage carbon emmssion is to tax it - either at the point of domestic production or at the place of import; exports would be carbon-tax-free (i.e. the tax is reclaimed on exports, but taxed by the country importing those goods if it so chooses). Likewise the taxation point for international travel and shipping would be the arrival port. This would be neutral with non-complying countries, whose exports would therefore still be captured by the tax regimes of importing countries. Countries could be as aggressive or light-handed in their level of tax as they choose. Of course there would be complexities, like how to estimate the carbon content of imports, but still much less than the alternative.

However, the absolutists won’t buy the idea of carbon-tax-free exports, and so we have this nonsensical system of ‘cap and trade’. Someone needs to show some leadership on this. It would be nice if it came from both the green and carbon-producing sides of the debate .

Update: my idea is akin to VAT/GST which are consumption taxes neutralised at the border, and hopefully (I’m no expert) it does not break WTO rules on border taxes.

Following on from last week’s article on ‘the roof’ or krisha, a Russian colloquialism for a patron, today I learnt about the French term ‘gas factory’ or usine à gaz. Google’s translation of Wikipedia says:

“gas plant” is a derogatory term describing something very large, very complicated, even very expensive and which has been much talk(sic) but not used or not producing much in reality. It is used generally to describe something very disproportionate to its purpose. It takes its origin in the comparison made with a manufacturing plant of town gas, monstrous-looking, complicated and incomprehensible to the uninitiated.

What an apt euphemism. I came across it in Charles Bremner’s Times blog post on why French President Sarkozy has not canned the 35-hour working week in France. Apparently Sarkozy is trying to appease all sides in the debate by creating tax incentives and other inducements for those who work longer than 35 hours while not actually repealing the 35 hour week legislation. That would risk alienating those large elements of the electorate who have comfortable lifestyles and quite like the extra time off. Sarkozy is perhaps learning that quotation (or curse) of Bismark:

“Politics is the art of the possible, the attainable - the art of the next best”.

Mark Clare’s Valuecruncher has stepped up several gears. Originally offering a company valuation service to companies not covered by conventional investment analysts (I’ve used it), Valuecruncher now offers its tools free online to the general public. Valuecruncher is creating a community of investors, some of whom will take up its premium services later.

I’ve known Mark Clare for some years and I saw a preview of the new service earlier in the year. You input your own assumptions on key financial parameters for the company in which you’re interested; Valuecruncher’s algorithms then produce a share price projection. You can play with your projection and share it with others, who can comment on your assumptions and results. The user experience has been developed with the help of renowned web guy Rowan Simpson, who is known for his lean, uncluttered approach to website design.

In the words of Merrill J. Fernando from Dilmah Tea, “Do try it”.

Disclosure: I have no financial interest in Valuecruncher.

In The Huffington Post, Henry Blodget offers a crash course on how to be an economist:

1. Analyze what has happened.
2. Conclude that the future might be different…or it might be the same.
3. Pick one!

In Russia, whoever you are, you need a patron, someone who will promote and look after your interests and keep the bureaucracy and the bad guys off your back, in return for loyalty, business favours, partnership profits, etc.. Any foreign company seeking to do business in Russia needs such a patron, whom Russians call the ‘roof’, or krisha. It’s usually legitimate, and the financial arrangements can take many forms. McDonald’s has the Moscow City Corporation as their roof. Aer Rianta (the Irish duty free retail operator) has Aeroflot.

An article on The Spectator business blog was my first introduction to this concept, which I confirmed with my brother, who’s done several stints in Russia. He added that the need for a roof is less important for major companies these days, but it’s probably still a good idea for smaller players. Unfortunately, a roof can also be a local gang demanding payoffs. Make sure you pick the right roof.

Arrived in the UK to find the sun shining and the land green. While I’m here, I thought I’d do an occasional series of UK factoids, for the edification of my readers outside the UK (and some in it). These are from yesterday’s BBC business report.

UK factoid 1: 27 degrees Celsius in London yesterday. No business reason for that; I just wanted my Antipodean friends to know, as winter starts to loom large.

UK factoid 2: More than half of the companies in the FTSE 100 (more accurately the FTSE 101) are non-UK companies.

UK factoid 3: 12% of the companies in the FTSE 100 are non-oil mining, yet mining makes up only a tiny fraction of the UK’s economy.

The primary exchange of choice for major non-US companies is now London. Why? The general consensus of the discussions I’ve heard since arriving:

• A desire for global investor credibility, by having to comply with the UK’s stringent corporate governance regime.
• A market more friendly to non-domestic stocks.
• The US exchanges, by contrast, are parochial, with stifling yet ineffective regulation.
• The FTSE 100 is not an indicator of the UK economy anymore, unlike the Dow still is an indicator of the US.

Rod Oram has written an excellent overview of the challenges facing businesses in developed economies. He’s writing about New Zealand, but it could also apply to many companies in Australia, North America and Western Europe. In a nutshell, he argues that reducing bureaucracy and taxes, while improving infrastructure and education, are not enough, especially in countries with fully deployed labour. In the end, it all boils down to what businesses you invest in, and how those businesses perform and develop.

Oram’s closing paragraph says it all:

Here’s the acid test: what do you need to do in your business so you can reward yourself with at least an 80% increase in pay by 2018? When you achieve that, you will attract all the talent you need - some of it even from Australia.

I don’t think I’ve seen a single business plan or economic development proposal that, as a consequence of success over the next ten years, could afford to pay staff twice what they get today. Most plans assume no change in real terms, while some assume greater internationalisation which reduces average salaries.

If you’re in a business based on labour (no matter how professional), you’ve got a problem. If all you do is pass on someone else’s goods and services, you’ve got a problem. If you make me-too products and services, you’ve got a problem. If you’re creating smart new products and services that aren’t labour intensive, you’ve got a chance. What are you going to do with that opportunity?

New Zealand Trade & Enterprise has released the findings of several surveys on how overseas business people perceive NZ businesses, which present a picture of NZ business as ‘high in human values, but low in business acumen.’

The report summary is worth repeating in full:

• Business culture and values vary across countries, however global business values are shared. It is these global business values which the research showed New Zealand businesses are often lacking. This contributes to the general low awareness of New Zealand as a business partner.
• In short, New Zealand has a business culture that is perceived to be high in human values and low in business acumen.
• There is respect and admiration for the strength of New Zealand’s human values. These include:
  • an openness and directness that is unusual in international business, but which makes dealing with New Zealand businesses straightforward and agreeable
    a refreshing honesty which engenders rapid trust (although this can easily extend to naivety on New Zealand’s part)
  • resourcefulness, creativeness and flexibility – all perceived to be due to New Zealand’s geographic isolation, space and limited resources (eg. capital and government support)
  • wider cultural elements such as an harmonious relationship with Maori, respect for the land, environmental awareness, nuclear-free policy, female Prime Minister etc
    the success of the family and quality of life as the benchmark (sometimes at the expense of business success).
• New Zealand businesses can communicate in a business-like way, and there are New Zealand business success stories; but the perception is that many companies lack the hunger to be part of an international business community.
• Areas where New Zealand businesses show a lack of business acumen include:
  • low pro-activity and reluctance to follow up phone calls and/or contacts
    lack of preparation and research into a country’s culture and specific market characteristics eg. a ‘what can we sell’ approach, rather than asking ‘what does the market want?’
  • an overly-relaxed attitude towards business. “Give it a go” and “she’ll be right” are unwelcome and unsuccessful attitudes in global business
  • being unwilling to partner or collaborate to help their business go further
    a transactional approach to business and an unwillingness to establish and maintain relationships. While this issue is particularly strong in China and Japan, all five markets highlighted this as a shortcoming of New Zealand businesses.
• No country showed reluctance to do business with New Zealand, but there is a general feeling that New Zealand businesses need to come up to the mark to be taken seriously as a business partner.
• This does not mean that New Zealand should compromise its human values – they are part of the attraction of New Zealand – however it is essential that New Zealand businesses are able to demonstrate the basics of global business protocols if they are to be taken seriously.

In summary: nice, creative, naive and too laid back. Two words, guys and girls: SHARPEN UP!

(Spotted on NZ Angels)