It was a tension-racked Vista Group lunch today, as a vital question was discussed. Would the prestigious group of Wellington business bloggers allow Jim Donovan to remain a member, after he announced his intention to write his final blog post on 28 March? There were conflicting accounts of the decision. One account reported that Donovan’s continuing membership was agreed only by the narrowest of majorities, just one vote. Another said that Donovan had received 100% of the votes. In reality, only one Vista Group member - Wellington mayoral candidate Jack Yan - was there to vote; the other members having pressing business elsewhere. However, Yan said that he had consulted online with the wider membership and was confident his vote had their full backing.
The Vista Group then returned to its more usual fare of business and branding matters. The scheduled topic of the month was “Wellywood! Whose bright idea was that?“ The recent proposal - that a Hollywood look-alike sign celebrating the Wellington film industry be permanently erected on a local hillside - has been almost universally panned by the media and by local citizens, not least Jack Yan. He argued out that not only would the Wellywood sign infringe Hollywood’s registered trademark, it would also be a poor me-too image for Wellington - a weak joke for a fortnight’s film festival, maybe; a permanent sign promoting the city, most definitely not. Branding is about being distinctive. However, Jack’s argument that city identities are becoming more powerful than national ones was rejected by yours truly, who came dressed head-to-toe in black, New Zealand’s national colour. It was a silent, but powerful refutation.
Tertiary Education Minister Steven Joyce’s recent policy announcements have received a generally positive welcome. Tying an element of institutional funding to students’ course and qualification completion, requiring a reasonable pass rate for continued access to student loans, and rationalising the many redundant or overlapping qualifications; all seem to have gone down well. Even the usual naysayers have been muted in their response.
I find all this both gratifying and somewhat ironic. In 2001/2, the reports of the Tertiary Education Advisory Commission effectively recommended doing the same things. In July 2002, the people named to be the board of the Tertiary Education Commission (including me) reiterated their support for such initiatives. However, some were ruled out of bounds for TEC, eg. student support was deemed to a welfare issue not an education issue. Some we didn’t have the funding mechanism to implement (and for nearly 3 years we weren’t allowed to address that either, even though we rated it the number 1 problem to fix). Some the institutions weren’t ready to concede there were problems - eg. qualification rationalisation and completion rates. Some, like polytechnic governance, were, frankly, just too politically difficult for the then Labour-led government. However, we’ve been jawboning away on this stuff for all of the last decade and, like water on stone, we’ve worn down the obstacles.
Given the name of this weblog - Isambard Kingdom Brunel’s personal motto En Avant or “Get Going” - you’d be right to assume that I have been very frustrated by the time taken for all this. Smart policy development and implementation seemed often to have been trumped by the need to not upset anyone. To be fair, all the ministers I’ve dealt with have had their merits, and we’ve made increasingly faster progress. However, there’s a palpable difference when dealing with confident and capable ministers who understand the big picture and can drive through policy change, despite the naysayers inside and outside government and the bureaucracy. Governments can implement sweeping change quickly if they so chose and have the right people on the job.
There are still some big issues to address, not least being pricing - how much, how it’s presented, and who pays what to whom. Any good marketer knows the importance of price presentation. The new minister has already stated he’s interested in price as an issue, although he acknowledges this might take a little more time to work out. Given the current pace, that shouldn’t be another decade.
Declaration: I am a non-executive board member of the Tertiary Education Commission, and was recently reappointed for a third term.
I’ve long argued that what NZ lacked wasn’t fast broadband to the home, farm or small town. If those communities want it, let them pay for it themselves (perhaps through a locally subsidised utility since it isn’t economic outside the CBDs and central suburbs of NZ’s significant cities). What we do need as a nation is superfast, attractively-priced telecommunications pipes between our major centres and the rest of the world.
It’s that need Pacific Fibre plans to address. At this stage, all they really have is an idea and an intention, so activity is focused on planning, partnering and funding:
The group is looking to secure funding and build a 5.12 Terabits/sec capacity fibre cable to be ready in 2013 connecting Australia, New Zealand and the USA – the initial proposal is a cable which will deliver five times the capacity of the existing Southern Cross system.
I’m told by chums in the broadband business that Southern Cross has plenty of capacity available now and in future, through relatively straightforward upgrades, but maximises its profits through high pricing, which discourages heavy broadband users such as film or online services being based in NZ. Pacific Fibre may simply be a PR pressure play against a de facto monopoly, but so far it looks real enough. I do hope that a viable alternative can get traction. Competition is always better than an unregulated monopoly - not just for price but also for quality, service and, when things go badly wrong, for back-up.
So, Rod & Co., I’m keen. Call me.
Disclosure: My family trust has been a long-time shareholder in Telecom, part-owner of Southern Cross. However, the trust’s investment manager has sold out now.
Update: Lance Wiggs has posted some technical details on the PF website.
You’ve got just two weeks left to enter the 2010 New Zealand Hi-Tech Awards. Even if you’re not an entrant, reward and encourage your team by booking a table at the Awards Dinner - it’s a great party (in Auckland this year on 7 May).
Once again, I’m a judge; it’s always inspiring to read the entries and interview the finalists. This year’s categories are:
PricewaterhouseCoopers Hi-Tech Company of the Year
NZX Emerging Hi-Tech Company of the Year
HiFx Innovative Service Product of the Year
Duncan Cotterill Innovative Software Product of the Year
Dell Innovative Hardware Product of the Year
International Business Wales Hi-Tech Exporter of the Year
A new initiative from the Institute of Directors in NZ aims to lift governance skills in small and medium businesses. Most are owner-managed, and many suffer from the owner spending too much time working “in the business” rather than “on the business”.
Perhaps the biggest fear for owner-managers is loss of control, but a good non-executive director isn’t there to usurp the owner’s authority, instead helping shape thinking and encouraging decisive action:
They are committed only to the company, but can be objective about it.
Combine this level of commitment with skill in critical areas - say, international trade, marketing or finance - and you can tap into a powerful source to guide the company and help it to grow and develop. A well-chosen board is also one of the cheapest sources of advice available.
A good board will challenge the perspectives and attitudes of the owners and managers. If the owners, perhaps unconsciously, have been used to getting their own way, they may find this a bit of a strain…to say the least. The smarter, progressive ones will get over it and recognise the benefits of being challenged, but also properly supported, by independent-minded people.
The role of owner, owner-manager or Managing Director can be pretty lonely. A board gives them the opportunity to test their ideas and get a sense of perspective from people not involved in the day-to-day
Another common fear is expense. However, just like hiring good staff, a good director will easily help you make or save many times the cost of their fees.
If you look at successful medium or large businesses, almost all have at least one independent non-executive director. Very few of those companies would consider not having that oversight and advice. Visit firstboards.iod.org.nz for more information.
Disclosure: I’m a member of the IoD Wellington branch committee.
The global Toyota car recall has been extensively covered in the mainstream media. Product recalls are not a new phenomenon in the car industry; even the highest quality marques have them. So why has so much media commentary, particularly in the US, been full of delighted glee at Toyota’s misfortune? Simple - they’ve had 30 years of hearing and telling each other that US car makers (and by implication the US itself) are rubbish, having been resoundingly trounced by Toyota in market share, production methods, quality and general admiration. As Dave Segal wrote in the New York Times last week, “Life … is just high school writ large.” Finally the smart Japanese kid who has beaten you year after year has failed a test. Schadenfreude.
However, if past experience is anything to go by, Toyota can turn disaster into success. In the 1980s, Toyota suffered a massive and widespread quality failure in New Zealand. In a country where cars don’t rust much (for reasons I don’t fully understand), it seemed that the entire Toyota fleet was rotting away, and people referred to their most popular models - Corolla and Corona - as Toyota Corrodas. Branding hell. After a slow start, cash-rich Toyota did something very few other companies could have. It offered a free panel repair/replacement to every Toyota owner with a car less than 5 years old (and didn’t quibble if it was several years older). At the same time, Toyota developed and introduced a virtually rust-proof multi-layer galvanizing process to its body manufacturing, and announced a comprehensive long-term warranty on not just the body, but the entire vehicle. A carefully-conceived, long-term advertising campaign shifted the Toyota brand positioning away from technical promotion to emotional connection. The end-result - Toyota became more local than the locals and one of the most trusted brands in the country.
US automakers should watch out. Toyota may be a bit slow to respond at first, but it has huge resources, and when it sorts itself out, then beware. Toyota will be back, and better than ever.
One of my best reads this summertime had the somewhat dry title “The British Industrial Revolution in Global Perspective.“ Don’t be put off. Written by Robert Allen, Professor of Economic History at Oxford University, it’s a very readable* and convincing account of why the Industrial Revolution happened in 18th-century Britain, rather than anywhere else. Allen discounts any notions that Britons were superior entrepreneurs or innovators; indeed, other countries enjoyed similar advances in science, education, institutions and commerce. Instead, after setting the scene with societal and economic developments in the 16th and 17th centuries, Allen points to some primary factors which came together only in Britain and nowhere else:
The highest wages in the world (thanks to the Black Death and its effects on British society).
An abundance of cheap energy from coal (albeit not very useful initially, but developed to supply growing city populations).
Ample supplies of iron ore close to that coal.
Those factor conditions did not come together anywhere else, and so there were not the incentives and rewards for creating the wave of technological and business innovation that transformed Britain (and later the world). Allen also shows that the state played very little distinctive role in the British transformation. It was the cumulative efforts of individual entrepreneurs, engineers and other innovators addressing real business problems and opportunities which, because they were common in Britain, also generated classic cluster effects.
While interesting in its own right, Allen’s book reinforced for me much of what is wrong with current economic development thinking. All we seem to hear is more education, more science, more infrastructure, less regulation, less tax, and so on. All well and good (at least up to a point) but these are me-too strategies. Everyone else is following them, more or less. Me-too economies can’t make the step-change that Britain achieved in the 18th century (and sustained for 200 years).
The questions I think business innovators should examine are not only “What do we do to sustain and grow the industries we already have?” but also “What unique un-addressed problems and opportunities do we have which, if resolved, will enable us to build new unique and sustainable global competitive advantage?” And for policy-makers, “Will you adjust your economic development mechanisms to support those new initiatives?”
I can think of at least a couple of significant problem/opportunity combinations where New Zealand could build global leadership. Know anyone with some serious spare investment dollars?
*For those wanting data and/or academic references, Allen provides plenty, but they don’t get in the way.
I was an early investor in Surveylab, which makes the ikeGPS range of professional hand-held data-capture devices. Their point of difference is that they capture the image and location of an object from a distance, unlike most GPS devices which only tell you where you are. Applications are manifold, in network industries like electricity and telecommunications, in environmental agencies like the US Parks Services, and in military applications such as UN post-war reconstruction. Sales are primarily B2B, either direct or via their major distribution partner in the US. Founder Leon Toorenburg is looking for someone to take on the global marketing role, with a particular emphasis on internet-enabled sales. The business is VC-funded, with another funding round being completed as I write. So if you or someone you know is interested in the job, take at look at the ad on Seek or TradeMe.
Mainstream telecommunications companies needs brands that relate to people as individuals; literally, everyone is a potential customer in their own right, even when they’re acting on behalf of their employer. New Zealand’s largest telco recently changed its very corporate look to this sketched asterisk logo and colour palette. I like it; it’s simple, light and human. Corporate rebadging always attracts critics complaining of waste, insincerity, “a child could have done better”, and so on. Rebadging is also a heaven-sent opportunity for those who hate a particular organisation (or large corporations in general) to replay all their historical grievances. Sometimes they’re justified, sometimes they’re not. However, I’m not commenting today on Telecom in general. I just think their rebadging is a good decision, and I look forward to seeing if and how they apply this lighter personality throughout their business.
The NZ Herald has assembled a montage of recent quotes from Treasury Secretary John Whitehead. He’s a public servant, not a politician, and it’s been many years since I can recall one in this country making such bold utterances, rather than discreet ministerial advice.
John Whitehead himself:
Fiscal sustainability:
“As an erstwhile motorcyclist, I know that when your skull has been saved by your crash helmet, the first thing you should do is replace your helmet.” - speech to Russell McVeagh, Dec 08
Capital gains tax:
“At the risk of being chased down by an angry crowd with pitchforks and flaming torches, yes this should include consideration of moving the boundaries to tax more capital gains - for example on investment property - and shifting more of the tax base towards consumption.” - speech to Institute of Directors, June 09
Being frank:
“We have a Government which by and large welcomes free, frank and imaginative advice: let’s take advantage of that.” - speech to policy leaders, June 09
Seizing the day:
“It is very important … we don’t lose sight of our medium and longer-term goals. As Hillary Clinton has famously said, ‘Don’t waste a good crisis’.” - speech to policy leaders, June 09
Being unpopular:
“We face tough decisions and can’t afford to be sidetracked or avoid decisions, even though some of them will be unpopular and painful.” - NZ Herald column, Aug 09
Being bold:
“The tough spending decisions have not yet been made… and the longer we leave it, the harder it will get. Your support in helping frame the debate and argue the case for bold change will be essential.” - speech to Institute of Directors, Oct 09
And from his department’s papers:
Tax reform:
“We see reform of the variable rates of tax on different incomes/investments, and the reduction of the top personal income tax rate, all to 30 per cent, as having greatest impact.” - Medium Term Tax Policy Challenges, Feb 09Capital gains tax:
“The extension of the income tax base to include capital gains would be a second priority.” - Medium Term Tax Policy Challenges, Feb 09
Government debt:
“No other country in modern times has (yet) seen its NIIP [net international investment position] stabilise with such a high level of reliance on foreign capital.” - Closing the Income Gaps, Aug 09
Government spending:
“The case for earlier and more substantial fiscal consolidation is much stronger than it was earlier this year… Having dealt with that initial situation, some more significant adjustment is now warranted.” - Closing the Income Gaps, Aug 09
Closing the gaps:
“There is nothing in the current projections or set of policies that suggests material progress is likely in reversing the large per capita income gap that exists between Australia and New Zealand and the average of its OECD peers.” - Closing the Income Gaps, Aug 09
Now vs 1987: “The New Zealand shake-out following 1987 was also a painful multi-year period of deleveraging - and the imbalances then were, in most respects, less severe than those New Zealand now faces.”
- Closing the Income Gaps, Aug 09
Balancing the books: “The Budget projections were finalised in April… As things stand today, the prospects for any sort of successful rebalancing seem much less favourable.” - Closing the Income Gaps, Aug 09
The 2025 Commission has released its long-awaited report. I’m presenting a paper at a conference on competitive advantage next week, so I’ll hold my fire until then. However, for other comment:
I’m still waiting for commentary from the leading economist bloggers (although they may have said it all before). Meanwhile here’s one seriously scary statistic:
I was at a breakfast function this morning to witness the induction into the NZ Hi-Tech Industry Hall of Fame (aka. The Flying Kiwis) of two of this country’s leading technology entrepreneurs - Rod Drury (whom I first knew 20 years ago as a junior consultant who could build clever spreadsheets) and Selwyn Pellett, (whom I first met 12 years ago when he sold us some components). Both thoroughly deserve their admission to the Hall of Fame. There’ll no doubt be plenty elsewhere on their careers, but it was interesting to hear them talk about dark moments. Rod was fortunate in not having any serious business disasters, but acknowledged the terrible loneliness of being away from home for long periods, staying in yet another hotel. Anyone who thinks business travel is glamorous clearly doesn’t do it much! Selwyn talked about launching his company on the London AIM share-market when there was an unexpected last-minute problem; the gap between what the new investors would pay and what the existing shareholders would accept had suddenly widened to what seemed like an unbridgeable gulf. It looked like the listing would be cancelled and with it all the plans which depended on the new capital. Fortunately a deal was done and the listing went ahead, albeit a day late.
I remember a particularly dark moment at Deltec. The global market for cellular network antennas had virtually dried up very suddenly. I’m talking about a 90% drop in the space of a month. Fortunately we’d built up a cash reserve and rode it out for a while, but after the 3rd straight month of no orders, we held a secret board meeting off-site in a private room at the Wellington Club. We’d asked the receivership partners at PwC to come in later and advise us on the actions we were taking as directors, since we didn’t want to be personally sued for trading while insolvent. After an hour of doom, gloom and tough decision-making, one of the independent directors suddenly said “**** this! It’s my 60th birthday today and we’re going to celebrate!“ He ordered champagne for us, served just as the the PwC receivership guys walked in. The look on their faces was priceless; a brilliantly funny moment in an otherwise awful day. On the positive side, PwC told us we were doing all the right things, and we survived the downturn, which was (inevitably) followed by a boom.
You rarely hear about the dark moments, but for most entrepreneurs and business owners, dark moments come along more often than most other people realise.
Know anyone who wants to play a big role in a new web business in Wellington, NZ? Get them to look at this. Some people I know are planning to build an international business-to-business on-line marketplace for clients and providers of a specialist business service. I’ve had a look at what they’re planning and it’s very promising; probably the best web business idea I’ve seen recently (locally). The market is truly international in scale and scope. However, while these guys really know their services market, they freely admit they know little about building and operating an on-line marketplace. They’re looking for 3 key people to join them in the start-up team:
The CEO: someone who knows how to build a web business, build and lead the team and operational processes, drive the strategy and international marketing push. Excellent English language written and spoken communication skills. Proficiency in another major European or Asian language would be useful, but not essential.
Head of development: Leadership experience in Agile web-business application development. Knowledge of on-line payments, cloud-based infrastructure, etc.. Good understanding of customer-centred product management and design.
The business could also use the occasional services of someone who understands (at a business level) cross-border payments; maybe consult, maybe part-time, maybe advisory board.
So if you, or someone you know, want to put yourself on the line with all the challenges and potential rewards of a start-up business, please email me with a short pitch on what you have to offer. Those wanting a big salary, fancy offices, hordes of staff, regular hours and business class travel should not apply!
PS: Thanks in advance for any links from bloggers and twitterers.
17 years after the release of the Cadbury Report, the accepted wisdom in most English-speaking countries is that, except in unusual circumstances, the same person should not hold the roles of CEO and chairman* of the board at the same time. European countries have increasingly adopted the same practice. The USA stands notably apart, having a very high prevalence of combined CEO/chairman appointments. However, do the results justify the change? 5 years ago, professors from the Wharton Business School said that, as shown by analysis of the financial performance of US corporations, there was no evidence to support separation. Now Harvard professor Bob Pozen reports similar findings from British and European studies. Given this lack of evidence, Pozen comes out against any mandatory requirement for a separation of duties in publicly listed companies.
However, Pozen notes:
… most US firms already have an independent person performing the key functions that you would want from an independent chair. That person is the lead director, an independent board member who helps set board agendas and conveys the concerns of independent directors to the CEO. The lead director is also needed to preside over periodic executive sessions — attended only by independent directors — which are now mandated by listing standards at US stock exchanges. Choosing a lead director is a less dramatic way of fulfilling this listing standard than appointing an independent board chair.
In other words, there is a degree of separation and oversight in many USA listed companies, albeit the CEO is still the dominant player. However, notwithstanding the lack of empirical evidence one way or the other, I suspect most boards who have separated the roles of chairman and CEO, especially outside the USA, will be extremely reluctant to go back to the old model. Boards want CEOs to perform, to get things done, to drive the business forward, but they like the positional advantage a chairman has over a CEO on the odd occasion they need to rein the CEO in. It’s easier for a board to steer via the chair, than from the side.
Finally, Pozen adds:
… there is only one arrangement with generally negative results for a company: having a former CEO becoming the board chair of the same company. This can undermine the power of the new CEO. Unfortunately, as mentioned above, over 15 percent of US companies have this arrangement. Clearly that practice needs to change.
PS:
I am a member of the Wellington branch committee of the Institute of Directors in New Zealand, whose recommended best practice is generally separation of duties.
I use the chairman* title in a non-gender specific way, taking my cue from some notable female company chairmen who vehemently eschewed the “chair” title prevalent in more PC circles.
Elected governments set policy, not government agencies who can advise but ultimately do what they’re told. That’s democracy. Readers may recall that I was a member of the board of New Zealand’s Tertiary Education Commission. As an office holder, my opinions on tertiary education policy could be expressed privately, but not publicly. With my second term about to expire (two terms is the normal maximum) I’d been thinking of writing an opinion article tentatively titled “What I’d do if I was in charge of tertiary education, now I’m not.” It would have been radical and provocative. However, the new government has seen fit to appoint me for a third term. So I am and I can’t!
However I would like to pay tribute to my departing colleagues Kaye Turner and John Blakey, both members of the founding board, and Graeme Fraser, who joined us a year or so after we’d started. This requires a little history. From 1999 until 2002, I was on the board of the NZ Manufacturers Federation and somehow became an advocate for industry’s views on what was wrong with the country’s tertiary education system, critical of the policies of both the existing National government and then the subsequent Labour government. So you can imagine my surprise when, in July 2002 I was asked to accept appointment to the board of a new government agency to manage the funding of all tertiary education in New Zealand. (Lesson - sometimes it’s better to keep your mouth shut!)
The Ministry of Education did most of the policy development in those early days. The new Tertiary Education Commission implemented those policies once the Minister approved them. Some things were very challenging to deal with; for example:
inheriting (with a guarantee of no redundancies) 300 staff who administered one important but relatively small policy and funding stream and less than 50 staff who struggled to administer another 20 times bigger in money and complexity;
officious and sometimes bizarre micro-management from other government agencies;
contradictory policies;
out-of-control funding mechanisms;
dealing with a large, incredibly diverse group of over 700 education providers (public and private), some of whose primary goal seemed to be maximising the money they could get out of government, irrespective of credible educational outcomes.
It was, frankly, a mess.
I remember the first time the nascent commission met one evening in August 2002. With our (at the time) tiny staff, we each presented our take on the situation and what we saw as the big issues. Our combined list of Top Ten Issues has proven a huge task ever since. Getting the political, institutional and operating stars to align before many of them could be addressed took a very long time (and is still a work in progress as I write this). There have been false starts and mistakes made, battles with bureaucracy, mangled communications, litigious education providers (both public and private sector), and a perpetual high-profile political context to everything.
One of the oft-made criticisms of the TEC is that it grew into a huge bureaucracy, Actually, the TEC has never been bigger than the combined size of the various agencies it replaced or absorbed, except when we were finally able to rejig the organisation to fit its purpose while also changing the fundamental design of the funding process. The old system and organisation still needed to work while we built the new one, but was quickly down-sized once we’d got it implemented. There’s an important general message - if you want less bureaucrats, having fewer regulations and simpler policies is a major part of the way forward.
Many things required smarter policy thinking, and over time, the TEC has taken over much of that task - a credit to the quality of the people. There’s still a lot to do and some of those Top Ten Issues are still to be nailed. As Sir Humphrey Appleby might say, some problems require “a very bold and brave minister” to tackle them. Choosing between the lesser of two evils and occasional dead-rat-swallowing are things you have to get used to! However, many things have steadily improved, and the system is starting to work as intended.
When after 3 terms of Labour-led government, a National-led government took over, there were only 3 board members who’d been there from the beginning, all of whose second terms had expired. Our appointments were extended while the new administration settled in, learnt how things worked, and developed its policy direction. It’s gratifying that the administrative machine we’ve built at the TEC has proved more than capable of quickly and relatively easily enabling the new government to make some significant policy changes in the confidence that implementation will be relatively straightforward. That’s again a credit to the commission’s staff, my past and present colleagues on the board, and those officials from other agencies and ministries who supported us.
So I say thank you to Kaye, John and Graeme for your unflagging commitment, support, advice, thoughtful criticism and friendship.
Now, Minister, I have got one or two radical suggestions to make.
This weekend, I finally got round to reading Michael Hill’s book “Toughen Up.” For those who don’t know him (US and UK, I’d guess), Michael Hill is the founder of Michael Hill International, the publicly-listed mid-market jewellery retailer which grew from a single store in small-town Whangarei to a multinational chain spanning New Zealand, Australia, Canada and (recently) the USA. Hill’s story is an inspiration to those who think they’ve left it too late to strike out on their own. Hill didn’t do well at school, and he wasn’t talented enough to pursue a career in music or architecture, his early passions. When he was 17, his parents arranged a job in his uncle’s jewellery store where, learning from his salesman father who also worked there, Hill discovered he was good at selling jewellery. For 23 years, he drifted along, eventually running the store despite his uncle’s disdain and repeated refusals to let Hill buy into the business. Everything changed when Hill’s house burned down. Watching the flames, he had an epiphany, resolving to buy his uncle’s business. When Uncle Arthur again refused Hill’s very generous price, Hill announced he would set up in competition; he was ordered to clear out there and then. The rest, as they say, is history.
Michael Hill’s book (co-written with Claire Harvey and already in its third print) is a deceptively simple read. With a light, self-deprecating and chatty manner, he expounds his business insights through his personal and company history. I found myself nodding vigorously at several points, particularly learning not to fight on too many fronts at the same time, keeping things simple, keeping focused on big goals, and being prepared to make mistakes. Several chapters feel like something I might have written myself when explaining business ideas to staff.
Hill’s narrative is interspersed with adoring short notes from some of his staff; some readers may find that it feels too much like a company indoctrination manual. Even so, persevere. There are some golden nuggets of business wisdom in there. And the title? It goes back to Hill’s house fire epiphany at age 40. Times may be tough now, but there is no better time to start something new.
Economies change. The pattern and places of jobs shift. Voters demand politicians do something about it. Regional development programmes are often part of the political response, and many start to offer tax breaks, employment subsidies, building subsidies and so on. It sounds good, it looks like action, and (I’m being unfairly cynical here) no politician hangs around long enough to be accountable for the almost inevitable lack of success.
It gets worse when you have regions in the same economy competing with similar programmes. It just escalates into an arms-race of who offers the biggest subsidies. Britain has a particularly bad case of regional subsidies. In a country full of property investors and businesses, it’s amazing that its seven regional economic development agencies build business parks, often in areas away from where business is or wants to be. Bangor, a small university town in remote north-west Wales, has got one. It’s been empty for years. To throw good taxpayer money after bad, they’ve built another one 20 miles down the road at Holyhead!
Here’s a simple test. If it was your money, would you invest in a speculative large-scale commercial property investment in a remote small town. Of course you wouldn’t. So why should the taxpayer? Here’s another simple test. Would this business operate in this town/region/country without this subsidy? Why will it stay long term? No-one in their right mind would have built a major computer factory in Ireland (2 sea journeys away from mainland Europe) if it hadn’t been for the then-cheap labour, EU subsidies and Irish tax breaks. So it should have been no surprise when Dell announced it will close its subsidised Irish factories and move to Poland. The Poles simply offered Dell a better proposition than the Irish.
Is there any developed country with regional economy development subsidies which has achieved sustained economic well-being that wouldn’t have happened anyway? Ah, I hear, what about Singapore? Singapore is the exception that proves the rule, and that’s the point; it is an exception, a small city-state sitting at the hub of a key trade route, with no hinterland to worry about, and a collective will which allows it to act more like an industrial conglomerate than a country. For the rest of us, all the evidence shows that the market will determine what long-term industries you have, and where they will locate. All governments can usefully do is facilitate underlying factor conditions such as infrastructure, education, regulation and taxation frameworks, etc.. After that, like it or lump it, it’s all up to individual businesses.
None of which will stop voters demanding that “the gumment must do something” and politicians saying “we will“.
Disclosure: I was a non-executive board member of 2 regional economic development agencies in NZ. We didn’t do subsidies; we did try (not always successfully) to address factor conditions.
Stockbrokers never seem to get any positive press. They make more money the faster they can persuade you to churn your portfolio, and they rapidly tap-dance around the issue when you question the performance of stocks you’ve bought on their recommendation. So maybe we shouldn’t be surprised that a Wellington stockbroker has applied these abilities to become the world’s fastest tap-dancer. Slow-motion video showed that he achieved 1056 taps in 60 seconds. Think about that - it means he had to lift a heel or toe off the ground 18 times every second. Who needs automated stock-trading systems when a human broker can move that fast in real-time?
Is nothing sacred? Shocking news from the UK that Heineken is shifting production of Newcastle Brown Ale to Tadcaster in Yorkshire. How can Newcastle (pronounced NewCAHsel, not NEWcarsel) Brown Ale not come from Newcastle? (Actually, Gateshead on the opposite bank of the River Tyne). Before the Real Ale movement took off, Newky Brown was the aspirational beer for students, and unusual in those days for being in clear glass bottles. I remember the university rugby club being asked to provide bouncers for the university all-nighter concert at The Hammersmith Palais; our reward was free access to 12 hours of non-stop top rock bands and several crates of Newcastle Brown.
On a more serious note, though, when a brand is so intimately associated with a city, especially a city with such strong personality (accent, soccer team, and setting for many popular TV programs), it does seem like a major risk to move all production away from its original home. Heineken justifies the move on the grounds that Tadcaster already produces NBA for export, and with falling national beer sales, rationalisation is necessary. Understandable, and maybe a brand like NBA can survive such a move, but surely a token mini-brewery could have made a buck while keeping the brand roots valid. I’ll not be surprised if something along those lines happens. Other regional beer brands like Monteith (from New Zealand’s rugged West Coast region) have had to resurrect their traditional homes because their drinkers’ identification of the brand with the place invoked passionate protest.
Stockbrokers never seem to get any positive press. They make more money the faster they can persuade you to churn your portfolio, and they rapidly tap-dance around the issue when you question the performance of stocks you’ve bought on their recommendation. So maybe we shouldn’t be surprised that a Wellington stockbroker has applied these abilities to become the 