Sir Paul Callaghan

Those of you who are regular readers of my blog will know that my thinking in regard to New Zealand’s future is heavily influenced by the research, insights, and passion of Sir Paul Callaghan.

I was incredibly sad to hear that Sir Paul has passed away today.

New Zealand needs more people like Sir Paul. We need more people who realize what makes New Zealand a great country, but also look at the realities of the situation this country is in. But more importantly than that, we need people who look at how New Zealand’s situation can be drastically improved over the coming decades. Sir Paul did all of these things, and that’s why I have been so influenced by him, and so admire him.

I’ve seen Sir Paul speak a number of times. Regardless of whether you agree with his viewpoint or not, you cannot help but think about how New Zealand can be improved. And that, in itself, is an immense contribution to New Zealand. To get thousands of people thinking about improving this country greatly increases the chances that improvement will be made.

You only need to look at this post I wrote to see the impact and effect Sir Paul has had on my thinking. He’s provided me with the grounding evidence as to why New Zealand needs to be improved, and has inspired me to get New Zealand to a much better situation in the coming decades.

Thank you, Sir Paul.

Let’s all aspire to care as deeply about this country, and do as much for it as Sir Paul did.

Encountering Ways of Life

There’s almost nothing in the world that excites me as much as visiting a new country or city for the first time. I wanted to write here about why I so love discovering new places, and how we can all gain empathy for different ways of life.

When you go to a different town or city within a single country, you’ll begin to see differences in lifestyles. You’ll see people of different demographics doing different things each day. They might be eating local delicacies or speaking local dialects. Children will be wearing different school uniforms. Adults will have different priorities with how they look. You can always see differences between different cities.

When you travel to a different country entirely, the differences in ways of life are amplified. You might have more trouble finding similarities between your home country and a new country than finding differences. People act in entirely different ways, and different countries have different vibes to them.

Here in New Zealand, we’re unlucky in that we can only easily see the first types of differences through traveling to different towns and cities. We can drive for a few hours and start to see differences. Some towns have older populations. Some have different ethnic majorities. Some are focussed on work. Some are focussed on lifestyle. But wherever you go, people will by and large be speaking the same language and acting in similar ways.

If you’re in Europe, or Asia, you drive for a few hours and you can be in an entirely different world. A good example is driving for thirty minutes from Singapore to Malaysia. First you’re in a booming, wealthy modern city with a strict law and where everyone speaks relatively good English. Next you’re in an entirely different world, where different languages are spoken, people look different, a different currency is used. First you have a proper toilet to use, next you’ll be getting long-drops until you get to another huge city.

That’s a thirty minute drive that can get you that contrast. The same happens in Europe. From wherever in Europe you are, you can see an entirely different way of life just a short flight away.

For decades this has been a disadvantage to New Zealand. It’s been too far to travel to see different cultures and ways of life. Let’s face it, even Australia isn’t hugely different to NZ.

But now, through the Internet, we can learn a huge amount about different cultures and ways of life from wherever we are. Start by reading other countries’ local newspapers online. Walk along streets in different countries on Google Street View. Watch some YouTube videos of events in other cities around the world. Look at street photography from different cities.

All of these things are so easy for anyone to do, and they’ll teach you a huge amount about what it’s like being in a different city. I especially recommend looking at street photography from different cities. Street photography is an art – people walk up to strangers on the street and take their photos in their natural setting, without giving them warning. The photos as a result show you precisely the things you’ll see when you walk down a street in another city. People are depicted in their everyday contexts, and you’ll gain a huge amount of empathy for the people you see in the photos, and understand what their lives are like. Check out street photographers like this for a great example.

Whenever I hear about a country that I’ve never been to and have no idea about, I’ll spend a bit of time doing the things I mentioned above. In twenty minutes or so, I’ll have a much better understanding about what it’s like to be in that city or country.

Of course the Internet will never (in the near future) replicate the feelings that we have through experiencing a place first-hand. But we can gain more of an understanding than we ever have been able to before without visiting the place. I think everyone should take advantage of this ability to learn about other cultures and ways of life.

Note: I spoke on this topic at the StrategyNZ conference in Wellington last year. I only had five minutes to talk, so didn’t go as in-depth as I did here. Nonetheless, if you’re interested, here’s the link to my talk.

New Zealand In My Eyes

I love New Zealand.

I’ve lived here for about half my life. I was born in Washington DC, but moved before I can remember (and I’m not entitled to US citizenship). Since then, I’ve also lived in the Cook Islands, the Philippines, and Spain. I’m lucky in that I’ve seen enough of the world to know what makes New Zealand so great, and also what holds us back.

Whenever I’m overseas, I’ve always felt as though I’m a representative of the entire country. At the schools I’ve been to in other countries, I’ve always been the sole New Zealander (and these have been big schools). Everyone has known me as “the Kiwi”, and I’ve always been proud when called that.

Growing up as a representative of New Zealand – and being lucky enough to know what that means – has given me a truly huge respect for this country. Most of what people say is correct. We are a bloody inventive bunch. We’ve got values and a heart. We are friendly and happy. We have a stable and uncorrupt government, no matter who’s in power and what anyone says. And we’re lucky enough to have an abundance of the colours blue and green – some of the best and most beautiful natural resources in the world.

Going forward, it is of utmost importance to me that New Zealand not only remain relevant in the world, but emerges as a clear leader in the world.

It should be clear to everyone by now that the world is in a rough spot at the moment. Both Europe and America – long the leaders of the world – are clearly on unsustainable courses. Power is shifting. New leaders will emerge over the next decade. China is clearly one, but there is room for others.

I’m writing this post right now because: 1. New Zealand is heading in entirely the wrong direction and will decline in power and wealth over the next decades, and 2. I want New Zealand to be a wealthy world leader.

There are people far more experienced than me talking about these things. Sir Paul Callaghan explains why we’re going to become poorer and more irrelevant on our current course. Derek Handley shows us an alternative path, and inspires us to take action. Andy Hamilton tells us about the role of smart enterprises in a brighter New Zealand future.

New Zealand currently has two key sources of value that give us our place in the world: tourism and dairy. Let’s examine these going forward, drawing on the insights and statistics of Sir Paul Callaghan.

New Zealand has 1.3 million FTE (full-time equivalents, essentially the number of jobs available). We also have a per capita GDP of approximately $40,000. In order to maintain our current GDP of approx. $125billion, we need a GDP of $120,000 per job. Tourism in New Zealand produces around $80,000 per job. That’s two-thirds of the per-job GDP we need to sustain our current GDP, which means the more tourism we export, the poorer we become. We are immediately doomed if we at all try to increase tourism, which is what a large majority of people currently seem intent on doing.

Dairy, in contrast, produces $350,000 per job. Sir Paul Callaghan says it succinctly – “Without dairy, we would be desperately poor”. However, dairy is finite in capacity. We only have so much land to farm on, and we’re not too far off its capacity.

I’ll repeat: the current course that New Zealand is on will not allow us to even sustain our current GDP, let alone grow.

Countries like Singapore and Hong Kong didn’t grow through their natural resources (they don’t have any). And remember, thirty years ago New Zealand was providing aid to Singapore. Now they both have GDPs twice as large as ours. New Zealand will never become relevant in the world, as Singapore and Hong Kong are, if we continue to focus on growth through our natural resources.

Throughout New Zealand’s history, our key weakness has been our physical distance from the rest of the world. It costs huge amounts and takes a long time to export to other countries. It takes ages to travel anywhere. We’ve actually done remarkably well exporting dairy and tourism, considering this.

In the twenty-first century, New Zealand’s physical distance from the rest of the world became a competitive advantage. Well, it would have, if we’d pursued other sources of growth.

The Internet. You’ve heard it before. It breaks down physical barriers. That’s what it does best. No longer do we write physical letters, or need to travel across the world to see people. No longer do books and newspapers need to be printed and sent here. No longer is New Zealand restricted to growth through bringing people to the country or sending goods out.

The Internet is the biggest opportunity New Zealand has ever had, and ever will have. It allows us to achieve growth and sell products at absolutely no additional cost to what it costs other countries to produce. We can reach the rest of the world in milliseconds, compared to the previous days. Furthermore, our physical distance from the rest of the world becomes a competitive advantage to us because the smartest people in the world will want to come and live and work in a beautiful, pristine island.

And here New Zealand is building a national cycling track to encourage tourism, destroying areas of forestry to turn it into farming land, and then selling great chunks of our land to the Chinese.

The stars are aligned for us. Global power is shifting at the same time that the Internet gives us another path to growth. I refuse to let my country miss the biggest opportunity it will ever have. I refuse to let New Zealand become poor and irrelevant, when it could become a rich world leader.

This post marks my commitment to doing whatever I possibly can to create a rich and powerful New Zealand. This will be a core tenet of my life.

Watch Sir Paul Callaghan and Derek Handley’s talks. Follow Derek’s advice on what you can do right now. Think about the New Zealand that you want and how we might get there.

To finish, I’ll quote Derek, as he says it best:

“As we continue through the twenty-first century, New Zealand can choose to be an idle bystander, or it can choose to be a shaper of this century. The former path is a path to failure and irrelevance as a country – and those failures as a collective will cast a long black shadow over the Land of the Long White Cloud for many, many years to come”.

Respect for the Motor of the World

I ordered some clothes online on Tuesday from a British retailer. They arrived in the mail this afternoon (Friday). I haven’t thought about mail companies or courier services in the past – they’ve always seemed a bit boring and unimpressive. But for some reason today I started thinking about how it all works and became amazed by it.

For a little parcel to be sent from a warehouse in Maidstone in the UK to my home in Wellington in just three days is just incredible. It was sent by DHL, and I could track it every step of the way. From Maidstone, it was sent to London Heathrow, then to Leipzig, then to Singapore, then to Auckland, then to Wellington where my house is.

Think about it. At each of those places it had to be transported on the ground as well, and scanned so that they could track its progress and update it online for me. It likely passed through at least six ground transport vehicles and was presumably handled by a similar number of individual humans on the way. That’s on top of the five flights it made (two long-haul).

DHL probably has tens, if not hundreds, of thousands of parcels being sent simultaneously across the globe to an almost equal number of individual destinations. And DHL is just one of the courier companies in the world (albeit one of the biggest).

Companies like DHL literally make the world go around. Without them we wouldn’t have economies or really be considered a globe. It’s a huge feat to deliver a product from one building on the top of the world to another building at the bottom of the world in three days. For fifteen pounds. This happens every single day, with millions of items (and people) and I’m embarrassed to say that I’ve never felt in awe of this machine before. In it’s broadest sense, that’s what the collection of global companies is – it’s a machine, or a motor, that makes the world function as we expect it to.

I’ll admit that I take most of the modern world for granted. Computers, mobile phones, skyscrapers, airplanes, supercars, and, yes, the ability to buy things from the other side of the world and receive it within three days. I’ve expected it without thinking about it in the past. Recently, however, I’ve been noticing how complex so many of these systems are and how great a feat they are.

There’s a couple of ways to look at all of these incredible things that the modern world gives us, in my opinion. The first is we can look at it all and say “It’s such an incredible world and individual humans are such a small part of it”. Or, the way I look at it, is we can say “It’s such an incredible world, and all of this incredible stuff was created by human beings”. Yes, it’s a machine that makes the world go around. But the machine was created, and is maintained, by humans. We’re pretty impressive creatures.

I’m gaining a healthy respect for most of the things I’ve previously taken for granted. If you take them for granted too – I hope you’re thinking about them in a slightly different way, like I now am.

My Kindle experience so far leaves something to be desired

I’ve been trying to decide recently whether to stick with physical books, or go to e-readers. It wasn’t that hard to make that decision – I’ve been trying to make my life paperless, and have done quite well so far, so I figured an e-reader would help even more with that goal. Then the harder decision was which e-reader. Kindle, Kobo, Sony…? Each had their advantages and disadvantages, especially to people in New Zealand (Kobo is linked more directly with New Zealand booksellers). But I eventually decided on the Kindle because they have a larger range of books and lower prices, and I liked their design better.

The next decision was which Kindle to get. Amazon had just brought out the new Kindle Touch and normal Kindle. I figured I’d go with the Kindle Touch, but then saw that people were frustrated with the touchscreen, and it wasn’t shipping to New Zealand yet. But I wanted a keyboard to be able to annotate what I read (I annotate a lot), and the normal Kindle didn’t have that. So, that left me with the Kindle keyboard.

But that’s not all. I then had to decide between the WiFi only version and the WiFi plus 3G. I read up on it, and found out that the 3G could be very useful as I could use it as emergency Internet access if I was traveling and couldn’t get WiFi anywhere. Amazon made it seem as though I could access the Internet (Facebook, emails, in basic form) through the experimental browser in any country in the world for free. So, it seemed like that made sense considering it was just less than $100 more for the 3G access.

Finally. Decided on the 3G Kindle Keyboard, and went and got it. But that wasn’t the end of my frustration.

I’m writing this post to say two things. Firstly, to explain my experience. And secondly, to suggest to Amazon that they make the Kindle experience better for international buyers.

So I fired up the Kindle as soon as I got home, and immediately opened up the Kindle Store to search for some books. I’m reading The Godfather, by Mario Puzo, at the moment to take my mind off of studying when I need a break (it does it very successfully). I searched for that – nope, not available on my Kindle. I then searched for The Fountainhead, by Ayn Rand, which I’ve been wanting to read ever since reading Atlas Shrugged. Not available. I searched for The Gatekeepers, a book about the US college admission process – not available.

All three of these books were ones that I had searched for on the Amazon website prior to getting the Kindle. They all said they had Kindle versions. But once I get my Kindle, it turns out I can’t get them. Why? Because I live in New Zealand. For whatever reason, they aren’t available on Kindle when you live down here.

Secondly, I found a couple of books that were available. I had seen on the Amazon website that they were either free, or 99cents each. But on my Kindle, they were $2 to $3. Not sure why that is, but I’m guessing it’s because I live down here.

In this whole process of searching for a Kindle and getting it, Amazon never made me aware that some books would not be available to me in New Zealand, or that they would be more expensive. There was specific information they showed me about using Kindle in New Zealand, which said that I would have access to hundreds of thousands of books. I figured it was the same number of books that customers in the US got access to.

One more thing. While I had been made to believe through the Kindle product page on Amazon’s website that I could use the 3G access anywhere in the world, that isn’t the case. I can use the 3G anywhere to search the Kindle Store, but not to use the experimental browser – “Access not available in your country”. Therefore one of the key reasons I opted to get the 3G version doesn’t actually exist anymore.

So, two suggestions to Amazon:

1. Simplify the process of choosing a Kindle. Take lessons from Apple about making customer choice an easy thing. Many potential customers might have given up on getting a Kindle because they couldn’t decide on which model to get.

2. Be open and honest about the experience that international customers are going to have with the Kindle. While you don’t specifically state that international customers will have access to the same books at the same prices (and 3G) as US customers get, it was implied. I felt cheated because you didn’t tell me that before I purchased. If you’d told me, I would have still purchased, but felt better about the whole experience.

Rugby World Cup Economics

I was wondering for a few months whether the Rugby World Cup would actually benefit New Zealand economically. I couldn’t quite get my head around how the boost in spending by tourists would even cover the costs associated with the tournament, let alone provide economic gains OVER the cost. And on top of that, whenever I read an article with statistics about the extra tourists and their spending, it seemed as though the numbers were complete guesses as they varied between every single article.

Then I learned about an economic theory called the Multiplier Effect. It explains how our economy can benefit hugely from the World Cup as a result of tourist spending. Let me explain the background to the economics behind the World Cup, and then how the Multiplier Effect works.

Extra spending by any New Zealanders that occurs as a result because of the world cup is not included in any figures about the economic benefit from the tournament. That’s because we assume all New Zealander’s income is fixed in the short-run, and if they spend their income on World Cup-related goods, that’s not extra spending in the New Zealand economy – it’s simply spending in a different area of the economy.

The boost to our economy comes primarily from the extra tourists we attract directly because of the tournament. Reserve Bank figures estimated the number of tourists that would visit NZ during the World Cup at 90,000, and put the amount they would spend at $700 million. These figures may or may not represent the actual figures, but those will come out sometime soon. I’ll use those figures for the purpose of this post.

$700 million is not the total benefit that our economy gets. This is where the Multiplier Effect comes in.

The Multiplier Effect says that cash injections into an economy are multiplied through the economy as people receive a share of the income and then spend a part of what they receive.

Let me run through this. Let’s say a tourist spends $1000 at a New Zealand clothing shop and the company’s profit from this purchase is $100. That $100 goes into the pocket of New Zealand shareholders. Each of those shareholders will then save a proportion of that income, but spend the rest at other shops within New Zealand. Each of those people who then profit because of that purchase will in turn save a proportion of that profit, but spend the rest within New Zealand.

The Multiplier Effect means that money from that initial tourist’s spending flows through the whole economy, and its effects are multiplied as it goes.

The Multiplier Effect actually has a formula which you can use to calculate the multiple by which the initial spending will be multiplied in the economy. I don’t have the necessary information to calculate the multiple correctly, but I’ll tell you the formula so you understand it better.

Multiplier = 1/1-MPC

“MPC” is the Marginal Propensity to Consume. This is the mean percentage of the extra income that each person in the economy spends after they receive it. So let’s say that after taxes and what they save, the initial clothing store shareholder spends 80% of what they received in the first place. 0.8 is then their MPC value, and you can use this to calculate the multiplier.

If we used 0.8 as a complete estimate and put it into the formula, this would give us a multiplier of 5. This means that the estimated $700 million that tourists were expected to spend in New Zealand is multiplied by five in order to see the actual value it brings to the New Zealand economy. That gives us a (completely estimated) value to the New Zealand economy as a result of tourist spending of $3.5 billion.

I found this theory very useful, as without it I simply couldn’t understand how the World Cup was going to benefit New Zealand that much. Hope you learned something too!

New Zealand’s Future: Using Our Natural Resources

Bear in mind that everything I say in this post is said simply because I love New Zealand and care about it having a great future in the world. But I seriously wish we’d do some things differently. We deny ourselves the growth that our natural resources could give us, and we have political parties that don’t know that correlation does not imply causation. Those are the two things that have been frustrating me most recently.

I’m not one to get involved in New Zealand politics. But Sir Paul Callaghan’s talks about giving NZ a prosperous future have been making me think a lot more about how we can go about doing that. And it frustrates me to no end seeing our politicians doing exactly the opposite to most of the advice Sir Paul gives. So, like any blogger who gets very worked up about an issue, I thought I’d have a public bitch about it and offer my personal opinion on the issues. Thank you all for the opportunity.

Sir Paul Callaghan has repeatedly said that the only way for New Zealand to achieve economic growth and development is through sustainable innovation. He states that tourism is clearly not sustainable, citing the fact that there is a clearly defined limit to how many people can do the Tongariro Crossing each day. Completely true. So Sir Paul says that the way we achieve economic growth depends on our entrepreneurial talent, and how we nurture it. I completely agree, but I would not rule out the use of our natural resources too quickly.

Many people forget that New Zealand has one of the largest EEZ’s (Exclusive Economic Zones) in the world. In fact, our EEZ stretches to fifteen times the land area of our physical country. The ocean that we control has an incredible amount of resources in it, including oil. Now don’t get me wrong – I appreciate the value that our “clean green” image gives our country, and by no means do I want to destroy our tourism industry. I would oppose any huge mining project on the mainland in an area that tourists actually visit and notice. But how about hundreds of kilometers out at sea? Would anyone ever notice a few oil rigs? I doubt it, and yet the value that they could bring to our economy is enormous. A few oil projects would contribute very noticeably to our GDP.

Of course things could go wrong. There’s always the possibility that a disaster could occur on one of these oil rigs. But, like anything, it’s risk vs reward. And in my opinion, the value that using our natural resources could bring to New Zealand is far greater than the risk of a potential disaster. We would invest hugely in safeguards against disasters, and have plans ready to be put into action immediately in the event that something did go wrong. We would also, of course, use the most modern and safe mining and exploration methods in the world.

People often wonder how it is that Australia is powering ahead of New Zealand each year. It’s obvious – they’re smart enough to use their natural resources. And at the same time, they still have a huge tourism industry. I believe that in order for New Zealand to continue to grow we need to focus on three things – tourism, intelligent use of our natural resources, and sustainable innovation (nurturing entrepreneurship).

Now, I appreciate that this is perhaps a little bit of a hot topic given the Rena ship disaster in New Zealand. But this is where New Zealand needs to forget the word “green” for a minute, and just think logically. A few days ago, after the Rena showed that it had an oil spill, Phil Goff went straight to stating that this disaster should end all deep-sea drilling. He said: ”There shouldn’t be deep-sea drilling until we know there are safeguards in place that can absolutely be relied upon”. Think about this. The captain of a ship makes a massive error and runs the ship into the reef. Unfortunately, this leads to an oil spill from the ship. And by Goff’s logic, this means we should end all deep-sea drilling in New Zealand.

If you go by that logic, we should stop using plastic packaging on products simply because our rubbish bin blows over in the street. This is what I mean by our politicians do not realize that correlation does not imply causation. Simply because an oil spill and deep-sea drilling both involve the word “oil” does not actually mean that they are related or caused by similar things. But since this is a “green” issue, we don’t tend to think too much about it and we’ll all go to arms against anyone or anything that talks about mining or oil.

The point I’m driving at is that we need a political party to be strong about using New Zealand’s natural resources, and realize that we are insane to deny ourselves the growth that intelligent use of our resources could bring. Sir Paul Callaghan’s idea of sustainable innovation to grow New Zealand’s economy is perfect – but it’s not as easy to master. Innovation, to a large extent, depends on luck. Use of natural resources is more solid and depends less on luck. I believe a combination of the two is required.

Alright, that wraps up my complaints about New Zealand policy for today. Well in all honesty it doesn’t even cover a fraction of them, but I figure I’ll get enough flak for going against the status quo “green” policies. I’ll end on the note of suggesting that if you haven’t yet watched any of Sir Paul Callaghan’s talks, please do watch one such as this – it’ll get you thinking about how we can make New Zealand a country that has a place in the world.