Whatever Happened To Competitiveness?

Posted on Thursday, 17 January, 2019 by Paul Spence

Having spent a decade helping to build a technology business as well as giving back to the community along the way, I thought that I was making a valuable contribution to growing a more knowledge intensive economy here in New Zealand. I was able to measurably improve my own lifestyle and assumed that we were all heading in the right direction together. But with regional economic development becoming more politicised than ever and national indicators of labour productivity and GDP actually decreasing over the last two years – I now realise that we have a lot more hard thinking ahead of us as a nation if we are to deliver on the clean and competitive, high value economy that we all hoped for.

Lately, in an effort to determine how I can best contribute intellectually to this creative endeavour, I’ve been revisiting some of the traditional macro-economic theory around “competitiveness”. As well, I’ve been exploring some new approaches that are emerging in the development arena, with the goal of bringing together my business experience and the latest in economic development thought leadership. I’m a firm believer that policy and actions should be driven by a combination of practical skills and academic theory.

The World Economic Forum defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country”. Productivity is simply the ratio of outputs versus inputs in an economy. Traditionally a more productive economy generates more wealth and (theoretically) more income per capita and better standards of living for its citizens. In practice, it is more problematic and here’s why.

Firstly because this formula assumes wealth is the only measure of good. Happily, some governments and corporations are now beginning to rethink GDP and put more weight on less tangible measures of progress such as well-being for example. Secondly, social factors can skew apparent productivity. For example wealthy nations with large populations of guest workers who have a much lower standard of living compared to local residents. Also the rise of pan-national states (such as EU) and the drift away from globalism towards regional trade agreements, force us to revisit how we look at competitiveness from a global perspective.

Competitiveness is as relevant as ever, but it is being framed within a somewhat different context these days. Even Prof. Michael Porter, who famously drove much of the original thinking around competitiveness, agrees that the landscape has shifted. Today businesses (and national economies) are highly networked, social and collaborative – meaning that the forces of competition have changed. Furthermore Porter has evolved his own thinking and now dedicates much of his time to promoting social progress as a measuring stick independent of GDP.

The challenge for New Zealand remains the same. How do we drive our economy up the value chain and away from extractive and polluting commodity based export industries? After ten years on the job, I learned that building and scaling a knowledge based business is very hard work. Even for those who do succeed, the returns may not outweigh spending the same time and capital investing in property, dairy farming or planting pine trees. That’s a huge competitiveness problem that we need to solve if we are to maintain our enviable lifestyle into the future.

Paul Spence is a commentator and serial entrepreneur, a co-founder of New Zealand based technology ventures iwantmyname and Creative Forest and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Photo credit: Renea Mackie – Creative Forest

Creating An Education Nation

Posted on Saturday, 17 November, 2018 by Paul Spence

This week I gave my young son a tearful hug and watched him cross through airport security to join the first leg of a long journey to Europe. I found myself, reviewing the previous eighteen years and wondering whether or not I had done enough for him. His mother and I have a solid friendship now, but we separated when he was just two. So co-parenting presented numerous challenges for us for many years. Not the least of those was that (despite his intelligence) my son sometimes struggled within the school system. At times it broke my heart and I often felt like I badly let him down. But what I have found out since we began researching our new project Creative Forest is that the education system is simply not serving our kids well enough in the 21st Century.

Let me state that this article is not about shifting blame or spotlighting shortcomings in education, it’s about acknowledging that kids have different learning styles, society is changing rapidly and that we are not addressing this fast enough. Our current “modern” form of Western education has origins that date back two centuries. That system arose in the wake of the Industrial Revolution as economies transitioned away from being agrarian and when there was a need for a more literate workforce. Teachers stood at the front of the class imparting knowledge to students lined up in rows. Little has changed.

I don’t mind admitting that this old system served me well personally, because I actually enjoy absorbing facts and was good at sitting exams (one of my few talents). I ended up with three degrees including a post-graduate qualification and was the first person on my father’s side of the family to complete a university education. But now it’s becoming clear that many bright children are not suited to this model, yet there are so few alternatives. It’s time we became an education nation where teaching is properly resourced and we provide alternate pathways that motivate learners. Our future viability in the world depends on it!

Today we are faced with vastly different economic structures, increasing disparities in wealth and exponentially accelerating technological change. How do we equip our children with the skills to navigate these enormous problems? With Creative Forest we take some of the emergent thinking on project based learning and personalised learning and bring them together with a design based ecosystem approach that supports both students and teachers. The open source Creative Forest system delivers success in STEAM subjects, on the basis of personal inquiry, guided by teachers and external mentors. So we use a hybrid setup with the online platform supporting the classroom environment.

Critics of these new methodologies worriedly cite the dangers of eliminating knowledge from the curriculum, but this is a red herring. Learning is not a zero sum game and introducing new approaches does not need to be at the expense of curricula. Indeed bringing forward some new thinking has the potential to enhance how knowledge is passed on. It also opens doorways for kids that were previously excluded and conveys soft skills such as collaboration that they will need in the real world. Thankfully some teachers are already beginning to embrace these ideas and Creative Forest is making progress working with these early adopters.

Meanwhile, thirty hours later we receive a cheerful FaceTime call from my son. He has negotiated several major international airports, landed in Tokyo, Japan, found his hotel then flown on to Osaka the next day, where he interprets online maps to find his way safely across a huge, unfamiliar non-English speaking city, via trains and buses, to a tiny apartment where his buddy is staying. We also hear that he has a job offer awaiting his return to New Zealand. I guess I didn’t fail him entirely in his education.

Growing Outwards: Why NZ Needs A More Mature Global Outlook

Posted on Sunday, 17 June, 2018 by Paul Spence

After three weeks holiday travel, incorporating some of the leading historical and business centres of Europe, it has been quite an adjustment settling back into daily life in the sleepy province of Wairarapa where gumboots and track pants are regarded as the height of fashion in some circles and the main export is unprocessed timber. New Zealand offers many lifestyle benefits, but it is very evident that our cultural isolation threatens to obscure opportunities, unless we learn to take a wider view.

Whilst I will not miss the ever present throngs of humanity and the choking European smog, it was a blessed relief to have a short break from the incessant background noise of sports “news” and the tedious drone of the increasingly dull and introspective media at home in New Zealand. Regularly escaping our little islands and receiving a taste of the real world should be mandatory for anyone in business, education or media or those holding political office. Only by gaining a proper perspective do we truly get a sense of our own irrelevance. Then we can be more effective and realistic in how we engage with the world and with each other.

So much of our cultural focus in New Zealand continues to be fixated on the lower end of the value chain. This is the greatest constraint on raising our aspirations as a nation. By way of example I include, the mind numbing obsession with contact sports, our continuing over-dependence on filthy primary industries as a source of income and a growing preoccupation with political correctness driven by a vocal minority and fueled by a misplaced sense of post-colonial guilt. We must all look outwards together once again and take a bigger picture view.

Only by creating a higher value economy (through trade) and a more informed view of the world can we deliver social equity in the form of better employment and educational opportunities for young people and a welfare safety net for an ageing population. Recent research by the Productivity Commission points to better international connectivity as part of the solution for improving productivity because globally connected firms tend to adopt new technologies earlier and generate better returns. So where do we look for future growth markets?

There’s a free trade agreement on offer with the EU soon, that could be a ray of sunshine. But with the “European project” potentially faltering under the weight of unmanageable levels of migration, ballooning debt and resurgent nationalism, we would be wise to cultivate multiple options. One area of interest is South Asia and in particular India. The sub-continent is currently enjoying the highest economic growth of any region and boasts an emergent and large middle class. We may need to reassess how best to approach this market however. Data shows that NZ exports to India declined in the period 2011-17 and consisted primarily of unprocessed wood products.

The UAE also looks promising as oil prices rebound and their government pump primes with increased infrastructure spending. The Emirates are served by outstanding air links to and from New Zealand and its government has always understood that they must leverage technology to diversify away from reliance on neighbouring oil revenue economies. That’s an opportunity. Perhaps the most interesting challenge then for our technology entrepreneurs is how to create high value, weightless (digital) exports that appeal to customers in regions that are less familiar to us. It takes 25 years for a single pine tree to mature and provide income. With a more global view we can do better than that.

Photo credit: Renea Mackie – Creative Forest

Paul Spence is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Creative Forest and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Not A Drop To Drink

Posted on Sunday, 15 April, 2018 by Paul Spence

The environment and human development seem to be increasingly at odds. Having recently moved to a drought prone province, the state of the local rivers and reservoirs is never far from our minds. On the other hand we’ve also had a spate of storm damage around the country during the last few months, thanks to a heavy rain and sea swells. So whilst we have a vast surplus of water in some places, others are running dry.

Of particular concern in our own province is that plans to future proof the area against looming fluctuations in water supply have been knee-capped by the government for the sake of political expediency. Given that the region has a growing population, a water dependent agricultural base and an expanding viticulture industry, that’s a big concern. It’s a concern that could be addressed by levying the biggest users, rather than turning off the tap to residential consumers (as currently occurs). But worries over water sustainability are not limited solely to Wairarapa.

The counter argument to investing in water reservoirs is that irrigation fueled intensification of agriculture has demonstrably led to the degradation of waterways and lakes in New Zealand. Even Fonterra’s current charm campaign cannot detract from the facts. Having a prominent sportsperson deliver milk to schools by helicopter is fun, but it won’t enable the kids to swim in the rivers that have been despoiled by Fonterra’s suppliers. By the way, the damage caused by Fonterra’s corporate greed extends beyond New Zealand shores. Expect to hear more about their slow moving China train wreck this year. But I digress.

How we manage our most valuable, life-giving resource may well turn out to be the most important issue of our time. But at a time when central government claims to be interested in supporting economic growth in the regions it is difficult to understand why they are failing to address water security.

Paul Spence is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a mentor with Startup Weekends and Lightning Lab. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

March For Science Matters

Posted on Saturday, 29 April, 2017 by Paul Spence

Last weekend’s March For Science may have been largely symbolic, but it was important. When a government appoints a rabid climate change denier to perform a hatchet job on its own environmental agency, you know that somebody has seriously lost the plot and voices need to be heard.

Interestingly even China is now becoming increasingly concerned around problems created by climate change and has committed to refactoring the economy towards green energy. It’s a bit like trying to turn around a super-tanker, but I suppose you have to start somewhere. But it is very difficult to reconcile that technologically adept nations such as the United States are going in the opposite direction to almost everyone else on the globe.

The role of science in economic growth and development has long been established. Science driven technological innovation has been a key contributor to our advancement as a species over the last few hundred years. From health to computing to space exploration, science has been at the base of almost every step forward. We live longer and more fulfilling lives, largely due to scientific discoveries.

Conversely, science has arguably also been responsible for some of our backward steps. Industrialisation, internal combustion engines and nuclear weapons are also products of the science lab. Science therefore is no panacea. The philosophical and morale context around science is ever-changing and what seemed like a good idea 50 years ago might be framed very differently by future generations. Scientific theories also evolve over time as new ideas emerge and get tested and old ideas are discarded.

What we do know is that the scientific method provides a solid basis for exploring and understanding our world. Discarding rational thought in favour of rumour and outright lies may be a successful political strategy, but it will certainly not help us to address the pressing social, health and environmental issues in the world.

Paul Spence originally completed a B.Sc. degree in Applied Geophysics and was previously employed as a support meteorologist in the aviation industry. He is a commentator and serial entrepreneur, a co-founder of Wellington, New Zealand based technology ventures iwantmyname and Polanyio and a mentor with Startup Weekends and Lightning Lab. GeniusNet is working to support global environmental projects through its portfolio companies.

You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

Big Ideas Poor Execution

Posted on Sunday, 23 April, 2017 by Paul Spence

In early 2014 the Wellington City Council announced a series of “big ideas” to boost economic growth in the city. Predictably, in the two years since, there has been little progress.

For starters, it was always clear that the airport runway extension was not a good idea because of technical reasons that I have outlined on numerous occasions. What was less clear, was the business case to justify a ratepayer funding subsidy based on these illusory benefits. It subsequently emerged that the real reason for the extension was to make it safe for existing aircraft. Something that the airport should have taken care of years ago.

The Miramar film precinct and creative enterprise zone idea sounded promising at first, but once again there seems to have been little progress. Additionally, Shelly Bay (see photo above) on the Miramar Peninsular is ripe for development but has been an embarrassing eyesore for many years because the ownership can’t seem to work collaboratively and constructively. A number of attempts have been made to move forward on developing the area but once again nothing has happened yet. The film museum now looks set to rise on a site opposite Te Papa, co-funded by the city. At least we have that to look forward to.

Finally, and most disappointingly, there was the concept of a tech district based around the Cuba Street precinct, where many of our most exciting startups and technology sector companies reside. Our office is located in this area and I’m not aware of any initiatives yet. In fact council staff have been putting up more yellow stickers and telling building owners to get concrete masonry sorted or suffer the consequences. So the future of the area is sketchy, especially in light of recent seismic activity.

What did happen in the previous two years was that the council invested a huge sum of ratepayer funds into a vanity project aimed at helping a private company set up a large co-working space on the edge of the CBD. It’s a good venue, but initially bold community-building objectives seem to have fallen a little by the wayside this year. I’ve also heard one or two newly elected councillors privately express their reservations over this and the lack of innovation support generally. Now that the Grow Wellington model has been homogenised and had the life crushed out of it, the incoming council are trying to figure out how to fill the vacuum.

Overall I’m worried about Wellington’s crumbling economic competitiveness, a scenario which is likely to be compounded by the hidden effects of a slow-moving earthquake impact, including incapacitation of the container shipping terminal. There are many old and damaged buildings in the city now and (unlike Christchurch) there does not seem to be a unified vision about renewal of the inner city. The old town is looking dated and shabby, whilst our neighbours in Australia and Asia surge ahead. This situation has crept up on us, but it’s time to cut through the political window dressing and admit we have a problem.

Parochialism Will Ultimately Fail So Think Globally

Posted on Sunday, 19 February, 2017 by Paul Spence

Australian Prime Minister Turnbull’s recent flying visit to New Zealand, to meet our new PM Bill English, was a considerably more civil affair than Turnbull’s reportedly heated conversation with the “so called” U.S. President the previous week. Perhaps that is why the visit went under-reported in the media. Neither Prime Minister could be regarded as a stellar charismatic, but perhaps that’s not such a bad thing. In these unenlightened times, a safe pair of hands with good diplomatic skills and a head for business is a far greater asset. Strengthening regional economic linkages will be key to survival in an uncertain world.

During that top level meeting in Queenstown a cooperation agreement on science and research was signed that paves the way for more trans-Tasman collaboration. To the popular media, topics such as this are about as dull as a damp dish cloth and the agreement went largely unnoticed. That’s a shame because everyone needs to understand how important regional cooperation is becoming to the economy. How we play within Asia-Pacific will have implications for our future opportunities and prosperity. The disturbing shift (in some quarters) towards isolationism and protectionism demands that we build stronger regional relationships.

There needs to be a local mindshift as well. I’m tired of well-meaning local government agencies constantly banging on about how they are making over their cities into the next big centre for technology innovation. It’s a ridiculous notion. The entire population of New Zealand could fit into most major cities on the Asia-Pacific rim, with whom we are in a battle for capital and talent. We contribute 0.1% of the global economy and we are under-cooked by most measures in terms of science and technology research and innovation commercialisation. Short-sighted parochialism makes no sense and must end now. Our businesses and civic leadership need to get with the programme and start connecting regionally.

I had a conversation along these lines recently with Shawn O’Keefe, formerly a co-founder of South by Southwest (SXSW), a huge global film, music and interactive media event. Shawn is currently based in New Zealand and is now an advisor to the Myriad event launching in Brisbane this year. Myriad is supported by the Queensland government, which is pouring a huge investment into promoting innovation in the Sunshine State. Myriad is a three day festival of art, technology, innovation and investment match-making. A key theme of the event is that we need to collaborate regionally to compete globally.

It would be great to see a strong contingent of New Zealand tech founder entrepreneurs at this event.

Image credit: Paul Spence

Ashes To Ashes 2016. Now Welcome To 2017

Posted on Sunday, 1 January, 2017 by Paul Spence

Let’s face it, last year was a pretty shit year for fans of popular music and culture. I don’t care what the statisticians say, the catalogue of highly talented stars that made premature exits in 2016 was exceptional and shocking. However the media were (mostly) too polite to mention that the collective drug consumption of the dearly departed probably supported a number of small South American nations’ economies throughout the 1970’s and 80s. All tragic losses, but perhaps not entirely unexpected.

Less predictable was the outcome of the U.S. election, a result so unpalatable that we can only hope that the American political establishment will find a way to put matters right, before there is a very nasty accident involving long range armaments or fiscal collapse. One way or another, I very much doubt Trump will see out his four year term. The Brexit debacle was equally disturbing and was also another example of a poorly informed, inward looking minority being allowed far too much influence. But of course it would not be democracy if we excluded people with double-digit IQ and questionable heredity from voting.

At a time when irrational fear, regional isolationism and misguided notions of nationalism seem to be taking root globally once again – it is important that thinkers give voice to their concerns loudly and often. Important because intellectualism usually becomes an early victim of the mob, when rational thought gives way to populism and slogans. History repeatedly shows us that this never ends well.

So I was at first encouraged when I read this opinion piece on how we all need to work together to create a sustainable economic future for New Zealand. Whilst I certainly agree with the sentiments, I disagree that this approach is predicated on Auckland as the “centre of innovation” for New Zealand. In fact the problems of Auckland are analogous to arterial thrombosis. If the heart fails, the entire body will die – and that’s a big issue for all of us in New Zealand. Regional relationships and complex networks are the better approach, as I have discussed previously, with regional linkages and multiple innovation hubs.

For my part this year, I intend to continue to connect entrepreneurs and innovators from across New Zealand and abroad and to contribute economically by working on growing the businesses we have under the GeniusNet portfolio and (hopefully) add one or two more during the year. I will also continue to speak out on issues, especially those that relate to economic development. It is about time the citizenry had greater influence over decisions than those self-serving politicians whose main aim is building grandiose edifices to themselves. Here’s something good from 2016 that gives the world hope in this regard. Thanks Audrey.

Network Effects Strengthen Our Economic Game

Posted on Friday, 2 September, 2016 by Paul Spence

network I really enjoyed attending Project16 this week. Offering a nice blend of business, philosophy and creativity, the event attracts an esoteric mix of thought leaders from the United States and bakes them with a sprinkling of local influencers, thinkers and doers. What I like about the event is that it challenges our thinking and helps build connectivity by creating a diverse set of connections. That’s important for an island nation that lies a long way from global markets.

It was also a relief that most speakers generally avoided trotting out the usual slogans such as “number eight wire” and “punch above our weight”. Self-congratulatory (but outdated) language such as this should be forever confined to the 20th Century. We also need to move away from parochial attitudes to economic development. It’s no longer acceptable to be championing specific regions or cities as the centre of gravity. Wellington is no more the “centre” for film production than Auckland is the king of software. Yes, we do have regional strengths, but we can leverage these better by working together.

Economic development is not a zero sum game. But everyone can win through collaboration. Rather than trying to compete individually for capital and talent with mega-cities of Asia-Pacific such as Hong Kong, Sydney and Los Angeles, we need to be building relationships and making deals regionally that are more competitive. For example New Zealand tech startups are now accessing capital in Asia. The Sydney “fintech” scene is doing the same. We could set up more “sister city” relationships that have a meaningful economic basis, rather than a political or ceremonial objective. Deal-making should be driven by identified opportunity, rather than through meddling by governmental agencies.

For this reason, pundits who predict that extending Wellington airport will thrust the region onto the global stage are mistaken. Apart from the technical and economic reasons I already outlined that militate against this silly idea, we actually need to switch the thinking towards complex networks, where much greater value is created through diversity. That means it’s also totally fine (and indeed desirable) for air transport links to hub through Auckland, Sydney, Adelaide or Melbourne.

Paul Spence is a commentator and serial technology entrepreneur, a co-founder of iwantmyname (a New Zealand based global Internet venture) and a mentor with Startup Weekends. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest.

No Public Funding For Runway White Elephant Please

Posted on Thursday, 26 November, 2015 by Paul Spence

The debate over whether or not public money should be invested in the extension of Wellington International Airport’s (WIAL) runway is starting to heat up. Despite project studies only being released to the public this week, city councils across the region have already indicated they will provide financial support towards the $330 million cost. At present central government has said it will not support and some local body councillors are already starting to feel uneasy about the overall proposal.

The Wellington City Council (minority shareholder in the airport), Wellington Chamber of Commerce and WIAL have been enthusiastically promoting the supposed “economic benefits” of the project. But the real reason the extension is needed is because the current length is sub-standard even for short-haul jet operations. WIAL is essentially asking taxpayers and ratepayers to co-fund capital works. Given that WIAL parent company Infratil earned a staggering $453 million last year and reportedly has a $1 billion war chest, why are public funds needed at all? Surely WIAL can make it’s own business case and access funding itself?

Adding 300 metres to the runway will not make it safe for wide-body aircraft. “Long haul” flights are not coming to Wellington any time soon and here’s why. Firstly, medium haul, mid sized airliners are actually being phased out across the Asia-Pacific region as we speak. My understanding is that the last Qantas 767 has already gone and Air NZ has a small number remaining with limited lifespans. Asian airlines no longer operate these types. Air Asia and Jetstar withdrew A330s from Christchurch and Auckland, because they could not make a profit. In any event, an A330 would not be able to operate fully laden, even from an extended runway. Truly “long haul” aircraft such as A380, A340 and B777 are unlikely to be operated because of weight and size limitations.

The 787 Dreamliner is often touted as the saviour of long thin air routes. Again, it will not be possible to economically operate this aircraft out of WLG, even with a longer runway. Extending the runway will not remove the nearby hills. Aircraft take-off restrictions are governed by the climb performance under instrument flight conditions with a failed engine at the takeoff point. Long haul operations (10-16 hours) require huge fuel loads and substantial take-off weights. Take-off performance is a function of aircraft weight, engine power and ambient conditions, NOT runway length. Aircraft will be payload limited even with the runway extension in place. This is a really important point that most commentators and the media have missed.

There are many other reasons why investing in a runway extension is a bad idea. Not the least of these is that the airlines refuse to commit. You can be sure that Air New Zealand is not going to undermine it’s cosy hub and spoke operation that is based in Auckland and it’s not clear that any Asia or U.S. based airlines are at all interested. Some passengers complain that travel via Auckland or Sydney is onerous. But can you name any city under 500,000 population in North America that has direct air links with London or Hong Kong? Hub and spoke operations are the norm elsewhere in the world. There are many other investments that Wellington can make as a city and a region in order to promote economic development.

Unsurprisingly, there is zero information on the WCC or WIAL websites about the public consultation process. But the media are reporting the following information. There will be three public open days where people can meet one-on-one with the experts who prepared the reports. The open days will be held at Chaffers Dock Function Centre on December 2 from 12pm to 3pm, at SPCA Fever Hospital in Mt Victoria on December 3 from 5pm to 8pm, and at the Brentwood Hotel Conference Centre in Kilbirnie on December 5 from 12pm to 3pm.

Postscript: There is now a dedicated website providing links to information from the consultants who were paid by the project supporters to provide reports. The site also contains information about public presentations and how to make a submission.

Paul Spence is an ardent supporter of regional economic development, a commercial pilot licence holder and a technology sector company director based in Wellington.

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