This is worth watching, Dow Chemical CEO Andrew Liveris and Australian Business Council chief Tony Shepherd spoke on Sunday with Alan Kohler on the ABC’s Inside Business.
At 5.40 Andrew Liveris says Australia is suffering a state of economic rigor mortis – “we’ve lost the ability to innovate” – with no plans and a great complacency. It’s something all Aussies should reflect upon, although don’t expect these blokes to be any help.
In many ways it was Yahoo! who pioneered Silicon Valley’s Greater Fool Business Model during the dot com boom of the late 1990s.
The Greater Fool model involves hyping a website, online service or new technology in the hope a hapless corporation dazzled by the spin will buy the business for an improbably large amount.
Fifteen years later many of those services are closed down or languishing and the founders who were gifted millions of dollars by gullible boards and shareholders have moved on to other pursuits.
The news that Yahoo! has sealed a deal to buy blogging site Tumblr for $1.1 billion dollars shows the company’s urge to buy in success remains under new CEO Marissa Mayer.
It’s difficult to see exactly what Tumblr adds to Yahoo!’s wide range of online properties except a young audience – exactly the reasoning that saw News Corporation’s disastrous investment in MySpace.
What’s particularly concerning is a comment made by Yahoo!’s CFO Ken Goldman at JP Morgan’s Global Technology Conference last week.
“So we’re working hard to get some of the younger folks,” Goldman said on a webcast from the J.P. Morgan Global Technology conference in Boston.
It’s all about trying to “make us cool again,” he said, adding that Yahoo will focus on content that’s “more relevant to that age bracket.”
So they are spending a billion dollars to “make us cool again” – it’s disappointing Marissa Mayer has allowed middle aged male executives to run free with the shareholders’ chequebook in a quest to rediscover their youth.
Like most middle aged life crises, it’s unlikely to end well.
For Tumblr’s founders and investors things have ended well. It’s time to buy those yachts and fast cars those middle aged execs covet.
In the meantime the quest for internet ‘cool’ – whatever that is – will move onto whatever online service teenagers and twenty somethings are using.
Australia’s leaders need to snap out of their China dreamland analyst Patrick Chovanec told the Australian Davos Connection’s China Forum two weeks ago.
What triggered this comment was a speech by Australian Treasurer Wayne Swan to the Financial Services Council in Sydney last September where the Treasurer compared China’s economic performance to sprinter Usain Bolt;
It’s like Usain Bolt easing off a bit at the end of the 100 meters because he’s 10 meters in front and has already smashed the world record.
“My response was that if that’s the way Australia’s leaders are thinking about China’s economy, if that’s the dreamland that they are in, then they need to snap out of it really fast,” Chovanec said in his keynote.
“Because China is facing a very serious and potentially disruptive economic adjustment. A realistic idea of where this adjustment is going is essential to countries like Australia.”
Chovanec’s view is that China cannot sustain current growth rates by “providing the fodder of the consumerist economy.”
This was borne out in the Global Financial Crises where exports fell from 8% of GDP to 2%. To make up for the drop the PRC government stimulated the economy and investment went 42% of the economy to half.
It was this stimulus that drove the soaring commodity prices in recent years and underpins the Blue Sky Vision of Australia’s political and business leaders.
The establishment view is that China will move from infrastructure spending driving the economy to a consumption driven society.
Moving to a consumption driven economy though means a very different Chinese society which means a different group of winners and losers, Chovanec warns.
He also doesn’t see urbanisation as the real driver of the Chinese economy, “If you look around the world, urbanisation has not always driven economic growth.”
“It’s based on a premise that moving people from a rural environment to an urban environment generates productivity gains.”
“Now for China over the past thirty years that has proven largely true,” says Chavonec, “but going forward most of that hanging fruit has been picked.”
“In order to realise productivity gains, China is going to have to discover new areas of competitive advantage.”
The biggest risk that Chovanec sees at present though is the level of bad debts in the economy and the rate of credit expansion with a trillion dollars pumped into the Chinese economy over the last quarter.
“You’re getting less and less bang for the buck from credit expansion.”
Chovanec doesn’t see China’s future as bleak though, “the China growth story doesn’t have to be over.”
“There are a lot of sectors in China where there’s real potential for true productivity gains – agricultural, logistics, health car, services, consumer branding, retail.”
“The challenge for China is not that the growth story is over but the engine of that growth story is going to have to change.”
Dealing with those changes is also a challenge for countries like Australia who have staked all on the current growth story.
Chovanec’s wake up call to Australia’s leaders is timely – the question is how quickly they can wake up to the changes in China.
The Prime Minister’s comments at the ADC China Forum last week raised an important question about Australia’s mining boom – can the industry sustain employment as the construction of mines, ports and railways are completed?
After her keynote speech at the event’s gala dinner the Prime Minister was interviewed by Busines Spectator’s KGB – Alan Kohler, Robert Gottliebsen and Stephen Bartholomeusz – about the country’s relations with China.
In that interview, the Prime Minister was upbeat about the continued employment bonanza from the resources boom.
I think overwhelmingly the prospects are good for resources. There is nothing to fear here. The absolute peak of the price cycle has probably passed, but we will still be doing good business in resources. It will be supporting jobs.
A few days earlier Fortescue Mining Group’s CEO, Nev Power, spoke to Alan Kohler on Inside Business.
Nev was a little more circumspect about the prospects for continued booming employment in the mining sector.
our capital expenditure program and expansion is coming to an end around mid-year. And then we’re into a very high volume phase and it’ll be a matter of driving the maximum efficiency out of the business through that phase.
So even if the iron price and export volumes do hold up, it looks like the resources employment boom may be reaching its end as mining projects move from the labour intensive construction phase to being relatively hands off production mines.
If Nev gets his way with ‘maximum inefficiencies there may be fewer jobs to go around.
The Prime Minister – along with all of Australia’s political leaders – remains hopeful, as she said in her speech.
So we are not, indeed we have never been, simply a quarry or a beach; ours is a diverse and sophisticated economy and a valued trading partner with the biggest global economies.
As the expansion phase of the mining boom tails off, that economic diversity is going to be tested. Hopefully there is a Plan B.
Given the stock market movements following last week’s Associated Press Twitter Hack it may be time to reconsider the way exchanges and listed companies share and control information.
One of fundamental principles of modern stock exchanges is that the market is fully informed – that everybody buying or selling security gets access to the same information at the same time.
In an Australian context, this is covered by a term called ‘continuous disclosure’, should a company’s management become aware of any issue that could affect they must advise the market immediately.
What’s interesting with this principle is the way that information needs to be made public, specifically clause 15.7 of the ASX listing rules.
An entity must not release information that is for release to the market to any person until it has given the information to ASX and has received an acknowledgement that ASX has released the information to the market.
This puts the Australian Securities Exchange, a private company with an almost monopoly position in the Australian investment community, in the position of being the ultimate gatekeeper of knowledge.
While there’s good regulatory and probity reasons for having a central clearinghouse – that the clearinghouse itself has some serious conflicts of interest is another matter – one has to wonder how long its position can be retained in a world where information is moving fast.
It may be however that we’re in a passing phase as the financial of the global economy has reached a stage where no stock exchange, futures market or clearinghouse can manage the data that’s flowing through it.
Time will tell, but the markets themselves are finding other ways to inform themselves.