economy | Paul Wallbank - Communications Professional

We came, we saw, we were ripped off.

What a greasy schnitzel tells us about Australia’s economy in the 21st Century.

One bad schnitzel on Queensland’s Gold Coast illustrates the biggest economic problem facing Australia.

As we approach the 2013 Australian election, it’s notable how the debate – if it can be described as that – hasn’t touched on the biggest issue facing the country, the hollowing out of the nation’s economy.

In the 1980s the Gold Coast was going to be the centre of a Japanese led tourism boom.

That boom petered through a combination of greed and incompetence on the part of Australian tourism and hotel operators, a process being repeated with Chinese tourists twenty years later.

Like the rest of the Australian economy, in the 1990s the Gold Coast looked inwards with a focus on property speculation and construction that kept the workforce employed pouring concrete and fitting out kitchens.

In the meantime, the Gold Coast’s tourist assets were left to rot through under investment. Jupiter’s Casino is a good example of this, a building stranded in the 1980s and in desperate need of a capital injection.

The Gold Coast was not alone in this, a review of Perth’s Rendezvous Grand Hotel — built by Alan Bond in the 1980s — illustrates exactly the same problem at the other end of the country.

A lack of investment plagues all of Australia’s hospitality industry, a dinner at the Bavarian Bier Cafe on the Gold Coast’s Broadbeach* was a disaster as poorly trained staff were overwhelmed by a half full establishment and let down by poor business systems.

That shocking meal — which saw the staff struggle to get out a salad and two beers in over two hours with the greasy, overcooked mains arriving nearly three hours after the diners arrived — is not untypical in Australia.

Soviet style service is fine when beer and a poorly cooked, mostly breadcrumbs, schnitzel costs fifty kopecks, however at modern Australian prices the service, food and cooking should be world’s best.

That high prices rarely translate to superior standards in Australian establishments shows how poorly the nation has adapted to being a high cost nation.

While it’s fashionable to blame the mining industry for the down under manifestation of the Dutch disease, the answer to what has driven Australia’s under investment in tourism, agriculture and manufacturing lies in the cities and suburbs.

On the same day as the disastrous Bier Cafe meal, the Gold Coast media was reporting that relaxed zoning restrictions would allow unrestricted high rise building heights.

While the real estate industry welcomed this, the reality for local property speculators hasn’t been pretty with buyers in the twin tower Gold Coast Hilton development being hit with forty percent losses.

Part of the reason for the poor performance in property speculation is that Gold Coast industry has been hollowed out with local office vacancy rates varying between 27 and 14% percent.

While much of the rest of Australia’s property markets have been spared similar declines to date, the emphasis on real estate speculation over investment in industry has been similar across the nation.

That lack of investment in productive industries, whether in tourism or manufacturing is already hurting Australia, more critically it’s preventing Australian businesses’ from dealing with the transition to being a high cost economy more akin to Switzerland, Japan or Germany than the United States.

One bad schnitzel on the Gold Coast might not tell us much in itself, but the under investment in systems, training and staff is a bad omen for Australia’s economy.

Regardless of who wins Australia’s federal election on Saturday, it’s unlikely the group of pampered apparatchiks occupying the Treasury benches will have any idea of helping business or society transition to the realities of the Twenty-first Century.

*Paul travelled to the Gold Coast and ‘dined’ at the Broadbeach Bavarian Bier Cafe as a guest of Microsoft Australia

Evolving cities and Silicon Valley’s private buses

What do Silicon Valley’s corporate buses tell us about the way our cities are evolving?

One of the phenomenon of Silicon Valley’s development has been the rise of the ‘Google Buses’ – the private services run by the big tech companies to shuttle their workers between home and their workplaces.

The Bay Area’s private bus shuttles are a real time illustration of how regions evolve around industries and economies and how cities and communities are in many ways dynamic, living creatures themselves.

An effect of the Google Buses is that San Fransisco is experiencing a ‘reverse sprawl’ notes Eric Rodenbeck in his Wired Magazine story Mapping Silicon Valley’s Gentrification Problem Through Corporate Shuttle Routes

It’s about more than gentrification as we’ve experienced it thus far: It’s about an entirely reconfigured relationship between density and sprawl, and it’s going to need new maps to help us navigate this landscape.

Driving those buses is instructive as well and Buzzfeed has an interview with an anonymous driver employed by one of the bus companies. The driver’s tale shows the scale of the phenomenon.

This bus holds 52 people and that is 52 cars that are not on the road in one trip, and we have 70 routes in our system. That’s thousands of cars everyday.

Driving cars is fundamental to the American – and Australian – lifestyle. The modern American city developed around the motor car and that mobility is the defining feature of the Twentieth Century.

So maybe the Google Buses are an early part of the redefinition of our cities to meet the the needs of the 21st Century and cars are not the driving factor.

In this vein, Jarrett’s Walker’s Human Transit blog teases out some of the issues behind these developments.

Finally, this joke is on the lords of Silicon Valley itself. The industry that liberated millions from the tyranny of distance remains mired in its own desperately car-dependent world of corporate campuses, where being too-far-to-walk from a Caltrain station — and from anything else of interest — is almost a point of pride. But meanwhile, top employees are rejecting the lifestyle that that location implies.

While I don’t agree with Jarrett’s proposition that the geeks riding these buses want to mingle with strangers given the locations they live – I’d argue they’re attracted to those locations because their peers live there and downtown amenity to good restaurants and bars – he raises a very good point about the mismatch between where the workers and the jobs are.

Jarrett’s point touches on land use zoning and its effects on the evolution of cities. An excellent piece by Alexis Madrigal in The Atlantic tracked Silicon Valley’s iconic techonolgy sites, most of which have been demolished due to the pollution partly caused by zoning requirements for underground tanks.

The issue of zoning is also raised by Rodenbeck who points out that zoning issues with carparks are what has made employee buses more attractive to the giant tech employees.

Zoning different land uses makes sense on one level as no-one wants to live next door to a tannery, heavy metal waste dump or quarry, but there’s a risk with fixed ideas that our cities will become less responsive to economic developments, particularly in an era when people don’t want to, or can’t, dive across town to get to their jobs.

What Silicon Valley’s corporate buses really show is that our cities are evolving around the needs of today, not yesterday. It’s something governments, businesses, investors and communities should keep in mind.

Image of Google shuttle bus stop from David Orban through Flickr

Living in an age of grey boxes

What does modern architecture tell us about our suburbs and society in today’s Australia?

If an era’s architecture tells us about the times, what do today’s houses tell us about modern society and values?

On Sydney’s North Shore lies a collection of old army bases, from the 1980s onwards the military started moving out and some of the land was handed over as national parks, other parts were converted into office parks or cafes while the disused married quarters were sold off to private home builders.

The old stores and administrative buildings have been adapted into artists’ studios and elegant, if expensive, offices. Overall, that’s been a success which has created quite a thriving businesses and creative community.

old army store converted into an art gallery

Many of the colonial officers’ and NCO’s quarters, impressive sandstone and wood structures, have become offices, restaurants or function centres. Although some are still looking for a purpose.

What happened to the functional three bedroom 1960s and 70s brick veneer homes that housed a generation of army brats is less encouraging and tells us much about the times in which we live.

A few of the old post World War II homes remain for Navy families in the still operating, and expanding, HMAS Penguin and these show us the houses that once lined Middle Head Road in Mosman.

old-mosman-military-family-home — 1960s Mosman military home

old-mosman-militrary-family-home-2 — Another old Mosman military family home

These are perfect examples of the functional family homes that covered Australian suburbia during the 1960s and 70s. While nothing exciting or particularly pretty, they were adequate for their task as baby boomers built their families in the post war prosperity.

When they were sold by the Federal government most those modest family homes on Middle Head were bulldozed to make way for the grey behemoths of the 21st Century.

new-grey-mosman-mansion — New grey mosman mansion

Like the Mc Mansions that crowd today’s suburbia, these feature four, five or even six bedrooms with on-suites, multicar garages and games rooms. Just as every child today has to win a prize, every room has to have a plasma TV.

These monuments to the modern consumerist economy triumphantly march along a road that once featured modest homes with gardens, trees and lawns.

In many ways these modern buildings represent the ethos of our time – grey, non-descript, poorly built, overcapitalised and dependent on cheap, never ending debt.

A striking aspect about them is their hostility to the pleasant surroundings and the 1930s mansions that make up most of the street. With their battleship grey, security features and blocky air raid shelter lines they look much more like some sinister military installations than the red brick army homes they replaced.

What’s also notable about these new buildings is many are empty. Some of them are being refurbished, only a few years after being built, and many are undergoing substantial repairs – a testament to how Australian building standards have declined in the past two decades.

Strolling along Mosman’s Middle Head Road its hard not to imagine that if Dorothea Mackellar were writing her iconic My Country poem today, she would have included the lines;

I love a sunburnt country
a land of capital gains

The tragedy for Australia is those old three bedroom houses could have been used by a visionary government to help low income families in Sydney’s increasingly unaffordable suburbs.

However we don’t live in visionary times and government assets today exist to be sold off as quickly as possible to Australia’s rapidly growing rentier classes.

There was little chance those modest housing blocks would become anything more than expensive, over capitalised gin palaces for bankers and the city’s well connected business elite who are never slow to see a coal mine or old military property going cheap.

Architecture tells us a lot about our times and the abandoned Middle Harbour army base is a good commentary on the phases of Australian development through the twentieth Century and the beginning of this century.

The houses also tell how Australians see speculating on overcapitalised property as a safer investment than building the technologies and businesses necessary to prosper in this century. How that will turn out remains to be seen.

What will be interesting is how our great-grandchildren see us and our legacy when they look upon the grey, hostile buildings we built to celebrate our good fortune in the early 21st Century.

Cutting the middle management fat

Cutting middle management is an imperative for business as markets change quickly.

No-one can say life is comfortable at Cisco when every two years the company engages on a round of job cutting that tends to keep employees on their toes.

While this year’s job cuts are relatively mild – only 4,000 as opposed to nearly 13,000 in 2011 – it’s notable the focus on culling middle management positions.

“We just have too much in the middle of the organization,” the Wall Street Journal reports Cisco CEO John Chambers as saying.

One of the challenges for businesses is become more flexible when markets are rapidly changing. Having ranks of middle managers makes it harder for organisations to respond.

John Chambers and Cisco are reducing their middle management head count to respond to that need. Many other companies are going to have to do the same.

Can Russia build a Silicon Valley?

Can Russia build its own Silicon Valley in Skolkovo?

Like many other countries, Russia is trying to build its own equivalent of Silicon Valley at Skolkovo on Moscow’s outskirts as Tech Crunch reports.

Across the world governments are trying to find a way to replicate Silicon Valley – from London’s Tech City to Australia’s Digital Sydney, the hope is they can create the same environment that built California’s success.

In some respects, Russia should be well placed to create their own Silicon Valley having had the same massive Cold War technology investments as the United Stated. The old Soviet system also left a deep scientific and mathematics education legacy.

As the Tech Crunch article points out though, the Russian financial and legal systems are working against the nation with most local startups looking at incorporating in offshore havens like Luxembourg and Cyprus rather than taking their chances with the local tax laws and courts.

If finance was the sole criteria for succeeding then Skolkovo would be almost guaranteed success with twenty billion US Dollars of private and government fundiing behind the project.

Funding alone though isn’t enough, and most industrial hubs are the result of happy accidents of transport, natural resources and skills being found in one region.

It might take more than a load of cash for Russia to build their own Silicon Valley, but with a shrinking and aging population the nation needs to find a way to diversify away from simply being an energy exporter.

Image courtesy of Skolkovo Foundation through Flickr

Downward trends and demographics mark the end of consumerism

The age of ever expanding consumer spending is over, we have to start thinking of different ways

One of the features of the late Twentieth Century economy was how consumer spending came to dominate the economy – as manufacturing moved offshore, mines closed down and agriculture became largely automated, many developed nations’ growth came from retail spending.

Today’s release of retail spending figures by the Australian Bureau of statistics shows how that economic model too has come to an end. A post on the Macrobusiness blog illustrates the steady, structural decline of retail spending in Australia.

Since 2000, the rate of growth has been declining, only low interest rate policies over the last two years has kept retail sales at a steady level.

Those businesses whose business models are built on the assumption of high growth rates have a big problem – its no coincidence it’s the department and clothing stores are among the loudest complainers about taxes, labour costs and rents as they see their sales and profits shrinking.

Basically the Twentieth Century era of consumption has come to an end as households have maxed out their credit cards. Now that many of those households are now older, they simply don’t need to spend as much anyway.

With the demographic, economic and cultural changes now happening in society it’s a bad time to be planning on massive expansions in household spending and debt as we say in most western countries from the 1960s onward.

It’s time to think different, and be a lot smarter about getting consumers to buy your products. The era of the 72-month interest free deal is over.

Is Australia falling behind on the internet of everything?

Australian businesses are falling behind the rest of the world in using the Internet of machines says Cisco

Last Friday Cisco Systems presented their Internet of Everything index in Sydney looking at how connected machines are changing business and society.

Cisco Australia CEO Ken Boal gave the company’s vision of how a connected society might work in the near future with alarm clocks synchronising with calendars, traffic lights adapting to weather and road conditions while the local coffee shop has your favourite brew waiting for as the barista knows exactly when you will arrive.

While that vision is somewhat spooky, Boal had some important points for business, primarily that in Cisco’s view there is $14 trillion dollars in value to be realised from utilising the internet of machines.

Much of that value is “being left on the table” in Boal’s words with nearly 50% of businesses not taking advantage of the new technologies.

Boal was particularly worried about Australian businesses with Cisco lumping the country into ‘beginner’ status in adopting internet of everything technologies along with Mexico and Russia, with all three lagging far behind Germany, Japan and France.

In Boal’s view, Australian management’s failure is due to “the focus on streamlining costs has come at the cost of innovation.”

This something worth thinking about; in a business environment where most industries only have two dominant players and the corporate mindset is focused on maximising profits and staying a percentage point or two ahead of the other incumbent, being an innovator itsn’t a priority – it might even be a disadvantage.

For Australian business, and society, that complacency is a threat which leaves the nation exposed to the massive changes our world is undergoing.

What happens when the power goes out?

How would you cope if the electricity was turned off?

Cisco gave a media and analyst briefing earlier today on the Internet of everything looking at how various technologies can help with tasks ranging from reducing traffic accidents to improving productivity which I’ll write up later.

One of the analyst’s questions though is worth pondering – “what happens when the power goes out?”

For most of the industrial processes discussed by Cisco and the panellists, this would be a hassle but most of the systems would, or should, be designed to fall back to a default position should the power fail.

On a much bigger scale though this is something we don’t really think through.

In modern Western societyour affluent lifestyle is based upon complex supply chains that get the food to our supermarkets, fuel to our petrol pumps, water to our taps and electricity to our homes.

Those chains are far more fragile than we think and few of us give any thought to how we’d survive if the power was off for more than a few hours or if the shop didn’t have any milk and bread for days.

It’s one of the fascinating thing with the end of the world movies. When the meteorite hits or aliens take over then our power and food supplies probably have only 72 hours before they dry up.

After that, you’ve probably got more to worry about your neighbours trying to steal your hoard than being ripped to pieces by zombies.

Most of us probably wouldn’t cope without the safe, comfortable certainties which we’ve become used to.

One thing is for sure — if the power does fail, then most of us will have more to worry about than whether our smartphones are working or whether our geolocating, internet connected fridge is tweeting our wine consumption.

Gen Y and the need for building new businesses

As baby boomers struggle to maintain their living standards, the burden will fall on younger generations to build future businesses.

The retirement of the baby boomers has been an demographic inevitability, but it’s interesting how policy makers and the population in general have ignored the ramifications of this despite the first boomers now aged beyond 65.

One of the consequences of this is we may see an entire generation being forced to become self employed entrepreneurs.

Illustrating this point are two stories from the US over the last few days; John Mauldin’s dissection of where US jobs are going and Zero Hedge’s 35 facts that should scare American baby boomers.

The 35 facts really boil down to one thing, that an affluent, middle class retirement at 65 when average life expectancy is 78 is an illusion for most people – neither their bank accounts or the state treasury can support that sort of spending.

Which is the point of John Mauldin’s column, that over 50s are taking most of the available US jobs as they can’t afford to retire.

For those over 50 who’ve fallen out of the workforce due to unemployment or illness, getting back into the workforce is proving to be tough and for many of those folk their later years are going to be a struggle.

Equally, as Mauldin points out, the younger generation is being locked out of the jobs being hogged by the over 50s.

Another aspect to that is those employed Gen-X’s and Y’s hoping to get a crack at a seniors manager’s job or their name on the partner’s list are going to find a longer wait as the boomers hold on for as long as they can.

Those young ‘uns need those high salary jobs too, a Westpac report on US student debt posits that crippling education costs are making it harder for graduates to participate in the workforce and affects their spending power when they do find a job.

What’s clear is existing government, corporate and social structures are beginning to struggle with the realities of the changing workforce and its demographic composition.

On a personal level, those Gen Xs, Ys and boomers who are locked out of the workforce have to find a new way to participate in the economy. It’s probably those locked out of today’s workplaces who will build the businesses of the future.

Airtasker and the future of work

Micro task service Airtasker looks to reinvent employment in a partnership with the CareerOne job site.

Tim Fung, the co-founder of Airtasker, has been previously been interviewed on this blog about micro tasking service’s mission to change the workplace.

With the news that that Airtasker had gone into a partnership with employment site CareerOne it seemed Tim might be a good guest to kick off the first video for the Decoding the New Economy YouTube channel.

During the interview Tim describes the motivations behind starting Airtasker, how he sees the relationship with CareerOne evolving and the benefits of operating out of a co-working space.

The Tank Stream Labs working space is an interesting setup – based at the bottom of Pitt Street in the heart of Sydney’s financial centre, it’s not in the more edgy areas on the city fringes where the rest of the town’s workspace are located.

Being away from the hipsters and grunge doesn’t seem to have hurt Tank Stream Labs as the space has now expanded to a second floor of the ten storey office block. The roll call of tenants is quite impressive too.

For Tim being in the workspace has been a great benefit for Airtasker.

There’s always the thing about sharing knowledge and more obviously there’s a lot of great contacts that everyone shares.

Airtasker’s relationship with employment site CareerOne is an interesting development that sees the joint venture between News Limited and Monster move into the crowdsourcing field. It also gives job hunters an opportunity to find short term work while looking for a more permanent role.

People are looking for more hours of work but equally businesses were coming to CareerOne and saying ‘hey, all you do is full time work’ and that’s only one piece of the employment puzzle.’

For CareerOne it really allows them to build up the full spectrum – all the way from tasks to part time to full time and be a one stop shop for employment.

How that works for CareerOne remains to be seen, but for Airtasker and Tim it validates their business model along with exposing their service to a wider audience.

With the workforce evolving and the trend to informal, casualised employment; services like Airtasker and the US Task Rabbit will take a more prominent role in workers’ careers. While it’s debatable on how desirable or stable such employment is, it’s the reality of a process that started in the 1970s.

Tim takes a more sanguine view of the challenges facing workers in an informal employment market.

What I’m sharing on Airtasker is my free time. Currently we have this pool of literally tens of thousands of hours of people sitting around saying ‘I’d love to have a job’ and that’s an underutilised resource.

Airtasker in many ways is one of the new breed of middlemen creating markets where one didn’t exist before. The service is an example of how new ways to communicate create opportunities to connect buyers and sellers.

Services like Airtasker are part of the future that’s very different to the world we or our parents grew up. It’s going to be interesting to see how society and governments evolve around the realities of today’s workplace.

Can governments save declining cities?

Detroit’s decline illustrates the limits of government powers in the face of economic and historic forces.

Following yesterday’s post on comparing the relative problems of Detroit and the Chinese ghost city of Ordos, The Fiscal Times has a somewhat wistful description of Motor City’s decline by one of the city’s sons, Eric Pianin.

Pianin’s story charts the various attempts to revitalise the city following the disastrous 1967 riots that triggered the middle class and white flight from downtown.

As last week’s events show none of these efforts worked, which begs the question of what governments can do to save cities and regions facing structural decline.

Every city has an economic reason for existing — it could be transport links, natural resources or an industrial cluster. When that reason fades the population moves on.

For Detroit, the high point was the late 1960s as the US motor industry reached its zenith. Through the 1970s the sector languished and was then displaced by smarter, better Japanese competitors.

In the face of this there was little local, state or Federal governments could do. Detroit’s importance, wealth and population were destined to decline as industry left regardless of how much money was spent on grand schemes to revitalise the town.

Perhaps sometimes we just have to accept there are limits to government power and the predicaments of cities like Detroit are the natural course of history.

Over time, it may be Detroit manages to reinvent itself however the city will almost be very different, and smaller, city that it was in its heyday.

View of Detroit Central Terminal Station by Jason Mrachina through Flickr.

Ordos and Detroit – A tale of two cities and two economies

The problems of Detroit and Ordos tell us much about the differences between the US and Chinese economies

This week bought news that that two cities, one in China and one in the US, had fallen into deep financial trouble.

While the bankruptcy of Detroit is very different to the developers of the Ordos new city failing, there is a strange symmetry between the two stories.

Detroit is the biggest US city ever to enter bankruptcy with an estimated $20 billion in debts, dwarfing the previous record of Alabama’s Jefferson Country’s $4 billion default in 2011.

The fall of Detroit wasn’t unexpected as the New York Times tells.

Detroit expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry, and then shrank away in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.

Like most industrial hubs, Detroit grew became the centre of the US motor industry due to geographic and commercial advantages along with a few historical accidents but as the economy changed, the city’s importance faded.

It’s sad for the people of Detroit but it isn’t the first industrial hub to fade away; Ironbridge, once the cradle of the English industrial revolution, is today an open air museum and a charming rural spot.

Ordos on the other hand is an example of 21st Century government planning with the Inner Mongolian provincial leaders building the city of the basis of build it and they will come.

They haven’t.

The collapse of Ordos is going to be an interesting test of the Chinese economic model. Many of the country’s local and provincial governments – like Australia’s – have become dependent on the revenues from property sales. Now the market is drying up, local councils are having trouble paying their bills as Bloomberg reports.

Some Ordos district governments had to borrow money from companies to pay municipal employees’ salaries, Economy & Nation Weekly, published by the official Xinhua News Agency, said in a July 5 report on its website.

So while Detroit illustrates the stresses in the US system, so too does Ordos tell us about the problems facing Chinese governments.

The tale of these two cities also shows the difference between the US’ industrialisation of the early Twentieth Century and today’s economic development in the PRC and reminds why the results of ‘Capitalism With Chinese Characteristics’ may be very different to the modern American consumerist economy.

For Detroit, at least there’s good news as one US city manages to works its way out of bankruptcy. For the developers of Ordos though, things must be looking very grim.

Ordos image courtesy of Bert van Dijk through Flickr.