King Merdeus

…everything he touches turns to shit.

There is a pattern that can be observed occasionally and, as long as you’re not exposed to the consequences, can be quite amusing once you’ve seen it.

Firstly, a British example:

Many years ago, a chap by the name of Derek Wanless was the Chief Executive of Natwest Bank for 7 year in the 1990s. At the commencement of his stewardship, Natwest was one of the four largest “high street” (i.e. retail) banks and was a solid performer, taking customer deposits and issuing mortgages.

Wanless’ entire experience, from leaving school, was in the retail sector, having come up through the ranks of the branches. So, he put this expertise gained in just one sub-sector of banking to another, opening up an investment arm and taking the bank into the USA (a market already awash with investment banking services, one presumes).

Guess what happened next?

Huge losses for Natwest which resulted in his defenestration by the board…with just a 7 figure payout to comfort him. Not long after, the bank was bought in a hostile and hugely embarrassing takeover by a far smaller rival, the Royal Bank of Scotland.

Hot on the heels of this success, he was asked by the then Chancellor of the Exchequer (i.e. the UK’s Treasurer), Gordon Brown, to review the National Health Service. Ponder that for a moment; his previous experience was, to put it as kindly as possible, to destroy a profitable bank and drive it into the arms of a smaller rival so, obviously, he would have been the perfect candidate to look at the profligate and failing health service. To be fair to Wanless, this wasn’t Gordon Brown’s first or indeed last major failure of judgement, have a look at his record on the UK’s gold reserves to understand what a disaster his tenure was.

Finally, Wanless made a return to banking as an executive director to Northern Rock, overseeing the first UK retail bank to experience a bank run since the Great Depression.

Wanless died 5 years later, fortunately without having accepted any further positions in public life.

What’s the point I’m trying to make here? That Wanless was in “The Club”.

It’s a club you and I aren’t allowed to join. The rules of The Club are varied and changeable, but one rule remains constant; once you’re in The Club, there are very few occasions when consequences will ever catch up with you.

There are many examples of the Australian chapter of the The Club but today’s goes by the name of Peter Beattie.

I first learned of Peter during the 2013 Federal Election when he was parachuted into a seat by another member of The Club, Kevin Rudd. Some basic research unearths a disaster zone of a curriculum vitae, not unlike that of Derek Wanless. From a child protection scandal to a health service crisis, through to tying his colours to the mast of a desperate narcissist’s attempt to remain politically-relevant in the federal election, Peter has an enviable track record of mediocrity.

He also seems to either edit his own Wikipedia entry or have a sycophant do it on his behalf. We really must chuckle at the unintentional irony of a statement such as, “As was his style, Beattie faced the crisis head on”, which is then followed by a list of all the ministers who fell on their swords while he survived. As befitting a full member of The Club, the buck stopped just short of Beattie.

The latest chapter in the Peter Beattie show is a forthcoming defenestration from his role as Chairman of Australia’s Rugby League sporting code. The details of his golden parachute have yet to be disclosed but nobody would be surprised to learn of another 7 figure payout as a reward for mediocrity. After all, he’s in The Club.

Bill’s Opinion

I’m not a conspiracy theorist, I don’t really believe The Club exists.

It is far more likely that, once you’re in the circle of people who appoint and are appointed to senior positions on company boards and in government, as long as you can glad-hand the right people and you don’t wipe your snot on your shirt sleeves, you’re in The Club.

Why? You might be completely incompetent and a total narcissist but you’re a known, albeit a bit useless, quantity. Nobody is going to take a risk on someone they don’t know, are they?

“Completely mystified”

The responses below the tweet are priceless, but before you click the link, let’s look at the supporting article.

Apparently, the most likely explanation to the phenomenon of lowering costs for some expenses yet rising costs for others is something I’d not previously heard of; Baumol Cost Disease.

From Bloomberg’s helpful description:

The theory of Baumol cost disease, developed in the 1960s by economist William Baumol, states that some things rise in price even as productivity goes up. When society gets better at making cars, electronics, food and clothing, wages go up. But as wages go up, industries that don’t find ways to use less labor to produce the same service — for example, a string quartet — rise in price as well.

Which, prima facie, sounds reasonable and rational.

However, I would caveat that feeling of reasonableness with the statement that Malthusianism also sounds reasonable and rational when it’s first described, possibly for similar reasons.

What Malthus has been wrong about for the last 291 years is the Industrial Revolution. Or, more specifically, human inventiveness. Oscar Wilde touched on the solution we found to Malthus’ problem with this pithy quote;

Civilization requires slaves. Human slavery is wrong, insecure and demoralizing. On mechanical slavery, on the slavery of the machine, the future of the world depends.

As the wags and wits on Twitter were fast to point out, the costs that have experienced the most price inflation are, in a suspicious coincidence, the things that have most benefited from government “help” in terms of regulation and subsidies.

Correlation isn’t causation but there’s clearly something worth further enquiry here.

Bill’s Opinion

The most interesting part of the Baumol description is this:

….industries that don’t find ways to use less labor to produce the same service….

The obvious question that prompts is, “why don’t they find ways to use less labour?”.

Perhaps the range of possible answers are as simple as these two:

  1. Because the work involved is impossible to automate or make any more efficient, and/or
  2. There isn’t a great enough incentive to automate or make more efficient.

Anyone who has ever spent any time working in a government or quasi-government department and the private sector will recognise the critical difference immediately; there is no personal reward for for a manager to find a way to deliver the government service with fewer or with lower-skilled employees.

It is extremely rare for a government minister’s stated desire for improved efficiency to be translated into meaningful incentives down the organisation to a level where they will have any material effect.

As Ronald Reagan so eloquently put it:

Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

Or, as an anonymous quote (no, it wasn’t Milton Friedman) goes:

If you put government in charge of the Sahara desert there will be a shortage of sand in five years.

But remember, “economists are completely mystified“.

Reagan, journalists and weed

This is Ronald Reagan’s quip on the attitude governments have to business;

If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

With this axiom, we can be certain the end has come for the once never noble profession of journalism.

Philanthropist Judith Neilson to fund a $100m institute for journalism in Sydney. Note the irony of the Gruaniad having to get the begging bowl out at the bottom of that article.

She’s a billionaire, so $100m is just the loose change down the back of the sofa, but seriously? $100m to train people in a job that produces a product nobody trusts and therefore doesn’t want to pay for any more? This is surely the epitome of the concept of “having more money than sense”.

At least the money being pissed up the wall is her own. Over in Canadia, the country that used to be home to people who were tough enough to thrive in a climate even polar bears find depressing but is now the world’s epicentre of thumb-sucking social justice, the government of Justin Trudeau have spunked $600m to help their preferred news outlets to survive a little longer.

The temptation with these two stories of insanity is to point to industries that don’t need subsidies to survive but, when one starts to look for them, they are very thin on the ground.

Here in Australia, through combinations of direct financial subsidies, tax breaks or artificially high barriers to entry, one could make the case that almost every industry sector benefits from government largesse. Examples that would immediately appear on a Google search would include banking, (the late) car manufacturers, mining, fossil fuel energy, green energy, farming (try buying an imported banana), real estate, electronics retail, childcare, taxis and even national sports.

Probably the only sectors not benefiting from welfare for business are the illegal ones. Coincidentally, the price of marijuana has not increased with CPI and, in fact, has fallen.

Bill’s Opinion

Nobody wants any more journalists. If rich individuals want to waste their money subsidising journalism, so be it, but keep your damn hand out of my wallet.

Oh, and I’m out of Rizlas.

Australia discovers the internet

There’s an Australian government body, the ACCC, that regulates commercial competition, ostensibly new behalf of the consumer but, as we will discover, perhaps not.

Firstly though, let’s crack that old joke, “why is there only one anti-monopoly agency?”.

The ACCC has recently discovered that people aren’t getting so many newspapers delivered to their houses these days.

No, really.

The ironically-named “competition tsar”, Rod Sims says;

“I was getting the response of people saying ‘isn’t this just creative destruction? You know, classic Schumpeter, the way the world works?” he said in an interview ahead of the speech. “Well… it isn’t. This isn’t just like the car taking over from the horse and buggy, or more recently, Uber taking over from the taxi”.

What is it then?

The internet has been accessible to the majority of Australians since the mid 1990s. Therefore the value destruction of print media and journalists’ careers has been one of the most signalled disruptive industry changes in several generations, yet somehow the media organisations failed to adapt.

The ACCC estimates that the number of journalists employed in the print sector fell by 20 per cent in the three years to 2017; while between 2006 and 2016 the number of journalists employed by traditional publishers fell 26 per cent.

Let’s remind ourselves what those employed in news media are supposed to do every day they come to work…

The harsh reality is their real job description was, “produce interesting content that captures an audience for advertising”.

Perhaps the journalists would prefer something more worthy like, “identify and investigate important changes in the status quo and inform their customers”.

Either way, they’ve failed spectacularly.

Bill’s Opinion

From the mid 1990s, traditional news media failed to spot the impact the internet, cheap mobile phone data and smart/camera phones would have on their profession.

Which is a bit of a problem if your job is called “the news“.

Please don’t make us pay to keep this rubbish alive any longer than it needs to be.

Oh Canada

For decades, Canadians were the butt of many cruel jokes about how pathetic and effeminate their nation was, with a vague notion that they were the indolent, slightly retarded younger sibling of the successful USA, smoking weed in their underwear and playing video games whilst the older brother was pulling double shifts at work.

In 2015, Canadians thought long and hard about how to deal with this unfair criticism and came to the collective conclusion that the best plan of attack would be to elect a former ski instructor, gap year backpacker and professional trustafarian, Justin Trudeau, as their leader.

As a consequence, they’ve deservedly got legislation such as this gem;

Canadian government nationalises journalism.

Actually, that should probably read “Canadian government further nationalises journalism” as they already annually spunk half a billion Canadian dollars (about $75.43 US and a couple of Tim Horton donuts) on the CBC. One supposes an addition $120m a year isn’t going to be that noticeable, therefore.

Anyone with the mildest knowledge of history and just the slightest tendency toward cynicism will find the language used to announce this “innovation” (yes, that’s how one likely recipient of taxpayer largesse described it) has creepy echoes from a previous time;

An independent panel comprised of members of the news and journalism industry will flesh out the application of the moves announced in Wednesday’s fall economic statement. In particular, the group will decide which journalism jobs and which news organizations are eligible for the new funding.

Independently deciding who amongst them will receive free money? Yes, that sounds fine, I’m sure.

Oh, and it’s not an across the board subsidy then? Not every news outlet and journalist will benefit?

The government said the package will aim to help “trusted” news organizations, but will leave it to the media industry to define the application of the new initiatives.

Trust is a difficult thing to define, isn’t it? It’s almost easier to define the conditions where one doesn’t have it. After all, as the man said, “there’s only two men I trust in this world; I’m one and you ain’t the other one“.

Bill’s Opinion

As with so many issues facing us on a daily basis, it is a dangerous mistake to assume a single cause. The legislation has an underlying assumption that there is only one major cause to the economic decline of the traditional media sector; that digital media has broken the business model.

That may well be a major contributing factor but what hasn’t been considered is that there may be another cause of similar importance. Amusingly, there’s a clue in the press release; Canadians are no longer prepared to pay for traditional media because the speed of delivery and far wider choice of digital sources has opened their eyes to quite how biased and limited the traditional media has been. They’ve lost trust, in other words.

So now they have the worst of both worlds; Canadians are going to pay for journalism they don’t want to read……forever.

Forever?

Yes; ask yourself, under what circumstances will a Canadian government ever be able to announce a closing of this funding source once it has been embedded for a couple of years?

The independent media will wail and moan from the highest steeples and undermine any political party that so much as hints that the time has come to stop subsidising journalism that nobody reads.

Corporate protection rackets

Spotted recently at a place of work;

An accreditation that the workplace is “breastfeeding friendly”?

Okaaaaaay.

What’s going on here, do we think?

Surely very few people in 2018 would be so vehemently against helping mothers to continue breastfeeding for as long as they wish after childbirth (well, perhaps not too long that the child could write a letter in cursive script requesting a portion)?

So why the need for an accreditation agency to provide fancy certificates which, in effect, do little but state that, “this employer isn’t a dickhead about breastfeeding“?

Well, perhaps it’s something to do with the fact that one has to pay to be accredited?

The website is suspiciously cagey about how much this accreditation will cost. “Call us for a quote” for a service that can’t be much more than a quick visit to the dedicated room and a browse of the written policy?

Hmm, smells like a scam.

Bill’s Opinion

As we’ve seen with monopolies on virtue signalling, such as White Ribbon, what begins as a laudable idea soon takes on a momentum and becomes self-justifying. The moment fees are charged for the charity’s official seal of approval, it can be fairly certain that the charity has corrupted its purpose.

In fact, the ABA isn’t actually a charity at all, it’s a private “training” business that receives revenue from two almost equal sources; the fees from its protection racket and generous donations from the Australian taxpayer;

That’s a nice business you’ve got there, it’d be a shame if anything happened to it like a negative press campaign about being a bad place for young mothers to work“….

Questions we can answer

Traditional bricks and mortar retailers are suffering as people switch to cheaper, more convenient ways to shop.

Here’s a question for anyone who owns or runs a business;

Q. What do you do if your competitors are carving into your margins and market share with cheaper prices and more convenient services?

Do you;

A. Look at your cost base and search for efficiencies that will allow you to reduce prices?

B. Work to create a better consumer experience?

C. Investigate whether there are alternative goods or services you could offer to complement or replace the loss-leading lines?

D. Lobby the government to impose special duties, taxes and levies on the consumers who purchase from your competition?

Bill’s Opinion

If you chose option D, congratulations! You are officially a member of the crony capitalism class.

Welcome to the internet and the 1990s, Australian retailers, spoiler alert; get to see Bowie, Prince, George Michael and Motörhead in concert at the next available opportunity.

Capitalism and democratic choices are a distant memory in Australia

Remember how, back in the mists of time there used to be a clear choice for voters; a party of the free markets and less government spending versus a party representing the working class and unions?

Perhaps we’re looking back with rose tinted glasses and t’was always thus. Nonetheless, Australians were given a very clear glimpse of what lies ahead should the economy take more than a minor dip over the coming months and years; the federal government becomes lender of last resort to crap businesses.

No. Really.

Treasurer Josh Frydenberg and Small Business Minister Michaelia Cash will announce the small business funding policy on Wednesday, promoting the soon-to-be-established Australian Business Securitisation Fund as a way to overcome banks typically only lending to the self-employed when they pledge their personal home as collateral.

To summarise the announcement; “if the banks looked at your business and decided it was a poor bet and you didn’t have enough skin in the game, we’ve just decided the Australian taxpayer and their superannuation funds will lend you the money anyway“.

It’s very easy to be generous with other people’s money, isn’t it?

This is bound to end well.

The irony is that this policy wasn’t announced by either of the openly Socialist parties but by one of the two parties that historically claimed to be champions of free markets and minimal government intervention.

At a state level, similar disconnects have been shown between expressed and revealed preferences. Here’s a “free markets” politician bailing out rent-seeking taxi medallion speculators.

The $2bn fund to lend money to businesses judged by commercial lenders to be poor risks is an interesting development though, coming as it does so soon in to the worst housing crash in a generation, but particularly after this little legislative gem was snuck through onto the statute books with hardly any media coverage or explanation; insolvent banks can be rescued by confiscating deposits.

Bill’s Opinion

Will a “bail-in” of superannuation funds or bank deposits ever happen in Australia?

Unlikely, but not impossible. The risk isn’t zero.

There’s a great and often quoted dialogue in Hemmingway’s The Sun Also Rises;

‘How did you go bankrupt?’ Bill asked.

‘Two ways,’ Mike said. ‘Gradually and then suddenly.’

Perhaps this is the “gradually” part for Australian depositors. If so, it might be an idea to know how quickly you could act to not be caught out by the “suddenly“.

Dick by name….

Australia is home to a gentleman called Dick Smith. He owns an eponymous chain of electronics’ stores where one can purchase all manner of flat screen TVs, music systems, white goods and other devices.

To the best of our knowledge, practically none of these devices are manufactured domestically. Like most western economies, Australia used to manufacture TVs and radios but the availability of cheaper and better quality imports from its northern neighbours in Asia hastened the decline of the industry.

Dick Smith has personally benefited greatly from this destruction of the local industry.

Imagine our surprise therefore that he feels the need to berate an overseas supermarket chain from copying his successful model but in the grocery sector.

Apparently, the management of Aldi are morally reprehensible for providing good quality imported food products at a lower price than can be produced domestically.

Ponder that for a moment. Now look at the brand of phone, tablet or PC on which you are reading this. Where was it made? Korea?

Now look at the label in your shirt or dress. Was it tailored domestically? Unlikely.

What should be done about this?

Bill’s Opinion

Dick Smith is typical of most Australian “entrepreneurs” in as much that, once he has made his fortune, he sees no reason to feel shame about lobbying and making public statements to pull the ladder up and prevent others from following his example.

His competitor, Gerry Harvey, is another example of this syndrome, campaigning for the federal government to impose the 10% General Sales Tax on low value overseas internet purchases, despite the fact that this will incur a net cost to the taxpayer.

“Capitalism” is a much maligned noun these days but consider whether there really is that much of it about. Certainly the people who often are pointed at as being “capitalist” are no such thing. Dick and Gerry have more in common with the mercantilists of the 16th century than Adam Smith or Ayn Rand.

It’s definitely the rental agency’s fault

In Victoria, Australia, a place where corrupt unions and progressive politicians rule the roost, a young girl was murdered at a private party.

Of course, the political instinct in response to this is never to let the judicial process run its course; prosecuting the suspected murderer by a fair trial, sentencing them to prison if found guilty, letting them go free if found innocent.

Nope, in Victoria, the answer is to look to increase regulation.

Wait, what?

What new regulation is required in a murder case?

Regulation against AirBnB.

Seriously…… why? Because the apartment where she was murdered was a short term lease through the rentals website service, so, in the lefty logic, AirBnB must somehow be partially responsible.

Maybe the Victorian Premier, Daniel Andrews, has a point. Let’s step through some counter arguments to our instinctive position that it was 100% the murderer’s fault that she died;

Devil’s Advocate Position 1

If AirBnB hadn’t let the apartment to a bunch of teenagers, they wouldn’t have thrown a party which got out of hand and a murderer wouldn’t have murdered her.

Let’s face it, who amongst us hasn’t had the urge to violently murder someone at a party in a short term rental apartment? None of us? Hmmm, maybe that’s not Daniel Andrews’ greatest argument then.

Devil’s Advocate Position 2

If AirBnB hadn’t rented the apartment, the party wouldn’t have happened and a violent murderer wouldn’t have murdered the girl.

Because teenage parties were only invented after AirBnB was established? Because murders never occurred before AirBnB was established?

Devil’s Advocate Position 3

AirBnB have a duty of care to all visitors of their rental properties. Therefore there should have been some protective measures in place to prevent a murderer from murdering in the property.

By this logic, your rental car company should prevent you from crashing the car or hitting pedestrians.

Bill’s Opinion

If you are a legislator in a country with Common Law, consider the possibility that, 803 years after Magna Carta, there may already be appropriate legislation to cover most major crimes. How likely is it, after all those years and hundreds of thousands of man days spent considering legislative responses to public policy questions, that you’ve just landed on the best solution to a pre-existing problem?

Murderers are responsible for their crimes, not the owner or letting company of the room in which the crime was committed.