By Michael Parker*
[This is Chapter 10 of the book, The Pine Tree Paradox. Links to the previous chapters are at the bottom of this page.]
The need to build an Innovation Cycle, the path to do so and the intended outcome are clear. Yet there are tremendous risks along the way.
The outcome if we remain trapped in the Pine Tree Paradox is also well understood.
The question is therefore whether we feel desperate enough to make this leap of faith.
On 28 June 1986, the All Blacks, New Zealand’s national rugby team, played France in a test match at Lancaster Park in Christchurch. It was the 21st time the two countries had met in a test match with New Zealand having won 16 of the previous encounters.
The match lacked any broad significance in terms of championships, trophies or rankings. The World Cup was not at stake. The Dave Gallaher Trophy, which today is awarded to the winner of test matches between these two national sides, did not even exist back then. Neither did the IRB World Rankings.
Yet this match - the “Baby Blacks test” as it is remembered - is perhaps the greatest All Black performance ever.
The All Black team that day included only four players who had ever played for New Zealand before and only two, captain David Kirk and winger John Kirwan, who were current All Blacks.
The team was stacked with replacements because most of the incumbent players were, at the time, suspended from international selection. Earlier in the 1986 season, most of the incumbent All Blacks had participated in an unauthorised tour of South Africa, in breach of an international ban on sporting events with apartheid-era South Africa.
This stain on the All Black tradition is certainly part of what made that day so remarkable.
The “Baby Blacks” players represented a repudiation of the cynical and unethical actions of the New Zealanders who toured South Africa as the brown-shirted Cavaliers.
The Baby Black team and, in particular, its young captain David Kirk - who was invited but did not tour South Africa - sent a message that the whole country responded to: we can hold to our principles and we can play rugby.
In the five years following the socially corrosive and politically divisive Springbok tour of New Zealand in 1981, these objectives had seemed wildly at odds, until that day.
The All Black performance was remarkable precisely because the team included players like Gordon MacPherson from Otago and Brett Harvey from Wairarapa-Bush - each of whom played his only match for New Zealand that afternoon. Most of us will never play any sport - or perhaps do anything - as well as MacPherson and Harvey could play rugby.
However, their inclusion in that All Black pack would have verged on comical had they not played so extraordinarily well that day. Instead, their presence added to the mystique of the team. Mere men, not Gods, were playing in the black jersey that afternoon.
Even the style of play was cause for celebration.
The All Black team that day was overpowered in the line-outs and scrums, as the French were a technically superior side. The “Baby Blacks” had to concede these areas of traditional All Black dominance and, instead, the team attacked through the loose forwards.
Speed, agility and fitness were the keys: quick passes between forwards working at speed in close proximity.
This is the platform on which every great All Black team, and every great All Black victory since, has been based.
And this style of play was tailor-made for emerging players like Zinzan Brooke and Michael Jones - who would make their All Black debuts less than a year later. With eight of the Baby Blacks, these players formed the nucleus of the All Black squad that would secure our only World Cup victory a year later and anchor a nearly four-year period without an All Black defeat at any level.
American journalist George Plimpton once said that at the end of title fights he would watch the defeated boxer as the haunting realisation of loss engulfed the man’s face.
Look at New Zealand players, coaches, and even the crowd at the end of a test match and you will see a similarly haunted stare - even after a victory.
New Zealanders rarely look elated by All Black victory - they simply look relieved.
The weight of expectations of being the “best rugby-playing nation in the world” is lifted temporarily by a win. All Black victory, no matter the score or the opposition, means that expectations may have been satisfied, but they are never exceeded. The players and the public can rest - but only for a night. Despite victory, there is always something lurking in our consciousness just out of reach - a World Cup, a Bledisloe Cup, another Tri-Nations victory.
That June day in 1986 was different.
The All Blacks won that day, by a final score of 18-9, and the feeling after the game was not of relief but simple, uncomplicated jubilation. David Kirk commented later that: “The sense of elation afterwards was probably greater than anything I’ve ever experienced in my rugby career.”67 And Kirk, remember, captained our victorious World Cup side.
Mark Brooke-Cowden, who played for the All Blacks that day, later commented: “Sure, we’d been written off before the match but if you’d been in our dressing room a few minutes before kick-off, you would have put your money on New Zealand. I never saw emotion like it before or since. I remember looking across at Joe Stanley, one of the older heads in the team and a very, very hard man. He had tears streaming down his face. That’s when I knew something special was going to happen.” 68
It is not the generational shift, the opposition, the politics, the style of play or the participants that made this All Black performance the greatest ever. What made it the greatest game ever was the desperation of a group of people doing something that was extraordinarily difficult - far beyond their capabilities by any reasonable measure - and yet, through determination and perseverance, succeeding.
Fifteen people turned the logic and order of New Zealand rugby on its head. The sensation for the whole country was novel and thrilling. We should do it more often.
The Peculiar Benefits of Desperation
Despite our economic decline over the last 50 years, and the paucity of strategies to reverse the trend, the image of an angry and crazed Peter Finch in Sidney Lumet’s Network shouting “I’m mad as hell and I am not going to take it anymore!” will never resonate with New Zealanders. We are just not wired that way.
In the face of long-term economic decline and worsening prospects for our children, we New Zealanders will not stand at our front windows shouting, or take to the streets banging pots and pans, or man the barricades or hurl rocks. For that reason, we are called dull or the passionless people or a dozen other names by those who do not understand the national psyche.
But there is an image to which New Zealanders will respond: Smokin’ Joe Stanley in the minutes before the Baby Black test match against France in 1986, with tears streaming down his face reflecting his desperation to achieve what so many had announced was impossible, and desperate for the full measure of the victory to resonate across New Zealand society.
Here is the bet at the centre of my argument: give the New Zealand people a concrete plan for economic revival and how to improve our negative social and health outcomes.
Be realistic about how difficult the revival will be and how long the path will take. Explain what actions each person can take. Describe what success looks like. And then stand back and marvel at our capacity for determined struggle towards an audacious and difficult goal.
We are a nation without a challenging and uniting goal. Our politicians, our business leaders and our great thinkers have failed in this task. Even our current sporting goals are modest.
The problem with modest goals - hosting and winning the Rugby World Cup, marketing New Zealand as an attractive tourist destination, selling lamb to foreign markets - is that failure is disastrous and success is simply a relief.
Worse, success does not offer any significant economic reward because “victory” is not that great a leap from the present reality.
The thrill of an audacious goal is that those driven to achieve it are bonded together precisely because it is unlikely to occur.
In the realm of sport, the victorious underdogs will almost always observe that “no one gave us a chance” and so they were forced to support each other and desperately fight for victory. It is cliché because it is true.
There is virtue in setting a goal that is monumentally difficult to achieve and pursuing it as if your life depended on it. As a nation, that is the approach we need to take. No politician will ever say that. It is therefore up to us.
The Economic “Dead Spot”
I started researching this book because, in travelling home to New Zealand regularly over the last decade, I could not understand why, when the New Zealand economy had expanded every year since 1994, when long term government assets and liabilities for superannuation and healthcare were in balance and when unemployment, inflation and government debt levels were all in check, New Zealanders remained so pessimistic about the country’s future.
I could not reconcile the discrepancy between how New Zealand is perceived from the outside and how New Zealanders perceive their own country.
In my view, our pessimism is a reaction to the long-term decline in economic standing and living standards in New Zealand versus the rest of the developed world.
An economic “dead spot” exists beyond what a government elected for a three-year term is capable of addressing in terms of the country’s fundamental economic profile and what we individually are capable of changing through private action. And in the dead spot sits the genesis of our economic decline.
The solutions that are occasionally proposed are so watered down that they tend not so much to be rejected as to simply evaporate.
In part this is a legacy of our national aversion to thinking on a large scale (Chapter 1). But, if no one in New Zealand is willing to think and act on a large scale, how do we ever change course?
We have been on a downward trajectory as a nation for 50 years in terms of economic outcomes and social metrics (Chapter 2).
What if we set ourselves a truly audacious goal: to improve our education levels, to extend our life expectancy, to reduce our infant mortality, to improve our standard of living and to enhance our general wellbeing. What if we turned all of that around?
The normal response is: sounds great… but how?
We are a predominantly agricultural economy at a time when high growth economies are driven by innovation. Agriculture will always be an important part of the New Zealand economy.
But, as long as our economy is predominantly agricultural, any ambition to outperform the rest of the OECD over time will be thwarted by the fact that the well-performing countries engage in economic activities - extraction and, more significantly, innovation - that attract higher margins and create more value than agriculture (Chapter 3).
We are on the wrong horse.
We have to transition to an innovation-based economy if we want to grow faster than the OECD average and reverse the negative trajectory of our social statistics.
Transitioning from an agricultural-based economy to an innovation-based economy can occur if we construct an Innovation Cycle.
In the right political and geographic environment, an Innovation Cycle will create and sustain periods of high growth through the interaction of universities, research centres, start-up firms, venture-capital funds, banks, professional services firms and an entire creative class of people - designers, architects, artists, musicians - who are drawn to, and feed off, each other within the Cycle.
The model for this interaction is Northern California. At the heart of it all is a great research university (Chapter 4).
A great university can be built from the ground up in New Zealand, but that will require bold action, a strong aspirational statement - preferably in the form of outstanding architecture - and a commitment over decades to improve the university and support the Innovation Cycle that surrounds it (Chapter 5 and Chapter 6).
An undertaking of this scale and scope will be monstrously expensive and slow to develop. The government can certainly assist but it cannot solve this problem by itself.
The cost and timing means that it is difficult to muster political support. Worse, the question of our decline has ceased to be political because the political class has over the last 50 years demonstrated itself unable to address the problem. Governments keep changing, but the monotonic nature of our decline persists (Chapter 7).
No individual can pick up the burden privately because of the sheer cost.
Money is required from across the private sector - from New Zealand companies and residents and citizens around the world. Contributions from individuals are necessary with an annual target for donations of US$50 million for thirty years (Chapter 8).
In short, we want to be a global centre of innovation, we need the accompanying economic tailwind and a roadmap exists for how it has been done elsewhere.
The only remaining question is: are we desperate enough to take the leap of faith and do it?
Can you be Joe Stanley?
Why Not Us? Here’s Why…
Every economy aims to have the highest income per capita in the world. Every country wants to have the greatest research university in the world. Every region in the world wants to be the headquarters for the new generation of innovative companies that follow Google and Apple.
Yet there are only four countries in the world where the Innovation Cycle that I am outlining is truly possible: the United States, Canada, Australia and New Zealand.
There are some legal and infrastructure prerequisites to building an Innovation Cycle that effectively narrow the field to these four:
1. A stable democracy is required with a transparent public service so that corruption does not derail the process.
2. The country must almost certainly be English speaking.
3.The workforce has to be well educated.
4. Immigration policies must permit entry of both knowledge and creative workers.
5. The people will have to welcome new ideas and rapid societal change.
6. High quality infrastructure - roads, electricity and telecommunications - is necessary.
7. A legal system, with a long standing tradition of protecting intellectual property rights, is essential.
8. Concessions on taxation of capital gains and withholding taxes would help and a top marginal income tax rate below 40% is preferable.
9. Income inequality should not be so great that it creates philosophical conflicts for the individuals who will need to relocate to the region.
10. The physical region needs to be beautiful with plenty of agriculture and outdoor activities so that people who entertain the prospect of moving elsewhere think to themselves without irony: “And leave all this?”
Given these requirements, the potential locations are few.
And New Zealand is on the short list.
But if the idea of building an Innovation Cycle in New Zealand is to become reality, we will have to want it desperately. And that desperation will inform what we are willing to concede in order to make it happen.
Australia, Canada and the U.S. may want to create the next great global hub of innovation, but will these countries forsake a capital gains tax on investors who profit from the start-up companies that emerge? Will we?
Will Australia, Canada and the U.S. donate the most prominent land in their largest city and fund a structure on that land to be designed by Santiago Calatrava or Frank Gehry? Will we?
Will these countries open their borders to artists and interior decorators and chefs and musicians and yogis and snake charmers in order to create a creative class to support the Innovation Cycle? Will we?
Will the citizens of Australia, Canada and the U.S. donate from their pay cheque each month to a project that will take thirty years to evolve? Will expatriates remit thousands of dollars home every year for decades in order to support the Enterprise? Will we?
Australia, Canada and the U.S. may want a new centre of global innovation within their borders. But those countries do not have Portugal, the Czech Republic and Hungary threatening to overtake them in terms of income per capita.
Unlike the other potential locations for such a centre, we don’t just want an Innovation Cycle. We need it.
The question “Why not us?” is not asked rhetorically in this book.
If we fail to pivot to an innovation-based economy over the next 30 years, if Australia, Canada and the U.S. expand their innovation sectors while ours flounders, if another half dozen countries pass us in terms of income per capita, the answer to the question “why not us?” will be simple. It will be because we were not desperate enough to make the sacrifices - like the ones set out above - required to succeed.
The Innovation Cycle is the goal that we need to set for ourselves.
And the approach that we need to adopt is nothing short of Joe-Stanley-style desperation.
If we look back in thirty years and ask “why not us?” we will know why: because we did not want it enough. It is our choice.
The Worst Possible Option ... except for all the Others
This is not a reasonable plan. It may be detailed, but it is far from prudent.
I am suggesting that we re-engineer the New Zealand economy.
I am proposing that we embrace innovative industries as the core of our economy and that, over time, accept the relegation of agriculture so that farming merely forms part of the attractive lifestyle of New Zealand: sheep as scenery.
Further, I am proposing this course of action while acknowledging that it is impossible to predict what these innovative industries might be or when they might take shape, if ever.
There are no guarantees of success.
A thousand things could go wrong. Make no mistake: there is more than a hint of desperation in what is being proposed.
Along the way, I guarantee that there will disasters and disappointments. Donors will commit and then pull out. Faculty will sign up and renege. Government bodies will lean one way in their decision-making and then turn another. The very notion of the Enterprise will be ridiculed.
Those who support it will be patronised in public and laughed at in private. The notion that we can create Stanford on the Waitemata and turn New Zealand into a global centre of innovation will be viewed as laughable on its face and embarrassing in its ignorance of hard economic realities.
And that is just the way we want it.
That is what will bind us together for decades.
Without that resistance, this plan would have no chance of success.
History is not made by timid souls. Bluster and hope and desperation are required. As a nation, we need audacious goals. There has been a dearth of such goals in New Zealand for some time. No longer.
The Enterprise has just two things in its favour.
First, the range of potential outcomes from the Enterprise is skewed to the upside. In the worst-case scenario, Auckland will have a building on its waterfront designed by a world-renowned architect that becomes a tourist attraction and a performance centre for Auckland.
In the base-case scenario, Auckland will have a private university that knocks on the door of the top echelon of universities for decades, attracting foreigners to study in New Zealand and allowing New Zealanders to improve the quality of their education.
Under the best-case scenario, New Zealand will create an Innovation Cycle and we will establish a Northern California-style global cluster of innovation in New Zealand that is the envy of the rest of the world.
We will ensure a modern, liberal, wealthy, egalitarian, democratic, open, capitalist, educated, green, multi-cultural meritocratic future for our children who will be really good at netball, rugby and sailing and will go to the beach for two or three weeks every summer.
The only other thing that this plan has going for it is that the outcome if we do nothing is very well understood. Our standard of living will continue to fall relative to the rest of the OECD. South Korea, Hungary, Portugal and the Czech Republic will pass us in terms of GDP per capita. Our dollar will lose value.
Over time, we will stop comparing ourselves economically to Australia and start comparing ourselves to Chile. Our life expectancy, relative to the rest of the OECD, will continue to deteriorate and our infant mortality rate will rise.
Relatives who move to Australia and England will seem wealthier and wealthier each time they come home to visit even though, if they are honest with themselves, the jobs that they are qualified to perform in their adopted homes will be far from impressive. We will all continue to slide backwards.
These are our options. So tell me: why would we be anything but desperate to make this plan succeed?
67. "Black Gold", Observer Sports Monthly, Gavin Mortimer, 2 September 2007
68. "Black Gold", Observer Sports Monthly, Gavin Mortimer, 2 September 2007
This is the eleventh and final part of a serialisation of the book, The Pine Tree Paradox. An update and epilogue will be published next week.
The Introduction is here »
Chapter 1 is here »
Chapter 2 is here »
Chapter 3 is here »
Chapter 4 is here »
Chapter 5 is here »
Chapter 6 is here »
Chapter 7 is here »
Chapter 8 is here »
Chapter 9 is here »
If you would like to buy a copy of the full book, you can do so by credit card here » (Visa or Mastercard only.)
Michael Parker is an equity analyst living in Hong Kong. Originally from Wellington, he has spent the last decade in San Francisco, New York and - on good days - Waiheke. He has a law degree and bachelor of commerce from the University of Otago and an MBA from NYU. You can contact him here »
Used with permission. © Michael Parker. This book was originally published in 2010.
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