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Xero's Lena Hesselgrave on the future of Bitcoin post Panama Papers, concerns around housing consents issued in Auckland, the spectrum of crazy in the US election, how to hike productivity, why smartphone growth is dwindling & more

Xero's Lena Hesselgrave on the future of Bitcoin post Panama Papers, concerns around housing consents issued in Auckland, the spectrum of crazy in the US election, how to hike productivity, why smartphone growth is dwindling & more

Today's Top 10 is a guest post from Lena Hesselgrave, Xero's automation manager.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 10s here.

1. Ivy League economist interrogated on flight and why in America today, the only thing more terrifying than foreigners is…maths

On an American Airlines flight, young Italian economist Guido Menzio was escorted off and questioned as a potential terrorist threat, after the woman sitting next to him alerted a flight attendant to Menzio’s “cryptic notes, scrawled in a script she didn’t recognise”. The decorated Ivy League economist, known for his technical work on search theory, later returned to his seat after confirming to authorities the scribbles weren’t Arabic, or another foreign language, or some form of secret terrorist code. They were differential equations. The Washington Post reports:

Rising xenophobia stoked by the presidential campaign, he suggested, may soon make things worse for people who happen to look a little other-ish. “What might prevent an epidemic of paranoia? It is hard not to recognise in this incident, the ethos of [Donald] Trump’s voting base,” he wrote. In this true parable of 2016 I see another worrisome lesson, albeit one also possibly relevant to Trump’s appeal: That in America today, the only thing more terrifying than foreigners is…math.

2. Learning to be a more productive nation

Labour productivity grew just 0.3 percent in the year since March 2015 and the Productivity Commission found that in the 2000s New Zealand had "one of the lowest growth rates in GDP per hour worked among OECD countries”. These results seem at odds with a nation that prides itself on ingenuity and a strong work ethic.

World Bank consultant, Kinley Salmon, suggests that a focus on learning by individuals and firms as the primary objective of policy making would help to create sustained productivity growth. This could be achieved by increasing R&D spend (currently 1.17% of GDP), challenging tax policies which incentivise investment in ‘minimal learning sectors’ and ensuring there is adequate support for those launching new start ups. He says:

Take tax policy for example. Returns on housing in New Zealand are taxed more lightly than returns on financial assets. This contributes to the fact that our savings go overwhelmingly into the overheated housing market. According to Treasury, as much as 90 percent of household wealth is held in the form of housing in New Zealand, compared to 50 to 75 percent in other OECD countries. Yet real estate is a classic learning-free cul-de-sac. Taking learning seriously would mean asking how tax and financial policy can channel savings to productive sectors with higher learning potential.

3. How to get more grit in your life

Alongside policies that incentivise learning, perhaps what we really need more of as a nation is grit. In this week’s Freakonomics podcast Angela Duckworth defines the quality of ‘stick-to-itiveness’ and how it directly relates to levels of success. This might seems obvious in itself, but then why are some individuals so disproportionately successful? Duckworth refers to such individuals as ‘paragons of grit’ (think the Mozarts and chess grandmasters of the world) and looks at how anyone can learn and apply the techniques that enable them to excel in their fields.

Let’s start with the first thing I think that gritty people develop in the order in which they develop it, which is interest. So one thing that I found about paragons of grit, you know, real outliers in passion and perseverance, is that they have extremely well-developed interests. They cultivate something which grabs their attention initially, but that they become familiar with enough, knowledgeable enough that they wake up the next day and the next day and the next year, and they’re still interested in this thing. And I think that is something that we can actually intentionally decide: “I want to be the kind of person who stays interested in something.” And so that passion really does have to come first.

4. How a bus driver's son defeated a billionaire's son to become London's first Muslim mayor

In the past week Sadiq Khan was elected as London’s mayor after defeating Conservative opponent Zac Goldsmith. The new face of City Hall is the first Muslim, non-white mayor, especially significant during a tumultuous time for Europe as it grapples with terror threats and political populism. The key challenges the new mayor faces are how to build affordable housing in one of the world’s most expensive cities, numerous transport headaches, and how to integrate a city that is increasingly pulling away from the rest of the country. If Khan can help fix any of those issues, I sure hope Auckland’s mayoralty candidates are keeping tabs. The Economist says:

The big theme of Mr Khan’s campaign was a pledge to build 80,000 affordable homes a year, half of which he wants to be at a “genuinely affordable” price. Given that Mr Johnson, who cultivated a close relationship with house builders, never managed to deliver more than 24,000 new residences a year, this target looks wildly ambitious.

5. NZ at heart of Panama money-go-round

A collaborative report from RNZ News, One News and investigative journalist Nicky Hager, unravels New Zealand’s links to Mossack Fonseca after 61,000 documents were leaked from the Panamanian law firm. Known for offering extremely private, zero-tax foreign trusts to wealthy individuals, the law firm’s practices bring to light many questions around our nation’s tax policies. According to IRD the number of foreign trusts has more than tripled to 10,697 this year from 3,311 in 2008. RNZ reports:

Mossack Fonseca wasted no time setting up the local Auckland branch in December 2013 and from then on enthusiastically chased business, particularly from Mexico, but also from Uruguay, Chile, Brazil and Ecuador. New Zealand's tax-free status, high levels of confidentiality, and legal security are seen as the virtues, but a common thread through Mossack Fonseca is the need to avoid any structure or involve people who will attract attention from our authorities.

6. In the age of the Panama Papers, is Bitcoin technology the future?

The debate on how to balance privacy and transparency could in part be solved through the adoption of Bitcoin technology. Although currently more widely known for its illicit associations with The Dark Web, Blockchain advocates believe that the technology behind Bitcoin is the future of transparency, not secrecy. The distributed public ledger, known as a “blockchain”, removes the reliance on a single trusted source to a decentralised network of computers. Strong cryptography and a decentralised system mean that the technology is being heralded as “transparent and tamper-proof”. PBS reports:

This model of distributed trust offers a solution to the many social problems caused by a lack of open, trustworthy and agile record keeping. At a recent event hosted by the MIT Center for International Studies, Blockchain expert Michael Casey noted that automating trust through public ledgers will streamline business and government transactions, destroying information bottlenecks and improving transparency and efficiency.

7. Are smartphones doomed to the same fate as personal computers?

After almost a decade of enviable growth, the US$423 billion smartphone market last week showed a clear sign of slowing down. Apple Inc. reported its first quarterly sales decline in 13 years and Chief Executive Officer Tim Cook acknowledged that nine years after the iPhone’s game-changing debut that the market had “stopped growing.” Many smartphone manufacturers are seeking to diversify into adjacent markets such as smart devices including cars and drones, while others remain optimistic that the market will eventually revive. Bloomberg reports:

With consumers upgrading smartphones less often and first-time buyers harder to find, handset makers seem doomed to endure the same years-long sales decline as PC manufacturers. The industry has yet to identify and market the next big idea to take the place of smartphones, the way the iPhone and its ilk did when PCs fell from favor. The industry is hard at work developing everything from robots, cars and virtual-reality headsets to the grab-bag of connected gadgets and software known as the Internet of Things. Yet it may be years before many of these technologies enter the mainstream.

8. Why are Auckland housing consents falling?

Take a walk around the streets of Auckland and you can’t help but notice the much-needed construction of new housing developments around the city. However since September 2015 the number of consents for new dwelling units has actually been falling - from 812 in September last year, to the most recent data available, 766 in March this year. No doubt a concerning trend for a city struggling to keep up with current demand and streaking ahead in the most unaffordable housing rankings. Economist, Donal Curtin, says:

It's certainly a very odd development. It seems at variance with what you see on the ground in Auckland. Sure, there are lags between consents and construction, and a lot of the current activity could be down to the higher levels of consents issued earlier last year, but if there was a genuine drop-off in the housing consent pipeline over the past six months, you'd think you'd be seeing some slackening off in actual construction activity by now.

9. The economy is rigged, and other presidential campaign myths

When looking for reliable information on the economy, the current crop of US presidential candidates are probably the worst source. The New York Times dispels six particularly egregious claims about the economy as touted by candidates including claims that “we don’t make things anymore” and tax cuts will unleash “stupendous growth”.  

All candidates like to offer themselves as panaceas. “Vote for me and the economy will skyrocket, the poor will see riches without bound and that annoying wart on your foot will finally disappear.” Yet the power of the president — or even the entire government — is more limited than is often acknowledged.

Yes, there are things that can be done. A better education system, for example, would both promote growth and ameliorate inequality. But there is no magic bullet to improve our schools, and even if we succeeded, the economic impact would be felt slowly over many years.

Just once, I would like to see a candidate with a platform of humility: “Vote for me. If elected president, I won’t make a nuisance of myself.

10. U.F.O.s: What does the government know?

The antics from the US presidential campaign continued this week with Democratic front-runner, Hillary Clinton promising to give wider access to government records related to U.F.O.s and extra-terrestrial life.

In the context of this year’s election, some say it’s on the saner end of crazy #thetruthisstilloutthere

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44 Comments

According to Treasury, as much as 90 percent of household wealth is held in the form of housing in New Zealand, compared to 50 to 75 percent in other OECD countries.

All your eggs in one basket ?

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If you are geared up with nearly free 70% mortgage money, why not?
So muse most politicians too.
So expect no change.

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Housing is so expensive that even if you don't want it tied up in housing there's no money left over to invest elsewhere.

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Yeah, I heard it's not wise, but what can you do with just one egg?

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Thanks. Some 'outside the ordinary' thinking. Helps expand our own. Loved the economist on a plane one.

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....bit different to the statistician who travelled with a bomb in his brief case. He'd worked out the odds of there being two bombs on one plane at the same time.

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rastus - The subtlety of this will be over the heads of some.

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LOL, or writing your name on that one bullet ..

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Ha! What a frequentist.

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#1 For Americans to lose their paranoia, they must first come to terms with the unvarnished truth about their impact on the world, and change their ways.
#2 suggesting along the lines of some previous discussion here that any incentives or "helicopter money" must have a specified direction. To date Governments have been too generalist, probably worried about stepping on the toes of banks and the wealthy.
#4 my bit of idealism societies in general are not racist, (probably more like less racist) we are all looking for a saviour, and if he/she can sell the right message, we will embrace them. Khan and Obama are two examples of this egalitarianism.
#5 & 6 sort of looks like a variation of a Tobin tax might work - like having one for all money crossing a border in a particular direction - say outwards?

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Yes Murray. Tobin tax. 15% on all transactions where money goes outwards over our border.

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It'd capture untaxed profits by multi-nationals too. Lookin' better all the time.

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Why not have an APT tax instead.....do away with all the other taxes and level the playing field.????

Tobin tax is limited and not going to fix enough problems in the system including the distortions that have been created.

Those people and organisations who have pushed for free trade and globalisation have NOT understood that it should have been implemented with taxation changes across the borders as well......it has taken us 30 years or so to get to where we are and we have still screwed up.

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Bitcoin bubble won't last without Beijing's approval
http://www.scmp.com/comment/insight-opinion/article/1404497/bitcoin-bub…

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There is less chance of engine failure in a single engine plane than in a twin engine. Most twin engine planes will fly on one engine, but for some of them not for very long. Thus there was that Catalina that had to make a forced landing in the middle of the pacific. And it did not float for long.

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Panama—where no one can flush a toilet without the U.S. government knowing about it—is for suckers; the real elite, connected (or profiting) even indirectly from the real Masters of the Universe and the liquid modernity enablers of top of the line turbo-capitalism use hack-proof Luxembourg, Virgin Islands or Cayman Islands connections – not to mention secure, Empire-based Delaware and Nevada loopholes.
http://www.informationclearinghouse.info/article44637.htm

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That's veeeery interesting that you know this Andrew. Amongst your many contacts would you have any particular names and addresses of people we should deal with in Luxembourg, the Cayman Islands or the Virgin Islands?

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On speed dial mate, ' what do you need'?

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Ha ha, have a great weekend!

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#3 - NatGeo "My Brilliant Brain" featuring Susan Polgar

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Looks like a fascinating doco. Thanks Mike!

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NZ and the No 8 wire.
We had garages full of tools and bits. We invented things (electric fence) and more.
We repaired are own cars, washing machines and more.
But now
Do Makers Propose a More Open Source Future? | Idea Channel | PBS Digital Studios
https://www.youtube.com/watch?v=ct5fjHC7tL8

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Computer scientists have devised a digital crypto-currency in league with the Bank of England that could pose a devastating threat to large tranches of the financial industry, and profoundly change the management of monetary policy.

The proto-currency known as RSCoin has vastly greater scope than Bitcoin

RSCoin would be a tool of state control, allowing the central bank to keep a tight grip on the money supply and respond to crises. It would erode the exorbitant privilege of commercial banks of creating money out of thin air under a fractional reserve financial system.

http://www.telegraph.co.uk/business/2016/03/13/central-banks-beat-bitco…

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I have plans for my own version "BSCoin". It's like Bitcoin - only taller.

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#7 Smartphone sales. My Samson S3 cost about a grand and is now in it's 4th year so I am not a valuable handset customer. Great machine actually, but next time around, in five years say, I think I will be looking to spend $100 to $400. Those seem to be just as useful.
Mind you I met a university kid the other day. On his 7th phone in 18 months and his latest is a flash iphone at about $1200. Apparently his parents have sat him down and told him he would pay for the next phone. He says they seemed serious. !!! and !!! Probably these days that would count as child abuse.

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Yes, I was surprised at the obvious flaw in this byline - value versus units and the inane comparison to PCs, i mean after all where are all the smartphone users going - back to pen and paper?

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Smart phone users aren't going anywhere, they're just upgrading less often due to economic conditions and new categories of electronic devices competing for their dollars. A similar sales trajectory was seen with PCs when smartphones were introduced. It doesn't mean growth will tail off indefinitely but interesting that it's the first time a real dent in growth has been observed.

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Mate of the young fella was round the other day, said he was getting a new phone. Now I like to keep up to date and didn't like to look a fool. Now I know what an earphone is but, someone help me here, WTF's an eyephone.

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Dear Samson and Delilah...

My Smart phone is fantastic, when I switch it on I can txt or phone anyone in the World.

It is over 15years old...wonderful technology. keeps on working, in spite of my thumb usually up my ..proverbial.

(Was paid for by my Company, now it just keeps me Company, silently...Just as I like it. Free as a bird)

I used it for Y2K, so they could find me in an emergency. Luckily there was not any. Phew.?!.

I keep it off all the time, in case I want to use it. Battery never needs charging...Electricity costs more than ever....about 5 cents a year.

I still use one finger, one thumb, keep moving...and as brief as I can make it.

When I switch it off, I cannot be hacked, cannot be bothered, cannot be got at, when it does not suit ....me.

Everyone else on a Smart Phone I know is still working to pay for it...but what the heck...that ain't so smart...is it. Updating yearly is so passe.

Never owned an IPAD1, never mind the last one....Waste of money, waste of time, waste of energy, waste of resource, waste of battery, waste of investment, waste of other peoples, combined time, in a nutshell.

Worked in Computing since I was 21....was on-call for most of the time, carried a brick phone early on and this one, plus another freebie...so 2 freebie,s plus a pager....at Y2K...now there was simple technology....go to the nearest phone box....and direct dial. When urgently requested. I hasten to add. Reverse charge...no cost....again.

Now I see people with something glued to their ear...and thumbing away like a hitchhikers frenzied appeal. Millions of em...nothing better to do. Must have a one track mind.

I do not mind...No one can bother me...I am immune to techno babble these days.

Try it sometime....it give you plenty of time to do other things......

Please do not give me the thumbs up...it might hurt...especially if constantly using a smartphone..

And remember an Apple a day will keep the doctor and you all at E-bay.

Especially Mummies Boy....dweeb....it seems. God give me strength..

Another Samson...no thanks.

And that was my Friday Funny, but true.

I still use my fingers.....having a laugh at most of the wasted space here...but that is my prerogative. I have a lot of time....and the inclination...

Snore.

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"Returns on housing in New Zealand are taxed more lightly than returns on financial assets."

Can someone explain this for me please

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here an opener. Interest paid is in part merley a readjustment to maintain the value of your deposit..... and its taxed. The readjustment of the value in property as it rises does not get taxed.

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Oh. Like the capital gain on my shares.

OK, thanks.

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....nope. back to school.

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There's clearly differences to how tax is paid on fixed interest investments, but I'm not convinced there's any difference to the treatment of equities. Both get away without paying tax on capital gains if you don't trade too much, but pay tax on any income paid out.

The big difference is in leverage, most don't borrow (much) for equities so don't have interest payments to offset against income, while the majority of property investors leverage as far as they can get away with, so the income is largely offset against income expense.

This doesn't happen as often for equities due to perceived higher risks from the investor and the source of leverage (margin account interest rates are huge compared to mortgage rates)

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only in NZX and ASX, if you own shares outside of those markets you do pay capital gains tax

http://www.ird.govt.nz/technical-tax/legislation/2006/2006-81/2006-81-o…

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Oh. Like the capital gain on my shares.

OK, thanks.

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.. after the woman sitting next to him alerted a flight attendant to Menzio’s “cryptic notes, scrawled in a script she didn’t recognise”

LOL - When you choose to recruit the public into your security, don't be surprised when you get amateur results.

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Lord knows what would have happened if she had seen my indecipherable scribblings, even though they are in English.....

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"in English" -- Yeah, you *say* that, but from where I am sitting ...

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Another Freebie..as it is Friday...

An old joke, but....it can be updated....as you require.

Some of you may wonder about the Paperless Office.....never happened.

THREE WOMEN, TWO YOUNGER, AND ONE SENIOR CITIZEN, WERE SITTING NAKED IN A SAUNA.

SUDDENLY THERE WAS A BEEPING SOUND. THE YOUNG WOMAN PRESSED HER FOREARM AND THE BEEP STOPPED.

THE OTHERS LOOKED AT HER QUESTIONINGLY. "THAT WAS MY PAGER," SHE SAID.. "I HAVE A MICROCHIP UNDER THE SKIN OF MY ARM."

A FEW MINUTES LATER, A PHONE RANG. THE SECOND YOUNG WOMAN LIFTED HER PALM TO HER EAR AND BEGAN TALKING.

WHEN SHE FINISHED, SHE EXPLAINED, "THAT WAS MY MOBILE PHONE. I HAVE A MICROCHIP IN MY HAND."

THE OLDER WOMAN FELT VERY LOW-TECH.

NOT TO BE OUT DONE, SHE DECIDED SHE HAD TO DO SOMETHING JUST AS IMPRESSIVE. SHE STEPPED OUT OF THE SAUNA AND WENT TO THE BATHROOM.

SHE RETURNED WITH A PIECE OF TOILET PAPER HANGING FROM HER REAR END.

THE OTHERS RAISED THEIR EYEBROWS AND STARED AT HER.

THE OLDER WOMAN FINALLY SAID.........."WELL, WILL YOU LOOK AT THAT......I'M GETTING A FAX!!"

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Top effort.

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#3, what, like recidivist criminals?

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"The new face of City Hall is the first Muslim, non-white mayor, especially significant during a tumultuous time for Europe as it grapples with terror threats and political populism."

It is interesting that Lena Hesselgrave writes absolutely nothing about Khan's qualifications or past successes. Are there none? All that matters is that the person is "non-white" and "Muslim"? Isn't it racism when a person is judged (and in this case celebrated) solely on ethnicity?

Europe does not "grapple" with terror threats and political populism. It "grapples" with hundreds of people already having been butchered and many, many smaller attacks from murder to sexual assault occuring practically daily. It also "grapples" with a realistic prospect that anti-democratic mainstream politicians will continue to belittle and ignore the violence being perpetrated on Europeans and refuse to protect borders from millions of illegal migrants.

Not sure what "political populism" means in this context? Political parties that try to represent the will of the people? I am afraid, nobody except those responsible for the escalating security situation and social division "grapple" with a re-democratization of Europe.

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