June 2015 – Thomas the Think Engine

Disenfranchised but safe: Australia now.

The ABS has just released an odd bundle of data with a whole lot of hidden gems in it.

This part on political enfranchisement caught my eye. Between 2006 and 2014 fewer people felt able to have a say, down from 29 per cent to 24 per cent. Meanwhile, a growing share of people thought they couldn’t have a say.

But it’s not all bad news. Aussies feel a lot safer.

Is this the classic trade-off of voting for authoritarian governments – gaining safety but giving up your voice? Perhaps that’s a bit glib…

Let’s look instead at how men and women perceive safety.

Women fear more for their safety. They are three times more likely to feel very unsafe.

The question itself though is a bad one. How much you fear for your safety when home alone is less important than how much you fear for your safety when you’re home with your partner.

Intimate partner violence is the leading contributor to death, disability and ill-health in Australian women aged 15-44, according to White Ribbon.

I call on the ABS to lift its game and ask the right questions.

This next set of data didn’t come in a time series, but was interesting. A snapshot of who is happiest, it contains a few surprises: The elderly are the happiest, recent migrants are happier than average, and gays and lesbians are about as happy as the average.

It shows where society can improve – people with mental health conditions are far worse off than the average, and people who identify as non-heterosexual but not gay or lesbian are the least happy of all. I’m not sure what the policy options are for that last category, but I do know we can and should do more in mental health prevention and treatment.

One simpler issue I’d like to draw attention to is the unemployed. They are more unhappy than a person with a disability, and there’s more of them than there have been for years. Joe Hockey’s first Budget must bear a lot of blame for Australia’s recent surging unemployment rate. His second budget is better, but still not enough to undo the harm. Fixing unemployment is not a parlour game of economic philosophy. It’s an urgent issue to do with human suffering and it should be a national priority.

Why you should be proud you didn’t fall for the Apple Watch Hype.

This article originally appeared at The New Daily.

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You should be proud you didn’t succumb to hype and buy an Apple Watch. Not only because you saved between $499 and $17,000. (The $17,000 one has rose gold bits. Really).

You should be proud because the watch is a dud, and its failure shows some very good news: sometimes, we humans are smart enough to see through the best marketing in the world.

Apple’s marketing is famous. No. Beyond famous – it’s revered.

The Apple hype machine is what they’ll be teaching in marketing class in 100 years time. Apple’s marketers completely rewrote the rule book and managed to get news organisations to report breathlessly on the fact their new product was coming out.

Their secret recipe for marketing success had the following four parts.

Secrecy + Tantalisation

Apple makes exceedingly few official announcements about what it’s doing next. Then it springs surprises. The shortfall of official information creates riots around every possible leak, every possible hint. First rumours of an Apple watch were way back in 2012. 36 months of headlines ensued as the public salivated over the possible new product.

Reputation

Lots of companies had smartwatches coming out. Only Apple’s had people on tenterhooks. That’s because the California-based juggernaut earned our respect with a series of good products.

Customers who are thought leaders

If you have an effective but ugly product, it will be bought by effective but ugly people. Apple’s products are effective and look cool. Cool people want them, this makes Apple products even more cool. Repeat.

Fake scarcity

On launch day there’s never enough supply. This makes people queue. Then the news organisations show up to interview people queueing. Why can’t Apple sort out its supply chain? Oh, that’s right. It could easily. But lines of excited people are all part of the grand design. (Interestingly, the Apple Watch had an online launch, not in stores. Perhaps Apple sensed the queues might seem disappointingly small?)

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This four-part marketing symphony was in perfect tune for the many iPods, iPhones, iPads and MacBooks the California-based company launched between 2004 and 2014.

That decade of glory saw Apple’s share value rise from around $5 to $125. The company sold $800 billion worth of product at amazing profit margins – often over 50 per cent. It has banked so much money (US$194 billion according to recent reports) it could now buy Australia’s biggest bank – Commonwealth – without going into debt. On the same shopping trip it could also pick up Telstra and Macquarie Bank. And still have cash to spare.

But then the marketing machine stumbled.

It turns out brilliant marketing really only works in combination with a brilliant product. We should give ourselves a pat on the back, humanity. Sometimes a dumb product comes along and even the best marketing doesn’t fool us.

Let’s not mince words about the Apple Watch. It’s not good.

Some people put off buying a smart watch for a long time because they expected the Apple version to be a category killer.

Here’s some choice parts of a review written by one of those previously enthusiastic people:

“…A horror to put on…. the requirement to recharge every night very quickly became tedious … I almost never felt the haptic alerts… I decided to return it…. I nominated a courier pickup date and location, and I received a ‘return address’ label to print and attach to the box. Going through the motions of removing the Watch from my wrist, unplugging and coiling th charging cable, and stowing it all carefully back into the layers of excessive packaging, was strangely cathartic.”

And he’s not alone.

There are hundreds of unflattering reviews on the internet.

Given the trend towards bigger screens in smartphones, it’s not clear why people thought a smartwatch was such a good idea.

Historically, there has not been much demand for wearable information technology.

The market starts and ends with the wristwatch. Wristwatches became extremely popular in the west in the 20th century, following their use by aviators in world war one. But it would be easy to over-interpret the importance of a display strapped to your arm.

The wristwatch took serious market share from the pocket watch only in the last 100 years.
The wristwatch is a thing you glance at, not interact with. Even serious stopwatches are strapless.
When mobile phones came out, younger generations mostly gave up wristwatches.

An interactive display strapped to the one body part you can reach with only one hand may come to seem a technological dead end.

Apple is obviously betting that’s not the case. There are already rumours in the wind of a newer, better Apple Watch.

Will brilliant marketing and a brilliant product combine again in the case of Apple Watch 2.0? Apple better hope so. Because its next product launch will have to retrain the brains of consumers who just learned not to trust the hype.

The industry that’ll save Australia doesn’t require coding

There’s an industry on the brink of a break-out, and it doesn’t require us to learn C++. It would rather we learned to smile widely.

That industry is tourism.

Tourist arrival numbers hit records in November, December, February and March. Glancing at this graph of the last 15 years tells us we’re onto a winner. Look at that uptick since 2012!

Arrivals in March 2015 were 13 percent higher than a year ago. Arrivals in February were 14 per cent higher.

It’s time to turn your place into an AirBnB, people. There are already dozens of listings within walking distance of my house.

And it is more than just a cottage industry. There are thousands of real jobs available in the sector too.

That’s five times the number of jobs I could see in mining.

The tourism sector has been in growth mode for a long while, although we don’t celebrate it much.

Politicians are more likely to say they want to live in a country that makes things.

Are we somehow ashamed of tourism? Do we feel it debases us to offer hospitality to visitors? While it’s somehow strong and tough to make things and send them to those same people?

Bangladesh makes a lot of things. I’d rather live in a place people want to visit.

We can make Australia better for tourists by improving transport in our cities and nation-wide, by teaching languages, and by preserving our natural environment.

A politician that made tourism the centre-piece of their economic recovery plan would get my vote.

The big thing missing from The Killing Season

I really loved the Killing Season. A beautifully-made story about the most interesting period in recent Australian politics. It took Canberra’s political life seriously. I think we could have our own West Wing now – previously the closest we could manage was the satire of the Hollowmen.

The story, told by veteran journalist Sarah Ferguson, will scoop the pool at the Walkleys – the journalism industry’s own award night.

But it omitted a major angle. The role of the media in the downfall of two Prime Ministers.

This could be simply a matter of editing. Trying to fit months of excitement into an hour of TV means things must be skimmed over.

But there is a set of incentives at play that makes me think this omission is more fundamental. Before the narrative congeals and sets, I think remembering the role of the media is important

It’s shocking how speculation of this spill was just “some sections of the media causing trouble” #wherearetheynow

— Ahron Young (@AhronYoung) June 26, 2013

This tweet from Sky News anchor Aaron Young on the day Rudd knifed Gillard illustrates the media’s urge to write themselves out of history.

It’s very understandable.

The political journalist’s job is absurdly stressful and difficult. I doubt many people could imagine how precious time is for a working journalist. Deadlines don’t just loom. They crash down. There is scarcely time for typing, let alone time for reflection.

Pondering the role of the media in shaping political events is a job for retirement. Their job is to get stories out the door. Now.

Even if journos wanted a critical reflection on the media, where would it be found? The mainstream media is not in the business of introspection. [I did find this 2013 Crikey piece pondering the media’s role.]

So the press gallery favours a paradigm where they merely observe and report. If speculative reports come true, the paradigm is only strengthened.

But of course media practice changes politics. Without the media acting as it does, we’d not have half the policies we do. Boat arrival reporting drives asylum-seeker policy, for example. The media’s lens made John Howard trim those eyebrows and Joe Hockey get lap-band surgery. It drives soundbites and policy on the run.

But this is not a major subject of the thinkpieces that damn modern politicians’ inadequacy.

As in any mob, no individual can be blamed. Picking on Grattan or Oakes or Lenore Taylor is silly. There are around 180 journos in the official press gallery, from dozens of outlets. Then thousands more weighing in from beyond Canberra.

It’s rational behaviour for any one journo to see everyone else reporting leadership speculation, and so to report leadership speculation.

Indeed, the media organisations can throw up their hands too, and say they merely serve an audience. If those stories did not draw frenzied millions of clicks, they would not publish them.

But having no individual at whom the finger can be pointed doesn’t matter for a meta-analysis. The reporters and outlets can be basically innocent and the industry very much implicated. (Much like the problems within Labor don’t end with Shorten or Gillard, or even the people who responded to those polls ‘Dasher’ Dastyari was so smitten with.)

Having been in the media and seen how much power there is, how lightly governed it is, and how much you can get away with, it’s amazing. The reaction to the Finkelstein inquiry told me a lot about the power of the media.

What’s the Finkelstein inquiry, you ask? Exactly.

An enquiry into media regulation by a respected Federal court judge known as ‘The Fink,’ it got an extremely hard time in the media – when it was being reported at all. (The inquiry recommended things like newspapers reporting corrections and press council adjudications prominently.)

But the media is not above reproach.

The Killing Season included at least two examples of politicians backgrounding journalists with information that may well be fake. Arbib saying he’d reconciled with Rudd in 2013, and the SMH reporting Rudd was checking his numbers in 2010.

Reporting off-the-record comment means that the public can’t check its veracity. It requires utmost trust in the reporter. That trust was eroded during the period in question.

But off-the-record comment is just a small moving part in a big machine. The influence of the media on politics is like the water fish swim in – so pervasive they don’t notice it or question it.

To extend the water metaphor, let me say this. Politicians would be starved of oxygen without the media. But the life-giving force also contains vicious currents that affect the posture and behaviour of the politicians it sustains. Like a current in the water, we can normally only identify it by the ripples. The events of the Killing Season were more like a period of breaking waves.

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Note: I can see the response this piece is going to provoke : “Mate! Did you even watch the Killing Season? Labor ate itself! The media didn’t need to help it.”

But that’s a simplified version of history. Let’s not forget Mr Abbott was also nearly consumed by leadership speculation too. Would that happen if this was just a Labor problem?

Also, don’t let the narrative set in your mind until you’ve read Gillard’s book, in which the negative impact of the media is far more central. (She released excerpts to the press yesterday, but it somehow didn’t seem to get much coverage. Odd…)

The six stages of Costco

This story originally appeared over at The New Daily (a news site you ought to check out). They’ve agreed for me to host it here too.

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CostCo has been running in Australia for six years now, but the big American retailer just opened its first stores in Brisbane and Adelaide in the last 12 months.

Shopping at Costco is a rollercoaster ride. Here, for the uninitiated, are the Six Stages of Costco.

1. Fearing

In this stage, the shopper is bewildered by the membership-based discount warehouse concept.

Those in the fearing stage can be identified by the following class of statements:

Costco sounds weird. Is it just a supermarket? I can’t find a catalogue online.

It’s not near my house. How do I get there?

I hear it costs $60 to even be able to shop there! Who do they think they are?

Many will never leave this stage. Those that do will likely make the leap because of word-of-mouth. (Costco doesn’t advertise).

2. Learning

In the learning stage, the shopper’s fear and confusion is rapidly replaced with a sense of wonder.

The shopper begins to form an elementary map of their Costco store and assumes they will one day be able to navigate it confidently. (This assumption is false.)

The learner can be identified by the following kind of statements.

Look at the size of this place! Wow!

Things are so cheap here! I can get Veuve Clicquot around $50 a bottle!!

It’s mostly real brand name stuff – Nutella, Sony, Levis. It’s not like Aldi.

There’s even jewellery for sale … and you can buy holidays!

You can get a hot dog at the end for just $1.99. Delicious.

Coming to Costco is fun. It’s more like a theme park than a supermarket!

3. Loving

In the loving stage, the shopper’s very identity seems to merge with their membership of the discount warehouse.

You don’t need to ask to identify them as a Costco lover: they’ll tell you. You will be subjected to non-stop statements like these:

Did you know Costco works out 15-25 per cent cheaper than Coles or Woolworths on a per kilo basis?

Have you tried their beef? OMG. The quality is to die for.

Did you know the CEO of Costco pays himself just a third of what the Walmart CEO gets, while they treat their staff better than most other retailers?

You must come to Costco as my guest! I’d be delighted to take you!

The typical Costco lover is happily middle class. (Costco sells a lot of smoked salmon.) The Costco experience actually takes money to enjoy, given the fees, the need to go by car, and the need to spend hundreds per visit to harness the discounts.

Some people never leave this stage. They’re in retail nirvana. (Some of these people live near a Costco that does discount petrol and make their savings on fuel alone.) But there’s plenty of shopper with three more stages to go.

4. Realising.

In the realising stage, the Costco shopper learns thousand-dollar shopping trips can have a nasty hangover. You can spot the realiser by these mutterings:

Did I need to buy 1000 zip ties? And a kilogram of Hersheys kisses?

Why is there never any ******** space in my ******* fridge?!

Shame I couldn’t get through all those avocados before they went brown.

Yes, I can take you to Costco (again) to stock up on things for your party. Yes, taking a guest is one of the good things about the membership. No, I don’t mind.

Those cheap hotdogs are revolting.

The realiser has a few more unhappy moments coming.

If they darken the doors of the local Coles or especially Aldi, they may make the following realisation – not everything is cheaper at Costco. There are some non-perishable things Costco may be unbeatable for – pet food, or toiletries – but not everything.

5. Calculating

In the calculating stage, the shopper looks at some very long receipts with some big numbers on them. They try to quantify the opportunity costs that come with bargain hunting.

Here are some notes they may make on their spreadsheet.

If I save 20 per cent per $200 shop, but succumb to two $20 impulse buys I shouldn’t have, my savings are gone.

If I get a second freezer to freeze bulk meat, its going to cost me about $400 and then at least $100 a year in electricity. Hmm.

If I drive an extra 30 minutes to the Costco and back, and spend an extra 30 minutes shopping and waiting in line, I need to make sure the savings are worth 90 minutes of my time. So if I get paid $30 an hour, I need to save $45 per shop to break even. Plus petrol.

6. Quitting

The quitting stage is not spectacular. There’s no more excited chatter. The quitter quietly lets their membership slide.

Costco is growing and its stock price is double what it was five years ago, so the quitting stage doesn’t happen to everybody. But it happens to some.

For this group Costco is like an old friend you don’t see any more, and you wonder what you ever had in common. Maybe you are missing a screaming deal on a TV or some new tyres, but you know what, being a bargain hunter doesn’t seem like the most important thing in your life any more.

Maybe this is you, maybe it isn’t. But no matter what, before you quit, stock up on that cheap champagne!

A tropical metropolis on top of this antipodes?

Tony Abbott has a plan – to make the north of Australia more economically vibrant.

It says, “A growing northern economy benefits the whole nation through jobs, investment, infrastructure and services.” But is that true? Let’s have a look

Darwin has just 136,000 residents. It’s the smallest capital in Australia.

Darwin certainly seems to be a lovely spot with room to grow. So why not? It doesn’t make sense that most of the population is in the southern half of the country, far from our populated neighbours in Asia.

A highly developed north could be Australia’s California.

California grew late in America’s development – in 1900 LA had 100,000 population while New York had 3.4 million. Comparable figures to Darwin and Melbourne today.

But if expansion of population is the plan, we need to be clear why we’re doing it.

Having more population made sense back when Australia feared being invaded. Populate or perish was the cry. These days our big risks are different. So the idea needs to stand up economically to make sense. Let’s have a look at what the economics of this tropical metropolis might be.

BENEFITS:

1. The Northern Territory would have a higher population, so the fixed costs of operating the jurisdiction – such as parliament – would be spread over more people. This is efficient. It would have a minor upside for the rest of Australia as smaller GST transfers would be necessary to the NT, and the remainder of the country would keep more.

2. With more people living in the tropical north, the area would have bigger markets, and greater economies of scale. Prices should drop for consumer goods, and the range of goods and services would increase. Good news for Darwinians tired of the same few pubs and restaurants!

3. Australia would get a higher GDP. This might give us more clout in global affairs, but wouldn’t mean much for most of us. It wouldn’t necessarily solve our unemployment problem. Per capita GDP is what matters – lifting the total output of Australia is irrelevant for most of us.

4. The NT is 30 per cent indigenous. By creating more employment opportunities in the north of Australia, development could help reduce indigenous disadvantage.

5. If successful, a booming northern frontier could reduce the population growth rates in the southern capitals. This might reduce the rise in house prices and diminish pressure to build expensive infrastructure through crowded areas.

6. A more happening north might attract more tourism. Darwin is already a big tourist town and with Australia on the brink of a tourism boom a bigger, better offering could help the whole nation attract more tourists. The risk would be actually diminishing its charm. The key is good urban planning so the inevitable ugly parts of development are invisible from the tourist hotspots.

COSTS

1. Economic development always uses land. Changing the use of land always comes with an opportunity cost. In this case, the change would turn natural environment into suburbs and industrial parks. National parks are already close to the centre of Darwin. The location of development would need to be very carefully managed to make those opportunity costs worthwhile.

2. Putting another big city absolutely miles from the rest of Australia’s cities is only going to increase travel costs and times for the rest of us. Perth is bad enough!

3. Government effort could be expensive and futile. The plan to deregulate domestic routes in the north is already in tatters. Here’s the thing – forcing economic activity to happen in a certain place is next to impossible. Economic activity happens where it wants to. The venn diagram of development policies and failed development policies looks like a circle with only the faintest shadow. Having worked in both domestic regional development agencies and international aid efforts, I think I can say this with some confidence. We could be investing in a tropical white elephant.
Is this plan more likely to create Australia’s California or Australia’s Alaska? Please share your views below!

The economics of life expectancy improvements

Today a post I wrote is being hosted over at ANZ.

I t’s all about this chart of life expectancy improvements.

MELBOURNE TIMELAPSE

I made this video. Music is by Gomez.

So, do kids really need to learn coding?

Federal Labor is pushing to make coding part of our primary school curriculum.

Coding is extremely fashionable right now. A mate of mine works for a hot New York City start-up called codecademy that teaches people to code for free online, and has got a LOT of positive press.

Tony Abbott suggested learning coding was unnecessary, got laughed at, then had to back down when he realised his own government was also funding coding in schools.

Is learning to code important?

Well, the market for software has exploded and there are millions of apps for sale right now. Some apps make enough money they can have a $40 million ad campaign starring Kate Upton. But most make very little money.

From Metakite: The Shape Of The App Store

When I look at software I have on my computer and phone, I see relatively little that is boutique, and lots that is mainstream – Firefox, iTunes, etc. The replicability of software means we don’t each need one made personally.

That suggests the coding universe exhibits the characteristics of a one-to-many market, like acting or professional sports, rather than a one-to-one market like lawyering or medicine.

The key characteristic of labour markets in professional sports and acting is that a few people make a lot of money in them, while a large coterie of fringe dwellers hopes for a big break and makes next to nothing. App-making is the same.

Further eroding the need for coding skills is the fact coding can substitute for itself.

Good back-end coding makes it possible for non-coders to do things that used to require coding skills, like run a website (like this one), an online store, or even make an app. There are dozens of sites that let you make an app with simple drag and drop techniques.

Don’t get me wrong – there will be coding jobs in Australia in the future. Lots of them. Some of those jobs will be very well paid. We should continue to have great computer science programs at high schools and universities open to those who have passion for coding

But will there be enough demand to warrant teaching coding to everyone?

There will be even more plumbers in future and I don’t hear anyone saying we should teach the fundamentals of unclogging in Grade 5.

Let’s not forget writing code can be fiddly, repetitive and boring. This is not the sort of activity that will ignite bored kids imaginations. I did a term of writing code as an elective in 1995 and hope to never again cross paths with an assignment operator.

Even nerds that are experts in computer programming think learning to code is wasteful.

Coding requires an analytical mind and a grasp of language. Ensuring literacy and numeracy are in place is a higher priority than teaching coding. With the fundamentals in place, learning other things is easier.

We ought not fool ourselves that adding a subject is costless.

Adding to a school curriculum is easy for politicians. They don’t face the opportunity cost, don’t realise students are really only paying attention for a couple of hours a day, and don’t understand half the kids aren’t properly literate.

Teachers at the coal-face, however, know the trade-offs are real. The 2014 Federal Government review of the Australian curriculum highlighted that:

“the greatest concern was the content load expected to be delivered at primary school.”

We should push back on this fanciful policy.

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It’s the economy, Joe.

Here’s why the federal government will change in 2016.

Today, data was released showing negative wages growth for the first time in six years.

The last negative quarter was September 2009. The March quarter of 2015 takes us back to those bad days.

In an environment of negative wages growth, people feel stressed and unhapppy. Jobs are being lost. Negative feelings about the economy inevitably hurt governments.

It’s the economy, stupid!

… is a classic of modern political communication for a reason. Governments get thrown out when times are bad.

What Joe Hockey and Tony Abbott need to do is buttress the economy during the time when mining investment is falling. They ought not be stressing about surpluses – there are far less abstract and more concrete things in the economy that need their attention.

If the government spends more (in the right ways) it can keep people in work. This is important not just for their current well-being but their long-term prospects. People who spend time unemployed lose human capital. This permanently reduces their potential and the potential of the national economy.

The most recent Budget is probably not succeeding in pushing the economy forward and keeping people in work. The next Budget will be a pre-election Budget, so it will likely spend up big and reverse the mistakes this government has made. But will it be too late? The mid-year economic and fiscal outlook is also an opportunity to change course.

Another opportunity to change course will present itself if the Treasurer and Prime Minister are changed. It’s not impossible – a poll today is showing that the coalition’s recent recovery is ebbing, with the balance back to 47-53.

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