I have been banging on about the lack of leadership in Australia for over a decade. In the lead up to the 2010 Federal Election I had a letter read on “60 Minutes” supporting Mark Latham’s urge to voters to donkey vote (or intentionally ensure that their vote was informal) because he articulated the reason, that being disillusionment with the dearth of quality political leadership.

I cannot support the avenues that Mr Latham has since taken to play a role in Australian politics. While it is perhaps understandable to consider joining a “protest party”, one needs to be careful about what is the main message that that party protests and is seen by the electorate to protest. It is, of course, unrealistic to find ourselves totally aligned with any political party on all of the issues that concern us, but we all have issues which are clear-cut based on our value system, and I have no compunction in stating that xenophobia should be one of those issues for all of us.

Not pre-judging people by the way they look or for their lifestyle is not political correctness. It is just common human decency.

The leadership void is not confined to Australia. Globally there is a backlash against contemporary leadership by the elites in our societies. 

It is unsurprising, then, that leadership is a topic that is attracting much discussion in business circles and it is a key buzz word – or “hot button topic” – amongst an industry which picks up on these themes and profits from consulting to bring these values into corporations and other institutions.

I read a great deal of socio-economic material daily and I have business television running in the background throughout the day as well as much of the night (OK, I confess, I enjoy falling asleep to the clear and sure voices of Alix Steel and David Westin, or, if retiring earlier, Tom Keene and Francine Lacqua).

Through this I pick up on the themes, buzz words and phrases that come into fashion and then are dropped almost as quickly as they appear. 

Being a natural contrarian with an aversion to being a part of the herd I am sensitive to societal fashions and fads. Consciously or subconsciously incorporating these trends into my own behaviour does not make me feel cool, confident or included. Instead I gain confidence when I detect and intentionally eschew these trends. At quieter times I admit to myself that the nature of human societies is such that nobody who lives with at least one other person is immune from influence by others.

Perhaps nowadays it is in part an intellectual snobbishness to reject trends and thus a personal flaw. It is also, though, my own expression of the dissatisfaction with the media-saturated, now especially social media, environment that many of us are feeling and expressing in private and increasingly in public.  For me a big attraction of spending time overseas is the break from the continual political and other messaging to which we are subjected and have become increasingly desensitised.

How discouraging that so many among our young generations so value the role that “social influencers” play in society that they consider it the most attractive career choice.

Obviously the title of this post is a none too subtle poke at this phenomenon in institutional and workplace management. However, that these trends occur is not the main point of the post. Neither is this post really about the industry that has sprung up around promoting these trends and instituting them in organisations – the consultants, the authors, the TED talks, the internet/social media gurus.

I actually really like one of the buzz words in the title of this post, and if you have read much of my material, and are equally sensitive to detecting their use, then you will probably know what it is that current buzz word I like.

Authentic or authenticity.

Authenticity in the Workplace

The Oxford dictionary defines authentic as the quality of being genuine or true.

That is entirely consistent with my understanding of the word as I have used it through my adult life. It is a simple concept and I would expect that almost everybody raised with English as their first language would have a similarly crystal clear understanding of what the value authentic means. Similarly, everybody knows how that applies to human behaviour.

That does not mean, however, that everyone knows what it means to be authentic in their own behaviour. Does it mean to be true to your own nature and to reflect that in purity with your own actions, or does it mean to be true to a set of behaviours that you perceive to be ideal (or pure) in circumstantial context within your society.

With the first interpretation one can not avoid being subjective in analysing whether they are behaving in a manner entirely consistent with their own nature. Moreover, we, ourselves, are the only ones who can really know what is our own true nature, and we all are imperfect at analysing it, some of us being quite self unaware. Additionally we can never really know what others perceive of our true nature and how consistent we are to it in our actions, and what each other individual perceives of that will be contingent on their own patterning from innate and experiential factors.

So there is already an enormous amount of subjectivity and we have only discussed the least subjective interpretation. But I do not wish to get bogged down. Suffice to say that the latter interpretation requires one to accurately perceive what is ideal behaviour in all contexts, with all of the subjectivity that involves, and then there is the subjectivity of others perceiving what they consider to be the ideal contextual behaviours and constantly assessing whether your perception of that is accurate and that you implement that behaviour faithfully.

In reality, in organisations the meaning of an authentic person encompasses both interpretations.

The widespread application of the latter interpretation, involving conforming to ideal behaviours, and especially the pressure that some feel to do so and the energy that they must thus expend, is responsible for the backlash against “political correctness”.

With that out of the way I can finally move on to the point of this post!

How Authenticity is Acquired

Authenticity can not be taught or coached into anybody – a person either acquires it through the complex interactions of their genes and the circumstantial events in the very early period of one’s life, or they do not.

The most decent authentic human being on Earth can emerge from the slums of Mumbai having spent their childhood rummaging with hundreds of other children through moving piles of garbage as bulldozers push them towards the extremities of the dump pile.

And the most despicable scoundrel can have been raised under conditions which many consider to be the preserve of the elite and super wealthy with all of the privilege and excesses, and sometimes hidden barrenness, that entails.

Executives and managers within organisations can gather together in groups to be told about these buzz words, and they can be taught what is authentic behaviour, but if they have never before displayed it in their life then an authentic snowball in hell has a longer half-life than authentic behaviour does in that individual.

The reader will note from my writing that I not only like the word “authentic” but that I have intentionally been using it widely in my writing. I have to admit that this is in part due to the co-option of the term for business and corporate management agendas, and I have concerns on whether this will bastardise, taint or weaken its meaning. And so I have been setting about reinforcing what it really is to be authentic.

Why I feel this is necessary gets to the very heart of this post.  

Authenticity in Contemporary Leaders and Institutions

The value of honesty is very similar to the value of authenticity, and in many uses it can be considered a synonym, in our honesty to ourselves and to other people and to wider society.

Society is acutely aware that business and political leaders are nowadays highly trained in communication – e.g. in mannerisms including hand gestures during television interviews –  but it is patent that what is being communicated by them supports an agenda and is what they want others to perceive which may or may not not be related to the truth or even what they themselves really believe to be the truth.

In other words, unless the leader has the acting skills of Morgan Freeman, people immediately recognise it for what it is – spin – aka balony, bulldust, hogwash, or plain old crapola.

That goes equally to audiences for the messages delivered by political leaders and business leaders, and it flows down the organisational hierarchy. In other words, if nobody believes that the leader authentically or truly or genuinely believes what they are saying, then they sure are not going to believe their subordinates are going to be any more authentic in this regard.

So is it any wonder that people would question whether organisations authentically value authenticity?

Perhaps the 2019 Edelman Trust Barometer results (https://www.edelman.com.au/research/trust-barometer-2019, accessed 24/11/2019) showing a high degree of trust in “our employers” contradicts this assertion. However, examination of the internals of the data suggest that the relative trust in the employer has a lot to do with just how distrusting of the system and other institutions, including businesses, are the majority of Australians, and their other anxieties and insecurities are likely influencing people to want to believe in their own employer which has a large impact on their own life and security (“What Australians Expect of Their Employers”, https://aicd.companydirectors.com.au/membership/company-director-magazine/2019-back-editions/march/edelman-trust, accessed 24/11/2019).

Authenticity Versus Psychopathy

Over the last decade there has been a base of literature developing that suggests that psychopathy is more prevalent, at perhaps three times the rate, amongst executive ranks than in wider society (Lipman V, 2013, “The Disturbing Link Between Psychopathy and Leadership”, https://www.forbes.com/sites/victorlipman/2013/04/25/the-disturbing-link-between-psychopathy-and-leadership/#6e0eb4c94104, accessed 24/11/2019).

Psychopathy is traditionally a personality disorder characterised by persistent antisocial behaviour, impaired empathy and remorse, and bold, disinhibited and egotistical traits. It is sometimes considered a synonym of sociopathy (Psychopathy, Wikipedia, https://en.m.wikipedia.org/wiki/Psychopathy, accessed 24/11/2019).

A study of Australian business executives found that almost 6% could be considered to be psychopathic, while another 10.5% were dysfunctional and displayed psychopathic tendencies (Saft J 2019, “As psychopath CEOs destroy value, nice ones create it, https://www.reuters.com/article/us-markets-saft-idUSKBN19C2Y0, accessed 24/11/2019). So in a group of six Australian white-collar managers, chances are that at least one will be a psychopath or at least will display psychopathic behaviours.

These are the executives that are meant to institute the cultural agenda within an organisation as it works its way down from the leadership team. So if authenticity is highly subjective, do a group of people shown to have a significantly higher prevalence of psychopathy than broader society – i.e. the people that structurally work under them – truly have the skill to assess who is acting authentically and who is not?

The obvious answer is that as a group, no, they do not.

It is for this very reason that I would suggest that automation of a lot of human resources tasks will be a productive development. However, the executives will certainly not like handing over control of this function and it is very much in the nature of this group to resist this progress – that would be behaviour authentic to the group as a whole!

I would suggest at the very least that Artificial Intelligence could be used to scrub from applications any indications of gender or ethnicity or any other other factors associated with societal biases or prejudices, references to schools should be removed, and universities too – though some might suggest that a ranking be applied to give an indication of the quality of education received. This should be a relatively straight-forward start which should not be difficult to implement.

While many employees would be sceptical that ideals such as authenticity would be actively promoted with their organisation, as a top-down initiative from leadership teams to the rest of the organisation, because of these inherent flaws, that does not mean that people are not disappointed when the contradictions become apparent.

What upsets people most is the perception of an executive or management club, which used to be referred to as a “boys club” but is less so now even if it is still 60-40 at best (i.e. the highest representation of women), and a lot of these factors – the jargon and the spin – only serves as reinforcement. These groups watch the same TED talks, speak the same management spin vocabulary, and share the inside jokes that follow. Often the egotistical nature of individuals within the management group – remember these are not necessarily as socially intelligent or aware individuals – leads them to highlight this divide with their behaviours.

Nothing that I am saying is meant to take anything away from Ted Talk presentations by Brene Brown or Simon Sinek and others. In fact, all of this serves to underline just how important it really is to authentically promote authenticity and other management ideals within organisations.

It is just the old proverb in action that if I was going to promote authenticity in an organisation I would not start from this point.

To authentically take this on – rather than just provide lip service and be seen to be doing it while being ready to pounce on the next big idea that comes along – will take a major commitment by any and all organisations. And it will take a great deal of thought and system implementation to make progress at removing roadblocks for selecting for authenticity in employees, and one important measure will likely involve quotas to ensure diversity (I am currently working on a post on this topic).

Moreover, we live in a society where people feel more and more anxious, like they are on a hamster wheel, with increasing focus on the process so that it is the ends in itself rather than being the means to the end (again, another post on this is in preparation).

The answer absolutely does lie in promoting authentic individuals upwards towards leadership roles. However, authentic leadership is required to ensure that authentic people are accurately identified and promoted.

Authentic Leadership

I have a view that the ideal leader in very many situations is the reluctant one. Many years ago I read the First Inaugural speech by President Washington (In “Speeches That Changed the World”, 1999, Compiled by Owen Collins, Westminster John Knox Press, pp160-165) and I was awestruck by his humility and his integrity – or yes, his authenticity (maybe I have overused the term above so I will start using some synonyms more from here). 

In the speech he spoke of his desire to quietly toil away on his own land in retirement, but that his compatriots pleaded with him to sacrifice his own desires for the greater good.

On the one hand, I was summoned by my country, whose voice I can never hear but with veneration and love, from a retreat which I had chosen with the fondest predilection, and, in my flattering hopes, with an immutable decision, as the asylum of my declining years – a retreat which was rendered every day more necessary as well as more dear to me by the addition of habit to inclination, and of frequent interruptions in my health to the gradual waste committed on it by my time.

He also rejected all financial benefits from taking up the position, as he did in his prior military role.

When I was first honored with a call into the service of my country, then on the eve of an arduous struggle for its liberties, the light in which I contemplated my duty required that I should renounce every pecuniary compensation. From this resolution I have in no instance departed; and being still under the impressions which produced it, I must decline as inapplicable to myself any share in the personal emoluments which may be indispensably included in a permanent provision for the executive department… 

(I recommend the reader to track down and read the entire speech.)

Washington was confident that he was as good as any to do the job but was not overconfident. He took on the role without any thought of self-interest, in fact it was the opposite – he was acutely aware of what he was sacrificing, and even though he felt that there were others that could do the job, and that he had already sacrificed, he recognised that his society would gain confidence from his stepping into the role so he did.

I do not pretend that I am not cynical, but I struggle to think of leaders at the elite level who I am confident are not acting as their primary driving force self-interest, whether it be for financial gain or status. If I examine Australian politics I think John Hewson may be the last political leader that I would feel confident in saying that he was acting selflessly, and he fell short of the Prime Ministership. 

I do not suggest, here, that leaders do not make sacrifices. No, please do not take that easy option of arguing on the tangent rather than the exact point. I am saying that all recent political and business leaders that I can recall have have entered the position perceiving that they will gain more from their position than they are sacrificing. Even though on one hand Malcolm Turnbull could be considered to have sacrificed financially by entering politics, or at least not seeking financial advantage in his position, I think all consider that Turnbull is not known for humility and thus perceived significant status benefits from being Prime Minister.

To add my subjective assessment on the authenticity of all Australian Prime Ministers in my living memory would detract from this essay, so I will not, but to continue with the person I consider to be the best leader Australia never had in my life time is instructive. (I do, however, find it difficult to leave this statement without saying that he was beaten by a very good Prime Minister, who together with Hawke provided what I consider to be the best Australian political leadership in my lifetime.) 

I believe that the primary reason that John Hewson failed, even though he perceived himself to be acting for the greater good over self-interest, and I agree, is that people who are inclined to act for the greater good tend to be more honest and authentic, and those people can be outmanoeuvred by crafty people as they are more trusting in the sincerity behind actions. 

The wily reporter Mr Willisee knew that Hewson’s honesty would mean that his inclination would be to explain the example he was presented with so that the everyday viewer watching the television would receive the full picture. Of course Hewson’s inexperience did not help here, and giving the honest and precise answer – on the tax applied to a birthday cake – allowed Willisee to turn the tables and suggest that the everyday person would be confused. Mr Willisee did not bother highlighting that not understanding the physics behind how images appear on one’s television set does not prevent the viewer from enjoying its entertainment value.

Honest political campaigns remained out of vogue until the most recent Federal election, but given what happened, again, we can be certain that transparent honesty will not feature in strategies for political campaigns in Australia for a very, very long time.

For authentic and honest people, the wiliness and strategy that comes hand in hand with political manipulation does not come naturally, and must be actively learned, while those who have a lesser degree of authenticity have a greater predilection for being disingenuous or devious. 

Thus authenticity is a natural and powerful disadvantage to political astuteness and positioning throughout society, including in workplaces. The one exception is during crises when less authentic people are not attracted to the trappings of power and influence because these benefits are outweighed by the amount of effort and work that must necessarily go towards working for the greater good. However, these periods are aberrations and are not the normal state of things, not yet anyhow.

Authenticity as a Detriment to Career Progression

This truth about groups of human beings is one of the reasons for the popularity of the longest-running reality television program, Survivor, as viewers examine players – with wide-ranging abilities and strategies for social politics, and behaving in ways that most players say they never do in their “real lives” – who seek to outplay, outwit and outlast all others to achieve a significant financial prize.

I was immediately attracted to the concept and to the television show. But I quickly realised that I do not possess the skills to be good at playing the game, because while I possessed some skills that are necessary to do well – to read situations to understand the politics involved – I knew from my life experiences that I lack the skill of deception and am a very poor lyer which would prevent me from being a contender for the title of “sole survivor”.

I would suggest that all of my friends and many of my foes would rapidly admit that the authenticity piece – encompassing integrity and honesty – absolutely is right in my wheelhouse. 

Nowadays I would also say that this value was at times a detriment to my career as a scientist, because the truth is that career management in science is more akin to the game of Survivor than it is to being a meritocracy. And it took me a very long time to realise that, even longer to accept it, and I barely had the opportunity to even attempt to do something about it by the point at which I had run out of time. 

If “outplay” is a measure of competency at doing science, then to outwit and outlast are far more important ingredients for a prolonged career in research science. What’s more, I am in little doubt that sociopathy is even more prevalent in academic leadership than it is amongst executives.

The rubber really hits the road, however, when we begin to think about the highest profile case of recent times of corporate leadership not living up to societal expectations.

Australian Bank Executives, Authenticity and Culture

Question: Has recent leadership of the major Australian Banks been authentic?

If one considers the initial interpretation of authenticity then we need to ask what is the true nature of these senior bankers, and were their actions consistent their true nature.

I think many in society would say that the banking system does select for true scoundrels, and these senior bankers acted consistently with that nature.

Certainly our political leaders have no compunction in suggesting just that now. Of course, just like in Survivor, politically astute actors never underestimate the value of diversion or a shield to their own obvious shortcomings or ambitions.

Nonetheless, if we accepted that to be a scoundrel is their nature, and everyone now agrees that they acted true to that nature, then clearly recent Australian bank leaders have been authentic.

So is this really the behaviour we want to encourage in corporate Australia? Of course not.

So authenticity in leadership most definitely is about about being true to one’s nature, but it is crystal clear the character of that nature should be of a very high standard based on societal values.

Now to have reached the apex of Australian corporate structures – remember, Ian Narev was the highest paid business executive in Australia – these people were not plucked from obscurity. No, they are a product of the system – they were not just for the system, they were of the system.

So it is hardly surprising that many are highlighting just how difficult it will be to change corporate culture within Australian banks. And given how ex-Treasury head Ken Henry behaved in his testimony, it is clear that this culture is widespread in the elite economic leadership of the Country.

Here is the thing. I do not believe that there are many parents out there, even today, who teach toddlers to not share. In all the time that I have spent at playgroups with my children, and in playgrounds and at kids’ christmas parties, I have not once heard a parent say “no little Johnny, or Janie, those toys (or food or whatever) are all yours and you should keep it all for yourself”. Similarly I have never heard a parent tell a child that two wrongs can most certainly be a right as long as it is all right for you!

What I have come to realise is that most of us from our earliest times are taught what is ideal behaviour for the society in which we live, and co-operation and generosity is universal in human societies.

At some point in a person’s development, however, we begin to understand that not everyone behaves in an ideal manner. And we notice that, whether it is when they are driving or while at sporting events, even our own parents do not always behave in a manner consistent with those lofty ideals that they espoused when we were younger, and most likely they still encourage them from us.

We all learn, some earlier than others, that those who “get ahead” often compromise on these ideals. And gradually we become desensitised to those little compromises and deviations from the ideal that we all make.

So let’s imagine one day you join an organisation, and maybe that is an Australian bank, perhaps in the insurance arm which has developed a culture of selling some policies which are essentially worthless as they are almost impossible to claim on, and delaying on legitimate claims by terminally ill patients thereby decreasing the probability that the claimant will live long enough for an automatic policy reset to occur so that the estate can claim under the death benefit. These are all issues that were raised during the Royal Commission with the terribly sad stories attached. 

After a while you realise what is occurring and you have a moral dilemma on whether you will continue on with the employer or leave. Now this is a large organisation, one of the best-known companies and one of the  largest listed on the Australian Stock Exchange, and you enjoy a good remuneration and other benefits which make you feel secure. You decide to stay.

After a while you move into an area that is selling the worthless policies which is an open if infrequently discussed secret. You’ve already made compromises in staying with the employer because you realised that what the business is doing is not consistent with your morals when you joined. You have told yourself that others are doing it – and they seem like good people, so it cannot be that bad what you are doing, right? – and anyhow, what good would you be doing in making a moral stance by leaving, especially when that would decrease the security of your own family? Afterall, the experience has already taught you that there are unfortunates in our society and you really would not want to fall into the have-not category. But you are not an executive anyhow – it’s they who are making the decisions and must take the majority of responsibility for the actions of the organisation.

You notice a creep in how you feel at work, and you have a few drinks most nights with your partner to take the edge off, and are a bit more snappy with the children, but you generally feel (mostly) proud when you explain your career progression in your social circles.

Then you get a tap on the shoulder and are promoted to be a manager in the claims department. The claims department is quite separate from the sales department, so you were not all that familiar with how things worked there, but it became clear in the first few weeks that upper management is forcing on you and your subordinates a go slow on claims by seriously and terminally ill people. You manage people who have to deal with claimants on the phone and it’s a high stress position. But they are well paid, relative to remuneration from other employers, to compensate them for the stress and you all share in a generous bonus pool which is related, either explicitly or implicitly, to how well the flow of claims is slowed.

You realise that sleeping well is a thing of the past and it takes a little more alcohol to take the edge off these days. But you rationalise in the same ways as earlier – and if you did not do the job then somebody else would only be too keen to step up and take it on, and you have those school fees and the mortgage to pay. Honestly, would it really be any different for those claimants regardless of whether you are in that position or somebody else? Your employer is just going to keep on doing the same thing anyhow.

I have no experience of working in a bank or for an insurer, but the actual progression for the human beings who were the employees who carried out the actions which were detailed in the Royal Commission had to be something along those lines. At least it would have been for the ones who possessed some sort of moral compass when they joined the organisation – the completely inauthentic psychopaths, the scoundrels, did not have the empathy and compassion to give a second thought right from the start.

What concerns me most when the Royal Commission is discussed is that there does not seem to be enough accountability directed towards the lower levels. Sure the highest levels should pay a price – a real price – not a golden parachute out. Anybody involved with treating others so despicably really should receive a punitive action which makes them reflect on the poor decisions that they too made.

It is simply not good enough to say it was the company that made them do it – it was many human beings doing bad things to other vulnerable human beings.

Moreover, the authentic whistleblowers should absolutely be venerated and celebrated!

Nobody is Perfect: Some are Closer Than Others

Not everyone is unfortunate enough to enter such a toxic environment and needs to make a moral decision between staying in a job or leaving.

Nonetheless, that we all make compromises and deviations from the ideal behaviour through our lives is not in question. As the saying goes, nobody is perfect.

The question clearly is how many compromises were made and how wide is the deviation from what is the ideal behaviour according to broad societal values and expectations.

The fewer the compromises and the less the deviation from that ideal, the stronger the “moral compass”, and the more authentic the person.

These are the people who should be selected to lead multi-skilled and disciplinary teams, and these are the people that need to be curated through organisations using systems that are not biased by the compromises that already exist within organisations.

Dedicated to my parents Jan and George. You were the inspiration for my first compass without which I would not be the man I became. Thank you.

---

Gained value from these words and ideas? Consider supporting my work at GoFundMe

---

© Copyright Brett Edgerton 2019

I am working on a number of important pieces which will be posted in due course. Please subscribe to be notified of new posts at the bottom of this page. Upcoming posts include:

Major Release: Xenophobia must be addressed for an effective response to climate change inclusive of global population growth (published 2/12/19)

Investment Theme: Product and Food Miles (listed here 18/11/19; published 28/1/20)

Investment Theme: Defence and Military Spending (listed here 18/11/19)

Investment Theme: Autonomous Vehicles (listed here 18/11/19)

Investment Theme: Debt Monetisation (listed here 18/11/19)

Investment Theme: More Time for Personal Fulfillment (listed here 18/11/19)

Investment Theme: Education Revolution (listed here 18/11/19)

Markets: The voting machine may seem to be winning at present, but the weighing machine will surely reassert itself (listed here 18/11/19)

The RBA admits housing is the Australian economy (listed here 18/11/19)

Quotas are necessary to address workplace diversity (listed here 18/11/19; published 28/1/20)

The authenticity piece for leadership is right in my wheelhouse (listed here 18/11/19; published 28/11/19)

Let’s wage war on Climate Change (listed here 18/11/19; published 21/1/20)

My solution to The Human Time Paradox: a work in progress (listed here 18/11/19)

Forget trickle-down economics; our economic system is based on a siphoning up of resources to the elites, as it has always been (listed here 18/11/19; published 30/1/20)

The most under-rated and undiscussed lessons from Buffett and Munger are the most important (listed here 18/11/19)

Compare the two: homes4aussies 2008 forecast for Brisbane house prices V high-end realestate agency Johnston Dixon (listed here 22/11/19)

Where you can buy a home for under $60K costs included (listed here 18/11/19; hint see House Hunters International S149 episode 8 “Time to Chill in Abruzzo”)

Writing my own professional history: how to retire from science by 34 (listed here 22/11/19)

---

---

© Copyright Brett Edgerton 2019

Background

Ten years on from what is known in Australia as the Global Financial Crisis, and the Global “Free Market” Capitalist economies do not resemble their post-World War II construct.

As I write, fully 80% of German Government debt has a negative yield meaning that creditors are willing to pay the German Government for the opportunity to hold it’s debt.

Unsurprisingly, in this world of “free markets” dependent on Central Bank purchases of Government Bonds, and in Japan’s case, explicit purchasing of publicly traded shares, the prices of nearly all attractive, long-term assets are fully valued to say the least.

The mantra of TINA – There is No Alternative (than to step out the risk curve and purchase more risky assets to obtain a return) – is the order of the day.

Nobody can confidently predict how all of this experimental monetary policy manipulations will end and when. What can be said with some confidence is that 10 years after the last major financial crisis, there is not a lot left in the currently understood “locker” for Central Banks to draw upon in another crisis. The US looks likely to reverse some of its interest rate rises, from such low levels already that the usual response in a crisis to decrease interest rates by 4% in interest rates would similarly place their Government debt at a significant negative yield.

Repositioning of Geopolitics is another major complication, which alone previously would not necessarily have been a major concern, but is in the current backdrop of concerns over deflation and low wage inflation, and global debt piles. It is clear that under Trump the US has shown it will no longer acquiesce to Chinese emergence as a super power while flaunting international trading rules and subsidising (and carrying out industrial espionage) in technological innovation in telecommunications, etc. (This realisation early this year was the reason for our decisive action to sell down Chinese stock holdings – and the situation is playing out as I expected with rapid re-engineering of supply chains by large western corporates away from China and to other low-cost suppliers in the region.)

It now appears clear to me that Paul Volcker’s greatest achievement was not slaying the inflation dragon but in creating breathing space from political interference in setting monetary policy. Already under Greenspan that began to reverse, but the GFC has accelerated that movement and it appears to me that Central Banks are quite attuned to what their political masters always find desirable – looser financial conditions and higher asset prices!

Obviously that is not a sustainable situation, but markets can remain irrational for longer than many sceptics can maintain their position/stance.

Investment considerations over the next 30 years is and will continue to be quite unlike the second half of the 20^th century. Except in one important way – the businesses that prove to be exceptional over the long term – resisting rapidly evolving technology and economic conditions – will continue to significantly outperform. However, even Charlie Mungers expresses serious doubt that he would be able to outperform the indices from this current position.

So what to do?

In recent weeks Ray Dalio has received much publicity for writing a paper discussing the above points and stating that he believes that we are near to a paradigm change – ie that global debt levels will weigh and there is likely to be an event which ushers in a new paradigm. His conclusion is to buy gold.

His thoughts and conclusions are similar to mine, except that I would not be so bold as to say that any event is imminent. It’s difficult to know when the herd will decide to recognise that the emperor wears no clothes. However, it is clear that virtually all asset classes are very fully valued and one has to work hard to identify any assets that are reasonably valued, much less undervalued, in which to invest or park money.

Berkshire Hathaway has amassed a cash pile of $120 Billion largely due to a lack of opportunity, and incidentally it’s share price is still only 5% higher than when we sold out of our position almost 2 years ago while the S&P500 is up over 20% (due to a shunning of value style investing).

The point being that I agree with Dalio that gold is a reasonable place to park cash over the short to medium term. The argument that gold produces nothing is essentially gone now that bond investors need to pay sovereigns for the privilege of providing them with capital – so any long term store of wealth that does not have a high holding cost is worthy of consideration.

The AUD has corrected somewhat in recent months (currently buys around 0.68usd and widely considered to remain under pressure) while gold has appreciated. So plan is to allocate around 12% to gold in the first instance, with the first half of it purchased in unhedged form (GOLD ETF) – so that it is both a gold and AUD position – and then over the next few months a second tranche of either GOLD or GAU (the latter hedged in AUD, in the case that the AUD falls from it’s current level).

One of the few other assets of which I am aware that has not experienced a strong run up in price in recent years, and therefore may be a good asset in which to protect wealth over the long run, is pockets of rural property.  So I will continue to investigate whether there is an opportunity to invest in some agricultural land, possibly with a ruin in need of renovation if in Europe.

When we do experience a significant market correction we will take a significant position in Berkshire Hathaway as it appears relatively rare amongst US corporates in that it has invested in plant and machinery for future industrial growth (whereas many others have borrowed to simply buy back shares and boost share prices).

Additionally, as medium-short term positioning want to be “short” AUD, against USD as EU seems to be struggling in face of Global trade issues, and as a short term positioning consider taking some tactical equity risk as reasonable view that stocks will gain until April/May 2020?

---

Gained value from these words and ideas? Consider supporting my work at GoFundMe

---

© Copyright Brett Edgerton 2019

Earlier Comment: from “Early Signs of Negative Wealth Effect” at Rogermontgomery.com on 17 January 2019

It is basic common sense – when through regulation or general policy drift one sector of the economy is favoured over others, partly through co-option of the political and bureaucratic system, a smaller share of the pie must by definition be shared by the “others”. In this case the “others” were content to live with this while the pie was growing, but it was never sustainable to grow the banking/housing sector so out of proportion within the economy so that eventually the pie would shrink back and those proportionally smaller pieces of pie within a shrinking economy had to have serious consequences.

My disappointment is greatest with the RBA. They have treated everyone like we are Nongs (my wife’s favourite derogatory term 🙂 ) and have become confidence sellers – peddlers of hot air and baloney.

For example, until recently they argued that there would be no negative wealth effect on the basis that there was no discernible positive wealth effect as price rose strongly in recent years. Another far more plausible, and I have to say rather obvious, discussion around the topic would highlight that earlier stages of the long process of almost continually rising house prices, and concomitant household leverage, since the late 90s/early 00s was accompanied by strong wealth effects, and that the latest period of strongly rising prices in Sydney and Melbourne was not is suggestive that the positive wealth effects from these very strong rises in prices were counterbalanced by the negative wealth effects from the stock of household debt. In other words the laws of diminishing returns were very much in play and the end of the debt cycle was nigh, and the risks that Mr Stevens discussed in his 2012 paper “The Glass is Half Full” have in fact come to the fore .

From an investment perspective, I firmly believe that we have a deleveraging process that will go on for much longer than anyone would predict. A search for the truly long-term data on real house price movements in Herengracht provides sobering reflection…

I wrote the following to two mates in early May last year [2018]:

“FYI – obviously this ppt [presenting data of shop/restaurant closures in my near vicinity in Brisbane] is just for your eyes… don’t think it’s anything earth shattering, but I am convinced on this now and an effective* recession within 1.5-2 years is now my base case… It would be better if I was wrong, but I thought what I saw last November was a precursor and it continues to play out along those lines… I am sure that there will be policy thrown at the problem – and increasing the committed liquidity facility (to 250 billion) will stop the banks from going under and mean that we should not suffer a current account crisis (our own form of QE) – but there is a lot of vulnerability built into the system now (which the RC is addressing all too late) and the Government just has much less ammunition than it did 10 years ago (the AAA will be stripped, banks then downgraded, more sceptical voters so not sure first home buyer bribes, etc will work)… it’s going to be a long tough period for many over-leveraged Australians in my opinion…

Yes I have been bearish for a while… but the only reason to be bullish has been a belief in “too big to fail” and Government intervention which just leads to more and more moral hazard in markets… that’s hardly a reason to be confident over the medium to long term – well for anyone who is trying to build wealth through investing over their life time as apposed to those concentrating on earning a fat bonus from clipping the ticket of fund flows… there will be a time when Governments can not kick the can down the road for future Governments and taxpayers to deal with… And I rather suspect this is it for us…

I honestly look forward to one day being bullish 🙂

* “effective” because high immigration and increasing volumes of gas exports might prevent the technical definition from occurring – eg most business people here consider 2000/01 was similarly an unrecognised recession – but I think it’s going to get pretty bad so I think the definition will be met”

I continued on the same thread with this:

[For] businesses depending on discretionary spend I suspect a donut structure will be most rewarding – those targeting the zero or lesser leveraged cohorts in the young and the retirees, and the hole being the very highly leveraged in the middle. It will have to be a truly extraordinary business to do well in the middle because, in my thought process, house prices in Sydney and Melbourne relative to wages will fall for a decade or more if nominal price falls are capped at 20%. (Of course greater nominal house price falls will speed up the adjustment but that does not improve the investment case.) Eventually wages growth will do some of the heavy lifting on that but nobody believes that will be any time soon unless we get truly reformist or even radical (eg universal basic income). Based on the performance of our political/bureaucratic/business leaders over the last 2 decades, I can’t see how we can sustainably/enduringly avoid anything other than a long hard grind ahead in the middle… (I know it’s depressing, but I was amused to read [by James Montier, on GMO] that depression has been shown to be an advantage in investing… the author said they aimed to be miserable at work and jubilant at home… unfortunately it can’t be turned off and on 🙂 – but at least it’s not too challenging/confronting to accept depressing conclusions )…

Over the next 10 years or so there may well emerge one or two extraordinary businesses that do target this “middle” demographic… (in fact there is a case to make that tough conditions will produce exceptional businesses – like rugged ground and challenging conditions will produce exception wines – part of the reason why I am not deterred from investing in Chinese companies at present with growing headwinds of slowing growth within a changing economy within a changing global context) [See updated view on The Perils of Investing in Chinese Companies… I would suggest, though, that when analysing candidates, given these headwinds, it would be prudent to “lengthen the yardstick” and thus widen the margin of safety…

---

© Copyright Brett Edgerton 2019

Earlier Comment: from “Early Signs of Negative Wealth Effect” at Rogermontgomery.com on 7 February 2019

[In an earlier comment on this thread] I inferred that I had used the weakness in stocks at the end of 2018 to buy into numerous Chinese stocks, and that I felt that the tough conditions ahead would benefit these companies to sharpen their competitiveness. I had done this, but I have now reversed full throttle and below I explain why.

I have long felt that Chinese companies would be successful going forward – because of the size and growth of their own domestic markets, the way in which China was increasingly interacting with especially the developing world, and because of the Chinese-specific factors that everyone at least partly understands (ie the heavy hand of Government).

As early as 10 years ago when I wrote a piece on the Australian property bubble, which Steve Keen posted on his website, I have been of the belief that there is no reason why that final point would ensure that it is all smooth sailing for the Chinese economy and their companies and markets. I had this in mind when I invested and accepted that.

In recent years I have taken particular note of people who I admire greatly as investors and economic thinkers (eg Roger M, Charlie Munger, Grantham and others) in forming an opinion that I wanted to have a high weighting to Chinese companies for future growth potential. And last year’s falls created an opportunity to buy in at lower prices.

However, I have to admit that there was an extra unease inside of me as I loaded up especially on Chinese tech and automobile (around EV and autonomous), tech infrastructure, industrials (plumbing goods), and education companies.

I was fortunate to spend a month in China around 20 years ago, while I worked for the Australian federal Government, for an APEC training workshop. It was an interesting insight into the country that has emerged as our most important trading partner.

At 30 I was one of the youngest workshop participants – some attendees were in their 50s – and the first night that we stayed out later than the “recommended” time for lights out it became clear that it was not a recommendation but an enforced curfew! The second time that we were late, around a week after the first time, we were walking back to our accommodation about 30 mins after “curfew” and it become clear that the short stocky man who was taking photos throughout the workshop, and was that night a pillion on the motor cycle of the junior staff member, was laying down the law to that staff member and was very, very cross with our “insolent” behaviour. (Imagine professional men ranging from 30 to 60 years of age constantly checking watches to ensure that we were not late for curfew!)

After that incident, the next day the “photographer” entered the room and from 3 rows of desks in front of me took photographs with me in the centre of the frame. I covered my face acting as if in deep contemplation. The next day he came into the room again to take photographs, but this time squatted down immediately in front of my desk and made it clear that he would take a photograph of me if he so chose.

The small family restaurant that we were frequenting to have one or two beers between supper and “curfew” received two visits from black limousines while we were there. Men in dark suits entered and spoke with the owners after shutters were pulled across to cordon off half of their restaurant.

Also, when I worked in Thailand for a multi-national organisation under the auspices of the FAO I had an interesting and memorable conversation with a Chinese national colleague, who had quickly become a good friend, about Taiwan/Taipei.

With these experiences, I have watched concerningly whenever the level of interference by China into our political system has become apparent.

I also noted the changes that Xi made last year to prolong his stay at the helm, and I was particularly interested and concerned by Soros’ recent speech at Davos.

The truth is that while I am no fan of Donald Trump as an individual, I do think that pushing back on China is long overdue, and I respect his administration for it. I think that I would feel far more comfortable with the world if the US continues what it has begun. I suspect it will happen because Trump’s administration has crashed through the “group think” that had prevailed on China. I certainly hope that China’s main advantage – short-termism for political expediency by western democracies – does not return to the US or allies over this issue.

With that in mind, I not only think that we have begun a historic reframing of China’s engagement with our western allies, I very much want it to happen. As such I feel I cannot on the other hand seek to profit from China continuing to rise.

Attempting to do so will throw up all sorts of conflicts and already did. For example, while researching one of the EV companies that I was invested in I learned that it also produced military vehicles!

Now I realise that there are many western companies that at least partly depend on military sales.

But I do think that increasingly, as this relationship is reframed, we are going to have to navigate the shifting ground carefully as individual investors and at a national level (certainly that many interested observers, like myself, now understand from newspaper articles what the “five eyes” means is indication of that). For me I would rather be early than risk being caught in a rush for the exits when the crowd realises how the environment has become much more complicated and volatile.

I should also admit that my concerns were probably showing through in a question I posed on one of Roger’s posts at the end of last year when I inquired whether the Montgomery team was taking the opportunity to increase exposure to Tencent at cheaper prices or was concerned by a reframing of the wests relationship with China – and I have noted since in investment updates that exposure to Tencent has not been increased.

Fortunately, coming to this realisation did not result in a financial penalty for my family – it actually yielded a fairly nice short-term return – but I do wonder whether this is a widely underestimated issue that will ultimately affect returns over the medium to long term. I guess I hope it does because that will mean that what I consider to be a dangerous drift in geopolitics will have been contained or slowed.

I accept that these actions could be seen as an over-reaction – however, as a personal investor, not a professional with career risk at play, I am “allowed” to turn full circle on a dime, and it has usually worked out OK for me when I have done so. (If I wish to put a positive spin on it I would say that I tend to act decisively once I’ve decided, and am not afraid to admit if my opinion has changed, but hindsight is usually the best “judge” of that.) But I have to admit that while I was feeling good about buying into reasonably valued companies in the areas in which I have greatest conviction – as opposed to buying into mostly overvalued ones in developed markets – I do feel a whole lot better about my positioning now (which has resulted in me increasing cash weightings again to about 50%! – between September and December I had gone from less than 20% in equities to a high of close to 70%)

Comment on 14 February 2019 at One Important Aspect of Active Portfolio Management:

As I said [earlier], in this recent period I went from less than 20% in equities to around 70%… but I have already taken profits on my (considerable) China and wider EM positions as I want to see how the current reframing of the West’s relationship with China progresses, and because I want to be a lot more thoughtful as to my views on the ethics/risks of investing with companies arising from non-democratic authoritarian systems. My own personal experiences have never sat comfortably in this regard.

---

© Copyright Brett Edgerton 2019

Comment on RogerMontgomery.com on 3 November 2017 at Money News 31.10.2017:

I was at a small suburban shopping centre 8 kms south of Brisbane CBD that has 5 or so restaurants, and 2 fish and chips takeaways as well as several chain takeaways, at 7.15 last Thursday picking up some takeout… Two cars in the 30-odd capacity car park in front of that particular restaurant (and a normally busy fish and chips + another restaurant)!! Yes, there was a storm around but nothing out of the ordinary for Brissie this time of year – I typically hate parking at this centre because it’s pokey and difficult to find a spot – at least it used to be!

Been going to the restaurant for 15 years so know the owner well. He was complaining bitterly about business – said last year was bad, so when this year started better it was a relief, but it has dropped off badly through the year. (Seriously, it almost felt like tumble weeds would blow through.) Restauranteur said that his supplier has said that his business is down across the board except for the outer areas, and put it squarely at the foot of over-leveraged middle to upper income households.

Saw McKibbin talk the other night and he made the point that if the RBA was concerned about leverage/housing bubble then they should not delay rate increases to address this and as a sort of stress test. It’s what I have been thinking that they have actually been doing already with pushing through repricing of interest only borrowing.

I am the first to admit that one observation does not at all suggest a trend. But the restauranteur did supply information suggestive of a worsening trend. And, even if this particular night were an aberration, it was truly alarming compared with what I have witness at this centre over the years. I’ve seen nothing even remotely like this previously.

I was shocked because 1) data suggests that employment is improving in the Brisbane area with the (perhaps temporary) revival in resource industry prospects, and 2) even though the oversupply of apartments would create weakness in that segment of the market and that would cause some spill-over effects to the general property market, I thought the fact that Brisbane prices have not run anywhere near as hard as Sydney and Melbourne in the last decade would protect it somewhat from a sharp down turn.

These observations are leading to me to reconsider that view and I was wondering whether you have had any feedback on the general economy of this region?

As much as you hear anecdotes of politicians visiting cities and noticing too many cranes, suggestive of an economy running too hot, for me this portends the next phase is here…

(with respect to John Fraser’s comments late Friday, absolutely politicians have let Australians down in their disinterest in economic and social reform – but senior bureaucrats have sat by and done little to discourage massive household leverage and the blowing of a serious housing bubble)

Related comment RogerMontgomery.com on 8 April 2018 at ABC Nightlife:

I just want to pick up on the discussion about retail. What [is said in the article] about the global access to specialist retailers is spot on. What’s more, and actually I am surprised that this has not really featured in discussion I have heard on the topic, I think the impacts on general retail are much deeper than many appreciate.

I noticed several years ago the emergence of items on Ebay that seemed so incredibly cheap, even after postage costs, that it was trivial to “have a go” and purchase accepting that it probably was too good to be true. (In other words, the monetary loss was so trivial it was worth the risk that the item never arrived at all or was completely unusable.) Low and behold, the many products that I have bought in this time have turned up and nearly all have been at least as good as I would have purchased through mall or other brick and mortar retailers.

For our household this has ramped up in the last 6 months with the “discovery” of Wish (which incidentally is a major sponsor of the LA Lakers). For example, my wife is “known” at her workplace for her shoe collection. In fact, a few weeks back a sharp-dressing and well-informed male colleague held the lift door open to admire her shoes, enquiring “are those Christian Louboutin?” (Here in lies perhaps one weakness of this model – my wife is so discrete about her “thriftiness” that she dare not admit to anyone other than her closest friends about her new-found favourite shopping experience 🙂 ) All of her shoes she has purchased for less than $20 inclusive of postage – and she has even been fully reimbursed for very minor defects (which in no way lessen their appearance or wearability/longevity) on a couple of them. She has also purchased clothing, jewellery and lingerie for what can only be described as ludicrously cheap prices, sometimes free with postage costs of a few dollars! (which translates to incredible value seeing as they have all arrived and have not disappointed in terms of quality).

I suspect that the impacts of this fast-moving development is the reason why after years of whinging Gerry Harvey (“I don’t think this internet thingy is going to be much at all but I guess we have to do something”) looks like he is going to get his tax on all imported goods!

But the truth is that, while a $5 tax will double the price on some of these goods, when retailers have to pay mall owners tens of thousands of dollars each month in rent to have the space to retail what can be purchased directly from China for as little as 10-20% of the price, I doubt it will have a noticeable or enduring impact. (But it will annoy the general populace – and one has to wonder just how much flack is Mr Turnbull prepared to take on taxes for the business community… then again I strongly suspect many large businesses are “over-employing” as a down-payment on those tax cuts, eg. my local Bunnings!)

And these developments, I believe, is why Mr Lowey is pretty keen to get his sale off as soon as possible. Certainly the strains of this retail competition in combination with an over-leveraged “consumer” (afterall we aren’t people any more) are obvious to anybody walking around my local Westfield which is one of the largest in Brisbane! Yet another shop closure this past week, making around 15 closed with 13 or so closed since end of January. (It’s been rather humorous to watch their creativity at disguising just how many spaces are now vacant.) But on a serious note, it surely has not escaped the attention of most people employed in the centre and unfortunately I have seen nothing to dissuade me of my prediction of 4 months ago (on this site) that my region is heading toward recession, if not already in recession, as a consequence of over-indebtedness (due mostly to real estate speculation). What’s more I think it likely a forerunner of what will be seen throughout the country as particularly Sydney and Melbourne begin to digest the consequences of the extreme run-up in property prices over recent years from already lofty levels.

With an annotation on 10 April 2018:

Make that two more closures this past week – just noticed another store with boarding, this time covered in advertising for the neighbouring store, but enquiries within revealed that store is not expanding into the vacant space (so an attempt to reduce the proliferation of the black boarding reading “another exciting retailer opening here soon”) … retailers remaining in the centre – many with signs indicating major discounting – must be negotiating very hard indeed for rent reductions …

Comment on 26 September 2018 at Doing it Tough in Aussie Retail:

That [a recession is where we are] heading is now my base case…

And it is living in Brisbane – intuitively not the first city that one would imagine to show these stresses as house prices have risen much more modestly here over the last 6 years – but perhaps on deeper reflection that may actually be the reason – that has provided me with this insight…

I wrote about some observations from around Brisbane last November in the comments section of a post [and] it would be helpful if I updated you guys on my observations… At that time I noted an eerily empty car park in a suburban shopping centre with a number of restaurants on a Thursday evening, followed with the details of a chat with that restaurateur who described how poor business had gotten over the 2 years leading to that nadir (especially in the inner and middle rings of Brisbane), vacancies in that same centre, and then the closing of a large café in the very large Westfield centre that I frequent just at the beginning of the pre-Christmas period… Then I said in as much as Paul Keating famously worried for what was coming after seeing (too) many cranes in Australian cities, I feared what this portended…

Well since then I have seen nothing that assuages my concerns… More spaces in the smaller centre have become vacant and none have been leased… The high proportion of vacancies in small centres and shopping strips has been recognised and discussed in various newspaper articles in Brisbane… As has been the closing of large numbers of restaurants… From speaking with several restaurateurs a common story has been takings down by around 30% from 5 or so years ago, while costs have continued to increase (often by over 10% in the last year as rents continue to increase)… Under these conditions many have not increased menu prices for 5 years… Of course restaurants are under similar disruptive pressures to retailers…

The most marked changes that I have observed, however, are in the large Westfield Centre (one of the 3 largest in Brisbane)… Over a 1-2 week period at the end of January/start of February around 10 shops closed suddenly… I spoke with employees at a Jewellery store pasted in sales signs and they spoke of being frightened at how quickly it was happening and how they did not know what was happening to their own store… That store closed a few weeks later…

Since the café closed last November, I have counted a total of another 29 businesses that have closed in this centre (that does not include store relocations, nor does it included small temporary stores or kiosks in the aisles of the shopping centre which are much harder to keep track of but are clearly much fewer in number than several years ago)…

Most vacant spaces remained boarded up for months and some spaces – including that original café that closed – have remained vacant 6 months or more… And some businesses that opened in a space have then closed after trading for only a few months…

In total I have counted 11 stores that have opened in vacant spaces, but that count stood at only 4 until mid-June, suggesting that the impending end of financial year may have caused a flurry of activity to acquire new tenants…

Clearly many spaces have been boarded up or left abandoned at any one time over the last 6 months, and this has not gone unnoticed by shoppers and especially those working in the centre…

In the mean time, the centre has increased its parking fees to customers by around 50%, which has not been mentioned in the local press, but one has to wonder whether that is going to further deter “consumers” from coming and “experiencing” the centre…

Also cost-cutting measures being undertaken may not be conducive to enhancing that experience – for example it is clear that the centre has became less well-lit in recent months…

This centre is a little unique in that it is 50% owned by a REIT in which it is the only asset, so I was keen to look at its financial year results… The only suggestion of deterioration in the results was a decrease in property income of 1.6%, but apparently the leased rate increased from 99% to 99.4%, and I could find no mention of the increase to parking fees… What I did also notice was that David Jones will only be re-leasing one of the two floors it currently leases from 2019, and the report suggested that this will have an impact on reporting for two years… so it will be difficult to ascertain the quality of earnings on the asset for a further 24 months…

The final observation that I will make is that a number of the business closures have been in the food court and none of these have been re-tenanted… where there were kiosks they were removed, so what was once rather tight seating is now very spacious… I would suggest that the apparent lack of uptake of shop vacancies in the food court is a reflection of a lack of confidence, even with reduced competition, and that would be partly related to the lower level of confidence among workers at businesses in the centre who are fearful of losing their own jobs and are cutting back on expenses by bringing their own lunches, etc….

Of course those aiming to downplay the pressure on households – from overleverage, improved bank lending standards (back towards prudent, sustainable practices), low wages growth and rising interest rates – apparently wishing not to dent”confidence” among “consumers” – have some factors available to muddy the waters as these industries are currently under disruption… But I think it is clear that what is occurring goes well beyond that…

It remains unclear whether this period will ultimately be recorded as a recession… I am aware that most business people in Brisbane consider that they went through a recession in the early 2000s – interesting since it was ended by the arrival of the housing bubble – that was not recorded as such… However, even though the level of immigration and the Volume of resources exports may reduce the likelihood of an official recession being recorded, I can’t help but think that, once these stresses to households flow through to other cities as their house prices don’t just rise slowly (as in the Brisbane experience) but fall, these mitigants will be overwhelmed and we will indeed record an official recession.

And, just as the lived experience of the majority of Australians is not as good as the GDP statistics alone would suggest, GDP will not accurately reflect the depth of the recession experienced by Australians.

The real shame if it is that it is now unavoidable – our economy was pushed to extremes in certain areas that have made it unsustainable – and nobody in a position of power has had the courage to do anything about it (remember Joe suddenly realising negative gearing wasn’t a good idea – when he had quit as Treasurer and was leaving parliament?)… The GFC provided the greatest ever “cover” in history to deflate a bubble, and that’s what was happening, until the RBA began listening to those that said “we need a little more confidence in our economy”… even when they, themselves, were warning of the risks of providing that confidence through unsustainable leverage… Now the RBA seems to be in search of another “crisis” on which to pin another bout of arse-covering – like a trade war – but I suspect it is all too late and the system has become entirely unstable…

In all honesty, there have been times when over the last year I have walked around feeling like the guy in “Margin Call” when he’s driving around and looking at all of the unsuspecting people hurrying about their lives…

Having gone so long without tough economic times, this will be hard-felt by many… Already a loving father of one of the restaurateurs that I spoke of above is very concerned about the mental health of his son, suffering depression… he hopes his son manages to sell his restaurant (in one of the most affluent suburbs of Brisbane)…

I can understand those in positions of power wanting to avoid recession – but doing so is always the best outcome, also, for those in power – and it really can’t be said to be for the betterment of our country if the tough microeconomic reforms required are not undertaken in the breathing space given by anti-recession spending… This was the case in our post-GFC period due a lack of genuine political-economic leadership and I fear Australians will now pay a heavy price…

---

© Copyright Brett Edgerton 2019

Comment on 13 April 2018 on RogerMontgomery.com at ABC Nightlife:

The following is perhaps more a “weekend read”, but I think this really needs to begin to be dealt with…

The more important issue around retailing in Australia, in my opinion, is the impact of the throw-away society on the environment, especially in relation to medium to large-sized (household) goods.

Here’s a question: When you last shopped for a household white good, what was the expected life of the product according to the salesman? And did the short time period shock you?

There is no way in the world that the price of goods sold represent their true cost, including importantly impacts on the environment in their production, use and/or disposal. Star ratings may be an attempt at addressing the middle point, but I don’t believe the other – probably more important issues – have really begun to be addressed.

This is something that I have been reflecting on following a couple of recent events.

Recently I took advantage of an in-home installation offer while purchasing a built in closet from a major global retailer. Near the end of the installation the installer told me there was a minor defect – a small scratch on the door – and that I would be within my rights to reject the product and have a new one delivered. And, as we all know, because these goods are flat-packed and sent from overseas, this would mean taking away the whole closet and bringing back an entire new one. Being fairly pragmatic (after all it was for my sons and they could easily do at least that much damage to it that very afternoon), but more importantly not wishing to add to waste, I declined to do that.

As he completed the job he proceeded to tell me just how many items arrive with defects that are rejected – one example was someone rejecting 3 sofas (including one that was completely busted) before getting “a good one” !

At the price that these goods are sold, and while I accept that some of these “defective” goods end up in scratch and dent sales or are sold/given to friends, at least I sincerely hope so, I think it highly unlikely that the goods are shipped back to be either repaired or at least repackaged and re-exported. One can only assume that much of these new goods end up being dumped.

“When I was a young lad”, if you could not afford a leather lounge you bought a vinyl one. Sure they did not breath – and being a poor student in Townsville I certainly understood what that meant! But at least they lasted for years!

Now it seems that “PU leather” is the cheaper alternative to leather. When we bought our last lounge (from a different retailer than mentioned above), not wishing to pay for our “forever lounge suite” having young children (still with a penchant for Niko pen art), we opted for “PU leather” over the real stuff.

Almost to the day on 2 years, once the “warranty” had expired, we noticed fine cracking all over. And within months this thing flaked down to the underlying fabric mesh over most of it. (We also bought an office chair and an ottoman in “PU leather” around the same time which have done exactly the same thing). It’s gross – the flakes stick to your skin and clothes, and build up like confetti around the offending and offensive piece.

I sent an email to the retailer of the lounge with photographs and asked them to contact me to discuss what could be done. They did so fairly promptly and it was quickly determined that we were outside of their warranty period. I replied that I was aware that ACCC regulations make it clear that warranty periods are largely irrelevant, and after further discussion they offered a 50% store credit. I replied that wasn’t good enough and that I would send them the link to my Youtube video clip of our experience, once I uploaded it, to give them first right of reply. At that point the representative said they would have the manager call me. The representative called back shortly afterwards offering a full store credit which I accepted (even though I would have preferred a refund to purchase elsewhere).

The point of all of this is that the business models of these manufacturers and retailers MUST allow for all of this transit damage and product failure in their pricing. (As well as the annoyance to the customers at the poor quality of the product being sold and the inconvenience.)

And we all know the number of goods that fail on us often due to rather small issues well before the product life of most of the other components have expired. These goods are often unrepairable because parts are unavailable or, in rare cases when they are available, the costs of repair are uneconomic compared to buying an entirely new good. Over recent years people have tended to replace rather than working at, and perhaps accepting a little inconvenience, extracting as much life from them as possible. (As a parent I would proffer as an example backyard trampolines where I have seen on many instances plastic components of the safety net breaking well before the utility of the trampoline has expired, but, unable to buy replacement parts, unwilling to persevere and develop work arounds, and with replacement cost of a cheap trampoline only a couple of hundred dollars, they are thrown out within just 2 or 3 years.)

While handy-minded people sifting through curb-side offerings and recycling programs might reduce this waste somewhat, much of these materials end up in land fill prematurely (or the metals recycled) often when 90% of the parts in the goods have significant useful life left in them (and are worth more than their elemental value which requires more energy to process).

Part of this is undoubtedly due to China encouraging over capacity in all forms of production (to meet their own internal growth targets). But I have little sympathy for retailers for not being able to compete with Chinese businesses selling directly because they have embraced these cheap suppliers for years. All that has changed is that first wholesalers were cut out by businesses going direct (via trade shows and then Alibaba and the like), and now the local retailers are being cut out.

What I believe firmly has to be the future, and this is where I do have something a little constructive to say about Trump, and it would be the saviour of local retailers with the right mindset, is that prices of goods do need to start to reflect their genuine costs to human beings as a whole. Perhaps that can be done by tariffs, but I think it would be preferable if it were explicitly called an anti-waste or environmental tax. (I realise that this is certainly not Trump’s aim – but it is interesting his first target for tariffs were white goods and solar panels – and if a reduction in the sale in the US of low-quality, short-lived products were an unintended consequence of his actions then that would be something!)

There needs to be pricing signals embedded in the costs of all goods that reflect the genuine full cost of goods. I simply can’t see how goods manufactured overseas from resources gathered in various geographies, and shipped to Australia (all along burning fossil fuels) can retail at these prices at a profit (with all of the local costs) after allowing for a replacement rate of say 50%.

If the genuine full cost of goods became embedded in the pricing then I strongly believe the concept of food miles would quickly expand to all goods (once again) and be a major competitive factor.

If I were the entrepreneurial type I would be going flat tack on this right now, opening for example small furniture shops where the furniture is made very locally and customers know that whenever the piece should break – be it accidentally during setup or in 10 years – it can be repaired promptly and at reasonable cost. Sadly this type of service tends to be marketed as a premium-type of service and thus is expensive. But the premium level can be built in based on the desirability of the materials used (eg. type of timber and fabrics), not the longevity of its components and construction, to allow for different pricing points.

Further complicating customers assessment of quality is an understanding that the marketing budget spent on the product or branding (of producer or retailer) is often more correlated to the retail price rather than its actual quality.

Moreover, it has long been postulated that even some high quality goods are intentionally and programmatically made to function less well or even become defunct after a specified period. This is often referred to as “planned obsolescence” and may be used to drive more frequent turnover of a product and therefore increase sales. Evidence of such behaviour should be treated very dimly indeed by national and perhaps international authorities.

I do not pretend to have all of the answers – of course I am abundantly aware that I have few of the answers. But the problem is plain for all to see.

Moreover I wish to be clear that I am in no way suggesting that all imported products are poor in quality, and all locally produced products (currently or in the future) are necessarily of higher quality. The progress towards producing higher quality products, with greater reliability and better technology, as national economies develop and manufacturing capabilities improve is well understood.

Essentially there needs to be disincentives for retailers to sell, or for customers to purchase, products which are likely to have short working lives compared to the resources that went into making them or to the true full cost of their disposal.

In many instances this may well lead to a renaissance in local manufacturing and this would mean that the customer is dealing once again with retailers who will genuinely stand behind their product because it actually is their product! (As used to be the case before transport allowed increasingly wider distributions of goods.) And regardless of your budget you can access this level of service because pricing signals have been altered such that retailers of lesser quality goods do not have a price advantage and the competition would require them to also stand behind their products irrespective of their origin.

Undoubtedly this would lead to increased inflation during a prolonged adjustment phase. But I just can’t see how the world can afford this level of waste and its consequent damage to the environment. (I always think of the movie “Wall-E” when I reflect on this, with piles of rubbish taller than sky-scrapers.)

If this type of restructuring were undertaken genuinely and comprehensively, then absolutely I would support taxing of (some, or even all) goods purchased directly from overseas suppliers by end customers if it were necessary to prevent circumvention of these anti-waste measures.

I think most Australians have to know in their heart of hearts that we have been underpaying for a whole range of goods. We all manage to avoid confronting this reality, except on the rare occasion when we are reminded by, for example, a building collapse in a developing country where, it emerges, was housed a business (often employing very young people) exporting cheap goods to Australian companies or companies retailing to Australians. Even those of us that feel guilty about it are relatively powerless to do anything about it or even to become better informed.

Clearly international and/or supra-national authority involvement is what is needed to genuinely address these issues.

Moreover, while I have a lot of time for the benefits of unions – and I consider it a sad state of affairs that our Reserve Bank Governor has become the loudest voice arguing for salary increases due to increasing impotence of labor unions – I do have concerns about them talking about disparities in safety standards between our wealthy nation and developing countries. Given their membership is Australian workers, I do not think they are calling for improved working conditions for the benefit of people in the developing countries. And it would be unrealistic for people to work in pristinely safe factories and walk out the gate dodging potholes and innumerable hazards to return to their shanties. (I think most people will be familiar with the footage of children scrambling over moving piles of rubbish and dodging bulldozers in a race to get hold of resources that may be of some value and benefit to improving the lot of themselves and/or their family.)

If we want the world to become a fairer and more equal place then we need people in poor countries to have a chance to benefit from accessing wealth from rich countries by as many mechanisms as possibly. Moreover, again the link between population growth and economic development of a regions is very well understood.

This is my major concern about the policy adjustments I propose above. However, I find it difficult to believe that it would be impossible to make these adjustments within the broader context of genuinely working towards a better world for all human beings.

When it comes down to it, I am a globalist and I am always sceptical about campaigns to protect local environments and peoples (above others). Two precepts explain my views best, the “butterfly effect” (if a butterfly flaps it’s wings in the Amazon …. ) and the following quote from Franklin D Roosevelt’s Fourth Inaugural Address on 20 January 1945:
“We have learned that we cannot live alone, at peace; that our own well-being is dependent on the well-being of nations far away. We have learned that we must live as men, and not as ostriches nor as dogs in the manger. We have learned to be citizens of the world, members of the human community”

(Why I similarly have deep scepticism towards those who wish to argue for enforcing a population limit for Australia.)

But there is no doubt that we need to urgently work towards making human progress on this globe sustainable, and when done in the context of caring equally for all human beings irrespective of where we live or were born, then that will really be something of which we all can be proud.

In fact, I believe a “Roosevelt clause” should be inserted into the oath of all those in Public Office from and for all nations that acknowledges that to do their best for their constituents they must always, and above all else, act as “citizens of the world; members of the human community”.

---

© Copyright Brett Edgerton 2019

Comments made on 2 August 2017 at “How Driverless Cars Will Change Our Lives“

I recall Buffett saying during a Squawkbox session around the time of last year’s annual meeting that for the first time in the 30 odd years that he had been privy to detailed insurance data that the incidence of single driver accidents had increased… without any actual data to back up his hypothesis, he suggested the cause may be the proliferation of the smart phone… at the time I agreed to myself and thought “yes, you can’t go for a 10 min drive in your car without seeing at least one person at lights distracted by their phone”…

More recently I have been reflecting that it seems at lights almost half of all drivers are distracted by devices, as well as (more worrying) while driving in traffic and on occasions the drivers I have witnessed have been in heavy vehicles (trucks)…

I personally think that once the technology is proven to be safe, autonomous vehicle acceptance in major metropolitan areas will rapid and profound – and may well be driven in part by regulation and enforcement, as well as preference…

As someone who is not particularly status driven – I recently replaced my 15 year old camry with a 10 year old station wagon (because I appreciate the depreciation rate to reliability ratio of these cars) – when I thought about an alternative being a safe, highly efficient (appears at your door within 5 minutes of ordering through your app), and clean vehicular pod (no steering wheel) I suddenly had no desire to waste space in my home to park a vehicle or the logistical hassles of maintaining one…

I honestly think that the biggest obstacle to overcome my envisioned future is the status symbol value of one’s own vehicle…

But I do wonder whether younger Australians will quickly get over that – afterall, they certainly won’t have the big home in which to park a flashy vehicle because, well, they can’t afford one, can they? Certainly not both!

Comment made 19 July 2019 at “The Autonomous Age is Still Some Way Off“

I do believe that the “need” for this is growing sharply indeed. Two years ago in a conversation around this topic I would say that it is becoming necessary because people are becoming less able to keep their hands off of their devices, and that in one round trip pre or post school drop off/pick up I would see at least one driver totally distracted on their phone. Then a year ago I changed that to at almost every traffic light I would notice at least 1. Now I have to say that at every light I see many! It’s essentially an epidemic…

I do agree also on your point that many of these safety concerns will be met by lower order automation and other regulatory responses such as road cameras to detect device usage. But I think this will go much further – I think that fatigue detection software will be adapted fully to detect distraction, and may well become compulsory in cars in the years ahead (I did some research on potential investments in this space but most were either a part of larger companies – eg Caterpillar – or were not planning public listing any time soon).

I had a brief chat with a delivery driver a month back who had some rather frightening stories – in one case he saw a crash at lights where the young woman on P plates didn’t even break as she went through a red light and straight into a collision! It didn’t surprise me given the level of distraction I have been observing personally… And I mentioned the school periods because I want to make the point that it is not just young drivers – I think that middle-aged drivers up to their 60s are some of the most distracted! Perhaps Facebook will need to link in with maps to detect fast motion and automatically close down (like many car Bluetooth systems will not allow fiddling when moving)…

So I believe that over the next decade stronger and stronger regulation will be needed to stop distraction. It’s a far, far bigger issue than drink driving ever was. And ultimately people will be required to decide – get off your device or drive… A lot people will not want to be detached from their devices, but also will not want to make use of mass public transport… so the demand for autonomous is enormous, I believe… (and this trade-off will help people get over the “control” issues that they might have with “letting go of the wheel”).. it’s not just cheap money that’s “driving” the investment in this area… So money will continue to be thrown at even if there is a “paradigm” shift in the availability of financing, and I think this will happen at a speed that will surprise many skeptics… Mind you, like most major technological advancements, being able to make money by investing in the theme, well that’s something else altogether… I do like the anti-distraction device theme over the next decade

---

© Copyright Brett Edgerton 2019

Comment on 9 February 2018 at Why Helicopter Parenting Can Set Kids Up For a Crash:

Thanks for sharing that very thought-provoking article, Roger.

“He believes many of us get deluded by a phenomenon known as survivorship bias, where we only see the winners … and do not properly observe the losers.”

That is precisely the point I made to my son’s teachers when I accompanied their class to the Queensland primary school leadership forum two years ago. (Now being a stay at home dad, I am fortunate to have these wonderful opportunities to help out teachers, the children and my sons.)

An amazing assemblage of “winners” was put together to inspire the children – including the young scientist that was in the running to go to Mars – and they were all keen to share the secrets of their “success”, many even having the humility to admit that fortune was indeed a factor. But it was clear that none truly understood just how big a factor it was (perhaps it is only natural to focus on what we actually contributed to our “success”).

I suggested to the teachers that we only heard from the “winners”, and while their messages were very worthwhile, the children would also do well from hearing from some of the many equally talented and equally resilient people that for any number of reasons did not quite “make it”. The teachers gave polite affirmation to the comment, but it’s probably something that one can not fully appreciate unless you can truly understand it from personal experience or from observing it at close hand.

Here I am going to share something deeply personal, where these reflections formed the basis of the first point I made in a letter that I wrote a year ago to be held for my sons in the event of my early passing (I recall reading, not long after I wrote this, a letter by a female corporate high-flyer in the US to her children which received enormous publicity at the time – as I read it I could not help but smile at the extreme contrast in our parenting – but it is this variability that makes the world an interesting place!):

“Enjoy the ride”
Now I realise that you have sat down to read this important letter – probably with a range of emotions – and after just one page I am going to ask you to do something which requires you to stop reading for a bit. I want you to watch one of my favourite movies – “Along Came Polly” – at first writing you have both watched the very start of it where Claude was naked on the beach trying to find customers to come scuba diving with him. So go and watch the whole movie (again?) and take in especially what Mr. Pfeffer says to Sandy. Then continue reading.

Hope you enjoyed the movie and be sure to use the word “shart” in your everyday life as often as possible 🙂 … Also frequently quote “as long as you are for scuba Lubaan I am a pea” (I love that one)… Now back to the serious stuff…

As we are growing up we are bombarded with all of these positive messages that we can do anything! “You can achieve any dream!” Popular culture – through TV, etc, and the education system – is strongly based on this. It’s part of the incentive system for capitalist societies (along with one of my pet hates that greed, if not completely good, is natural). Most often the inspiring people that you see and listen to, like at leadership days and so on, are from the small proportion who actually get to where they set out a long time ago.

While the “you can achieve any dream!” message is worthwhile, nobody tells you that lots and lots of people don’t end up achieving the dreams that they set out to achieve – I would be certain it is lots more than do. However, if they have the right mindset they usually realise that the goals that they do actually achieve are much better for them anyhow!

The inspirational speakers usually glance over luck and circumstance, and instead focus on their resilience and goal-setting, both important characteristics to develop.

The danger in taking the “you can achieve any dream!” message literally is that you can trap yourself into trying to achieve something which only had real relevance and meaning for a short time in your life, when in fact you have changed and you might just be better off considering other new dreams.

Take me for instance – I would, and could, never have imagined even when I was 30 where I would be at 40! I left Australia just after I turned 31 with my beautiful wife on an adventure that was going to be exciting and, through working in the top labs in the world in my field, together with my hard work up to that point, I was going to cement my place as the world’s expert in freshwater crayfish disease. Many already considered me to be Australia’s leading scientist in the field – in fact I was introduced as such before my talk at the World Aquaculture Society meeting in Sydney in 2000. And even though I had mixed (at best) relationships with Australian colleagues – in a dog-eat-dog world nobody wants young, enthusiastic competition! – I was going to develop such a strong position that not even my strongest detractors could deny me a future in Australia when I was ready to return.

A lot of people who are focused on a goal forget about enjoying what happens along the way, and the truth is for all of us this is where real life is lived. As Mr Pfeffer says, “it’s not worth it if you don’t enjoy the ride”. For some that is a hard thing to achieve, but I am convinced that learning to “enjoy the ride” is the most important skill in life. And being open-minded on where that ride takes you will get you a long way towards enjoying that ride.

I can’t take credit for choosing the right path for me when I retired from science at 34 years of age. At the time it felt like I had little choice, and the extreme stress of what had occurred over the 3.5 years since we had left Australia to go to France – together with what had occurred before that – had robbed me of most of my perspective on life.

I was just extremely lucky that the path that I ended up on turned out to be the right one for me. I have told you both several times, but you need to know that I would not change a thing – and if I knew how much I would love being a stay-at-home dad to you both then I would never have struggled so much with my ending my scientific career. You both, together with your mother, are the best things that ever happened to me and I will be forever proud that I had the opportunity and privilege to take such a strong role in helping you to become the wonderful people you are.

The ride was so much better – and infinitely more fulfilling – than my dreams of what it would be like to achieve my earlier goal!
END

Again, not long after writing this to my boys I was interested to watch a 4 Corners episode on how hard it was for sports stars to deal with the ending of their careers, especially when it was an abrupt end through injury. Many spoke of their struggles with depression and anxiety.

I reflected on how ironic it is that it is that we only hear about these challenges because they were “winners” – that people might actually be interested in Lauren Jackson, for example, as she is known to many Australians because she was once a sports star.

I related very much to the challenges those sports people faced, as I think very many others would, and so I am pleased that the story aired. It’s just unfortunate that there is not a lot of awareness that very many every-day people have had to face similar challenges – you don’t need to have been a household name to have suffered the loss of what you perceived to be almost your very purpose for being, even one that you believed whole-heartedly was making a difference for society and mankind in general regardless of whether it was widely recognised or not.

When I returned from overseas without a job, but hoping to continue my research by attracting funding, I was manically driven to turn something up for myself. On one occasion I recall driving the car with my wife and realising just how much I was taxing my brain – I was driving while talking to my wife, and all along my mind was spinning with ideas for research proposals. I spent 18 months unemployed in Australia – but working every day writing research papers and grant applications, reviewing journal papers and research grants, and generally trying to prove myself useful to the university that was providing a desk for me – before reality caught up. In my case it was the joyous news that I was going to be a father – that my partner of 14 years, with whom I had dreamed for a decade of starting a family as soon as possible once we had some financial security and stability, was pregnant.

Having received notification that all of my grant proposal were unsuccessful, with nothing else on the horizon, and with a perhaps old fashioned view that it is best if one parent devotes themselves to raising children, it was clear that my career in science was over. And when I sent an email notifying my field of my retirement, including pulling research papers that were in various stages of review, and sending papers back to editors that I had received to review, suddenly a hole opened up in front of me that I could not avoid falling in. How on Earth can I occupy my thoughts when the thing that had consumed 90% of my cognisance was gone with the click of a mouse button!

I now realise that my nervous breakdown was inevitable… (That is something I probably would never have admitted to publically before, and only do so now as I am now fairly sure that I will never have another career, and I am not sure that society’s understanding of mental health is strong enough to see past that for an ex-scientist – though possibly for an ex-sports star!)

I tend not to enjoy speaking about my past and until recently I had been able to totally avoid it. But recently I joined a men’s group for company (while the kids are at school) and rather ironically after a few months a speaker was invited to discuss the white spot virus outbreak in Queensland prawn farms. I had never taken the step of standing in front of the guys and explaining my background – as most newcomers had done – though I realised I probably should as many would have wondered what this “young” fella was doing among them (I am 20 years younger than the average). When I reflected on what I would say I realised that at the time when I quit science most likely I was the only Australian who had ever worked with white spot virus. Even if there was another Australian who had worked on the virus in another foreign lab, I was certainly the only Australian who had exposed native Australian species to the virus.

It was hard to listen to the speaker – full of the political baloney that had frustrated me so greatly when I worked in Biosecurity policy in Canberra for a few years before we went to Europe – but ultimately it was very cathartic for me.

Finally, after 14 years, I can say in total honesty that I am free of the pain and disappointment, and am actually very grateful for the way things happened because as a young adult I got to experience the world through my career, by my early-30s I had established a formidable legacy that can never be taken from me, and best of all I have had the opportunity to be there for my sons in a way that very few modern parents – and especially fathers – do. I have come a long way from the 17 year-old who begged his parents to let him drop out of university to return to the family sugar cane farm in northern Queensland.

When I tell people that I am a stay at home dad, a lot of people respond that I am so lucky “to be able to do that”. Absolutely I am lucky. But not only because I am “able” to be a stay at home dad. Because through circumstances it was me that got to stay at home with the kids after my wife and I had chosen that was right for our family.

These decisions are intensely personal for Australian families. However, without seeking to diminish in any way the struggles that many Australians face in making rental payments, I have to admit that I agree with the authors of “Affluenza” where they suggest that there are also many Australians who are working more to earn more to buy more things to impress people that they like less. (Unfortunately a lot of those depreciating status symbols have now been bought by increasing leverage against appreciating home values which will prove ephemeral, certainly in inflation-adjusted terms.)

I can’t help but think that the issues raised in the above article are a reflection of growing anxiety in society, expressed especially in our children, and exacerbated by the perceived acceleration in the rate of change such that children have no idea of what “success” looks like in the future anyhow. For instance, they are told that they will have many more jobs than their parents had and most of these have not even been created. What’s more, perhaps they will only need to work 15 hours a week and be paid a basic universal income. In stark contrast, an alternative future might see Australia continue to follow the US and we could experience growing inequality and may have the entrenchment of a working class poor (who occasionally sell their plasma to help make ends meet).

The point is, I personally think that active and thoughtful parenting has never been more crucial for Australian children, and that is why I feel incredibly proud that we have put a lot of effort into making well-informed decisions, thankful to my Accountant wife for working hard and smart, and grateful for living in a society that allows people to choose what works for them.

Sadly, in my opinion, in Australia a career in science is probably a worse choice than sports person – instead of very low probability/high reward it is a low probability/low reward proposition (I studied till 26 and earned above a subsistence income for just 4 years) and I think “Park Ranger” is probably out of place on that list… I encourage my naturally STEM-talented sons to not listen to the business leaders that encourage increased enrolments in these fields and instead think about paths that what let them have their jobs if that’s what they end up deciding they would like to do…

Then again, I also note that Malcolm Turnbull said at the weekend that nobody should study law unless they intend to be a lawyer. My father always said to me, looking down as his muddied cane farmer hands and torn work clothes, “you don’t want to be like this, do you?”… Lately I have been reflecting on whether, just like it is natural for children to want to emulate especially their same sex parent, perhaps it is equally natural for us to want to discourage our children from following in our paths (even if somewhere deep down there is immense pride if they ultimately choose to)?

Additional comments on same thread on 13 February 2018

Since I wrote that passage on Friday, I have to admit that my past has been ruminating in my thoughts. Partly it is the reality that (when something happens to bring these memories and emotions back into the fore) I have to acknowledge that probably I will never truly be completely free from the disappointment and sadness (anybody who went recently to see Yusuf Cat Stevens in concert where he explained how difficult it was for him to “make up” with music after such a long time might begin to understand.)

However, there is also an element of guilt – and of concern that I might be seen to be a “Negative Nellie” by others – and worse still, one who would seek to take away the dreams of his children. In this day and age we are told that we should spend time only with “positive people”, and that “negative people” are just a drain on our energy. So speaking about negative issues – that are not graphically shocking and immediately anxiety-raising – is not exactly something that is “encouraged”.

This testing of myself is my nature that I cannot escape – a person who naturally asks “why” also is prone to repeatedly asking that question to test whether that opinion holds true to that moment in time.

Once again questioning my views that it is best to discourage my sons from following my path into science has brought a lot of those points back into my mind, and perhaps sharing them is a useful contribution on what needs to be addressed for scientific research to be a viable career for more young Australians.

Firstly, I will make 3 points:
1. Queensland called itself “The Smart State” over 20 years ago. In the intervening period we have had a massive resources boom, and somewhere along the way “The Smart State” was dropped from our car number plates.
2. Remember that huge issue in the early years of the new Millennium – the “Brain Drain”? – in Government reports in my field and reports to Government from Industry my name was included in discussions surrounding the affects of the Brain Drain.
3. When I held a Humboldt Fellowship in Germany in 2003 I met 7 other young Australian scientists holding the same fellowship. Only one of us had a job to return to – for young Australians the utility of the fellowship was to provide another year “in the game”. Fellows from most other countries – both developed and developing – typically were using the fellowship as a sabbatical. In that year Australians had one of the highest success rates of all countries – I think around 40% of applicants were successful. In other words, compared to the pool of Humboldt applicants, a better level of researcher was applying from Australia, and we were comparatively more insecure than even those coming from developing countries.

The takeaway from these points is that this issue has been around a very long time. But the reality is that, even if Governments decide that politically it might play well to talk about technology and innovation, there is a long history of these initiatives being dropped at the first sign of the easy gains from another resources boom.

The ambivalence surrounding this was clearly on display when I saw Paul Bloxham speak last week on television. This investment bank senior economist – who was said to be a loss to the Reserve Bank of Australia – when asked if he was concerned about the loss of advanced manufacturing and the lower levels of innovation in Australia, responded that he was not because we have no natural advantage in these areas and that we are better off focusing on those which we do – resources, tourism and education (of course, not research, but graduate factories).

For me nothing has changed, and the probability that anything will change in Australia on this front is very low.

With these thoughts fresh in my mind, at the weekend I was talking with a German research scientist currently working in an Australian university and another German-born visitor – a general practitioner living in the UK. The research scientist told me how he had to write his NH&MRC application that afternoon. He was looking forward to it because during the week he gets precious little time to actually “do any science”, and this for him was a rare opportunity. It was a common complaint that I heard many years ago.

It seems that most of those that actually gain security as a research scientist actually do very little of it – and those that actually do carry out the research generally have very, very little security.

We spoke about just how difficult it is to live a life in research science, and he was clear that he knew that he had been extremely fortunate to have survived. However, unsurprisingly, he was pointing out the things that he had done to survive – like being flexible and moving around.

When I told him about my experiences shifting around he had to concede that he also realised that flexibility was far from a guarantee, either (and he actually apologised when I told him what had occurred during my stint in German university – but that is another story). We also found common ground in acknowledging that it is very, very difficult to have what many would consider a “normal life”, such as putting/finding yourself in a position which you feel secure enough to have a child.

(In fact, I have come to realise that most of the people that I know of my age that have survived the academic or scientific research fields into their 40s in fact were unmarried. And one ex-scientist that I have gotten to know in recent years – a woman who ironically worked in the lab of one of the best-known Australian scientists working on a women’s health issue – was told that she had “clearly decided on an alternate path” when she notified her boss that she was pregnant!)

But I took the last bit of wind out of his sails when I asked whether he had unemployed researchers in his institute at a desk writing research proposals and generally trying to prove useful to find a way to stay in the game just a little longer.

His tone dropped as he confirmed there were several. I turned to our GP friend and rhetorically asked whether he had any unemployed GPs in their late 20s or 30s voluntarily turning up to work at the clinic just hoping that they might prove their worth and ultimately be rewarded with perhaps a 12 month contract, or get really lucky and be offered a 3 year contract!

You can be assured that most science departments in all Australian universities have these people desperately hoping to make something happen for themselves – not wanting to give up on their dreams, or lose all of what they have been working towards, and proving their resilience to someone… anyone… Many will not survive, and, besides the personal costs to those people, that is a serious waste of human capital and a significant loss to Australia.

What’s more, compared to contemporary science postgraduates I was fortunate because monetarily I only paid for this lesson in foregone income. HECS only came in towards the end of my undergraduate degree and it was standard to receive waivers on HECS when conducting postgraduate research.

Imagine coming out into this environment with a full HECS debt from undergraduate studies and postgraduate qualifications for the privilege of conducting research that you hoped might help mankind in some way.

Why do so many people do it? Probably in part because it’s easiest to keep “doubling down” in the hope that black might finally be spun on the roulette wheel rather than realistically reconsidering the probabilities of the range of “successful” outcomes (from single to multi-year contracts through to more secure employment).

More important, I suspect, is that monetary reward is not a high priority for budding researchers, while intellectual and self-esteem rewards are more important. My second job after completing my PhD was a well-paid Government policy position, but I only ever saw the extra income as a resource to be saved to ultimately help me to get where I wanted to go – to be a word-class research scientist.

When I moved to France my personal income dropped by over half, and because my wife could not work, our household income dropped by over 80%. The following year over 40% of my Humboldt fellowship went to paying rent in Munich, and the remainder went on other living costs. And on returning to Australia I was unemployed for 18 months while I worked every day (towards the end I had a 3 month contract based in Thailand at a local rate of pay).

Even at that point, it did not really concern me EXCEPT for the fact that in the two years we were in Europe Brisbane house prices had doubled. By the time we had settled in Brisbane, with my wife in a full-time job, and then pregnant with our first child, house prices were well on their way to tripling!

As I said to the Senate Select Committee on Housing Affordability at its Brisbane hearing, deteriorating housing affordability in Brisbane during this period was a deciding factor in our decision to end my career.

Effectively, the political system is choosing a structure for our economy that disadvantages and thus dis-incentivises a huge swathe of people who, under a different structure, might choose to stay on in roles which “give back” to society.

With the prospect of growing inequality, it is completely rational that those with flexible innate and learned abilities will choose “safer” career options which are more likely to provide the opportunities afforded to previous generations of Australians, such as the possibility to have children and own a home.

To take this the full circle, I see no evidence from policy-makers that they even understand the short-comings in our economy and society, let alone have any desire to genuinely tackle these issues in sustainable long-term strategy.

While that remains the case, when I hear a business leader encouraging young Australians to increase enrolments in STEM I will continue to re-interpret the acronym as follows: STEM = smarties to exploit monetarily!

Instead, to young Australians I would suggest that, as well as climbing trees and enjoying your sports for the fun of it, get a subscription to National Geographic and American Scientist and let that satisfy your interest in science.

I have the Sky Business Channel, Bloomberg or CNBC running continuously at home outside of the kids’ electronic time. It is on not only for my interest, but so that my sons passively take it in. My 12 year old knows who are Mario Draghi, Janette Yellen, and Glen Stevens and now Phil Lowe; he understands (roughly) what is quantitative easing; and he understands more about markets than I understood in my early 20s. A week ago my 9 year old acknowledged that I was right about bitcoin, that when something seems too good to be true in finance it nearly always is.

A while back my eldest son challenged me suggesting that I have these channels running all of the time because I want him to work in “business”. I simply said that I will be proud of him no matter what he chooses as his first career or job. But I stressed the importance of understanding that what happens in these markets has a huge effect on what happens in the world and affects the way people can live their lives. (That lesson was seared into me watching what happened to my parents and family when the world sugar price collapsed in the early 80s – and that was followed by a sharp lesson in politics when Sir Joh told a hall full of desperate cane farmers that he would not do anything to help them because he had not had a member in parliament from the area for several years!)

The one thing that I do stress to my children, however, is the importance of not getting hung up on what will be their first job. After all, if they are going to have several different careers, and more jobs than the previous generation, which are yet to even exist, then why get stressed about choosing the first one! We also talk about the importance of flexible thinking and of strong emotional intelligence – thank fully they get that modelled to them in spades by their mother!

To those who have waded through these thoughts, sincere thanks… I hope they are of some use…

---

© Copyright Brett Edgerton 2019