What's the answer to addressing New Zealand's productivity?

So some are continuing to ask not just 'why' is productivity dropping in many places world-wide, but also how do you change the contribution from economies like New Zealand e.g. improve our productivity, or maybe just improve the performance of the New Zealand economy.

My TLDR has not changed in nearly 23 years since my day 1 at Icehouse - we need more firms that start or originate in New Zealand growing their international footprint, growing their wealth by operating in much much bigger markets and earning real dollars, not peso's.

When I also think about 'the drive' to get Icehouse going it was because so many of our best and brightest were leaving NZ in the 90s and early 2000's. We wanted to and had to do something.

Now in 2024, I feel somewhat time is repeating. So many of our young see their employment future, their future in Australia, where the money is better. Many, many go there for Uni and just expect they will visit the old's in the holiday season. Some and many olds are even thinking of moving to the lucky country.

Are we getting closer to unlocking answers for NZ? In short, no.

Thank you Ralph Shale for sharing this article from Gary Hamel who proposes that Unicorns however good they maybe are no substitute for a competitive, innovative economy - https://hbr.org/2017/02/a-few-unicorns-are-no-substitute-for-a-competitive-innovative-economy

Gary talks about unicorns, however famous and attention they might get, ultimately they represent a very small part of the wider economy & that the economic power of large corporations is growing, not shrinking. His bottom line from the data is that entrepreneurship is declining and conglomeration increasing. He also says this is a problem if the economy is dominated 'by coy's that are politically insulated and shackled to the ball an chain of bureaucracy'. Finally, he says 'growing more unicorns is no substitute for vigorous antitrust enforcement and a concerted effort to unleash the latent entrepreneurial energy that resides deep within large, established organisations'.

Mmmmmm now I am thinking again about New Zealand. What Gary is saying that 'unlock' the big companies in the US and that is where the economic growth in 'quant' comes from - that is where the potential is. Note his comment that you need a vigorous and aggressive antitrust regulator.

I can't get excited about our large firms in NZ being an answer to our productivity question. Just look at what Fonterra is doing selling its consumer brands division, to move one step further away from its market to focus.

I think the Unicorn type firms are more important in NZ to give hope that it can be done - Xero, Rocket Lab and so many more over the last 20 years have done it, doing it, and showing others, but again it is startups, small business going big, not really big NZ going big.

Over 30% of our economy is the Government - in terms of taxes and spend, actually I think it is 34%. That is too big in my view.

Ok again, there is the corporates - the large firms, that could be a potential source of opportunity to grow, to be more productive, especially given their scale? There are two types of large firms, those that are domestic economy focused and those that are not. Think in the first banks, telco's, insurance, energy, housing, supermarkets, rest homes etc. In the second, we are talking frims like Vista, Mainfreight, F&P Healthcare, Orion Software to actually name them who are globally focused firms.

I know there is talent in the first group, but you know if all you are doing is focused on your NZ market, and you get worried about the regulator, how is that contributing to productivity? The math just does not work.

If Gary Hamel was running the NZ version of an antitrust regulator, he would bust up these first group of companies - bust them up.

At the risk of arguing with others, I don't really know what the answer is these days to changing productivity for the country, but I know a few things that we need or should do

- our large firms with the current regulatory environment are not the answer the way they are, and the Government, one after the other is completely weak in their approach to them

- we should over-invest in infrastructure and housing, and there is a wall of KiwiSaver money that should be used for that (its our money)

- the KiwiSaver % of money going into alternative assets is just abysmal, we should change the rules that they can invest in private companies like Booster, Simplicity and Generate have done - open the tide e.g Australia Super into 'other' is like 27% I think (could be wrong) and we are like 1%

- the competition regulator needs to be way way way more aggressive and to be backed by Governments of the day, we just have too many assets, to many people tied up in companies that have very high market shares and whether there is a lack of competition or not (I think there is) our pricing for things like building houses shows we have more than a bit of an issue - just bust up our large companies because they are not helping and their pricing is not even remotely competitive

You know, if we had the best and most capable focused on how to create more wealth from trading in global markets not taking simple margins, but building up positions in global value chains, and creating intergenerational wealth wouldn't we be closer to improving productivity. In some places we don't lack for ambition, but we have too much waste, too much talent locked up in tiny markets, and we have too much bureaucracy and mediocrity for us to get ahead. We don't deserve to win in business on the global front - at least the country does not, but the unicorn founders and their teams do - because they are putting it on the line, they are doing it, they are showing others, so back to what Gary Hamel's said - I disagree, we need more unicorn founders from NZ to show others what is possible.

Do I have hope - yes, I do have hope, when you see the founders, the families and the organisations building multi-generation positions in global markets - it is the hardest work - it is the most rewarding - and it can make a difference - we have no choice, we don't have the scale in NZ, we have a cost base that is uncompetitive not just because of scale but how long a country we are, so we just need to keep pushing, be really focused on making choices and letting the entrepreneurs and founders get out there. And yes, bust up those large companies because we need to get the talent out of them hills and into something that makes a difference long-term.

I am still confused lol about how to solve this from a quant perspective.

However, the lawns, the spa and a fire beckon from this King's Birthday 2024 - well done Sir Peter Beck, you have inspired hundreds if not thousands of people in NZ to do the impossible. We need more people like you.

Andy