The Australia-China Free Trade Agreement continues to attract local controversy. I haven't commented on the latest discussion because, lacking knowledge of the detail, I have no value to add. My view is that we are locked into the agreement and, bar any tinkering at the margin that might be possible, let's just get on with it.
On Tuesday 1 September, the Australian Bureau of Statistics released the latest Australian Balance of Payments data. Associated with the release was a discussion paper on the interactions between the Australian and Chinese economies. It's worth a quick browse for those interested. Understandably, most of the discussion on the Australian-Chinese economic relationship has focused on Australia's resource exports. I think that's a mistake. The most vulnerable sector is education, now worth around $A4.4 billion per annum so far as the Chinese marketplace is concerned.
If, as seems likely, the rate of growth in the Chinese economy continues to decline, Australia as a low cost producer will continue to sell resources if at lower prices. However, Australia is not a low cost education provider. There is a significant risk that those institutions most dependent on Chinese students will suddenly find themselves forced to contract. That is one of the reasons why certain leading universities have been arguing so strongly for deregulation of university fees. If their international and especially Chinese student numbers drop sharply and they cannot increase income in other ways, their cost structures will become instantly unbalanced.
Let me tell you a little story. In the middle of 1987, we created Aymever as a consulting, training and information services company specialising in the electronics, aerospace and information industries.
We were on a high growth trajectory, growing fees from zero to $75,000 per months over eighteen months. At that level we were profitable, ploughing everything back into business development. To maximise capital usage, we leased furniture and equipment. It seemed sensible. Then came Mr Keating's recession. This hit professional services first. In just three months, our monthly fees dropped by two thirds. Financing costs that had been comfortable suddenly became crippling.
As it does, the financing strains on enterprises and governments at all levels escalates. National governments have somewhat more flexibility than start-ups, but the reverse leverage effects are still the same. As firms are forced to contract, so does the economy.
The photo shows practice for Chinese celebrations marking the end of the Second World War. We all hope that that China works its way through current economic difficulties. We need the stability. But in the meantime, I wouldn't buy any shares in Australia's G8 universities. What goes up, does have a tendency to come down.
9 comments:
I have to ask, Jim. I gloomily saw your departure from the APS and the establishment of yet another consulting firm as a net loss to the APS with no net gains, and the folding of Aymever, which I heard about years after the event, as cynical confirmation that public servants don't often make good private sector operators. I cannot think (apart from the initial cost to the APS of the loss of your services) of a single thought which stands up to decent analysis, or with which I would agree these days. (I'm sorry guys, I'm slow getting to the question.)
But the real point was, you had your fans and critics, and all agreed that your move was doomed to failure. We didn't often agree about much, particularly you. We later agreed that we had all been right, Aymever was doomed from the start. We didn't know its clientele (not all of it). we didn't know its expenses and revenues and cashflows, we just KNEW.
So finally, here is the question. If that's the best kind of thinking that double-degree graduates, experienced public sector managers and many in between who made (and make) up the Department of Industry can come up with, is there a hope for the such a body at all? Or should we just outsource the whole flaming thing?
tanners I think hindsight a wonderful thing, and often use it myself to justify/excuse my many personal failings.
I have been following this blog for quite a few years now, and am familiar with Aymever's history as recorded by Jim over the years. Perhaps a small timeline might assist:
Incorporated June 1987
Stock market crash October 1987
The recession we had to have - https://en.wikipedia.org/wiki/Early_1990s_recession_in_Australia
Deregisterted April 1996
PM Howard elected 1996 - and a longish period of sustained growth ensued.
I don't think Aymever's period of activity, its setup, growth, eventual demise, can fairly be provided as an example of "confirmation that public servants don't often make good private sector operators" - even though, as a trite summary, I tend to agree with you.
Coming from an entirely small business, computer consulting background, I see echoes of differences in our approach to that of Jim's company - and would tentatively suggest a primary difference is the carrying over from the public sector of a mentality to 'segment' skills (as Jim said "I believed in research and depth of knowledge, so we needed a basic research function") with some sort of miraculous overarcing management capability to combine different skillsets into a profitable whole. This is just not how young aggressive private startups ever work in my (humble) opinion: skills tend to be more 'homogenous' i.e. anybody can do anything needed at short notice, recognising that some skills can be dormant for months at a time, and thus have a hard to justify carrying cost if that's all you bring to the table.
Anyways, I'll be very interested in Jim's response - but your "it was always going to fail" comment sticks in the craw a bit; perhaps indicative of just what might be wrong with our public servants rather than those who dare to dream.
kvd
ps tanners, will leave you to search for earlier Aymever posts on this blog. There's some really intertesting stuff, imo.
Hi 2t. That was an interesting comment for a number of reasons. I think that the question of fans and critics probably deserves discussion over a glass of red wine! At this point, I will address two issues.
It is clear in retrospect that the business concept on which Aymever was based was fine. Without arguing the point, you don't grow professional services business at that pace without doing something right. Further, the areas we were in subsequently generated a number of very successful businesses.
Our problem lay in basic business failures. There were two aspects to this. The first was inexperience, the lack of street smarts. The second lay in our failure to recognise what we actually had when things finally went bad in cash terms after a large client non-payment. The business was still viable, as it turned out very viable, but we were doing something completely new, we had no-one to advise in a practical sense. There were family conflicts that finally led us to call in administrators. We were quite naive.They promptly closed the business. A month later new work came through, they were all existing bids, that would have allowed us to regroup.
Going back through the Board papers, we came just so close. We had very detailed financial and time reporting systems. We weren't flying blind. We could have cut spend by 5%-10% over time without affecting performance, and that was all that was required. Our external director, a very experienced commercial person, struggled to understand how the cuts he wanted resulted in a degree of business implosion in the period leading up to the appointment of the administrators.
That's water under the bridge now, although its still difficult to cope with. It would be easier if the original concept was flawed, but to see major commercial successes based on just the things we had identified is a little hard to take. Mind you, most (not all) of those successes have been outside Oz.
Turning now to your question. The knowledge and skill sets required in policy are different from those required in the business world. When public servants start wishing to impose rules and standards on business performance based on their managerial, economic and quality perspectives a mess results. If you go back to that time in Canberra, we were trying to create a climate, a framework, that provided for maximum business options. We could not judge what would be successful, that was not our role, but we were trying to provide broad guidance and to create options, accepting that commercial failure was inevitable. It did not matter from our perspective if firms or even sub-sectors failed so long as the successes outweighed failures. Our job was to create the climate for success.
I don't know if industry departments now can come up with new things. You need a new way of thinking. We were at a place and time when new ideas were briefly possible. Then mechanism came back in.
Thanks, kvd. We were writing at the same time!
I'm not being well understood at the moment. I might go back to writing school. :)
I was saying that was how I and others thought about 20-25 years ago. The comments that stick in kvd's craw were ignorant. The comment that public servants don't make good private sector operators is a total overgeneralisation. But the mindset is still there.
MY question was essentially "Does that indicate a vast failure of the policy generation abilities of public servants?", NOT "Didn't you know you were bound to fail?". Don't forget that Jim had been working in the Department of Industry, Technology and Commerce at that stage. It's depressing to look back and see what we (the public servants not including Jim) agreed on, and even more, what were sources of conflict.
Hi 2t. I didn't take your remarks amiss! As it happened, in sorting out yesterday, I found some of our internal seminar papers from the time. One from September 1986 was entitled "Towards a new approach to industry policy: One; The Policy Development Process."
We were unusual at the time and indeed now in trying to articulate and test a policy development approach that consciously aimed to challenge, to break from, the prevailing orthodoxies. Those orthodoxies had failed. Why replicate past errors? Our approach was enormously productive for a period, then stumbled as the central coordinating agencies, the guardians of the past, re-asserted their control. We were lucky in that we did have that brief window to at least try new things.
Some of the things that we trialed such as the use of large scale consultation processes to create a concensus about the need for change have survived, if in somewhat mongrel form. Since I'm still involved to some degree after all these years, I can trace the path of most of the current orthodoxies. My exposure outside the public service to management consulting has given me a very healthy degree of cynicism about fads and fashions, including some that I used to espouse.
I think that one of the difficulties of current public sector agencies lies in the narrowness of staff experience. And, no, I'm not repeating that nostrum about the importance of private sector experience! Rather, they don't have varied life experience or indeed and especially intellectual challenge outside narrow domains.
It is depressing looking back to see the nature of conformity and conflict. If it's any consolation, at least we are still trying. The Jolly Roger still flies from the mast, if now in bedraggled, faded and tattered form! I no longer hope to bring about the major change that I once considered possible, but I haven't given up. It's more micro now, but I still try and monitor my successes. An attitude shift here, a change in policy settings there, the rediscovery of a lost element of the past.
And if I may be forgiven a very personal comment, I take considerable pride and pleasure in the work that you have done over time including SI and ET. The flag still flies.
Thank you, Jim. I'm not sure why it took courage to reply to your gracious remarks. But it did. Still a shy boy, I guess.
I take pride in my former leader, whose politics I never shared, whose idealism and conviction I never questioned, and who was my exemplar in so many ways.
I had better stop before the other contributors barf, but even so, thank you. The only way I repay your debt is by passing the lessons on to others, and I try to do that every day.
As a postscript, to many but kvd and Winton in particular, thank you also. You challenge me and keep me actively thinking which is a joy to the otherwise trammelled soul. In Timor, my skin colour leaves me unchallenged in many situations. That's an ugly place for an honest person to find themselves. You've recently cut me down for sloppy ideas and I appreciate it.
Total irony note: Timor is about to ban smoking in 'all public places' (don't ask me to define that, but my last taxi driver did two cigarettes, in the taxi, in 10 minutes :) After asking me if it was OK and ignoring my answer.) I said (without thinking) How are they going to enforce that??. I hope that causes some guffaws at my expense here.
Thank you, 2t! I did laugh at your last para.
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