Thursday, October 30, 2014

Losses Don't Save Lives

We know that “framing” – how issues are presented - has an indelible impact on how they are perceived and often on subsequent behaviour. If they are framed in a misleading manner misleading conclusions may be drawn and resulting behaviour perverse.
This morning Radio NZ reports “Port profits up but at a cost” and sets out the numbers associated with the shocking accident record at NZ ports in the last year.
The high rate is unacceptably high, absolute tragedy for those affected and has unnecessarily brutal results.
It is not however a necessary result of profit or  a “high cost” of profit.
The implication that it would somehow be lower and all would be well without such high profits is mischievous sensationalism which is likely to stand in the way of fixing problems.
Running at a profit is never an excuse for a poor safety record or an inevitable cost. Numerous companies including ports make profits and have a better safety record than the NZ effort last year.
Companies running at a loss or unacceptable profit do not have better safety records than profitable ones. Quite the reverse. Lives cannot be saved by simply running at a loss.
Running at a profit offers the resources to address safety issues and for pressure to be placed on managements and boards to address poor safety records. Losses give them the ideal excuse to do nothing.
Success including earning a healthy profit demands safe sustainably healthy conditions. Unsafe practices and a poor record threatens profit.
A less sensational report would have highlighted the problem areas, asked what is being done and how quickly and might well have scolded companies for moving too slowly or too narrowly.
Only the sloppiest of journalism coupled with slow brain editing grabs pointless unsupportable sensation resulting in predictably illogical conclusions which inhibit improvements rather than help. 

Wednesday, October 15, 2014

Hardly a lesson learned… a $1m plus education fail

Another day another failed prosecution. Hardly news. Hardly surprising…. but hardly anything learned either.

Media analysis of the SFC debacle is busy writing lazy headlines full of melodrama while the major lessons are being lost.

Just so we are clear…. the Janet and John here is:

  1. no “guru” is infallible. Having an old Volkswagen, a folksy “way”, and being a “good joker” is not enough and never was.
  2. this applies to Buffett as much as anyone else. Buffett’s greatest attribute is probably the fact that he is the world’s least deluded investor. He does not kid himself – ever.
  3. If you do not use your brain and do some homework you will lose your shirt or (regrettably) lose the taxpayers shirt. And you deserve to – big time.
  4. There is always risk – every time. If you can’t see it that just means you are blind to it. It’s there. Look for it till you find it. If you can’t find it invest elsewhere.
  5. don’t whinge, moan and blame the government – bond holders did it with Equiticorp, investors were “saved” with SCF (which the judgment now says there is little evidence did anything wrong (so can I have my tax money back then?). Its poor logic and pathetically dim.
  6. As the promoter of the awful Deposit Insurance Scheme himself (the beaming RH Cullen) said  “You lost, eat that”.

As for governments:

  1. The rat always smells the cheese. If governments say “come to Santa” the kids will flock. Deposit guarantee schemes always produce “too big to fail / not pay / hand out”. Come to Santa policies are just silly – that’s all. Do stop – its my money you are wasting.
  2. Less is more. It is pointless – utterly pointless passing laws you can’t, won’t or don’t have the bottle and competence to enforce. The Serious Fraud here is that taxpayers spent over a million on a failed prosecution which helped no one (legal fraternity aside).
  3. Do not, ever, try to save investors from risk. You can’t, you look silly, you delude them in a cruel hoax – and you still lose everyone’s shirt. Also – note – it doesn’t even get you votes for heavens sake.

So use your brain, face risk, get educated… it needs to be part of our culture.

I have long argued that if the average Kiwi knew as much about investing as he and she know about power tools, DIY, various “Idles”, and My Kitchen Rulez then we wouldn’t have a retirement problem.

DIY being in our genes does plenty for Placemakers, Mitre 10 and Bunnings and close to nothing for our kids and your retirement.

Thursday, October 9, 2014

What Academics Are Really Saying


All walks of life have their codes. Academics no less than other gangsters. Below some glimpses of the argot:image

Hat tip to Conrad Hackett

Faulty Logic…

Please note – the fact that “we”, or NIWA or even the PM have discovered a fault which we hadn't noticed makes not one whit of difference to the probability of an earthquake event. It was there all along.

So much – one would think – is obvious…. but

Monday, September 29, 2014

This graph says plenty…


Labour’s General Election vote since 1938 thanks to David Farrar.


  • best score since 1938 was the capitalist Labour Govt of 1984 –1990
  • 1938 – 1984 is how long it took to cripple the economy enough to get that turnaround
  • as the overall benefits of the “model” slid down so did the vote

The current review of the Labour Party has no chance of going anywhere useful for them until they face a few serious questions (as other Social Democrat parties world wide have done) about the model itself.

Monday, September 22, 2014

Classic from the textbook–Election 2014

There is a substantial body of work in the areas of behavioural economics and cognitive psychology which shows that the record of political pundits, political forecasters and the media is appalling in forecasting all but the most obvious of outcomes (a comprehensive review is to be found in Nate Silver’s The Signal and the Noise).

Kahneman shows that we tend to have a systematic bias which involves:

  1. Consistently underestimating extremes – National won and by a significantly greater margin than was forecast while the left suffered greater than expected decimation; and,
  2. that we are very poor at estimating ranges or spreads – much the same thing here too. The gaps between the factions were not well estimated as forecasters cramped things around the averages.

Did forecasters do better than a random pick would have? Yes – very likely they did. Even the Peters NZ First result has become systematically bizarre to the point where it is unlikely to be the result of a coin toss (the main guy who ran the coin toss – Hone Hariwera dipped severely).

Did the pundits and forecasters do any better than an amateur would have done? Very unlikely – and they got the extremes wrong – just as the amateur would have.

Moral? Don't pay forecasters much attention and certainly not money unless you are wanting to buy moral support – and even that is a dubious purchase – just ask the left.

Wednesday, September 17, 2014

The most boring bankrupt economic argument–“we export raw logs when we could be adding value and making jobs”

The rot set in in the late 1940s on this. Jim Anderton was maybe the first in the modern era to believe we wantonly refused to profit from the blindingly obvious money and jobs to be had from processing timber.

In recent times only Winston Peters has been bright enough to see what the entire business sector has apparently completely missed.

Now, joining him as a value add timber processing expert we have the lawyer from Herne Bay – Mr Cunliffe who has spotted the opportunity.

It is, you understand, not so profitable that any of them would give up their day job… it never is, is it?

It seems that only these elite economic whizz kids can see what needs doing. Mr Cunliffe even wants to stop Fonterra doing the unthinkable – exporting what people want to buy and what they will buy – and focussing instead on processing raw product here in NZ.

Apparently there is more money to be made ignoring the reality which sees us export what people want and instead “processing” here in NZ… at an uncompetitive wage rate all these people, in a curious coincidence, want to hike.

Evidently the business sector, with skin in the game and a shirt to lose – not just “the baubles” knows we are more than lucky to be able to export the logs and milk fat – and doing that is far from a cinch.

Shouting “value add” does not make one a competitive processor, it does not convince consumers in a world full of competitively priced product they should buy from you, and it will never justify giving up the hard earned offering you do have.

Besides… 50 years of bleating about this wrong headed nonsense produces boredom by the tonne none of which can be exported.