Weather proofing your business
One of the functions of a strategy consultant is to be able to look at the future and try to predict how best to handle anything which could be thrown at you. A bit like when I attended Military Staff College although I can’t say they always got it right.
When I say “your future” this is made individual since after all companies only exist for the benefit of the individuals so what effects companies influences the outcomes for individuals.
Let’s start with some possible forward predictions which unfortunately are not too bright. We might not appreciate a doctor’s diagnosis but that does not make the illness go away nor make the medicine more pleasant to take.
For Australia, the reality is that as a convenient quarry we have had it so good for a long time that we somewhere lost the plot believing we were invincible and the good times would go on forever. Under this delusion, we managed to inflate our average basic wage structure to a level where it is out of all proportion to rates paid elsewhere in the developing world. Look at wages paid for people working in restaurants and Australia had a rate at around $16 an hour against $9 in the UK and $7 in the USA.
Accept now that IT jobs are going to lead the way for employment in the future and we find in Australia many of these jobs are now [forced] overseas. This week alone in normal course of business I spoke to someone in India on an AMEX question, a nice TPG guy in the Philippines and find that UK visas are sent from Canberra to the Philippines for processing.
So we are not getting those basic IT jobs anymore and has anyone noticed that at almost every supermarket chain over 90% if not 99% of people serving on the food counters are Asians? In certain suburbs they don’t accept credit cards only cash and one does not need to be a genius to know why. There is a massive underground tax avoidance regime in operation and one could only wonder why no one does anything about this. Having worked in 52 countries I also know for a fact that in some countries there are “help desks” outlining how to maximise welfare payments once you get to Australia. In recent weeks the media has bemoaned the number of properties sold to Asians and questioned how this can be when they are only meant to be permitted to buy new apartments. They don’t seem to have any idea that it is possible for people in the know to leave the title deed in the name of your bank – which is Australian - with the added benefit that when you sell to a likeminded buyer you don’t have the bother with having to pay stamp duty. Otherwise there are country to country sales – government supported – where foreign countries buy rural properties to produce primary produce to shop back to their own populations, mainly because Australia with its small population cannot compete with investing against an investor with a captive large scale end market.
None of this is Asian bashing since they are helping to fuel our economy. The issue is that some people have had it so good that bit by bit the country is driving itself into a wage crisis squeeze which coupled with an aging population makes it as the Treasure keeps telling us, an unsustainable situation.
And it is fairly obvious that Australia has caught itself in a welfare trap where now enough people are receiving its benefits to influence the voting to perpetuate the system. From personal knowledge there are many people who go to the doctor with the slightest ailment who would not go if they had to pay. Hobart hospital years back introduced a $1 fee for hospital visits and halved the numbers overnight. But we ask the doctors associations if they think it is OK to introduce charges. And let’s not suggest that doctors have to be revisited for renewed scripts on numerous occasions when one visit might have been enough. And we have Clive Palmer advocating free universities “So everyone can attend university”. Where will we get the plumbers and bricklayers? Where all this leads is towards a working class which won’t have the jobs in which to work.
The retailers bemoan competition from online overseas imports but go to Harvey Norman and buy some furniture and you buy on display or catalogue, and then have to wait a couple of weeks while they order from their supplier, so why not cut out the middle man?
Looking at the low levels of interest on deposits both in Australia, while the banks can make huge profits from basic charges on their customer base, this does not stimulate large scale investments in other than the extractive industries. The system seems to be riding on a small number of producers without anything new on the horizon. Again Clive Palmer is basing his concepts on a country funded by a giant quarry.
Where in bringing up Palmer’s name, the Australian electoral system is well past it’s used by date where a Senate is no longer a house of review and the country can be held to ransom by people with less than 3% of the vote. While this exists, major necessary reforms are impossible, not that change won’t come eventually but this is not in the foreseeable future.
In a nutshell, what Australia has done is outsource its IT prominence and pushed a great deal of its manufacturing overseas (car industry), having low paid jobs to immigrants and leaving a gap in the middle for basic service industries which are overpricing its employees who can do well enough by buying cheap Chinese imports while hoping mining will be the answer.
That was the good news.
The bad news is that China, our main driving engine shows signs of a major slow down as they fight with major structural problems of their own. People have made the mistake for years dazzled by the attraction of a 1.3 billion population market before realising that while there is a central government the Provinces all have certain autonomy provided the stick to the party line so you need to sell to them individually. In the east, Dalian and Qingdao operate comparable to major countries with their own representative offices in the UK and USA. In 2000 the “iron rice bowl” support from cradle to grave still existed with in some cases over 60% of retired workers still on the payroll. But times change, the one child only policy is putting strain on the caring for the aging and workers want to supplement earnings to compensate for earlier government support. Imagine a country with 50 million more men than women.
In five years China’s gross GDP will have surpassed that of the USA putting them in front if not on a per capital basis. Don’t expect China to be magnanimous from that position when they can flex their muscles. Even if they want your resources they will be able to set the price and after a recent trip around Africa, you see China buying up resources at bargain basement prices. The China dominance effect however will be to put the USA on the back foot no longer giving America the appetite nor resources to play world’s policeman, a geopolitical reality Putin is all too aware of. This year iron ore prices to Australia have fallen 38% indicative of China’s slow down and Australia’s quarry scoring a hit. Watch this space for more bad news.
Add to that the expansion of the global terrorist networks with the likes of ISIS and the global mix becomes even more frantic. The USA as World’s policeman until today have no plan to contain this group and again one has to question the sanity of politicians who think that it is possible to bomb these people into oblivion. Every terrorist has some son or relative who will just become a more committed terrorist. The Agamemnon in all of this which no one even wants to think about is what happens to world trade if terrorist groups start shooting down passenger planes at random and no one wants to fly? But for now let’s not go there..
Otherwise the big problem out of all of this is history. The whole global network seems to be slowing down and it does not appear anyone has a strategy to solve it. In the past what has provoked stimulus has been the start of a war which could mobilise men and resources with some noble aim and at the same time motivate industry into further production. Putin moving into Ukraine would not be sufficient to trigger such an event but ISIS with its blatant brutality might just be enough to evoke a military response. Overall we have a mobile global population with fewer jobs per capita and eventually the poor who are indoctrinated towards one man one vote will take over and this then supports the ideagogs.
So if you are an Australian how do you weatherproof yourself for the years to come? The first suggestion is to “Read the fine print”. As times get tough, individuals and companies are becoming more creative in what they are trying to sell and a lot of what is out there does not measure up to the advertising. Needless to say it is not possible to aim at specifics but one does not have to look too far.
Secondly “Put enough away for a rainy day”. As you hear often enough in Game of Thrones, “Winter is coming”. Advertising will promote the need for stimulating the economy by spending but unfortunately that is only a short term measure. Let someone else do the spending, look after yourself. But don’t lock yourself in – back to suggestion one, “Read the fine print” as in buying an annuity.
So in weather proofing, there are two sides, for the individual and for business – or combined, the individual in business. The future means becoming more computer savvy, social media and its uses have only just started and there will be an exponential growth in what can be achieved in this area. Automate, automate, automate.. Obviously there is always a niche market for enterprising individuals but generally there will be markets to stay clear of and these will be anything involving employment of labour. This is because with outsourcing, geographical barriers have been broken down to the extent that only service industries in hospitality can be insulated but even then not entirely with promotion and booking services located offshore. We move towards a global wage rate.
For further insulation for yourself or your business you will need to come and let us have specifics so that we can carry out a review and derive a workable plan. The main thing in strategy planning is to have your plans A, B, C etc. and have someone along to test them for validity.
Peter Nelson
P J Nelson & Co. Pty Ltd
68 The Chase Road
Turramurra NSW
Australia 2074
0432651835
+61 432651835
Skype: peter.john.nelson